TRANSPO

FINALS
REVIEWER
E2018
PROF ANGELES

CUCUECO & FABON


I. General Discussion
A. What is a public utility?
Definition:
A public utility is a business/service engaged in regularly
supplying the public with some commodity or service of public
consequence such as electricity, gas, water, transportation,
telephone, or telegraph service As its name indicates, the term
public utility implies a public use and service to the public.
Unlike a private enterprise which independently determines
whom it will serve, a public utility holds out generally and may
not refuse legitimate demand for service.
Elements of a public utility
1. There must be public interest/consequence
2. Private property devoted to public use
3. Offers to the public indiscriminately
4. For hire/compensation
Consequences of being a public utility2
1. Ceases to be juris privati
2. Grants to the public
Munn v Illinois
The legislature of Illinois responded to pressure from the
National Grange, an association of farmers, by setting
maximum rates that private companies could charge for the
storage and transport of agricultural products. The Chicago
grain warehouse firm of Munn & Scott was found guilty of
violating the law but appealed the conviction on the grounds
that the law was an unconstitutional deprivation of property
without due process of law that violated the Fourteenth
Amendment.
The Supreme Court decided that the state power to regulate
extends to private industries that affect the public interest.
Because grain storage facilities were devoted to public use,
their rates were subject to public regulation. Moreover, even if
Congress alone is granted control over interstate commerce, a
state could take action in the public interest without impairing
that federal control.
In re: Public utility: Property does become clothed with a public
interest when used in a manner to make it of public
consequence and affect the community at large.
When one devotes his property to a use in which the public has
an interest, he, in effect, grants to the public an interest in that
use, and must submit to be controlled by the public for the
common good, to the extent of the interest he has thus created.
He may withdraw his grant by discontinuing the use, but, so
long as he maintains the use, he must submit to the control.
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Luzon Stevedoring Co v PSC
Petitioners had an interisland service. A complaint was filed
alleging that they were charging freightage rates unapproved
by PSC and which resulted in ruinous competition.
The Court held that even if petitioners only served limited
clientele, their business still fell within the definition of a public
service/public utility under the law. Thus, their rates must first
be approved by PSC.
In re: Public utlity: Public utility is not determined by the number
of people actually served. Nor does the mere fact that service is
rendered only under contract prevent a company from being a
public utility. On the other hand, casual or incidental service
devoid of public character and interest, it must be admitted, is
not brought within the category of public utility. The
demarcation line is not susceptible of exact description or
definitions, each case being governed by its peculiar
circumstances.
It is not always necessary, in order to be a public service, that
an organization be dedicated to public use, i.e., ready and
willing to serve the public as a class. It is only necessary that it
must in some way be impressed with a public interest. Thus, a
business may be affected with public interest and regulated for
public good although not under any duty to serve the public.
B. What is a public service?
Elements of a public service
1. For hire/compensation
2. General/Limited clientle
3. Permanent, occassional or accidental
4. For general business purposes
PUBLIC SERVICE V. UTILITY
- Public Service: Defined under CA 146
- Public Utility: Defined by tests in jurisprudence
- All public services are public utilities but not all
public utilities are public services.
o But in essence, they are the same.
PUBLIC UTILITY
PUBLIC SERVICE
(N.B. The conclusion in the diagram is based from the notes of
Prof Quimbo and Prof Ty, however in the case of JG Summit v
CA, the separate opinion of Justice Tinga gave the converse,
that public service is the broader concept that encapsulates
public utility. The ff is the text lifted from the said separate
opinion:
Formerly, there was a statutory definition of public utility, but it
was abandoned in C.A. No. 454. The definition was instead
solely applied to public service apparently because it did not
exactly fit the concept of public utility. It is significant in this
regard that while the 1935 Constitution which took effect on
February 2, 1935 specifically mentioned public utility, C.A. No.
454 shifted from public utility to public service as the sole
reference term in the Public Service Act.
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Another dissimilarity is that a public utility requires a franchise,
aside from a certificate of public necessity and convenience, for
its operation, while a public service which is not a public utility
requires only a certificate of public convenience. The dichotomy
in requirements flows from the enforced indeterminacy of the
market for the service provided by a public utility. Thus, it may
be pointed out that all public utilities are public services but
the converse is not true. This is so because the term public
utility connotes public use and service to the public
CA 89 (Public Service Act), Section 13(b)
(b) The term "public service" includes every person that now or
hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier,
railroad, street railway, traction railway, sub-way motor vehicle,
either for freight or passenger, or both with or without fixed
route and whether may be its classification, freight or carrier
service of any class, express service, steamboat or steamship
line, pontines, ferries, and water craft, engaged in the
transportation of passengers or freight or both, shipyard,
marine railways, marine repair shop, [warehouse] wharf or
dock, ice plant, ice-refrigeration plant, canal, irrigation system,
gas, electric light, heat and power water supply and power,
petroleum, sewerage system, wire or wireless communications
system, wire or wireless broadcasting stations and other similar
public services: Provided, however, That a person engaged in
agriculture, not otherwise a public service, who owns a motor
vehicle and uses it personally and/or enters into a special
contract whereby said motor vehicle is offered for hire or
compensation to a third party or third parties engaged in
agriculture, not itself or themselves a public service, for
operation by the latter for a limited time and for a specific
purpose directly connected with the cultivation of his or their
farm, the transportation, processing, and marketing of
agricultural products of such third party or third parties shall not
be considered as operating a public service for the purposes of
this Act.
C. Legal Bases and Rationale for Regulation
Legal Basis: Sec. 6, Article XII, 1987 Constitution
Rationale: Police Power
Rules on exercise of police power:
- Protection against arbitrary and excessive rates.
- But not rates that are so low as to deprive the public utility of a
reasonable return on investment.
o Requires the balancing of investor and consumer interests
Republic of the Philippines v Meralco
MERALCO applied with the ERB to increase its distribution
charge to consumers by P0.21 per kwh. The ERB provisionally
granted a P0.184 increase subject to adjustment upon COAs
audit of MERALCOs books. The COA Report yielded the
recommendation that (1) MERALCOs income taxes be
excluded from operating expenses and that (2) the net average
investment method be used to determine the rate base, instead
of the average investment method employed by MERALCO.
The ERB adopted COAs findings and consequently ordered a
P0.017 increase and a refund of P0.167.
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The SC ruled that MERALCO failed to prove that the rates
fixed by ERB were unreasonable or confiscatory as to deprive
its stockholders a reasonable return on investment. Income
taxes should be borne by MERALCO alone and not shifted to
consumers. The net average investment method more
accurately reflects the real status of the property.
In Re: Legal Basis:
The regulation of rates to be charged by public utilities is
founded upon the police powers of the State and statutes
prescribing rules for the control and regulation of public utilities
are a valid exercise thereof.
Balancing of investor and consumer interests The State
protects the public against arbitrary and excessive rates while
maintaining the efficiency and quality of services rendered.
However, the power to regulate rates does not give the State
the right to prescribe rates which are so low as to deprive the
public utility of a reasonable return on investment. Thus, the
rates prescribed by the State must be one that yields a fair
return on the public utility upon the value of the property
performing the service and one that is reasonable to the public
for the services rendered.
D. Where does the Power to Regulate Public Utilities
Reside?
Rationale
Legislative By virtue of police power and
the law-making powers under
the
constitution.
Administrative Agencies By virtue of delegated powers
by Congress, as it would be
very impractical for Congress
to handle everything.
Albano v Reyes
The PPA, together with DOTC 1 Secretary Reyes, held a public
bidding for the development, management and operation of the
MICT at the Port of Manila. The winning bid was awarded to
respondent ICTSI. However, petitioner assails the award
claiming that MICT is a public utility, hence, a legislative
franchise is needed before it can legally operate.
The Court ruled that the Constitution does not imply that only
the Congress has the power to grant authority to operate. It
may be granted to specified agencies such as PPA. In this
case, the relevant laws (E.O. 30 and P.D. 857) expressly
empowers the PPA to provide services within the port Districts
and authorized it to choose to either undertake by itself or
contract, at its option, the operation and management of the
MICP. Therefore the Contract between PPA and ICTSI,
coupled with the Presidents written approval, constitute
necessary authorization and presumes validity and regularity of
official action.
In re: Source of Power: Franchises issued by Congress are not
required before each and every public utility may operate.
Thus, the law has granted certain administrative agencies the
power to grant licenses for or to authorize the operation of
certain public utilities.
KMU Labor Center v Garcia
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The LTFRB, pursuant to the Department Order 92-587 of the F. Not a Public Utility
DOTC Secretary, issued LTFRB Memo Circ. 92-009 which
gave provincial bus operators the power to fix rates 20% above Case Subject alleged Why it wasnt
and 25% below the LTFRB prescribed fare. PBOAP increased to be public
its fare by 20%, hence KMU filed a petition for certiorari utility
assailing the validity of DO 92-587 and Memo circ. 92-009. Tatad v Facilities to be The facilities used to build
Garcia used in the a public utility is not
The SC struck down both issuances because they constitute an construction of encompassed by the
undue delegation of legislative power (Congress, by the Public EDSA LRT (MRT) meaning of public utility.
Service Act, delegated to LTFRB legislative power to fix rates, Project Hence, the ownership of
no law provides for further delegation so LTFRB cannot further these facilities by a
delegate), and that Memo circ. 92-009 is contrary to the Public foreign corporation is not
Service Act with regard to the requirements for the grant of a synonymous to the
Certificate of Public Convenience. Memo circ. 92-009 provided operation of a public
that the requirements are to be determined by public need utility that is only limited
which is presumed in favor of the applicant, when instead it to Filipino owned-
should be the applicant who proves that it is capable of corporations
providing the public service. Iloilo Ice Ice plant Because it was not
and Cold holding its services out to
In Re: Source of Power: Although LTFRB was granted the Storage v the public indiscriminately
power to fix rates, as such delegation to an administrative body Public and only transacting
is allowed due to the complexity of modern life, the enabling Utility through special contracts,
law did not include a provision allowing the LTFRB to delegate Board then it is a private
such task. Hence, the doctrine of potestas delegata non enterprise. Hence, the
delegari potest (What has been delegated cannot be public may not demand
delegated) applies) for its service to be
conducted
JG Summit Shipyard A shipyard is an
Holdings v enclosure for
E. What happened to the Public Service Commission? CA building/repairing ships,
and by nature it has a
Timeline, Public Service Commission to LTFRB: limited clientele whom it
may choose to serve at its
1. During the Commonwealth period, the National discretion. It is not legally
Assembly passed a more comprehensive public utility obliged to render services
law. This was Commonwealth Act No. 146, as amended indiscriminately to the
or the Public Service Act, as amended. Said law public. The fact that it
created a regulatory and franchising body known as the offers its services does
Public Service Commission (PSC). The Commission not give the public a legal
(PSC) existed for thirty-six (36) years from 1936 up to right to demand that such
1972. services be rendered.
2. On September 24, 1972, Presidential Decree No. 1 was
issued and declared "part of the law of the land." The List of enterprises that are not covered by the definition of
same effected a major revamp of the executive public service as stated under section 14 of CA 146:
department. Under Article III, Part X of P.D. No. 1, the
1. Warehouses;
Public Service Commission (PSC) was abolished and
2. Vehicles drawn by animals and bancas moved by oar or sail,
replaced by three (3) specialized regulatory boards. and tugboats and lighters;
These were the Board of Transportation, the Board of 3. Airships within the Philippines except as regards rate fixing;
Communications, and the Board of Power and 4. Radio companies except as regards rate fixing;
Waterworks. The Board of Transportation (BOT) lasted 5. Public services owner or operated by any instrumentality of
for thirteen (13) years. the Government/GOCC except as regards rate fixing.
3. On March 20, 1985, Executive Order No. 1011 was
issued abolishing the Board of Transportation and the
Bureau of Land Transportation. Their powers and
functions were merged into the Land Transportation
Commission (LTC).
4. Two (2) years later, LTC was abolished by Executive
Order Nos. 125 dated January 30, 1987 and 125-A
dated April 13, 1987 which reorganized the Department
of Transportation and Communications.
5. On June 19, 1987, the Land Transportation Franchising
and Regulatory Board (LTFRB) was created by
Executive Order No. 202. The LTFRB, successor of
LTC, is the existing franchising and regulatory body for
overland transportation today.
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II. Constitutional Provisions
A. Article XII, 1987 Constitution
Section 6, 11, 17, 18, 19,Article XII, 1987 Constitution
Section 6. The use of property bears a social function, and all
economic agents shall contribute to the common good.
Individuals and private groups, including corporations,
cooperatives, and similar collective organizations, shall have
the right to own, establish, and operate economic enterprises,
subject to the duty of the State to promote distributive justice
and to intervene when the common good so demands.
Section 11. No franchise, certificate, or any other form of
authorization for the operation of a public utility shall be granted
except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines, at
least sixty per centum of whose capital is owned by such
citizens; nor shall such franchise, certificate, or authorization be
exclusive in character or for a longer period than fifty years.
Neither shall any such franchise or right be granted except
under the condition that it shall be subject to amendment,
alteration, or repeal by the Congress when the common good
so requires. The State shall encourage equity participation in
public utilities by the general public. The participation of foreign
investors in the governing body of any public utility enterprise
shall be limited to their proportionate share in its capital, and all
the executive and managing officers of such corporation or
association must be citizens of the Philippines
Section 17. In times of national emergency, when the public
interest so requires, the State may, during the emergency and
under reasonable terms prescribed by it, temporarily take over
or direct the operation of any privately-owned public utility or
business affected with public interest.
Section 18. The State may, in the interest of national welfare or
defense, establish and operate vital industries and, upon
payment of just compensation, transfer to public ownership
utilities and other private enterprises to be operated by the
Government.
Section 19. The State shall regulate or prohibit monopolies
when the public interest so requires. No combinations in
restraint of trade or unfair competition shall be allowed.
B. Ownership
Gamboa v Teves
Petitioner, as a stockholder of PLDT, filed the present case to
nullify the sale of PTICs stocks to MPAH, an affiliate of First
Pacific. According to petitioner, the sale was unconstitutional as
it violated the Filipinization of public utility which only allows at
most 40% capital ownership to foreign-owned corporations,
First Pacific being a Bermuda-registered, HK-based firm.
The Court agreed with petitioner, such that the term capital in
the Constitution refers 1) to common stocks, which have voting
power as provided in the Corporation Code, and 2) to preferred
shares, whenever the Article of Incorporation grants voting
rights to shareholders thereof. Under the PLDTs Articles of
Incorporation, holders of common shares have voting rights for
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all purposes, while holders of preferred shares have no voting
right for any purpose whatsoever.
Considering that common shares have voting rights which
translate to control, as opposed to preferred shares which
usually have no voting rights, the term capital in Section 11,
Article XII of the Constitution refers only to common shares.
The true test for a valid operation of a public utility under the
Constitution is for the legal title to the 60% common stocks,
coupled with the beneficial ownership thereof, be reserved to
Filipinos. Applying the rules to PLDT, foreign ownership is 64%,
hence because of this violation of the Constitution, PLDT was
sanctioned.
In Re: Ownership: The evident purpose of the citizenship
requirement is to prevent aliens from assuming control of public
utilities, which may be inimical to the national interest
In the Matter of: Corporate Rehab of Bayantel
Bayantel entered into several credit agreements with the
petitioners, but ended up failing to fulfill its obligations. It asked
for a debt restructuring, so the creditors filed for rehabilitation.
The RTC, acting as Rehabilitation Court, held that the
Rehabilitation Plan had to conform to the constitutional limit of
40% foreign ownership. This was upheld in the CA. The SC
also agreed, explaining that because Bayantel was a public
utlitity corporation, it fell under Sec. 11, Art. XII of the 1987
Constitution, which provides that 60% of the shares which have
voting rights must be controlled by Filipinos. Because
converting the unsustainable debt in Bayantels case would
result in 77.7% of shares being owned by foreign companies,
the ceiling of 40% had to be implemented.
C. Exclusivity
Metro Cebu Water v Adala
Adala applied for a CPC to operate waterworks system in
Cebu City. This was opposed by petitioner on account of a law,
PD 198, which vests an exclusive franchise upon public utilities,
The PD provided that petitioner GOCC had an exclusive
franchise over water works in Cebu.
The Court nullified the law as this was repugnant to Section 11
of the Consti, nor shall such franchise, certificate, or
authorization be exclusive in character or for a longer period
than fifty years.
D. Subject to Amendment
RCPI v NTC
RCPI established radio telegraph and radio telephone services
in some municipalities in the country. Eventually, Kayumanggi
Radio Network filed a complaint against RCPI due to the latters
operation in 2 municipalities without a certificate of public
convenience and necessity. RCPI alleged that they are
authorized to operate due to the legislative franchise granted to
it by NTC and its predecessor Public Service Commission. NTC
ordered RCPI to cease and desist from operating in the 2
municipalities.
The SC agreed with NTC. Looking at Sec 15 of E.O. 546, the
exemption enjoyed by radio companies from the jurisdiction of
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the Public Service Commission and the Board of
Communications no longer exists because of the changes
effected by the Reorganization Law and implementing
executive orders. RCPIs claim that its franchise cannot be
affected by Executive Order No. 546 on the ground that it has
long been in operation since 1957 cannot be sustained.
The Court validated such amendment as this was in conformity
with the Constitution, mandating that a franchise can be
subject to amendment, alteration, or even repeal by the
legislature when the common good so requires.
E. Fixed- Term
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Agan v Piatco
PIATCO won the bid for operation of NAIA IPT III.
In an earlier decision, this court held that there
were irregularities in the granting of the bid to
PIATCO and declared the contracts for the NAIA
IPT III project null and void. Respondents contests
this decision and to ask for compensation for the
take over of the government of NAIA IPT III, as
provided under the concession agreement.
The issue faced by the Court was WON the State could
validly take over the operation of NAIA III without just
compensation.

Francisco v TRB
Petitioners assail the constitutionality of the various PDs, which,
among others, granted the TRB the power to grant toll
operations certificates and to issue, modify and promulgate toll
rate charges, and the issuances it promulgated and
agreements entered into.
The Court held that there was valid delegation of powers. Some
clauses, however, in the supplemental toll operation
agreements, were invalidated for being violative of the PDs and
the Constitution.
The Court held that the State could as an exercise of police
power and not the power of eminent domain, and therefore
does not require the payment of just compensation. This was
particularly justified by Section 17, Art 12 of the Constitution.
NB: The case did not talk about the need for legislation to
implement Section 17, but nonetheless, as the David v
Macapagal-Arroyo was a later ruling, it can be concluded that
the exercise of Section 17 needs an implementing legislation.
G. Privatization of State-Operated Public Utilities

In Re: Fixed Term: There was a provision in the Supplemental
Toll Operation agreement that allowed for extension of
concessions, the Court held that while the TRB is vested with
the power to extend administrative franchise it grants, it cannot
do so for an accumulated period exceeding 50 years.
Otherwise, it would violate Art. XII, Sec. 11:
F. Take-over Power
David v Macapagal-Arroro
PP No. 1017 (A call by PGMA to the PNP to prevent or
suppress lawless violence, declaring a State of Emergency)
and GO No. 5 (the implementation order of PP 1017) was
issued as a
response to rising unrest and plots to destabilize
government and assassinate. The police also
raided The Daily Tribune and confiscated anything
pertaining to a mock-up of the dispersal that
took place.
Kuwait Airways v PAL
There was an existing commercial agreement between PAL
and KA which gives the former a share in the revenue earned
by the latter in transporting passengers from Manila to Kuwait.
However this was removed in the subsequent agreement
contracted by representatives of the government. The issue
faced by the Court was WON the bilateral agreement between
the government and KA is superior than the commercial
agreement.
The Court held that by virtue of PALs privatization, the role of
the state was limited to its regulatory capacity. It could not
infringe the property rights of PAL without the due process of
law. Since PAL was already privatized, the power of the
Government is limited to its capacity as a regulator.

The Court held that the declaration of a State of Emergency by

the President alone in PP 1017 was Constitutional, but such
declaration does not ispo facto lead to a valid take-over of
private property. The power to declare a State of Emergency is
vested in the Congress as provides for by Art 6, Sec 23 (2) In
times of war or other national emergency, the Congress may,
by law, authorize the President, for a limited period and subject
to such restrictions as it may prescribe, to exercise powers
necessary and proper to carry out a declared national policy.
Unless sooner withdrawn by resolution of the Congress, such
powers shall cease upon the next adjournment thereof.
Section 17 of Art XII must be understood as a facet of
emergency powers. Hence, the exercise of a takeover is not
upon the discretion of the President alone, but needs the
enactment of a law by the Congress to determine what is
reasonable terms.
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III. Regulation of Public Utilities
A Authority to Operate
Types of authorizations
1. Management contracts
2. JVA
3. TOA/STOA
4. Provisional authority
5. Administrative franchise
6. Legislative franchise
7. CPC
8. CPCN
CA 89 (Public Service Act), Section 16(a)
Section 16. Proceedings of the Commission, upon notice and
hearing. - The Commission shall have power, upon proper
notice and hearing in accordance with the rules and provisions
of this Act, subject to the limitations and exceptions mentioned
and saving provisions to the contrary :
(a) To issue certificates which shall be known as certificates of
public convenience, authorizing the operation of public service
within the Philippines whenever the Commission finds that the
operation of the public service proposed and the authorization
to do business will promote the public interest in a proper and
suitable manner.
Provided, That thereafter, certificates of public convenience
and certificates of public convenience and necessity will be
granted only to citizens of the Philippines or of the United
States or to corporations, co-partnerships, associations or joint-
stock companies constituted and organized under the laws of
the Philippines; Provided, That sixty per centum of the stock or
paid-up capital of any such corporations, co-partnership,
association or joint-stock company must belong entirely to
citizens of the Philippines or of the United States:
Provided, further, That no such certificates shall be issued for a
period of more than fifty years
Albano v Reyes Supra
Case was an example of authority to enter into Management
Contracts
PLDT v NTC
ETCI (private respondents) was granted a provisional authority
by the NTC to construct, install, establish, operate and maintain
a cellular mobile telephone system in Metro Manila, subject to
certain conditions (limited coverage, interconnection agreement
with PLDT, etc). PLDT opposed this, alleging that NTC has no
jurisdiction to grant authority to ETCI.
The court held that it is within the jurisdiction of the NTC to
issue the franchise. The NTC is the regulatory agency with
jurisdiction over all telecommunications entity. It is legally
clothed with authority and given ample discretion to grant a
provisional permit or authority. In fact, NTC may, on its own,
grant such relief even in the absence of a motion from an
applicant. NTC may also revoke, amend or revise the same.
Case was an example of authority to grant provisional authority
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Francisco v TRB- Supra
Case was an example of authority to grant administrative
franchise
NPC v CA
CEPALCO, the holder of the franchise providing electric supply
to Cagayan De Oro questioned the ruling of the NPC, granting
another power generator (FPI) to operate in the same area.
The FPI, in their defense argued that their rates were more
reasonable and their facilities were more accommodating to the
needs of the area. The NTC agreed with the view of the FPI,
hence, the grant of the authority.
The Court ruled that the NTC had no jurisdiction to confer
authority to FPI. A careful study of the law provides that the
jurisdiction to determine which power company should supply
energy in a given area lies with the Department of Energy.
Case was an example of legislative franchise
i General Qualifications
Definition:
A certificate of public convenience (CPC) is an authorization
granted by the LTFRB for the operation of land transportation
services for public use as required by law.
Requisites: (Sec 16, PSA)
1. Nationality Requirement- the applicant must be a citizen
of the Philippines, or a corporation or co-partnership,
association or joint-stock company constituted and
organized under the laws of the Philippines, at least
60% of its stock or paid-up capital must belong entirely
to citizens of the Philippines,
2. Financial Capability and Technical Know-how- the
applicant must be financially capable of undertaking the
proposed service and meeting the responsibilities
incident to its operation, and
3. Proof of promotion of Public Interest- the applicant must
prove that the operation of the public service proposed
and the authorization to do business will promote the
public interest in a proper and suitable manner. There
must be proper notice and hearing before the LTFRB
can issue a CPC.
Test for ruinous competition:
It must be shown that the business would not have
sufficient gains to pay a fair rate of interest in its capital
investments.
*The mere possibility of reduction in the earnings is not
sufficient.
Lat v PSC
Private respondent Diaz applied for a Certificate of Public
Convenience (CPC) for an ice plant. The petitioners, his
competitors, opposed his application, alleging that there was
lack of due process because they werent present in the
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hearing for the application of Diaz. They also allege that the
grant to Diaz would lead to ruinous competition.
The Court held that the private respondents
have met the requirements (see above) for the
awarding of a CPC and that there is insufficient
proof of ruinous competition because Diaz was only operating a
2 ton ice plant while petitioners were operating a 63 ton ice
plant.
KMU v Garcnia- Siupra
In Re General Qualifications: The assailed provision, giving
gave provincial bus operators the power to fix rates 20% above
and 25% below the LTFRB prescribed fare, militates against
the requirement of the law that the issuance of a CPC is
dependent upon the applicants capability to prove that it is
qualified. An applicant must, at all times, be required to prove
his capacity and capability to provide the public service, public
need should not be presumed in his favor.
ii. Revocation or Cancellation
Grounds for revocation/Cancellation of a CPC
1. The holder is a mere dummy
2. The Operator has ceased operations and placed
vehicles on storage
3. Operator totally abandoned service
*A CPC cannot be revoked if there is no showing of
willful and contumacious violation of the law and rules
Public Service Act, 16 (m)
Section 16. Proceedings of the Commission, upon notice and
hearing. - The Commission shall have power, upon proper
notice and hearing in accordance with the rules and provisions
of this Act, subject to the limitations and exceptions mentioned
and saving provisions to the contrary
(m) To amend, modify or revoke at any time certificate issued
under the provisions of this Act, whenever the facts and
circumstances on the strength of which said certificate was
issued have been misrepresented or materially changed.
Divinagracia v Consolidated Broadcasting System
Petitioner filed a complaint with the NTC praying for the latter to
cancel the franchise of CBS and PBS (both radio broadcasting
companies) for their alleged failure to comply with the
franchises terms stipulating that these companies should offer
to the public 30% of its common stocks.
The Court ruled that the NTC had no power to revoke/suspend
licenses. Although the NTC has the power to issue CPCs, the
power to revoke is not expressly granted to the NTC. It must be
noted that the subject matter of the dispute are broadcast
stationsan industry specially regulated by the state. Hence,
requiring a statute to provide for its franchise. For broadcast
stations it can be said that they are holders of dual franchise,
one from a law provided by congress and another by the NTC,
since the latter is the office regulating air waves. Thus, the
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Court ruled that to allow NTC to revoke the license is
essentially a death sentence in violation of the franchisees
rights, without any compelling state interest to allow NTC to
revoke in the first place.
3.A.iii CPC v CPCN
Certificate of Public Certificate of Public
Convenience Convenience and Necessita
Does not require a prior Requires prior issuance of
issuance of municipal municipal franchise
franchise
Public Service Act, 15
Section 15. With the exception of those enumerated in the
preceding section1, no public service shall operate in the
Philippines without possessing a valid and subsisting certificate
from the Public Service Commission known as "certificate of
public convenience," or "certificate of public convenience and
necessity," as the case may be, to the effect that the operation
of said service and the authorization to do business will
promote the public interests in a proper and suitable manner.
The Commission may prescribe as a condition for the issuance
of the certificate provided in the preceding paragraph that the
service can be acquired by the Republic of the Philippines or
any instrumentality thereof upon payment of the cost price of its
useful equipment, less reasonable depreciation; and likewise,
that the certificate shall be valid only for a definite period of
time; and that the violation of any of these conditions shall
produce the immediate cancellation of the certificate without the
necessity of any express action on the part of the Commission.
In estimating the depreciation, the effect of the use of the
equipment, its actual condition, the age of the model, or other
circumstances affecting its value in the market shall be taken
into consideration.
The foregoing is likewise applicable to any extension or
amendment of certificates actually in force and to those which
may hereafter be issued, to permit to modify itineraries and
time schedules of public services, and to authorizations to
renew and increase equipment and properties
PAL v CAB
1 Section 14. The following are exempted from the provisions of the
preceding section:
(a) Warehouses;
(b) Vehicles drawn by animals and bancas moved by oar or sail, and
tugboats and lighters;
(c) Airships within the Philippines except as regards the fixing of their
maximum rates on freight and passengers;
(d) Radio companies except with respect to the fixing of rates;
(e) Public services owned or operated by any instrumentality of the
National Government or by any government-owned or controlled
corporation, except with respect to the fixing of rates. (As amended by
Com. Act 454, RA No. 2031, and RA No. 2677 )
7

PAL questioned Civil Aeronotics Board s issuance of a
Certificate of Public Convenience and Necessity (CPCN) to
GrandAir in the absence of a legislative franchise for the latter
to operate. They also argue that a Certificate of Public
Convenience and Necessity requires a legislative franchise,
while a Certificate of Public Convenience (CPC) does not.
The Court disagreed with both submissions. It reiterated its
ruling in Albano v. Reyes, holding that a legislative franchise is
not necessary for the issuance of a CPCN if all the
requirements of law are met. Further, the fact that Necessity
is included in the title of a CPCN as opposed to a CPC does
not alter the requirements of law in such a way that the former
can only be issued when there is an existing legislative
franchise.
B Rate Fixing
Rationale for control by government:
By embarking capital in a utility, an investor agrees that its
charges to the public shall be reasonable. It becomes a public
servant a substitute for the State in the performance of the
public service. The compensation or opportunity to earn
guaranteed by the Constitution is the reasonable cost of
conducting the business.
What is just and reasonable9?
It is not a question of formula but of sound business
judgment based upon the evidence it is a question of fact calling
for the exercise of discretion, good sense, and a fair, enlightened
and independent judgment.
In determining the just and reasonable rates to be charged
by a public utility, 3 major factors are considered by the
regulating agency2:
1. Rate of return
a. A judgment percentage which, if multiplied with
the rate base, provides a fair return on the
public utility for the use of its property for
service to the public
b. Not prescribed by statute but by administrative
and judicial pronouncements
c. SC has consistently adopted a 12% rate of
return for public utilities
2. Rate base
a. An evaluation of the property devoted by the
utility to the public service or the value of
invested capital or property which the utility is
entitled to a return
3. Return itself
a. The computed revenue to be earned by the
public utility based on the rate of return and
rate base
Public Service Act, 16 (c)
Section 16. Proceedings of the Commission, upon notice and
hearing. - The Commission shall have power, upon proper
notice and hearing in accordance with the rules and provisions
of this Act, subject to the limitations and exceptions mentioned
and saving provisions to the contrary :
2 In Re Rate Fixing: *It has already been provided for in the notes
Republic v Meralco
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(c) To fix and determine individual or joint rates, tolls, charges,
classifications, or schedules thereof, as well as commutation,
mileage, kilometrage, and other special rates which shall be
imposed observed and followed thereafter by any public
service:
Provided, That the Commission may, in its discretion, approve
rates proposed by public services provisionally and without
necessity of any hearing; but it shall call a hearing thereon
within thirty days, thereafter, upon publication and notice to the
concerns operating in the territory affected:
Provided, further, That in case the public service equipment of
an operator is used principally or secondarily for the promotion
of a private business, the net profits of said private business
shall be considered in relation with the public service of such
operator for the purpose of fixing the rates.
Public Service Act, 20 (a)
Section 20. Acts requiring the approval of the Commission. -
Subject to established limitations and exceptions and saving
provisions to the contrary, it shall be unlawful for any public
service or for the owner, lessee or operator thereof, without the
approval and authorization of the Commission previously had
(a) To adopt, establish, fix, impose, maintain, collect or carry
into effect any individual or joint rates, commutation, mileage or
other special rate, toll, fare, charge, classification or itinerary.
The Commission shall approve only those that are just and
reasonable and not any that are unjustly discriminatory or
unduly preferential, only upon reasonable notice to the public
services and other parties concerned, giving them a reasonable
opportunity to be heard and the burden of the proof to show
that the proposed rates or regulations are just and reasonable
shall be upon the public service proposing the same.
Philcomsat v Alcuaz
Philcomsat applied for CPC and an authority to continue
charging its current rates, before the NTC. Upon the second
renewal of Philcomsats provisional authority, NTC ordered that
the rates Philcomsat charges be reduced by 15%. Philcomsat
filed a petition before the Court, claiming that it was not
afforded procedural due process (notice and hearing). The NTC
argued that its assailed act was within its rate-fixing power.
The Court held the order of the NTC was void as the rates were
made without notice and public hearing. Sec. 16(c)1 of the
Public Service Act requires proper notice and hearing in the
fixing and determination of rates. Whether the rate be
temporary or permanent, or whether it is made upon a
complaint, summary investigation, or upon NTCs own motion,
notice and hearing are required with regard to rate-fixing. Since
a hearing is essential, NTC should act solely on the basis of
evidence before it, and not on the knowledge or information
acquired by it but not offered in evidence in the said required
hearing.
Republic v Meralco- Supra
8

at the beginning of the Section on Rate Fixing
i Under Delegation
KMU Labor Center v Garcia Supra
In Re Under delegation: The Court held that there was undue
delegation of power to the bus operators
ii Provisional Rates
Requisites under LOI No 1334-A to approve new rates
provisionally without notice and hearing:
1. a finding that the main petition is sufficient in form and
substance;
2. the submission of an affidavit showing that the
increase in rates substantially conforms to the formula,
if any is stipulated in the franchise or toll operation
agreement, and that failure to immediately impose and
collect the increase in rates would result in great
irreparable injury to the petitioner;
3. the submission of a bond
Padua v Ranada
Citra, an investor in the Skyway Project, filed
before the Toll Regulatory Board an application to increase toll
rates, in view of the depreciation of the peso to the US dollar.
The TRB approved a provisional adjustment without notice and
hearing, which petitioners sought to set aside.
The Court ruled in favor of TRB. It held that an administrative
agency (such as TRB) may be empowered to approve
provisionally, when demanded by urgent public need, rates of
public utilities without a hearing. The reason being, provisional
rates are by their nature temporary and subject to adjustment in
conformity with the definitive rates approved after final hearing.
Moreover, the power of the TRB to approve rates provisionally
(without notice and hearing) is expressly provided for by law--
LOI No. 1334-A.
Freedom from Debt Coalition v ERC
The ERC promulgated an Order provisionally approving
MERALCOs ex parte application for rate increases. Petitioners
herein assail the Orders validity, alleging that the ERC was
without jurisdiction to grant the provisional rate adjustment
The Court held that the ERC has the power to grant provisional
rate adjustments as provided for under the EPIRA.
Unfortunately, the court also held that the grant of the
provisional rate adjustment to Meralco in the assailed Order
was tainted with grave abuse of discretion. The Court noted
that the ERC did not follow the requirements set forth in the
law: first, the need to publish the application in a newspaper of
general circulation in the locality where the applicant operates;
and second, the need for ERC to consider the comments or
pleadings of the customers and LGU concerned in its action on
the application or motion for provisional rate adjustment.
Because of these infirmities, the Order is declared invalid.
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iii Rate Refund
BF Homes v Meralco
Meralco cut the power off water pumps of BF Homes because
of non-payment of electric bills amounting to 4 million. BF
Homes requested Meralco to apply their 4 million debt to the
refund they were entitled to based on a decision promulgated
by the SC the year before. In the decision, they were allegedly
entitled to 11 Million pesos. Meralco refused to apply the refund
money because the Energy Regulatory Commission has not
yet approved the schedule of refund payments. BF Homes then
filed a writ of injunction with the RTC to inhibit Meralco from
cutting off power from their water pumps. The RTC granted the
writ.
The Court ruled that the RTC had no jurisdiction over the
dispute, as following the doctrine of primary jurisdiction, it was
the ERC that had the authority to rule on the dispute. The
offsetting of the debt of petitioner to their entitled refund credit
falls squarely within the jurisdiction of the ERC.
IV. Vis--vis Power to Grant Authority
Francisco v Toll Regulatory Board- Supra
In Re: Power to Grant Authority: The Court held that aside from
TRBs power to grant authority to possible franchise
holders, the TRB also has rate-fixing powers. It is very well
within the power of the TRB under the law to approve the
change in the current toll fees. Section 3 (d) of P.D. 1112
grants the TRB the power to [i]ssue, modify and promulgate
from time to time the rates of toll that will be charged the direct
users of toll facilities.
C. Area of Operation
Napocor v CA
CEPALCO, the holder of the franchise providing electric supply
to Cagayan De Oro questioned the ruling of the NPC, granting
another power generator (FPI) to operate in the same area.
The FPI, in their defense argued that their rates were more
reasonable and their facilities were more accommodating to the
needs of the area. The NTC agreed with the view of the FPI,
hence, the grant of the authority.
The Court held that the NTC had no jurisdiction to grant the FPI
the authority to operate.
In relation to this portion of the syllabus, the case exemplifies
how public utilities have a specific area of operation, hence
their franchise over the area gives rise to their right to be the
sole provider of such utility. In this case, CEPALCO has the
rights to operate in Cagayan De Oro hence, they questioned
the authority of FPI to also operate in a particular place within
CDO, as there arises a dispute on contract infringement.
D. Approval of Sale and Mortgages of Public Utility or Equity
Process
PSC has to hold a public hearing with notice to all interested
parties to determine if there are good and reasonable grounds to
justify the transfer
9

Rationale:
-franchise is personal in nature therefore any transfer or lease
thereof should be notified to the PSC.
- The PSC is in charge of safeguarding the public interest.
Montoya v Ignacio
A case was filed against Ignacio, the franchise holder of the
jeep that killed the wife of the petitioners. In Ignacios defense,
he alleged that he leased the jeep to Tahimik, hence, he should
not be held liable.
The Court held that Ignacio is still liable because the transfer of
his franchise was never approved by the Public Service
Commission. The law provides that any transfer or lease of a
franchise should be notified to the Public Service Commission
so that the latter may take proper safeguards to protect the
interest of the public. It follows that if the property covered by
the franchise is transferred, or leased to another without
obtaining the requisite approval, the transfer is not binding
against the PSC and in contemplation of law the grantee
continues to be responsible under the franchise in relation to
the Commission and to the public.
Zamboanga Transportation Co v Public Utility Commission
Zamboanga and Bachrach entered into a
mortgage to secure the purchase of two trucks. Petitioner failed
to pay, so in order to prevent the foreclosure on the original
mortgage, Bachrach Motor as mortgagee requested the
approval of the Public Utility Commission to execute a chattel
mortgage on said trucks. The issue before the Court was
whether the mortgagee may seek the approval of the PSC.
The Court ruled that the purpose of approval is the protection of
the public interest, and Bachrach may be the one to seek
approval from the commissioner to protect its interest as the
mortgagee.
Y Transit v NLRC
A bus company transferred ownership of its buses to its
President. While a labor case was pending against the bus
company, the President sold the buses to petitioner company.
The LA issued a ruling holding the bus company liable for
nonpayment of allowance and levied upon the bus companys
property, including the buses which were sold to the petitioner,
so the petitioner filed a third party complaint. Third party
complaint was granted, but the NLRC reversed and ordered the
levy.
The Court held that the buses should be levied as the transfer
of the buses from the original owners (the bus company) to its
President and subsequently, to Petitioner lacked the approval
of the PSC. Hence, the transferees merely held the buses as
agents of the registered owners (the original owners)
PLDT v NTC- Supra
ETCI (private respondents) was granted a provisional authority
by the NTC to construct, install, establish, operate and maintain
a cellular mobile telephone system in Metro Manila, subject to
certain conditions (limited coverage, interconnection agreement
with PLDT, etc). PLDT opposed this, alleging that NTC has no
jurisdiction to grant authority to ETCI.
In regard to this portion of the syllabus, PLDT also assails the
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transfer of stock of ETCI, alleging that the transfer requires the
approval of the PSC. This transfer of stock was among the
owners of ETCI.
The Court held that the approval of the NTC may be deemed to
have been met when it authorized the issuance of the
provisional authority to ETCI. There was full disclosure before
the NTC of the transfers. Hence the transfer were compliant
with the law.
E Power to set fees and other charges
Republic v International Communication Corporation
ICC filed with the NTC an application for a Certificate of Public
Convenience and Necessity to install and maintain an
international telecommunications leased circuit service. NTC
approved the application subject to the condition that ICC shall
pay a permit fee in the amount of P1,190,750, in accordance
with Sec 40(g) of the Public Service Act.
The Court that the NTC has the power to impose regulatory
measures. The absence alone of the word authorization in
Section 5(g) of RA 7921 cannot be construed to mean that the
NTC has been deprived of the power to collect such fees. The
words authorization, supervision and/or regulation
used in Section 40(g) of the Public Service Act are
not distinct and completely separable concepts
which may be taken singly or piecemeal. Unfortunately, in the
case at bar, the amount of P1,190,750 is just too high. Such
fees must be commensurate to the costs involved in
discharging its supervisory and regulatory functions.
F Other Means of Regulation
1. Law requiring to interconnect telcos (PLDT v NTC)
2. Ridjo doctrine
3. Provisional reliefs (BF Homes v Meralco)
4. Reasonable standard in establishing rules and
regulations (Taxicab v BOT)
Ridjo doctrine:
A public utility has the imperative duty to make a reasonable and
proper inspection of its apparatus and equipment to ensure that
they dont malfunction.
- Failure to do so is negligence on their part burdening them
with the consequence of such oversight.
PLDT v NTC - Supra
In regard to this portion of the syllabus, it must be noted that in
the provisional authority granted by NTC to ETCI, one of the
conditions imposed was that the latter and PLDT were to enter
into an interconnection agreement to be jointly submitted to
NTC for approval. This condition was opposed by PLDT.
The Court held that the NTC had the authority to order PLDT
and ETCI to enter into an interconnection agreement. Such
regulation of the use and ownership of telecommunications
systems is in the exercise of the plenary police power of the
State for the promotion of the general welfare.
As disclosed during the hearing, the interconnection sought by
ETCI is by no means a "parasitic dependence" on PLDT. The
ETCI system can operate on its own even without
interconnection, but it will be limited to its own subscribers.
10
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What interconnection seeks to accomplish is to enable the
system to reach out to the greatest number of people possible
in line with governmental policies laid down

BF Homes v Merallco - Supra

In regard to this portion of the syllabus, it must be noted that

the ERC has the authority to grant provisional remedies.
Hence, the prayer for a writ of preliminary injunction by the
petitioners with the RTC was invalid for going against the
doctrine of primary jurisdiction.
.

Taxicab v BOT

Petitioners assail the Memo Circulars which orders the

withdrawal from public service of taxi cabs over 6 years of use
and operation. They contend that the MCs violate due process
and equal protection clauses, because there was no hearing
and position papers accepted prior to the policy and it is only
implemented in Metro Manila.

The Court ruled that the MCs are valid because prior hearing
and position papers were only options of the BOT to guide
them in drafting policies. Moreover, the Court ruled that the law
provides that the agencies can choose how they would gather
their data. Hence there was no need to consult the operators,
and that it did not violate the equal protection clause since
there was a substantial distinction between them and operators
in other areas given the volume of traffic in Manila.
.

3. G Due Process Requirements

Pantranco v PSC

Petitioner applied with respondent to allow it to operate ten

additional trucks in compliance with its existing certificate and
with the current law. Respondent granted its application but
imposed two new conditions which fixed a 25-year period for
the validity of the certificate of public convenience, among
others, pursuant to CA no. 454. Petitioner filed a petition before
the SC to assail its constitutionality.

The Court upheld the said law, ruling that there was a valid
delegation of legislative powers to the respondent. However,
respondent violated petitioners right to due process when the
former imposed the 25 year period without giving notice and
allowing the latter to be heard.
.

KMU Labor Center v Garcia Supra

In regard to this portion of the syllabus, it must be noted that

the Court further ruled that in allowing bus operators to
determine what the rate should be will undermine the right of
the other parties (commuters) to due process. The purpose of a
hearing is to determine what a just and reasonable rate
is. Disregarding the procedural and constitutional right is
detrimental to the Constitution and public interest.

11

PART TWO: TRANSPORTATION LAW
I. General Discussion
A. Definition
A contract of transportation is one whereby a persons or
association of person obligate themselves to transport persons,
things or news from one place to another for a fixed price
(Crisostomo v CA)
Ratio: It is important to note when the contract is perfected to
determine liabilities of parties
B. Relationship to a Public Utility
If you examine Section 13(b) of the Public Service Act, various
modes of transportation are listed, thus putting such modes
within the coverage of the term public service if used by certain
persons for hire or compensation, with general or limited
clientele. The enumeration of Public Utilities rests solely on the
legislature
C. Nature of a Franchise
According to jurisprudence:
1. A CPC can be sold as it has considerable material
value (considered as a valuable asset (Raymundo v
Luneta)
2. It is affected with public interest and therefore, must be
submitted to the control of government (Cogeo-Cubao v
CA)
3. A CPC does not confer upon the holder any proprietary
right over the route covered thereby because is still
conditioned on public interest (Cogeo-Cubao v CA)
Raymundo v Luneta Motor
Petitioner is a purchaser of 2 Certificates of Public
Convenience from a certain De Guzman. However, before the
sale was consummated, these certificates were actually
attached by the creditor (Luneta Motor) of De Guzman because
of non payment of debt. The case was brought to the court to
determine whether or not a certificate of public convenience
may be the object of execution and garnishment sale.
The Court held that CPCs may be attached. Jurisprudence
provides for a test in determining WON property can be
attached and sold upon execution, i.e. whether the judgment
debtor has such a beneficial interest therein that he can sell or
otherwise dispose of it for value. Applying the said test, it was
held that CPCs are valuable assets since these are the
cornerstones on which the business of bus transportation is
built. They are even more valuable than ordinary properties,
taking into consideration that they are not granted to everyone
who applies for them but only to those who undertake to furnish
satisfactory and convenient service to the public
Cogeo-Cubao Operator & Driver Ass v CA
Private respondent Lungsod Silangan (LS) owned jeep line
and was a holder of a CPC, authorizing it to ply the Cogeo-
Cubao route. Angered because of a board resolution adopted
by LS, the appellant-association rallied and formed a human
barricade in one of the terminals as well as forcibly taking over
the operation of the jeepney service in the Cogeo-Cubao route
without any authorization from the Public Service Commission.
LS then filed a suit for damages. The question that confronts
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the court is WON LS is entitled to nominal damages for
invasion of property.
The Court held that LS is entitled to the said damages since a
certification of public convenience is included in the term
"property" in the broad sense of the term. Hence, when
appellant association unlawfully hindered LS from operating its
business, there was an invasion of property.
D. Scope of Franchise
San Pablo v Pantranco
Pantranco extended its bus operations to include ferry services
between Matnog (Sorsogon) and Allen (Samar). Its theory is
that the ferry service is a continuation of the highway which is
interrupted by the water, therefore no need of a separate CPC
as the same was necessary and incidental to the transportation
of passengers and cargoes. The question confronted by the
court was WON a CPC for ferry service was still necessary for
Pantranco
The Court held that Pantranco still needs a separate CPC for
their additional water transportation service as the Matnog and
Allen terminals are separated by an open sea, it is not merely a
continuation of the highway. Thus, Pantranco is already
engaged in interisland/coastal service that necessitates a
separate CPC.
E Prior-operator Rule
Definition
A first licensee/operator with a prior license should have more or
less a vested and preferential right over a person who seeks to
acquire another and a later license over the same route provided
that the following are complied with:
1. Keeps and performs with the terms and conditions of
the license;
2. Complies with the reasonable rules and regulations of
the commission; and
3. Meets the reasonable demands of the public.
Rationale
To secure adequate sustained service for the public at the
least possible cost, and to protect and conserve investments
already made for this purpose.
Batangas Transportation v Orlanes
Petitioner questioned the grant of a CPC to Orlanes covering a
particular route the former was already operating in. They
argue that granting a CPC to Orlanes would lead to ruinous
competition on their part. Furthermore, BTC argues that
Orlanes transportation service in other routes have proven to
be unsatisfactory, thus, the grant of the CPC would not further
public interest.
The Court revoked the license of Orlanes. In so doing, the
Court justifies the revocation on the fact that that jurisprudence
has laid down the rule that where an operator is rendering
good, sufficient and adequate service to the public, that the
convenience does not require and the public interests will not
be promoted in a proper and suitable manner by giving another
operator a certificate of public convenience to operate a
competing line over the same route.
So long as the first licensee keeps and performs the terms and
conditions of its license and complies with the reasonable rules
12

and regulations of the Commission and meets the reasonable
demands of the public, it should have more or less of a vested
and preferential right over a person who seeks to acquire
another and a later license over the same route. Otherwise, the
first license would not have protection on his investment, and
would be subject to ruinous competition and thus defeat the
very purpose and intent for which the Public Service
Commission was created.
F Kabit System
Definition:
A system where the grantee of a CPC allows another
person to operate under such franchise for a fee.
Rationale against the system:
A CPC is a special privilege conferred by government. Any
abuse of such privilege is against public policy and cannot be
countenanced
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due to the truck drivers fault. Gonzales sued for
damages but the truck owner alleged that
Gonzales had no legal personality to sue since he
was not the registered owner of the jeepney.
The Court held that Gonzales, despite being a Kabit is entitled
to damages since the evil sought to be avoided by law
enjoining the Kabit system was not present in the case. It must
be noted that the thrust of the law against the Kabit system is
not so much as to penalize the parties but to identify the person
upon whom responsibility may be fixed in case of an accident
with the end view of protecting the riding public. Hence, since
the dispute does not involve the determination of liability
between a Kabit and the license holder, Gonzales maintains
his right to collect damages as against the negligent truck
driver.
G Private nature; Rights and Obligations of Parties Inter se
arising from transactions relating to transportation

It is not per se illegal as there is no law punishing it Private Vehicles

as a crime. Nonetheless, it is against public policy because if we They are not public utilities (since no compensation)
are to allow such, owners will just transfer the erring vehicle to and their passengers are considered accommodation
another who does not have property to escape liability. passengers.
Their responsibility is to exercise ordinary or reasonable
It has been identified as one of the root causes of the prevalence care to avoid injuring his/her passenger.
of graft and corruption in the government transportation offices Note that under Art. 1761, passengers must also
observe due diligence to avoid injury to him/herself.
Kabit System Unregistered Sale
Sale is registered but not with No approval by the regulator Common Carrier Private Carrier
the owner of the assets Availability Holding out Contracts with
Void as to parties and 3rd Binding between parties indiscriminately special groups or
persons. Considered as a void individuals
contract under 1409 Required Diligence Extraordinary Ordinary Diligence
Diligence
Effects of Kabit system: Regulation Subject to state Not Subject
The operator on record is considered the operator of the vehicles regulation
under it as regards the public or 3rd persons Limitation of Allowed as Allowed, provided
- Ratio: To protect the riding public Liability provided by law not contrary to law,
morals, good
Parties to a kabit system will not be given any relief under the customs, public
law against each other (in pari delicto) policy
- But a kabit may enforce a claim against an offending party as Exempting Proving Casa fortuito, Art
the evil sought to be prevented by the law enjoining the kabit Circumstance Extraordinary 1174
system is not present therein Diligence and Art
1733
Teja v IAC Presumption of There is a No presumption
Teja sued Nale for the unpaid price, with interest and damages, negligence presumption
of a motorcycle. Their transaction included an agreement Governing Law Law on common Law on ObliCon
where Teja was to be registered as owner of the motorcycle carrier
with the LTC, while simultaneously allowing Nale to use Tejas
existing transport franchise. The appellate court reversed the i. Absent a Transportation Contract
ruling of the lower court granting recourse to Teja because both
parties are in pari delicto. Lara v Valencia
Lara, sick with malaria, hitched a ride with
The Court upheld the ruling of the IAC. The parties herein Valencia to Davao. Although Lara was invited to sit in the
operated under an arrangement, commonly known as the "kabit passengers seat, he chose to sit in the back of the pick-up. En
system" whereby a person who has been granted a certificate route, Lara fell from the pick-up
of public convenience allows another person who owns motor and sustained serious injuries leading to his
vehicles to operate under such franchise for a fee. A certificate death. The issue confronted by the court is WON Valencia is
of public convenience is a special privilege conferred by the liable for the death of Lara.
government. Abuse of this privilege by the grantees thereof
cannot be countenanced. The Court held that Valencia could not be
liable for Laras death. The owner and driver of a vehicle owes
Lim v CA to accommodation passengers or invited guests merely the
Gonzales passenger jeepney collided with a truck duty to exercise reasonable care so that they may be
13

transported safely to their destination. Thus, "The rule is
established by weight of authority that the owner or operator of
an automobile owes the duty to an invited guest to exercise
reasonable care in its operation, and not unreasonably to
expose him to danger and injury by increasing the hazard of
travel.
The owner of the vehicle in the case at bar is only required to
observe ordinary care, and is not in duty bound to exercise
extraordinary diligence as required by our law.
A passenger must observe the diligence of a father of a family
to avoid injury to himself which means that if the injury to the
passenger has been proximately caused by his own
negligence, the carrier cannot be held liable.
ii Liability of Registered Owner
Responsibilities of registered owner:
Liable for any quasi-delict caused by his/her vehicle even if a 3rd
person was driving it.
PCI Leasing v UCPB General Insurance
A hit and run occurred between a Mitsubishi lancer and an 18
wheeler truck. The truck hit the car from behind causing heavy
damage to the car, resulting in an explosion of its rear part.
UCPB, as insurer of the lancer and subrogated to the rights of
the insured, demanded payment from the registered owner of
the truck, PCI Leasing. PCI Leasing admitted to owning the
truck. However, in their defense, they argued that pursuant to a
contract of lease, SUGECO was the actual operator of the truck
and that the erring driver was the employee of said company.
The Court held that the principle of holding the registered
owner of a vehicle for quasi-delicts resulting from its use is well
established in jurisprudence. The main aim of motor vehicle
registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicle
on the public highways, responsibility therefor can be fixed on a
definite individual, the registered owner. Instances are
numerous where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles without
positive identification of the owner or drivers, or with very scant
means of identification. It is to forestall these circumstances, so
inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the
determination of persons responsible for damages or injuries
caused on public highways
II. Regulation of the Transportation Industry
General areas of regulation:
1. Area of Service
2. Rate-fixing
3. Penalties
4. Permits
5. Equipment
Differentiating Regulatory Agencies
CAAP CAB
LTO LTFRB
In-charge with the policy Regulates the business or
planning, direction and general economic aspect of the
welfare of the industry franchise
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A Department of Transportation and Communication, EO
125, Sec 4 and 5 (As amended by 125-A); EO 292, Book 4,
Title 15- See Annex, p 81
Mirasol v DPWH
Petitioner assailed the constitutionality the DOs that were
issued by DPWH, declaring certain expressways as limited
access facilities on 5 April 1993 and 25 June 1998,
respectively. Later, the TRB, under the DPWH, issued the
Revised Rules and Regulations on Limited Access Facilities.
Petitioners contend that the two issuances unduly expanded
the power of the DPWH in Section 4 of RA 2000 to regulate toll
ways. They further assert that the DPWHs regulatory authority
is limited to acts like redesigning curbings or central dividing
sections.
The Court held that the DOs are void because the DPWH has
no authority to declare certain expressways as limited access
facilities. Under the law, it is the DOTC which is authorized to
administer and enforce all laws, rules and regulations in the
field of transportation and to regulate related activities.
Since the DPWH has no authority to regulate activities relative
to transportation, the TRB cannot derive its power from the
DPWH to issue regulations governing limited access facilities.
The DPWH cannot delegate a power or function which it does
not possess in the first place. Since DO 74 and DO 215 are
void, it follows that the rules implementing them are likewise
void.
i Air
1 Civil Aviation Authority of the Philippines
Responsible for implementing policies on civil aviation to
assure safe, economic, and efficient air travel. The agency
prescribes safety standards and also investigates aviation
accidents. It undertakes the maintenance and operation of
airports and other similar facilities; registers aircrafts and other
incidents concerning the same and provides safety regulations
for air travel. Body that works with ICAO
International Civil Aviation Organization (ICAO)
The International Civil Aviation Organization (ICAO) is a UN
specialized agency, established by States in 1944 to manage the
administration and governance of the Convention on
International Civil Aviation (Chicago Convention).
ICAO works with the Conventions 191 Member States and
industry groups to reach consensus on international civil aviation
Standards and Recommended Practices (SARPs) and policies in
support of a safe, efficient, secure, economically sustainable and
environmentally responsible civil aviation sector. These SARPs
and policies are used by ICAO Member States to ensure that
their local civil aviation operations and regulations conform to
global norms, which in turn permits more than 100,000 daily
flights in aviations global network to operate safely and reliably
in every region of the world.
RA 9497 (2008), Sections 4, 21, 24, 35- See Annex, p. 82
2. Civil Aeronautics Board
Civil Aeronautics Board
Mandated to regulate, promote, and develop the economic
aspect of air transportation. Among others, it has supervision
14

and jurisdiction and control over air carrier, general sales agents,
cargo sales agents and airfreight forwarders, as well as their
property, property rights, equipment, facilities and franchise. It
issues CPC for air carriers.
RA 776, Sections 5, 10(A), 11 & 12- See Annex, p. 85
PAL v CAB (23 SCRA 992)
PAL opposed the grant by CAB to Fairways, another airline, of
a temporary operating permit, as it had not yet presented
evidence in the economic proceedings.
The Court ruled that the CAB has the authority to issue such
permits on its own initiative, and that there was no denial of due
process since what was at issue is a mere interlocutory order
and not a decision on the merits.
PAL v CAB (supra, the case on GrandAir)
In Re authority of CAB to issue a Temporary Operating Permit:
The Court held that the Board was expressly authorized by
R.A. 776 to issue the permit on its own initiative, implying that
the Board even had the power to issue the permit before the
completion of evidence for the application. Even if a legislative
franchise was required, this does not affect the Boards
jurisdiction to grant a permit as soon as the franchise was
given, thus it could still hear the application before the franchise
is legislated.
Kuwait Airways v PAL- Supra
In Re Authority of CAB: CAB has ample power under its
organizing charter, to compel PAL to terminate whatever
commercial agreements the carrier may have. After all, Sec. 10
of R.A. No. 776 grants to the CAB the general supervision and
regulation of, and jurisdiction and control over, air carriers as
well as their property, property rights, equipment, facilities and
franchise, and this power correlates to its Sec 4(c) which
mandates that the Board consider in the exercise of its
functions the regulation of air transportation in such manner as
to recognize and preserve the inherent advantages of, assure
the highest degree of safety in, and foster sound economic
condition in, such transportation, and to improve the relations
between, and coordinate transportation by air carriers.
ii Land
1 Land Transportation Office
Land Transportation Office (LTO)
Concerned with the registration of drivers and motor vehicles.
RA 4136 prescribes procedure for the examination, licensing and
bonding of drivers; the registration and re-registration of motor
vehicles, transfer of ownership, change of status, etc.
EO 125-A, Secs 9, 11, 13 (a)- See Annex, p. 85
2 Land Transportation Franchising and Regulatory Board
Land Transportation Franchising and Regulatory Board
(LTFRB)
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Exercises quasi-judicial and regulatory powers with respect to
land transportation; among its more important powers include the
power to issue, amend, revise CPCs; prescribe routes,
reasonable fare rates.
EO 202, Secs 1,2,4,5,6,7, EO 292, Title XV, Secs 15-22- See
Annex, p. 86
KMU Labor Center v Garcia- Supra
In regard to this portion of the syllabus, the SC held that
nowhere in the PSA are the regulatory bodies authorized to
delegate the power to fix and determine rates to a common
carrier, a transport operator or other public service. What has
been delegated cannot be delegated.
iii Water
Maritime Industry Authority
Maritime Industry Authority (MARINA)
Has jurisdiction over the development, promotion, and regulation
of all enterprises engaged in the business of vessels, shipyards,
dry-docks, marine railways, shipping and freight forwarding
agencies and similar enterprises.
Rationale for deregulation of shipping industry
To encourage investments in the industry by existing operators
and attract new investments.
EO 125, Secs 4, 14, RA 9295, Secs 8, 10, 11 - See Annex, p.
88
III. Common Carriers
A. In General
i. Definitions, Essential Elements
Civil Code Art 1732
Art 1732. Common Carriers are persons, corporations, firms, or
associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air,
for compensation, offering their services to the public.
Elements of a Common Carrier
1. Persons, Corporations, Firms, Associations
2. Engaged in the business of carrying or transporting
3. Passengers, goods of both
4. By land, water, air
5. For compensation
6. Offering their services to the public (see below for
discussion on public use, this is the principal difference
between a common carrier and a private carrier)
Art 1732 makes no distinction:
1. 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) (Fabre v. CA, 1996)
2. 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
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3. Between a carrier offering its services to the general 3. He must undertake to carry by the methods of which his
public and who offers services or solicits business only business is conducted and over his established roads.
from a narrow segment of the general population (De 4. The transportation must be for hire.
Guzman vs. CA)
The true test is whether the given undertaking is a part
Hence, the provision applies to all the above of the business engaged in by the carriers which he has
mentioned. The intent of the law is thus to not consider held out to the general public as his occupation rather
such distinctions. Otherwise, there is no telling how than the quantity or the extent of the business actually
many other distinctions may be concocted by transacted, or the number and character of the
unscrupulous businessmen engaged in the carrying of conveyances used in the employment. The question
persons or goods in order to avoid the legal obligations must be determined by the character of the business
and liabilities of common carriers. (Cruz v Sun actually carried on by the carrier, not by any secret
Holidays) intention or mental reservation it may entertain or assert
when charged with the duties and obligations that the
Parties to a contract of transportation law imposes.(Bascos v CA)
1. Shipper or Consignor- one who gives rise to the
contract of transportation by agreeing to deliver the Common Carrier Private Carrier
things or news to be transported, or to present his own Availability Holding out Contracts with
person or those of other or others in the case of indiscriminately to the special groups or
transportation of passengers public in such a individuals to carry
manner as to render for hire
2. Carrier or Conductor- one who binds himself to him liable to an action
transport persons, things, or news as the case may be; if he should refuse to A private carrier is
one employed in or engaged in the business of carrying carry for anyone who not bound to carry
goods for others for hire wished to employ him for any reason
unless it enters into
3. Consignee- the party to whom the carrier is to deliver A common carrier is a special
the things being transported; one to whom the carrier bound to carry all who agreement to do so
may lawfully make delivery in accordance with its offer and tender
contract of carriage (but the shipper and consignee may reasonable
be one person) compensation for
carrying them.
Freight Defined- The term is used in the ff manners: Required Extraordinary Ordinary Diligence
1. The price or compensation paid for the transportation of Diligence Diligence
goods by a carrier, at sea from port to port. Regulation Subject to state Not Subject
2. But the term is also used to denote the hire paid for the regulation
carriage of goods on land from place to place, or on Limitation of Allowed as provided Allowed, provided
inland streams or lakes. Liability by law not contrary to law,
3. The name is also applied to the goods or merchandise morals, good
transported at sea or inland streams or lakes. customs, public
policy
Thus, the term is used in 2 senses: to designate the Exempting Proving Extraordinary Casa fortuito, Art
price for the carriage, also called freightage, or to Circumstance Diligence and Art 1733 1174
designate the goods carried. Presumption of There is a No presumption
negligence presumption
Contracts through transportation agents- A contract of Governing Law Law on common Law on ObliCon
transportation is not changed, altered, or affected by the mere carrier
fact that the obligor avails of other parties to effect the
transportation agreed upon, as in the case of transportation Meaning of Public Use- Under the Public Service Law, two
agents. things are necessary to be under the ambit of the law:
Carriers defined- Persons or corporations who undertake to
(a) The individual, copartnership, etc., etc., must be a public
transport or convey goods, property or persons, from one place utility; and
to another, gratuitously or for hire, and are classified as private (b) The business in which such individual, copartnership, etc., is
or special carriers, and common or public carriers.
engaged must be for public use.
Private Carriers defined- Those who transport or undertake to
"Public use" means the same as "use by the public." The
transport in a particular instance for hire or reward. essential feature of the public use is that it is not confined to
privilege individuals, but is open to the indefinite public.
Test for a common carrier (Agbayani)
1. He must be engaged in the business of carrying goods It is this indefinite or unrestricted quality that gives it its public
for others as a public employment, and must hold character. In determining whether a use is public, we must look
himself out as ready to engage in the transportation of
not only the character of the business to be done, but also to the
goods for persons generally as a business and not a
proposed mode of doing it. If the use is merely optional with the
casual occupation. owners, or the public benefit is merely incidental, it is not a public
2. He must undertake to carry goods of the kind to which use, authorizing the exercise of the jurisdiction of the public utility
his business is confined.
16

commission. There must be, in general, a right which the law
compels the power to give to the general public. It is not enough
that the general prosperity of the public is promoted. Public use
is not synonymous with public interest. The true criterion by
which to judge of the character of the use is whether the public
may enjoy it by right or only by permission. (US v Tan Piaco)
US v Tan Piaco
Tan Piaco rented two automobile trucks and was using them
upon the highways of Leyte for the purpose of carrying some
passengers and freight. He carried passengers and freight
under a special contract in each case and had not held himself
out to carry all passengers and freight for all persons who might
offer passengers and freight. He was convicted for violation of
the Public Utility Law for operating a public utility without
permission from the Public Utility Commission.
The Court held that the trucks used by defendant were used
under special agreements to carry particular persons and
property, and not for public purpose. He was engaged in a
purely private enterprise as he did not render service to all who
may apply of his service. Hence, he does not fall under the
ambit of the aforementioned law, he can in no sense be
considered a public utility, for public use
Home Insurance Co v American Steamship
San Miguel Corp, as consignee of a shipment of fish meal,
sought damages from the owner of the ship (defendant) which
transported the cargo because it arrived with shortages. Home
Insurance, subrogated to the rights of SMC filed a suit against
defendant corporation. In their defense, AS argued that their
contract clearly stipulated that charterer (in this case, Luzon
Stevedoring) and not the shipowner is held to be liable for any
damage or loss. The lower court did not find merit in this
argument of defendant. Rather, it held them liable since the
Code of Commerce expressly provides for their liability and that
the aforementioned stipulation is against art 1744 and 1735 of
the Civil Code, or the provisions on common carriers.
The Court held in favor of defendant, holding the stipulation as
valid. The Court found that the arrangement between SMC and
AS does not fall under the laws of a common carriers as AS
was a private carrier. It must be noted that in this case, AS only
undertook to carry a special cargo to a special person.
De Guzman v CA
Respondent Cendana was a junk dealer reselling scrap metal
sourced from Pangasinan in Manila. For this reason, he owned
trucks to transport the metal goods to Manila. As a side
business, he would load his vehicles with various goods of
merchants on the return trip of the trucks to Pangasinanone
of which was the Petitioners. Unfortunately, the truck carrying
petitioners goods was hijacked resulting to the loss of the
goods. The petitioner filed a suit, claiming the value of the lost
goods based on an alleged contract of carriage. Cendena
argued that he was not a common carrier, as it was not his
principal business. As a matter of fact, he was not even a
holder of a CPC. Hence, he maintained that he could not be
liable for the consequence of a force majeure.
The Court held that Cendana is a common carrier even though
he backhauled 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 his occupation was not the carriage of goods
for others. There is no dispute that he charged his customers a
fee for hauling their goods; that fee frequently fell below
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commercial freight rates is not relevant here. Art 1732 of the
Civil Code makes no distinction as to the regularity of the
enterprise, thus, all the elements being present, Cendena falls
under the laws on common carriers.
Nonetheless, the court held that Cendena was not liable for the
loss of petitioner. Common carriers are not made absolute
insurers against all risks of travel and of transport of goods, and
are not held liable for acts or events which cannot be foreseen
or are inevitable, provided that they shall have complied with
the rigorous standard of extraordinary diligence.
Bascos v CA
Bascos was subcontracted by Cipriano to transport part of a
shipment the later was obliged to haul. Unfortunately, Bascos
failed to deliver the shipment because the truck carrying the
cargo was hijacked. Cipriano, paying for the losses incurred by
the owner of the cargo, sought reimbursement from Bascos.
Bascos contended the absence of a contract of carriage as
what was present was merely a contract of lease, thus, the
presumption of negligence cannot be applied in her case.
The Court ruled that Bascos was a common carrier. Because
she failed to present proof that she exercised extraordinary
diligence, the Court held her liable for the reimbursement
sought by Cipriano.
In arriving at this conclusion, the Court adapted the doctrine
culled from De Guzman v CA about the absence of distinctions
in Art 1732. In this case, it is sufficient that petitioner held
herself in public as a trucking business, offering her trucks to
those with cargo to move to be considered a common carrier.
It must be noted that the designation of the parties of the
contract was not conclusive on the Courts
Planters Products Inc v CA
Petitioners ordered urea fertilizer from a supplier in America. To
facilitate the shipment's delivery in the Philippines, petitioner
entered into a charter party arrangement with private
respondent, KKKK. Hence, using KKKK's vessel M/V Sun Plun,
the shipment was shipped from Alaska, USA to La Union, Ph.
When the cargo arrived, petitioners discovered that there was a
shortage. This resulted to the filing of a suit for damages
against KKKK. To defeat the presumption of negligence
present in CC the defendants argue that because of the charter
party arrangement, they cannot be considered CC.
The Court held that the vessel remained to be a CC because
when PPI chartered the vessel, the operation of the ship
remained under the control of KKKK. The parties herein
entered into a contract of affreigtnment which involves the use
of shipping space only as opposed to a charter by demise or
bareboat charter, where the whole vessel is transferred,
together with operation and command. The latter arrangement
converts a common carrier to a private carrier, but the former
maintains the nature of the vessel as a common carrier.
However, the presumption of negligence was overcome by the
showing of extraordinary zeal and assiduity by the carrier.
Fabre v CA
The Fabre Spouses were principally engaged in operating a
school service, transporting children to their school using their
minibus. On a particular occasion, a religious group entered
into an arrangement with Fabres, availing of their minibus
service to transport them to La Union. The minibus was driven
17

by the driver of the Fabres. Unfortunately, the group met an
accident resulting to the paralysis of one of the passengers.
The case was filed to seek damages from petitioner. For their
defense, the Fabres disavowed liability, claiming to have
exercised due diligence in the selection of their employees.
The Court held Petitioner liable for the injuries. The Court
reasoned that the defense of due diligence in the selection of
employees is not available to them as the Fabres fall under the
provisions on CC (Art 1759). Even if they were principally
engaged in the operation of a different transport service than
that where the incident took place, it must be noted that 1732
does not make a distinction. All elements being present, the
Fabres are validly CCs.
Loadstar Shipping v CA
LOADSTAR received on board its vessel goods for shipment
which were insured with MIC. The vessel sank off Limasawa
Island. The consignee made a claim with LOADSTAR which
ignored the same. LOADSTAR denied any liability and claimed
that the sinking was due to force majeure. CA ruled against
LOADSTAR, saying it is liable for the loss as it is a common
carrier. LOADSTAR appealed, asserting, among other things,
that it was not issued a CPC. As such, it is not a common
carrier.
The SC affirmed the CA decision, ruling that it is not necessary
that the carrier be issued a CPC, and this public character is
not altered by the fact that the carriage of the goods in question
was periodic, occasional, episodic or unscheduled. LOADSTAR
fits the definition of a common carrier under Art. 1732 of the
Civil Code.
First Philippine Industrial Corp v CA
FPIC is a grantee of a pipeline concession. City
Treasurer required FPIC to pay a local tax. FPIC claims
exemption by virtue of its being a common carrier, engaged in
the business of transporting petroleum products from the
Batangas refineries, via pipeline, to Sucat and Pandacan
Terminals.
The Court held that FPIC is exempt from paying local tax as the
aforementioned is clearly a CC. Based on the Civil Code 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.
Moreover, it must be noted that multiple laws recognize the
nature of FPIC as a common carrier (e.g. Petroleum Act, Public
Service Act, BIR Rulings)
Crisostomo v CA
Petitioner missed her flight bound for Europe because she was
misinformed by her travel agency (defendants) of the date of
her departure. Because of this mistake, Petitioner was not able
to join the European tour she booked through the aid of the
defendants. To compensate the petitioner for this mistake, the
defendants made an offer to petitioner to take a different tour
as a substitute. Petitioner took the offer, but upon her return,
filed a suit to refund the difference of the amount she paid for
and the substituted tour. Petitioner contends that respondent
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did not observe the standard of care required of a CC when it
informed her wrongly of the flight schedule.
The Court held in favor of the defendant agency and found
Crisostomo negligent. In arriving at this conclusion, the court
had to invalidate the claim that the agency is a CC. Defendant
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. In determining so, the Court
did away with the argument of petitioner that defendant, as a
CC, was obliged to exercise extraordinary diligence in the
fulfillment of its obligations.
Cruz v Sun Holidays
A newlywed couple on their way to defendant resort in Puerto
Galera met a tragic accident as the ferry they were riding in
turned table. The parents of one of the deceased brought this
case to court demanding damages and indemnification from the
defendant resort (the operator of the boat that sank). They
claim that the defendant, as CC, failed to exercise extraordinary
diligence required by law. The defendants argued that they
were not CC, nonetheless, they exercised extraordinary
diligence.
The Court ruled in favor of petitioners. It held that Sun Holidays,
as operator of the ferry, is considered a CC since its ferry
services are so intertwined with its main business as to be
properly considered ancillary thereto. In arriving at this
conclusion, the court took notice of the doctrine that Art 1732
does not make any distinctions as to the nature and extent of
the operation of the carrier. The fact that the defendant does
not charge separate fee for boat fare is of no moment because
transportation fee is factored in at the tour package price.
Lastly, the Court ruled that there was an absence of
extraordinary diligence as the defendants disregarded the
announcement of PAGASA of the bad weather on that day.
ii. Nature and Basis of Liability
Civil Code Art 1733, 1734, 1735, 1745 (5) (6) (7), 1755, 1756
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 the goods and for
the safety of the passengers transported by them, according to
all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is
further expressed in articles 1734, 1735, and 1745, Nos. 5, 6,
and 7, while the extraordinary diligence for the safety of the
passengers is further set forth in articles 1755 and 1756.
Goods:
Article 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international or
civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in
the containers;
(5) Order or act of competent public authority.
18

Article 1735. In all cases other than those mentioned in Nos. 1,
2, 3, 4, and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as required in
article 1733.
Article 1745. Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public policy:
(5) That the common carrier shall not be responsible for the
acts or omission of his or its employees;
(6) That the common carriers liability for acts committed by
thieves, or of robbers who do not act with grave or
irresistible threat, violence or force, is dispensed with or
diminished;
(7) That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the
defective condition of the car, vehicle, ship, airplane or
other equipment used in the contract of carriage.
Over the Passengers:
Article 1755. A common carrier is bound to carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances.
Article 1756. In case of death of or injuries to passengers,
common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755.
Basis of liability- Contract of carriage
Nature of liability- Direct and immediate
Culpa Contractual Culpa Aquiliana
Cause of Action The breach of the The wrongful or
obligation under the negligent act or
contract omission
Nature of Liability Direct and Vicarious
of Common immediate
Carrier
Principles governing the liability of the common carrier
(Isaac v AL Ammen):
(1) The liability of a carrier is contractual and arises upon
breach of its obligation, said breach occurring if it fails to
exert extraordinary diligence according to all circumstances
of each case;
(2) A carrier is obliged to carry its passenger with the utmost
diligence of a very cautious person, having due regard for all
the circumstances;
(3) A carrier is presumed to be at fault or to have acted
negligently in case of death of, or injury to, passengers, it
being its duty to prove that it exercised extraordinary
diligence; and
(4) It is not an insurer against all risks of travel
Extraordinary diligence required of common carriers- The
law requires CC to exercise extraordinary diligence which means
that they must render service with the greatest skill and utmost
foresight. The extraordinary diligence required in the handling of
goods of shippers and consignees last from the time the cargoes
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are loaded in the vessel until they are discharged and delivered
to the consignees (Agbayani)
Reasons for requirement- The nature of the business of CC
and the exigencies of public policy demand that they observe
extraordinary diligence, the business of CC is impressed with
special public duty and therefore subject to the control and
regulation by the state. The public necessarily relies on the care
and skill of CC in the vigilance of goods and safety of the
passengers.
Cangco v MRR
Cangco, an employee of Manila Railroad (defendant), was on
board one of the trains of defendant. As it came to a halt, he
stepped out and tripped on a sack of watermelons on the
platform. He went under the train and his right arm was
lacerated and later amputated. He sued the defendant, claiming
that its employees were negligent in placing an obstruction in
the platform. For their defense, MRR imputed contributory
negligence on Cangco.
The Court held that Cangco acted without imprudence in
alighting from the train considering his age and his familiarity
with the said practice. Hence, there can be no contributory
negligence imputed to him. With regard to the liability of MRR,
the Court held that the obligation of MRR to Cangco arose from
a contract of carriage, ergo, their liability is direct and
immediate. The ruling would have been different if the liability
arose from an extra-contractual obligation, allowing defendants
herein to be absolved from liability if due diligence was
exercised in the selection of employees.
The contract of defendant to transport plaintiff carried with it, by
implication, the duty to carry him in safety and to provide safe
means of entering and leaving its trains (civil code, article
1258). That duty, being contractual, was direct and immediate,
and its non-performance could not be excused by proof that the
fault was morally imputable to defendant's servants.
Isaac v A.L. Ammen
Plaintiff boarded a passenger bus, owned by defendant. But,
before reaching his destination, the bus collided with a pick-up
type motor vehicle, which resulted in his injury and severance
of his left arm. Plaintiff brought an action for damages against
defendant based on the latters breach of its contractual
obligation as a common carrier. According to plaintiff, the act of
the driver in squeezing his way through between oncoming
obstacles was considered negligent.
The Court held in favor of the bus driver, ruling that he
exercised utmost diligence in avoiding the collision. It must be
considered that the sense of caution one should observe
cannot always be expected from one who is placed suddenly in
a predicament where he is not given enough time to take
proper cause of action under ordinary circumstances. For this
reason, courts have held that failure to observe the same
degree of care that as ordinary prudent man would exercise
under ordinary circumstances when confronted with a sudden
emergency was held to be warranted and a justification to
exempt the carrier from liability.
Also, the plaintiff was guilty of contributory negligence for
sticking out his elbow outside the window, this was the
proximate cause
Fores v Miranda
Plaintiff Miranda sought to recover damages due to a collision
caused by a jeepney which was allegedly owned by the
19

petitioner at the time the collision occurred. Petitioner alleges
that the vehicle was sold to someone else one day before the
collision occurred.
The Court held that since the transfer was made without
approval of the PSC, responsibility remained with the grantee
under the franchise, the petitioner in this case. However, the
award of moral damages were deleted as bad faith was absent
in the breach of the contract of transportation (Art 2220). While
it is true that negligence may be occasionally so gross as to
amount to malicea fact that fact must be shown in evidence--
a carrier's bad faith is not to be lightly inferred from a mere
finding that the contract was breached through negligence of
the carrier's employees. Hence, absent sufficient proof clearly
evidencing bad faith, no moral damages may be collected.
Phil Rabbit v IAC
The jeep, owned by Sps Mangune, suddenly U-turned because
one of its rear wheels got detached. Almost at the same time it
turned, a bus, operated by Phil Rabbit, coming from the
opposite direction bumped its rear, killing 3 passengers. Cases
were filed against the Sps, Phil Rabbit and the drivers of the
two colliding vehicles. The issue confronted by the court is the
identity of the proper party that should be liable for the deaths
and injuries of the passengers.
The Court held that the jeepney drivers act was the proximate
cause of the collision. In ascertaining liability, the Court avowed
that in culpa contractual relations, the moment a passenger
dies or is injured, the carrier is presumed to have been at fault
or to have acted negligently, and this disputable presumption
may only be overcome by evidence that he had observed extra-
ordinary diligence as prescribed in Articles 1733, 1755 and
1756 of the New Civil Code or that the death or injury of the
passenger was due to a fortuitous event. In the case at bar, the
Sps were not able to prove that they exercised extra-ordinary
diligence, hence the presumption becomes conclusive.
LRTA v Navidad
Navidad got into a scuffle with the LRT stations security guard.
Tragically, because of this altercation, the former fell onto the
train tracks and was run over by the train and subsequently
died. The widow sued the security agency, the LRTA and the
train operator.
The Court held that the LRTA was liable for the death of
Navidad due to its nature as a common carrier. The duty of a
common carrier to provide safety to its passengers obligates it
not only during the course of the trip but for so long as the
passengers are within its premises and where they ought to be
in pursuance to the contract of carriage. The foundation of
liability is the contract of carriage. And its obligation to
indemnify the victim arises from the breach of that contract by
reason of its failure to exercise the high diligence required of
common carriers.
The train operator was absolved of any liability, there being no
showing that he was guilty of any act or omission directly
relatable to the death of the victim. The security agency was
likewise absolved. It was not shown that it failed to exercise
due diligence in the selection of the security guard involved in
the scuffle.
iii. Classes of Common Carriers
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Civil Code Art 1732 Supra
Civil Code Art 1733 supra
Civil Code Art 1755 supra
As to service
(1) Carrier of goods
(2) Carrier of passengers
As to mode of transportation
(1) Land
(2) Water
(3) Air
iv. Law Applicable
Civil Code Art 1766, 1753
Article 1766. In all matters not regulated by this Code, the rights
and obligations of common carriers shall be governed by the
Code of Commerce and by special laws.
Article 1753. The law of the country to which the goods are to
be transported shall govern the liability of the common carrier
for their loss, destruction or deterioration.
Applicability of laws (in order)
(1) Civil Code
(2) Code of Commerce
(3) Special laws (e.g. Carriage of Goods by Sea Act; Salvage
Act)
*Note:
The New Civil Code primarily governs CC
The Code of Commerce and Special laws have only
subsidiary application to CC
According to Art. 1753, the law of the country to which
the goods are to be transported shall govern the liability
of the common carrier for their loss, destruction, or
deterioration.
National Development Co v CA
Ship owned by NDC and managed by MCP as NDCs agent
figured in a collision near Japan. It must be noted that this ship
was carrying cargo from San Francisco, to be delivered to the
Philippines. Because of this, private respondent insurance
company, subrogated to the rights of the owner of the damaged
cargo, brought this case to the Court to collect damages from
petitioners. The pivotal issue in this case is the determination of
which laws govern loss or destruction of goods due to collision
of vessels outside Philippine waters, and the extent of liability
as well as the rules of prescription provided thereunder.
The Court held that liability of a carrier is governed primarily by
the civil code and, in all matters not regulated by it, the rights
and obligations of a common carrier shall be governed by the
code of commerce and by laws, hence the Philippine laws.
Jurisprudence provides 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.
B. Common Carriage of Goods
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i. Liability and presumption of negligence
Civil Code Art 1733, 1734, 1735.
Art 1733. Common carriers, from the nature of their business
and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to
all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is
further expressed in articles 1734, 1735, and 1745, Nos. 5, 6,
and 7, while the extraordinary diligence for the safety of the
passengers is further set forth in articles 1755 and 1756.
(SUBSECTION 2. Vigilance Over Goods)
Art 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster
or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in
the containers;
(5) Order or act of competent public authority.
Art 1735. In all cases other than those mentioned in Nos. 1, 2,
3, 4, and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as required in
article 1733.
G.R.: When loss, destruction or deterioration of goods occurred
during carriage, there is a presumption of negligence.
E:
Natural Disaster
Act of public enemy
Act/Commission of shipper
Character of goods; defects in packaging
Order of competent public authority
Restatement requisites of presumption from Ynchausti:
1. There is a contract of carriage;
2. Goods were delivered in control/custody of carrier;
3. Goods were received in good condition; and
4. Goods were lost, damaged, deteriorated.
How to rebut presumption:
Proof of exercise of extraordinary diligence
Responsibility of common carriers- In general, CC are
responsible for the loss, destruction, or deterioration of the goods
carried by them.
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Source of obligation: Contract, as the relation between a
carrier and its patron is contractual in nature.
Requisite Diligence:
1. Extraordinary diligence in the vigilance over the goods
(from the moment the goods are loaded in the vessels
until they are discharged and delivered to consignees)
2. Extraordinary diligence for the safety of the passengers
(Should be exercised not only during the course of the
trip but for so long as the passengers are within its
premises and where they ought to be in pursuance to
the contract of carriage)
The CC must give due regard to all circumstances
and take all steps necessary to insure the safety of
the passengers and the goods given the
circumstances.
Failure of observe requisite diligence: Breach of contract and
constitutes culpa contractual. While the liability of a carrier as
an insurer is not recognized in this jurisdiction, a carrier is
liable is liable for damages suffered by goods carried if such
damages arise from its negligence. The carrier is also liable
even in those cases where the cause of the loss or damage
is unknown.
Presumption of negligence- Under 1735,
1. Goods- if the goods are proved to have been lost,
destroyed, or deteriorated, CC 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.
2. Passengers- If a passenger dies or is injured, the
presumption is that the CC is at fault notwithstanding the
fact that it has exercised due diligence of a good father of a
family in the selection and supervision of employees.
Defenses available to CC-
1. Art 1734
2. Art 1735
3. Natural Disaster/Force Majeure
CC cannot interpose the defense that it exercised
due diligence in the selection and supervision of
EEs. The liability of the CC arises from breach of
contract, not culpa aquiliana. Nonetheless, it is the
duty of CC to teach their drivers not to overload
vehicles, exceed safe and legal speed limits and
other safety precautions.
Carrier not insurer- CC are not required to exercise all the
case, skill, and diligence of which the human mind can conceive,
nor such as will free the transportation of passengers from all
possible perils. A CC is not an insurer of the safety of the
passengers and is not absolutely and at all events responsible to
carry them safely without injury.
Ynchausti Steamship v Dexter
Upon respondents order, a shipment of mineral oil was placed
on board petitioners vessel and was received in good condition
as stated in the bill of lading. Upon arrival, two cases were
empty. Petitioner said the shortage was due to causes
unknown to it and that it was not negligent. Because of these
shortages, respondent refused to pay petitioner the proper
amount for the service rendered, hence petitioners recourse to
the SC.
The Court held petitioner liable for the shortages. The mere
21

proof of delivery of goods in good order to a carrier, and of their
arrival at the place of destination in bad order, makes out a
prima facie case against the carrier, so that if no explanation is
given as to how the injury occurred, carrier must be held
responsible.
Mirasol v Dollar
Two cases of books were shipped from USA to MNL on board
defendants vessel, but upon arrival, it was in bad order and in
damaged condition. Defendant refused to pay petitioner, said it
was due to sea water, which is force majeure, and that its
liability is limited by the bill of lading.
The Court held defendant liable. Having received the goods in
good condition, its legal duty was to deliver them in the same
condition in which it received them. Burden of proof shifted to
defendant to upon its admission that the goods were damaged
while in its possession. As to how the goods were damaged lies
within the exclusive knowledge of the defendant. Sea water is
not an evidence of damage due to force majeure. Also,
petitioner was not legally bound by the limited liability clause.
ii. Exemption from liability
1. Natural Disaster
Civil Code Art 1734 (1), 1739, 1740,
Art 1734 (1). 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;
Art 1739. In order that the common carrier may be exempted
from responsibility, the natural disaster must have been the
proximate and only cause of the loss. However, the common
carrier must exercise due diligence to prevent or minimize loss
before, during and after the occurrence of flood, storm or other
natural disaster in order that the common carrier may be
exempted from liability for the loss, destruction, or deterioration
of the goods. The same duty is incumbent upon the common
carrier in case of an act of the public enemy referred to in
article 1734, No. 2.
Art 1740. If the common carrier negligently incurs in delay in
transporting the goods, a natural disaster shall not free such
carrier from responsibility.
Art 361 Code of Commerce
Art 361. The merchandise shall be transported at the risk and
venture of the shipper, if the contrary has not been expressly
stipulated. As a consequence, all the losses and deterioration
which the goods may suffer during the transportation by reason
of fortuitous event, force majeure, or the inherent nature and
defect of the goods, shall be for the account and risk of the
shipper. Proof of these accidents is incumbent upon the carrier.
Parties to a contract of transportation
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1. Shipper or Consignor- one who gives rise to the contract
of transportation by agreeing to deliver the things or news
to be transported, or to present his own person or those of
other or others in the case of transportation of passengers
2. Carrier or Conductor- one who binds himself to transport
persons, things, or news as the case may be; one
employed in or engaged in the business of carrying goods
for others for hire
3. Consignee- the party to whom the carrier is to deliver the
things being transported; one to whom the carrier may
lawfully make delivery in accordance with its contract of
carriage (but the shipper and consignee may be one
person)
Harmonizing Art 361 and 1735 of Civil Code- Although the
shipper assumes the risk of the venture, it does not mean
that the carrier is free from liability for losses and
deterioration arising from his negligence or fault.
Requisite for defense of natural disaster:
1. Art 1739- natural disaster must have been the
proximate and only cause of the loss
2. The CC must exercise due diligence to prevent or
minimize the loss before, during and after the
occurrence of the natural disaster. Failure to minimize
the loss after the occurrence of the natural disaster
makes the CC liable although the CC had no role in
causing such.
3. Art 1740- the CC must not be in delay. Under 1165 par
3, if the obligor incurs in delay he shall be responsible
for any fortuitous events until he has effected delivery.
Exception: if between the delay and the loss of goods
due to force majeure, there intervened the shippers
negligence, the act of God is the proximate cause and
the shippers delay is merely the remote cause.
Accident due to defects of carrier not casa fortuito-
Accidents caused either by defects in the carrier or through the
negligence of the carrier is not casa fortuito.
Tan Chiong v Inchausti
There was a shipment of general merchandise on board
defendants vessel for delivery to Catarman, Samar, upon
petitioners order. Unfortunately, the goods werent delivered.
Upon vessels arrival in Sorsogon, the goods were transhipped
to a lorcha which would deliver the same to Samar, but it was
destroyed during a storm. Force majeure was the carriers
defense.
The Court held that defendant was not liable; that the loss was
due to the stranding of the lorcha in the heavy storm was
admitted by the petitioner; also, no proof that it occurred due to
the negligence of the defendant and its agents who had a
natural interest in preserving its craft and own goods.
The general rule is that loss of the vessel and of its cargo, as a
result of shipwreck, shall fall upon the respective owners, save
for exceptions and it is applicable whenever it is proved that the
loss of or damage to the goods was the result of a fortuitous
event or of force majeure.
Martini v Macondray
There was a shipment of chemical products was on board the
deck of the defendants vessel to be delivered from MNL to
22

Japan, but upon arrival, it was found that the chemicals were
damaged by fresh and salt water. Defendant claimed that the
bill of lading stated that goods were on deck at shippers risk.
Petitioner said it didnt consent to the same and that it
shouldve been placed in the hold.
The Court held that defendant was not liable; Petitioner was
notified as to the manner of the shipment and was given the
option to discharge the cargo from the ship if it is dissatisfied by
its arrangement, however it didnt do so.
Where the shipper consents to have his goods carried on
deck, he takes the risks of any damage or loss sustained as a
consequence of their being so carried.
Eastern Shipping v IAC
Petitioners vessel was carrying various goods (which are
insured) and was enroute from Japan to MNL when it caught
fire and sank, resulting to total loss of the ship and cargo.
Petitioner said that the loss was due to the fire, a fortuitous
event.
The Court ruled against petitioner; fire may not be considered a
natural disaster or calamity since it arises invariably from some
act of man or by human means and may even be caused by
the fault of the carrier. It does not fall within the category of an
act of God unless caused by lightning or by other natural
disaster.
Asia Lighterage v CA
Wheat shipped from the U.S. arrived in Manila and was
transferred to the custody of Asia Lighterage since it was
contracted to deliver the shipment to consignees warehouse in
Pasig. The shipment was not delivered because the barge
where it is stored developed a hole and eventually sank
allegedly due to the typhoon that hit the country.
The Court ruled that petitioner in this case is a common carrier
and that it failed to exercise due diligence because the barge
sailed even though they knew a typhoon was coming. The
Court also held that the typhoon is not the proximate cause of
the incident but the hole in the barge which was merely
patched-up (a provisional remedy). Such a remedy is not
enough for the barge to sail safely.
2. Act of public enemy
Civil Code Art 1734 (2), 1739
Art 1734 (2). 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:
(2) Act of the public enemy in war, whether international or civil;
Art 1739: Supra
*Acc to Tolentino: Includes pirates
Acts of public enemy- This defense is not absolute. Under
1739, the ff requisites must be met:
1. Act of public enemy must have been the proximate and
only cause
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2. CC must have exercised due diligence to prevent or
minimize the loss before, during, and after the act of the
public enemy causing the loss, destruction or
deterioration of goods.
3. Act of omission of shipper
Civil Code Art 1734 (3), 1741
Art 1734(3). 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:
(3) Act or omission of the shipper or owner of the goods;
Art1741. If the shipper or owner merely contributed to the loss,
destruction or deterioration of the goods, the proximate cause
thereof being the negligence of the common carrier, the latter
shall be liable in damages, which however, shall be equitably
reduced.
Acts or omission of the shipper-
1. Must be proximate cause
2. If merely contributory, and the proximate case is still the
negligence of the CC, the CC shall be liable for
damages although the damages shall be equitably
reduced.
4. Character of goods, etc
Civil Code Art 1734 (4), 1742,
Art 1734 (4). 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:
(4) The character of the goods or defects in the packing or in
the containers;
Art 1742. Even if the loss, destruction, or deterioration of the
goods should be caused by the character of the goods, or the
faulty nature of the packing or of the containers, the common
carrier must exercise due diligence to forestall or lessen the
loss.
Art 366 Code of Commerce
Art 366. Within the twenty-four hours following the receipt of
the merchandise, the claim against the carrier for damage or
average be found therein upon opening the packages, may be
made, provided that the indications of the damage or average
which gives rise to the claim cannot be ascertained from the
outside part of such packages, in which case the claim shall be
admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation
charges have been paid, no claim shall be admitted against the
carrier with regard to the condition in which the goods
transported were delivered.
Claims for damages- must be made at the time the goods are
delivered unless the indications of the damages cannot be
ascertained from the exterior of the package in which case such
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written claims must be made w/n 24 hours from delivery. This is
a condition precedent.
General Rule: As long as the damage to the goods was due
purely to the inherent nature or defect of the goods or of the
containers thereof, the CC cannot be held responsible. However,
under 1742, the CC must exercise due diligence to forestall or
lessen the loss for it to completely escape liability.
Government v Ynchausti
Government of the Phil. Islands shipped roofing tiles from
Manila to Iloilo through the vessel owned by Ynchausti &
Company. Upon delivery, it was discovered that some of the
tiles are damaged so the Government sued Ynchausti.
The Court ruled that Ynchausti is not liable for the damaged
goods due to the stamped statements in the bill of lading. There
is no presumption of negligence in the stamped conditions in
the bill of lading and also in the Commercial Code. More
importantly, the carrier was able to prove that the damages
were due to the nature and defect of the tiles, and not due to its
own negligence in handling the cargo.
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to prove that the Mayors order was within his power and
vested with legal character. Hence, the owner of the vessel,
acting through the captain was under no duty to follow the
orders of dumping the cargo in the sea.
iii. Duration of Extraordinary Responsibility
Civil Code Art 1736, 1737, 1738
Art 1736. The extraordinary responsibility of the common
carrier lasts from the time the goods are unconditionally placed
in the possession of, and received by the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person
who has a right to receive them, without prejudice to the
provisions of article 1738.
Art 1737. The common carriers duty to observe extraordinary
diligence over the goods remains in full force and effect even
when they are temporarily unloaded or stored in transit, unless
the shipper or owner has made use of the right of stoppage in
transitu.

Southern Lines v CA Art 1738. The extraordinary liability of the common carrier
The City of Iloilo requisitioned for rice from NARIC in Manila. continues to be operative even during the time the goods are
The latter shipped the rice aboard SS General Wright owned stored in a warehouse of the carrier at the place of destination,
by Southern Lines. Upon delivery of the cargo, it was until the consignee has been advised of the arrival of the goods
discovered that there was a shortage equivalent to 41 sacks of and has had reasonable opportunity thereafter to remove them
rice so City of Iloilo filed a complaint for recovery of the or otherwise dispose of them.
proportionate value of the rice.
When carriers responsibility When carriers responsibility
The Court held that Southern Lines is liable for the shortage begins terminates
due to the fact that despite the alleged condition of the cargo From the time the goods are Terminated at the time the
the carrier still accepted the goods and that it was found by the delivered to the carrier. The goods are delivered to the
CA that the shortage was actually due to the negligence of delivery to the CC must place consignee or the person who
Southern Lines. the goods to be transported has a right to receive them
unconditionally in the (actual or constructive
possession of the CC and the delivery).
5. Order of competent authority CC must receive them.
Otherwise, the extra-ordinary Constructive delivery- Notice
Civil Code Art 1734 (5), 1743 responsibility of the CC will not by the CC that the cargo has
commence. already arrived, placing them
Art. 1734 (5). Common carriers are responsible for the loss, at the disposal of the shipper
destruction, or deterioration of the goods, unless the same is Hence, it does not necessarily or consignee released the CC
due to any of the following causes only: follow that the perfection of the from extraordinary
contract marks the moment the responsibility. From such
liability begins. But in any moment the consignee or
(5) Order or act of competent public authority.
case, the liability never arises shipper should exercise
before the contract is perfected ownership over the cargo
Art 1743. If through the order of public authority the goods are as the liability of a CC is (unloading of CC).
seized or destroyed, the common carrier is not responsible, contractual in nature.
provided said public authority had power to issue the order.

Liability of the shipper for delay in obtaining delivery of

Order or act of competent authority- Under 1743, CC is not
responsible for the loss of goods if public authority had power to
issue the order. Where the officer acts without legal process, the
CC will be held liable
Ganzon v CA
The plaintiff, the shipper of scrap iron, filed a case against the
owner of the CC that unloaded his cargo on account of the
order of the Mayor of the province.
The Court held that the common carrier is remains to be liable
for the loss of the cargo because the owner of the vessel failed
goods- The shipper/consignee is responsible for unloading
the goods once he receives the notice of arrival of the
goods. Delay in unloading, leading to the loss of earnings of
the owner of the vessel gives rise to the shipper/consignees
liability to pay the demurrage (a charge payable to the
owner of a chartered ship in respect of failure to load or
discharge the ship within the time agreed).
Effect of storing in transit- Under 1737, the temporary
unloading or storage of the goods during the time that they
24

are being transported does not interrupt the extraordinary
responsibility of the CC.
Exception: Where the shipper or owner exercises its right of
stoppage in transitu (the right of a seller of goods to stop
them on their way to the buyer and resume possession of
them (as on discovery of the buyer's insolvency) called
also stoppage in transit)
Ratio for exception: The CC holds the goods in the capacity of
an ordinary bailee or warehouseman upon the theory that
the exercise of the right of stoppage in transitu terminates
the contract of carriage (converts extraordinary diligence to
ordinary diligence). Note that the observance of
extraordinary responsibility ceases only after the consignee
(seller, in the case of stoppage in transit) has been advised
of the arrival of the goods and has reasonable opportunity to
remove them or otherwise dispose of them.
Campania Maritama v Insurance Company
Macleod contracted the services of Compaia Maritima for the
Shipment of bales of hemp on board the latters steamship from
Davao City to Manila and eventually to Boston, Massachusetts.
Due to the contract, Compaia sent 2 lighters to Macleods
private wharf where the bales were loaded. While waiting for
SS Bowline Knot, one of the lighters sank resulting to
damage/loss of some bales of hemp. The insurer of the cargo
paid Macleod for the loss it suffered so the former sued
Compaia.
The Court ruled that there was a contract of carriage between
Macleod and Compaia and that the latter is liable for the loss
because the evidence shows that the mishap that caused the
damage or loss was due, not to force majeure, but to lack of
adequate precautions or measures taken by the carrier to
prevent the loss.
TEST: Whenever the control and possession of goods passes
to the carrier and nothing remains to be done by the shipper,
then it can be said with certainty that the relation of shipper and
carrier has been established.
Lu Do v Binamira
The petitioner, as agent of the carrier, is being held liable for
the loss of the shipment consigned to the order of the
respondent. The loss happened after the cargo was discharged
from the ship but before it had been delivered to the consignee.
It should be noted that the Bill of Lading of the parties stipulated
that the responsibility of the carrier over the goods ceases once
the goods are delivered to the Customs.
The Court absolved the petitioner from liability since the Bill of
Lading limited its liability in situations where the cargo was not
in the actual custody of the carrier. Such stipulations are fair
and valid, as they are not contrary to morals or public policy.
APL v Klepper
Plaintiff Klepper brought this action to recover damages
amounting to almost P7,000 sustained by his goods contained
in a lift van which fell to the ground while being unloaded from a
ship owned by the American President Lines. APL invokes
Section 4(5) of the Carriage of Goods by Sea Act as well as the
Bill of Lading, which both limited its liability to $500. CA ruled
that the same did not apply to the shipper, who failed to sign
the Bill of Lading.
The bill of lading provided that the shipper or consginee who
accepts the bill of lading becomes bound by all stipulations
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contained therein.
The Court held that the same was binding upon the shipper
since he impliedly accepted the bill of lading when he shipped
his goods on board the vessel and paid the corresponding
freight.
Samar Mining Co v Nordeutscher Lloyd
Plaintiff Samar Mining imported wire sieves on board the vessel
owned by defendant. The bill of lading provided that the goods
would be discharged at the port of Manila and delivered to the
custody of AMCYL, the bonded warehouse, which in turn had
the duty to transship the goods from Manila to Davao.
However, the goods were never received by the consignee.
The carrier denied liability for the loss as they had discharged
the goods to AMCYL in good condition, and pusuant to Section
11 of the Bill of Lading, their responsibility for the cargo had
ceased.
The Court held that the bill of lading was valid insofar as it
exempts the carrier from liability for loss or damage to the
goods while the same are not in the latters actual custody.
Pursuant to Article 1736, there was actual delivery from the
moment the goods were discharged in Manila as the
defendants personality changed from that of a carrier to that of
the agent of the consignee.
Eastern Shipping v CA
Eastern Shipping shipped 2 fiber drums of riboflavin from
Yokohama, Japan to Manila aboard SS Eastern Comet. Upon
arrival to Manila, the shipment was received by Metro Port
Services with one drum in bad order. Metro delivered the
shipment to Allied Brokerage, receiving one drum opened and
without seal. The consignee received the shipment with
spillages and adulterated contents from Allied Brokerage.
Mercantile Insurance Co., which paid the consignee the value
of the damaged goods, sought payment from the vessel owner,
arrastre, and the broker. RTC ruled in favor of mercantile and
ordered the 3 defendants to pay 19,032.95php with 12%
interest per annum from October 1, 1982, the date of the filing
of the complaint, until fully paid. CA affirmed this decision.
The Court partially granted the appeal of Eastern Shipping and
changed the interest rate to 6% starting from the date of the
decision of court a quo. However, once final judgment has been
served, it should be increased to the legal rate of 12%.
iv. Agreement Limiting Liability
1. As to diligence required
Civil Code Art 1744, 1745, 1751
Art 1744. A stipulation between the common carrier and the
shipper or owner limiting the liability of the former for the loss,
destruction, or deterioration of the goods to a degree less than
extraordinary diligence shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the
25

service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.
Art 1745. Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or
shipper;
(2) That the common carrier will not be liable for any loss,
destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in
the custody of the goods;
(4) That the common carrier shall exercise a degree of
diligence less than that of a good father of a family, or of a man
of ordinary prudence in the vigilance over the movables
transported;
(5) That the common carrier shall not be responsible for the
acts or omission of his or its employees;
(6) That the common carriers liability for acts committed by
thieves, or of robbers who do not act with grave or irresistible
threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the
defective condition of the car, vehicle, ship, airplane or other
equipment used in the contract of carriage.
Art 1751. The fact that the common carrier has no competitor
along the line or route, or a part thereof, to which the contract
refers shall be taken into consideration on the question of
whether or not a stipulation limiting the common carriers
liability is reasonable, just and in consonance with public policy.
2. As to amount of liability
Civil Code Art 1749, 1750
Art 1749. A stipulation that the common carriers liability is
limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is
binding.
Art 1750. A contract fixing the sum that may be recovered. by
the owner or shipper for the loss, destruction, or deterioration of
the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.
Requisites for a valid stipulation as regards amount of
liability (Shewaram v PAL)
1. Reasonable and just under the circumstances
2. Fairly and freely agreed upon
However, the carrier cannot limit its liability for
injury to or loss of goods shipped where such injury
or loss was caused by its own negligene.
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Heacock v Macondray
Plaintiff Heacock brought his action to recover the sum of P240
with interest representing the value of undelivered twelve 8-day
Edmond clocks, which were shipped and consigned to the
defendant Macondray as the agent of the vessel in port. The
lower court ordered the defendant to pay the invoice value of
the clocks. Both parties appealed. Plaintiff insisted being paid
based on the market value of the clocks while the defendant
insisted that its liability was limited to the proportionate freight
ton value of the clocks pursuant to the Clause 1 of the Bill of
Lading.
There are 3 kinds of stipulations in a bill of lading: 1) one
exempting the carrier from any and all liability for loss or
damage occassioned by its own negligence, 2) one providing
for an unqualified limitation of such liability to an agreed
valuation, 3) one limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value and pays a
higher rate of freight. Only the 3rd is valid and enforceable. The
present case falls within the 3rd stipulation.
The Court ruled that provisions limiting the liability of the carrier
in bills of lading are not illegal per se. However, since there
were irreconcilable stipulations in the Bill of Lading as to the
extent of the carriers liability, the Court held that the bill of
lading should be interpreted against the defendant carrier,
which drew the said contract.
Sherwaram v PAL
Petitioner was a passenger on board a PAL flight from
Zamboanga to Manila, but upon his arrival therein, he
discovered that his suitcase arrived at Iligan due to its wrong
tagging. He got his bag a day later, but his camera and
transistor radio, both contained therein, were missing. He sued
PAL for damages and the trial court ruled in his favour. PAL
argued that its liability should be limited to the amount printed
at the back of the plane ticket.
The Supreme Court ruled that petitioner could not be bound by
the conditions set by PAL for its failure to comply with the reqts
of Art. 1750 and that the loss of the two items was due to its
employees negligence under Art. 1734 and 1735. Particularly,
the defense of PAL fails to satisfy the second requisite of Art
1750 that the stipulation must be fairly agreed upon. The
condition behind the ticket was printed in small letters, and the
PAL tickets are instruments that cannot be signed to evidence
agreement to the stipulation.
Ong Yiu v CA
Petitioner, a lawyer, is a fare paying passenger of PALs flight
from Cebu to Butuan City. He had trials and hearings to attend
to in Butuan City, which he had to ask for suspension because
his luggage, containing all his important documents, was
mistakenly brought to Manila. PAL was able to recover luggage
within the same day, however, a folder of important documents
and 2 gifts from his parents-in- law were stolen. Petitioner filed
a complaint for damages against PAL.
The Court ruled that PAL had not acted in bad faith as it
exerted due diligence in complying with duty to look for
petitioners luggage. Also, based on condition printed at the
back of the plane ticket, PALs liability is limited to P100 as
petitioner failed to declare any higher value for his luggage. He
also failed to show actual value of goods allegedly lost. The
Court held the validity of the condition at the back, determining
that the ticket is a contract of adhesion.
26

Pan Am v IAC
Pangan entered into two agreements where he bound himself
to supply films to Prime Films and Hafa Adai Org to be
exhibited in the US and Guam respectively. When he arrived in
Guam, as a passenger of Pan Am, he discovered that his
luggage were missing. Hence, he filed a suit against Pan Am to
recover damages. Pan Am argues that their liability is limited to
the stipulation printed at the back of the ticket.
The Court held that petitioners liability should be limited to
$600 as stipulated at the conditions printed at the back of the
ticket. The Court held that the ruling in Ong Yiu is applicable
and not Shewaram. The Court determined that Shewaram was
not applicable in this case because the ruling therein focused
on the fact that the condition was written in small letters leading
to the conclusion that the plaintiff therein did not freely enter
such agreement. In the case at bar, Pangan never alleged that
the condition was written in small letters that could have
evidenced lack of consent.
NB: The ruling in Ong Yiu (1979) is clearly a departure from the
ruling in Sherwaram(1966). Unfortunately, the case of
Sherwaram was not cited at all in the case of Ong Yiu. To add to
the confusion, the case of Pan Am (1988), citing both cases held
both rulings as good law. What can be adduced is that a plaintiff
needs to allege that the consent of the ticket holder was vitiated
as he was not made aware of the assailed condition
Cathay Pacific v CA
Alcantara went to Jakarta for a conference. Upon arrival, he
was told that his baggage was lest in HK where they stopped
over en route to Indonesia. He sued Cathay for damages.
Cathay sought to limit its liability based on the Warsaw
Convention.
The Court awarded the damages sought by Pangan. It ruled
that such Convention was not an absolute limit to a carriers
liability. The Convention declares the carrier liable for damages
in the enumerated cases and under certain limitations. The
application of the Convention must not be construed to
preclude the operation of the Civil Code and other pertinent
laws. It does not regulate, much less exempt, the carrier from
liability for violating the rights of its passengers under the
contract of carriage, especially if willful misconduct is found or
established, as in this case.
3. As to delay in delivery
Maersk Line v CA
Respondent Castillo purchased materials abroad for its
business which was shipped using Maersk Line. However, the
goods arrived 2 months after the date agreed to by the parties
due to a diversion in its shipping route.
The RTC, CA and SC ruled that goods should be delivered
within a reasonable time and Maersk, because of its
negligence, should be held liable.
4. Factors affecting agreement
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Civil Code Art 1746, 1747, 1748, 1751, 1752,
Art 1746. An agreement limiting the common carriers liability
may be annulled by the shipper or owner if the common carrier
refused to carry the goods unless the former agreed to such
stipulation.
Art 1747. If the common carrier, without just cause, delays the
transportation of the goods or changes the stipulated or usual
route, the contract limiting the common carriers liability cannot
be availed of in case of the loss, destruction, or deterioration of
the goods.
Art 1748. An agreement limiting the common carriers liability
for delay on account of strikes or riots is valid.
Art 1751. The fact that the common carrier has no competitor
along the line or route, or a part thereof, to which the contract
refers shall be taken into consideration on the question of
whether or not a stipulation limiting the common carriers
liability is reasonable, just and in consonance with public policy.
Art 1752. Even when there is an agreement limiting the liability
of the common carrier in the vigilance over the goods, the
common carrier is disputably presumed to have been negligent
in case of their loss, destruction or deterioration.
Kinds of stipulation limiting liability-
1. Stipulation exempting the CC from any all liability for
loss or damage occasioned by its own negligence-
VOID
2. Stipulation providing for an unqualified limitation of such
liability to an agreed stipulation- VOID
3. Stipulation limiting the liability of the CC to an agreed
valuation unless the shipper declares a higher value
and pays a higher rate of freight- VALID AND
ENFORCEABLE
Under 1746 contract is voidable- The effect of the shippers
consent obtained by means of refusal on the part of the
carrier to carry the goods is to make the agreement limiting
the CCs liability voidable at the instance of the shipper.
Effect of delay in transportation- Under 1747, the CC cannot
avail of the contract limiting his liability in the ff cases:
1. Where the CC delays the transportation of goods
without just cause
2. Where the CC changes the stipulated or usual route
without just cause
Presumption of negligence- Under 1752, the presumption
continues even when there is an agreement limiting the liability
of the CC in the vigilance of the goods. The presumption is
disputable or rebuttable by evidence that the CC exercised
extraordinary diligence.
5.Applicable law in foreign trade
Civil Code Art 1753
Art 1753. The law of the country to which the goods are to be
transported shall govern the liability of the common carrier for
their loss, destruction or deterioration.
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precautions which said responsibility. Note that the
6. Rules on passenger baggage CCs advised relative to presumptions also apply.
the care and vigilance of
Civil Code Art 1754, 1998, 2000, 2001, 2002, 2003 their baggage A CC is liable for the loss of
baggage although not declared
Art 1754. The provisions of articles 1733 to 1753 shall apply to Responsibility for acts of and the charges not paid if it
the passengers baggage which is not in his personal custody passengers, family, his accepted them for
or in that of his employee. As to other baggage, the rules in servants, or visitors- CC is transportation
articles 1998 and 2000 to 2003 concerning the responsibility of NOT liable
hotel-keepers shall be applicable.
Responsibility for:
1. Acts of Thief/robber- not
Art. 1998. The deposit of effects made by the travellers in
considered force
hotels or inns shall also be regarded as necessary. The
majeure
keepers of hotels or inns shall be responsible for them as
a. Exception: when act is
depositaries, provided that notice was given to them, or to their
done with the use of
employees, of the effects brought by the guests and that, on
arms or through
the part of the latter, they take the precautions which said hotel-
irresistible force
keepers or their substitutes advised relative to the care and
2. Acts of employees- CC
vigilance of their effects. (1783)
is liable
a. Exception: Force
Art. 2000. The responsibility referred to in the two preceding majeure
articles shall include the loss of, or injury to the personal
property of the guests caused by the servants or employees of
the keepers of hotels or inns as well as strangers; but not that Stipulations limiting liability- Any stipulation diminishing the
which may proceed from any force majeure. The fact that responsibility required under 1998-2001 shall be void
travellers are constrained to rely on the vigilance of the keeper
of the hotels or inns shall be considered in determining the B. Common Carriage of Passengers
degree of care required of him. (1784a)
i. Nature and extent of liability
Art. 2001. The act of a thief or robber, who has entered the
hotel is not deemed force majeure, unless it is done with the Civil Code Art 1733, 1734, 1735.
use of arms or through an irresistible force. (n)
Art 1733. Common carriers, from the nature of their business
Art. 2002. The hotel-keeper is not liable for compensation if the and for reasons of public policy, are bound to observe
loss is due to the acts of the guest, his family, servants or extraordinary diligence in the vigilance over the goods and for
visitors, or if the loss arises from the character of the things the safety of the passengers transported by them, according to
brought into the hotel. (n) all the circumstances of each case.

Art. 2003. The hotel-keeper cannot free himself from Art 1755. A common carrier is bound to carry the passengers
responsibility by posting notices to the effect that he is not liable safely as far as human care and foresight can provide, using
for the articles brought by the guest. Any stipulation between the utmost diligence of very cautious persons, with a due
the hotel-keeper and the guest whereby the responsibility of the regard for all the circumstances.
former as set forth in articles 1998 to 2001 is suppressed or
.
diminished shall be void. (n)
Nature of responsibility (1755)
1. As far as human care and foresight can provide;
2. Using the utmost diligence of very cautious persons;
Classes of baggage of passengers-The law makes a and
distinction between 3. With due regard for all the circumstances.
1. Baggage in the custody of the passengers of their
employees Extent of responsibility:
2. Baggage not in such custody but in that of the CC 1. Passengers;
2. Crew and complement (PAL v CA)
Liability for baggage in Liability for baggage not in 3. Strangers within its premises, when their presence was
custody of passenger custody of passenger called for by the contract of carriage and known and
Regarded as personal As the CC has custody of such consented to by the carrier (Sulpicio v CA)
deposits baggage and are carried like
any other goods, the Instances where carrier is liable
The CC shall be responsible provisions on carriage of 1. Defects in the parts of the vehicle (Landingin v
for such baggage as goods shall apply Pantranco)
depositaries, provided that: (extraordinary diligence). The 2. Discoverable manufacturing defects (Necesito v Paras)
1. Notice was given to them moment the effects of the Instances where carrier is not liable
or to their EEs, of the passenger are received by a 1. Acts of strangers outside the carriers control or even
baggage brought by their carrier for conveyance, the law knowledge or could not have prevented (Pilapil v CA)
passengers immediately imposes on the 2. Sovereign acts (JAL v CA)
2. Passengers take the CC the extraordinary
28

3. Builders could not have discovered the defects
(Necessito v Paras)
Principles governing the liability of the common carrier
(Isaac v AL Ammen):
(5) The liability of a carrier is contractual and arises upon
breach of its obligation, said breach occurring if it fails to
exert extraordinary diligence according to all circumstances
of each case;
(6) A carrier is obliged to carry its passenger with the utmost
diligence of a very cautious person, having due regard for all
the circumstances;
(7) A carrier is presumed to be at fault or to have acted
negligently in case of death of, or injury to, passengers, it
being its duty to prove that it exercised extraordinary
diligence; and
(8) It is not an insurer against all risks of travel
Isaac v A.L. Amnen Trans Co
Supra
Plaintiff boarded a passenger bus, owned by defendant. But,
before reaching his destination, the bus collided with a pick-up
type motor vehicle, which resulted in his injury and severance
of his left arm. Plaintiff brought an action for damages against
defendant based on the latters breach of its contractual
obligation as a common carrier. According to plaintiff, the act of
the driver in squeezing his way through between oncoming
obstacles was considered negligent.
The Court held in favor of the bus driver, ruling that he
exercised utmost diligence in avoiding the collision. It must be
considered that the sense of caution one should observe
cannot always be expected from one who is placed suddenly in
a predicament where he is not given enough time to take
proper cause of action under ordinary circumstances. For this
reason, courts have held that failure to observe the same
degree of care that as ordinary prudent man would exercise
under ordinary circumstances when confronted with a sudden
emergency was held to be warranted and a justification to
exempt the carrier from liability.
Landingin v Pantranco
Leonila and Estrella died because the bus they were riding
swerved, resulting to them jumping out of the carrier out of
panic. It must be noted that, first, this bus operated by
Pantranco did not have a permit for that route, a fact not known
to the passengers then, second, that it was open in one side
and enclosed in the other which was a violation of the rules of
the Public Service Commission and third, that the
uncontrollable swerving was caused by the breaking of the
joint-cross of the motor
The Court held that the payment of Pantranco to the parents of
the deceased was proper considering the fact that they did not
exert the exraordinary diligence required of common carriers.
They disagreed with the finding of the lower court that what
occurred was an accident due to force majeure. Rather, the
court ascribes to the view that the proximate cause was the
defective cross-joint, hence, Pantranco should be liable
notwithstanding the fact that the particular bus was just
inspected the day prior to the accident.
Landicho v BTCo
Eugenio Landicho, carrying two cages of chickens, boarded
bus no. 443 of defendant BTCo. The conductor tied the two
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cages to the running board. Landicho claimed that one of his
cages was about to fall so he fixed it in place, and when he did
so, he fell from the bus and got injured. He was brought to
various hospitals for which BTCo paid his medical expenses.
Landicho sued BTCo before the CFI, Batangas.
The Court absolved BTCo from any liability as they found that
the true cause of Landichos fall was that he was drowsy and
not because his chicken cage was about to fall as the Court
found it to be securely kept during the entire trip. Landicho was
negligent in not placing himself safely in the bus when he
became drowsy and BTCo could not have been expected to
foresee that Landicho would feel drowsy. Landicho only has
himself to blame.
Necesito v Paras
Mother and son were passengers of a bus owned by Paras
which fell into a river. The mom died in the accident and the
son was injured. Two actions for damages were filed. During
trial it was found that the accident was caused by the fracture of
the right steering knuckle which was defective. CFI dismissed
both cases saying that the accident was due to a fortuitous
event.
The Court reversed explaining that though common carriers are
not insurers of the passengers safety, they are still liable for
injury resulting in defective parts unless such defect couldnt
have been discovered by the carrier even if it exercised the
required standard of care. For the purposes of such, the
manufacturer is considered an agent of the carrier. In this case,
the visual tests conducted by the bus lines failed to meet up to
the required standards of utmost diligence.
PAL v CA
Jesus Samson filed a suit for damages against PAL after he
suffered injuries from a plane crash in Albay. Samson was a
co-pilot of a C-47 plane owned and operated by PAL which
overshot the runway. He claims that the crash was due to the
slow response of the commanding pilot, Capt. Bustamente,
who PAL negligently allowed to fly despite the latters tumor. He
also claims that he was not treated properly for the injuries he
suffered, resulting in lingering dizziness which later caused his
discharge from PAL.
The Court held PAL liable, holding that PAL, as a common
carrier, has a duty to exercise extraordinary diligence in the
carriage of both its passengers, and the crew
Sulpicio v CA
Sulpicio entered into a contract of carriage with AGO Lumber
Company for the former to transport the latters timber. Upon
the failure to load the lumber due to heavy downpour, several
stevedores of CBL Timber Corporation (hired by Sulpicio)
boarded Sulpicios barge Solid VI and opened its storeroom.
These stevedores were warned of the gas and heat generated
by the copra stored in the holds of the ship. Unfortunately, a
stevedore still entered the storeroom, fell unconscious, and
died of gas poisoning.
The Court held that despite the fact that the stevedore was not
a passenger of the ship, the common carrier in this case is still
liable for his death. It must be noted that their presence was
called for by the contract of carriage. Sulpicio knew of the
presence and role of the stevedores in its barge and thus
consented to their presence. The Court also ruled that Sulpicio
failed the exercise the diligence required in the supervision of
29

its employees. It is not enough that Sulpicios employees
warned the stevedores. What Sulpicio should have done is to
sufficiently instruct its employees to see to it that the hatch of
the barge is not opened by any unauthorized person and that
the hatch is not easily opened by anyone.
JAL v CA
Michael and Jeanette Asuncion boarded JAL on a flight from
Manila to Los Angeles with a stop-over in Narita. A JAL
employee endorsed their application for shore passes which is
required document for them to be able to stay. During the
interview with a Japanese Immigration Official, it was noticed
that there was a discrepancy between Michaels height as
stated on his passport and his original height so their
application for shore passes were denied. Eventually, the two
of them sued JAL for not fully apprising them of their travel
requirements.
The Court ruled that there is no breach of contract on the part
of JAL because while it is true that JAL has the duty to inspect
whether its passengers have the necessary travel documents,
however, such duty does not extend to checking the veracity of
every entry in these documents. Furthermore, the power to
admit or not an alien into the country is a sovereign act which
cannot be interfered with even by JAL (not within the ambit of
contract of carriage).
ii. Duration of Responsibility
C.F. Civil Code Art 1736, 1738
Art 1736. The extraordinary responsibility of the common
carrier lasts from the time the goods are unconditionally placed
in the possession of, and received by the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person
who has a right to receive them, without prejudice to the
provisions of article 1738.
Art 1738. The extraordinary liability of the common carrier
continues to be operative even during the time the goods are
stored in a warehouse of the carrier at the place of destination,
until the consignee has been advised of the arrival of the goods
and has had reasonable opportunity thereafter to remove them
or otherwise dispose of them.
Constructive Delivery is contemplated in 1736
The necessity to know when presumption of negligence
attaches arises in case of a death or injury to passengers
When relationship of carrier and passenger terminates- It
does not cease at the moment the passenger alights from
the CCs vehicle at a place selected by the CC, or the point
of destination. It continues until the passenger has
reasonable time or opportunity to leave the CCs premises.
What is a reasonable time or reasonable delay is to be
determined from all the circumstances.
Jurisprudential basis:
1. During ingress (Del prado v Meralco) and egress
(Cangco v MRR)
2. Even after alighting from the vehicle until the passenger
had a reasonable time or a reasonable opportunity to
leave the carrier's premises (Aboitiz v CA)
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Test: The primary factor to be considered is the
existence of a reasonable cause as will justify the
presence of the victim on or near the vessel
3. Even during stop-overs, until the passenger reaches
the port of destination (PAL v CA)
Cangco v MRR
Supra
Cangco (a Manila Railroad employee) was on board a train. As
the train was slowly coming to a halt at the station, he stepped
out and tripped on a sack of watermelons on the platform. He
went under the train and his right arm was lacerated and later
amputated. Cangco later on sued Manila Railroad.
The Court ruled that it is Manila Railroads duty as a common
carrier to afford to its passengers facilities for safe egress from
its trains. Cangco had a right to assume, in the absence of
some circumstance to warn him to the contrary, that the
platform was clear.
Del Prado v Meralco
Del Prado tried to catch Meralcos Car No. 74 operated by
Teodorico Florenciano which already travelled a short distance.
He raised his hand to indicate that he would board the car so
the operator eased up a little without stopping. Before he was
securely on board, the motorman applied the power, causing
the car to lurch forward, and he slipped and fell to the ground,
his right foot crushed under the wheel of the moving car.
The Court held that while there is no obligation for street
railway companies to stop its cars at other points than those
appointed for stoppage, the motorman had a duty not to act in
such a way that would have the effect of increasing Del Prados
peril while he was attempting to board the car. Therefore, the
company was held civilly liable in damages, but Del Prados
contributory negligence was considered as a mitigating
circumstance.
The case here presents the carrier making a continuing offer to
enter into a contract of carriage with Del Prado.
La Mallorca v CA
Beltran family boarded a bus owned/operated by La Mallorca.
Upon arrival on their destination, the father led his family to a
shaded spot on the left pedestrians side of the road about 4-5
meters away from the bus. He returned to the bus to get a
bayong but he did not know his daughter followed him. As he
was waiting for his luggage, the bus suddenly moved (since its
engine was not turned off) and ran over his daughter, who was
standing on the road.
The Court ruled that the contract of carriage subsisted even
though the passengers have alighted. The contract of carriage
continues until the passengers have a reasonable time to leave
the carriers premises. Reasonable time is to be determined
from the circumstances of the case.
Bataclan v Medina
One of the front tires of Bus No. 30 of Medina Transportation
burst which caused the bus to fall into a ditch and to turn turtle.
Four passengers could not get out of the bus so shouts of help
were made by the passengers to the houses in the
neighborhood. Several Minutes later, some men came (one of
them was carrying a lighted torch made of bamboo with a wick
30

on one end and is fueled by petroleum). The men approached
the bus and suddenly a fire consumed the bus and the four
passengers trapped inside.
The Court ruled that the Proximate Cause of the death of
Bataclan and the other three passengers is the overturning of
the bus. SC also found that the bus owner Medina (through his
agent driver Saylon) was negligent because the driver was
speeding when the tire burst, the driver did not replace the old
tire despite being instructed to do so, and that he and the
conductor failed to warn the rescuers not to bring the lighted
torch too near the bus (since theres a gasoline leak).
Aboitiz v CA
A passenger who already alighted from the vessel returned to it
to collect his cargo he forgot inside. As he was pointing his
effects to the crew, he was hit by the crane of the stevedoring
that was unloading the vessel, resulting to his death.
The Court held Aboitiz liable for his death because of the
breach of the contract of carriage, particularly in failing to
exercise extraordinary diligence in keeping their passengers
who remain within the premises of the port as they await for the
unloading of their effects from the vessel, notwithstanding the
fact that they have already alighted from the vessel.
PAL v CA
Pedro Zapatos boarded a PAL flight from Ceby going to
Ozamis but this flight was rerouted to Cotabato due of heavy
rains. Upon arrival at Cotabato, the passengers (including
Zapatos) were given options: return to Cebu on the same day,
take a flight to Cebu on the following day, or to take the next
available flight to Ozamiz City on a later date. Zapatos chose to
return to Cebu but was not accommodated because the flight
was already full. He was left at the airport without PAL
providing him food & accommodation for his stay nor
transportation going to the city.
The Court held that the contract of air carriage is a peculiar
one. Being imbued with public interest, the law requires
common carriers to carry the passengers safely as far as
human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the
circumstances. While PAL's diversion of its flight due to
inclement weather was a fortuitous event, this did not terminate
PAL's contract with its passengers. The relation of carrier and
passenger continues until the latter has been landed at the port
of destination and has left the carrier's premises.
iii. Presumption of negligence
Civil Code Art 1756
Art 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
When presumption of negligence attaches (1756)- In case of
death of or injuries to passengers.
How to rebut presumption
1. Exercise of extraordinary diligence
2. Force majeure/caso fortuito/fortuitous event + no
negligence on its part (Bachelor Express v CA)
3. Passengers own negligence (Landicho v BTCO)
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3-fold test to exonerate common carriers from liability
1. The common carrier makes sure that a passenger
paces himself inside the vehicle;
2. The vehicle is operated carefully; and
3. Its mechanism is perfectly alright to avoid mishaps.
Notes:
- Carrier may still file a 3rd party complaint against another erring
vehicle.
- The defense of last clear chance is not applicable, since this
is a defense in contributory negligence between 2 vehicles.
iv. Force Majeure
Essential characteristics of a caso fortuito:
1. The cause of the unforeseen and unexpected
occurrence, or of the failure of the debtor to comply with
his obligation, must be independent of the human will;
2. It must be impossible to foresee the event which
constitutes the caso fortuito, or if it can be foreseen, it
must be impossible to avoid;
3. The occurrence must be such as to render it impossible
for the debtor to fulfill his obligation in a normal manner;
and
4. The obligor (debtor) must be free from any
participation in the aggravation of the injury resulting to
the creditor.
Bachelor Express v CA
A passenger at the rear portion of Bus No. 800 owned by
Bachelor Express stabbed a PC Soldier inside the bus. This
caused commotion and panic among the passengers and
resulted to the death of two passengers: Ornominio Beter and
Narcisa Rautraut.
The Court ruled that the sudden act of the passenger who
stabbed another passenger in the bus is within the context of
force majeure. However, Bachelor Express failed to overcome
the presumption of fault and negligence found in the law
governing common carriers based on the factual findings of CA
Yobido v CA
Tumboy family boarded a Yobido Bus Liner. On their way to
Davao City, the bus front left tire exploded which caused the
bus to fall into a ravine and hit a tree. The accident caused the
death of Tito Tumboy and physical injuries to the other
passengers. The wife and kids filed a complaint for breach of
contract and damages.
The Court held that the tire blowout in this case cannot be
considered a fortuitous event.
Bachelor Express v CA
A passenger at the rear portion of Bus No. 800 owned by
Bachelor Express stabbed a PC Soldier inside the bus. This
caused commotion and panic among the passengers and
resulted to the death of two passengers: Ornominio Beter and
Narcisa Rautraut.
The Court ruled that the sudden act of the passenger who
stabbed another passenger in the bus is within the context of
force majeure. However, Bachelor Express failed to overcome
the presumption of fault and negligence found in the law
31

governing common carriers based on the factual findings of CA
Yobido v CA
Tumboy family boarded a Yobido Bus Liner. On their way to
Davao City, the bus front left tire exploded which caused the
bus to fall into a ravine and hit a tree. The accident caused the
death of Tito Tumboy and physical injuries to the other
passengers. The wife and kids filed a complaint for breach of
contract and damages.
The Court held that the tire blowout in this case cannot be
considered a fortuitous event.
v. Limitations of Liability; Validity of Stipulations
Civil Code Art 1757 & 1758
Art 1757. The responsibility of a common carrier for the safety
of passengers as required in articles 1733 and 1755 cannot be
dispensed with or lessened by stipulation, by the posting of
notices, by statements on tickets, or otherwise.
Art. 1758. When a passenger is carried gratuitously, a
stipulation limiting the common carrier's liability for negligence
is valid, but not for wilful acts or gross negligence.
The reduction of fare does not justify any limitation of the
common carrier's liability.
Effect of gratuitous carriage-
1. Liability for negligence may be LIMITED, in no
case can parties stipulate a complete
absolution from liability.
2. Limiting liability for willful acts or gross
negligence is not allowed
3. Reduction of fare does not justify any
limitation of the CCs liabilitythe law requires
gratuitous passage.
Note that in the carriage of goods, parties may
stipulate a limitation on liability as long as such is
put in writing. This is not applicable to carriage of
passengers as the law exacts a higher degree of
diligence from the CCs.
Liability of owner of CC to accommodation passengers- Lara
v Valencia, the Court ruled that the owner owes the guest the
duty to exercise ordinary or reasonable care to avoid injuring
him.
vi. Responsibility for Acts of Employees
Civil Code Art 1759 & 1760
Art 1759. Common carriers are liable for the death of or injuries
to passengers through the negligence or wilful acts of the
former's employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders
of the common carriers.
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This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family
in the selection and supervision of their employees.
Art 1760. The common carrier's responsibility prescribed in the
preceding article cannot be eliminated or limited by stipulation,
by the posting of notices, by statements on the tickets or
otherwise.
General Rule: A passenger is entitled to protection from
personal violence by the carrier, its agents or employees EVEN
IF they acted beyond the scope of their authority or in violation of
an order.
Exception: Acts falling under force majeure
(unforeseeable or unavoidable)
Notes:
A common carrier cannot be absolved from liability by
proving diligence in the selection and supervision of
employees nor by notices or signages.
There is a difference between scope of authority and
line of duty. The law covers actions even beyond the
scope of authority. If the person was outside the line of
duty during the mishap, the common carrier is absolved
from liability (e.g. De Gillaco v MRR, where the court
treated the security guard as a passenger.)
De Gillaco v MRR
Gillaco was shot by Devesa, an employee of the Manila
Railroad Company, while inside the premises of the latter.
Gillacos widow and heirs sued the Company, with the lower
and appellate courts ruling in their favor.
The SC reversed, ruling that the responsibility of common
carriers extends only to those that the carrier could foresee or
avoid through the exercise of the degree of car and diligence
required of it. The act of Devesa in shooting Gillaco was
entirely unforeseeable by the Comoany as it had no means to
ascertain thatthe two would meet, nor could it reasonably
foresee every personal rancor that might exist between each
one of its employees and any one of the passengers riding in
its trains.
Maranan v Perez
Taxicab passenger Rogelio was stabbed and killed by the
driver Simeon. The taxicab was owned and operated by Perez.
While Rogelio was convicted of homicide by CFI Batangas,
Rogelios mom Antonia filed damages claim against Perez and
Simeon for Rogelios death. CFI Batangas ruled in favor of
Antonia. Both parties appealed the decision.
SC ruled that the case Gillaco vs Manila Railroad Company
(relied upon by Perez) is not applicable to this case and that the
common carrier is liable for intentional assaults committed by
its employees upon its passengers pursuant to Art. 1759 NCC.
LRTA v Navidad
Nicanor Navidad was run over by an LRT train when he got into
a scuffle with the stations security guard because he fell onto
the tracks. The widow sued the security agency, the LRTA and
the train operator.
The SC held the LRT liable as a common carrier when he
bought his token and was within the premises of the the LRT.
However, the train operator was absolved of any liability, there
32

being no showing that he was guilty of any act or omission
directly relatable to the death of the victim. Likewise with the
security agency, it was not shown that it failed to exercise due
diligence in the selection of the security guard involved in the
scuffle.
vii. Responsibility for acts of strangers and co-passengers
Civil Code Art 1763
Art 1763. A common carrier is responsible for injuries suffered
by a passenger on account of the wilful acts or negligence of
other passengers or of strangers, if the common carrier's
employees through the exercise of the diligence of a good
father of a family could have prevented or stopped the act or
omission.
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train one night and as it was slowly coming to a halt at the
station, he stepped out and tripped on a sack of watermelons
on the platform. He went under the train and his right arm was
lacerated and later amputated. He sued the respondent,
claiming that its employees were negligent in placing an
obstruction in the platform. The latter countered that Cangcos
contributory negligence led to his accident. The trial court ruled
in favour of the respondent.
The Supreme Court reversed it and held that, considering the
circumstances, including his age and his familiarity with the
said practice, Cangco acted without imprudence in alighting
from the train.
No contributory negligence as the act of alighting from the train
that hasnt fully stopped is a normal act of passengers.

Notes: ISAAC v A.L. Amnen

-General Rule: Common carrier is not liable for injuries inflicted
by strangers or co-passengers. Plaintiff boarded a passenger bus, owned by defendant. But,
Exception: Carriers employees could have prevented before reaching his destination, the bus collided with a pick-up
such act or omission with exercise of ordinary diligence type motor vehicle, which resulted to his injury and severance
-CC is not liable when the injury could not have been avoided of his left arm. Plaintiff brought an action for damages against
despite the exercise of due diligence defendant.
-Agbayani: the word injury should necessarily include death
The trial court and the SC both came into a conclusion that the
driver of the bus has shown that he has done what a prudent
Pilapil v CA
man could have done to avoid the collision. In fact, it was the
Pilapil got hit by a stone thrown by a bystander while he was on
driver of the pick-up who was negligent. Also, the plaintiff was
board the bus owned and operated by Alatco Transportation.
also guilty of contributory negligence for sticking out his elbow
outside the window.
The Court held that the common carrier is not liable because it
was able to rebut the presumption of negligence upon proving
Contributory negligence does not automatically exculpate, it
that the accident was due to an act of a stranger that they could
mitigates liability of common carriers
not have anticipated nor prevented from happening.

Bachelor Express v CA Supra

Difference between carriage of goods and passengers
Goods
Presumption of Negligence
In case of loss, damage or
viii. Duty of Passenger; Effect of Contributory Negligence deterioration
Civil Code Art 1761 & 1762 Duration of Responsibility
1. Upon actual delivery to
Art 1761. The passenger must observe the diligence of a good carrier or an authorized agent
father of a family to avoid injury to himself. (ability to exercise control and
possession);
Test: If there is nothing that
Art 1762. The contributory negligence of the passenger does remains to be done by the
not bar recovery of damages for his death or injuries, if the shipper, then carrier has
proximate cause thereof is the negligence of the common control and possession
carrier, but the amount of damages shall be equitably reduced 2. During storage in a
warehouse of the carrier at
Duty of passenger: the place of destination; until
To exercise ordinary diligence of a good father to avoid injury to consignee has been advised
him/herself. of the arrival of the goods +
reasonable opportunity to
Effect of contributory negligence: remove or dispose of them
It does not bar recovery of damages but reduces the amount of 3. During temporary
such. unloading or stored in transit;
4. Until actual or constructive
Effect of passengers negligence as proximate cause of delivery to consignee, a duly
injury authorized agent, a person
Common carrier shall be exonerated from liability who has a right to receive, a
stipulated authority, or the
Cangco v MRR shipper with reasonable time
Cangco, an employee of Manila Railroad, was on board the to remove goods.
Passengers
In case of injury or death
1. During ingress and egress
2. Even after alighting from
the vehicle until the
passenger had a reasonable
time or a reasonable
opportunity to leave the
carrier's premises
Test: The primary factor to
be considered is the
existence of a reasonable
cause
as will justify the presence of
the
victim on or near the vessel.
3. Even during stopovers,
until the passenger reaches
the port of destination.
33

Valid Stipulations
As to diligence
1. Must be in writing;
2. Must have a separate
consideration; and
3. Must not be against public
policy
As to liability
1. Limitation of liability to
amount in the bill of
lading, unless shipper
declares a greater value;
2. Fixing of a sum that may be
recovered if:
a. Reasonable and just under
the circumstances; and
b. Fairly and freely agreed
upon.
3. Limitation of liability upon
delay due to
strikes or riots
IV. Damages Recoverable from Common Carriers
As to diligence
None
As to liability
Parties may stipulate the
common carriers liability
for negligence, but not for
willful act or gross
negligence.
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damages.
Art 2201. In contracts and quasi-contracts, the damages for
which the obligor who acted in good faith is liable shall be those
that are the natural and probable consequences of the breach
of the obligation, and which the parties have foreseen or could
have reasonably foreseen at the time the obligation was
constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor
shall be responsible for all damages which may be reasonably
attributed to the non-performance of the obligation.
Art 2203. The party suffering loss or injury must exercise the
diligence of a good father of a family to minimize the damages
resulting from the act or omission in question.
Art 2206. The amount of damages for death caused by a crime
or quasi-delict shall be at least three thousand pesos, even
though there may have been mitigating circumstances. In
addition:

A. In General (1) The defendant shall be liable for the loss of the earning
1. Actual or compensatory capacity of the deceased, and the indemnity shall be paid to the
2. Moral Damages heirs of the latter; such indemnity shall in every case be
3. Exemplary Damages
4. Nominal, Temperate, Liquidated damages assessed and awarded by the court, unless the deceased on
account of permanent physical disability not caused by the
Damages Contract defendant, had no earning capacity at the time of his death;
Actual Good Faith- Those that are natural and
pecuniary loss probable consequences of the breach of the (2) If the deceased was obliged to give support according to the
obligation & which the parties have foreseen provisions of article 291, the recipient who is not an heir called
or could have reasonably foreseen at the to the decedent's inheritance by the law of testate or
time the obligation was constituted
Bad Faith, fraud, malice, wanton attitude- all
the damages which may reasonably be intestate succession, may demand support from the person
attributed to the non-performance of the causing the death, for a period not exceeding five years, the
obligation exact duration to be fixed by the court;
Moral provide Breaches of contract where the defendant
victim with acted fraudulently or in bad faith (3) The spouse, legitimate and illegitimate descendants and
resources to ascendants of the deceased may demand moral damages for
allow him to mental anguish by reason of the death of the deceased.
undertake some
diversion What forms part of actual damages?
Exemplary If the defendant acted in a wonton, 1. Proven pecuniary losses
fraudulent, reckless, oppressive or a. Loss of earning capacity
malevolent manner b. Loss of support;
c. Medical and funeral expenses.
B. Actual or Compensatory 2. For breach of contract of carriage:
Civil Code Art 1764, 2199, 2201, 2203, 2206
a. Good faith carrier: Natural and probable
consequence of the breach + forseeable or
reasonaby foreseen at the time of constitution
Art 1764. Damages in cases comprised in this Section shall be of obligation;
awarded in accordance with Title XVIII of this Book, concerning b. Bad faith carrier: All damages reasonable
Damages. Article 2206 shall also apply to the death of a attributed to non-performance of obligation
passenger caused by the breach of contract by a common 3. For quasi-delict (Air France): Natural and probable
carrier. consequences of the act;
4. P50k for death;
Art 2199. Except as provided by law or by stipulation, one is
entitled to an adequate compensation only for such pecuniary Formula for lost earning capacity:
loss suffered by him as he has duly proved. Such =2/3 [80 ]
compensation is referred to as actual or compensatory
Main factors to be considered in awarding lost earning
capacity:
34

1. The number of years on the basis of which the
damages shall be computed; and
2. The rate at which the losses sustained should be fixed
(average annual income; industry rate, etc.)
Rules on documentary evidence for lost earning capacity
G.R.: Documentary evidence should be presented to
substantiate the claim for damages.
Exception: No need to present if deceased is:
a. Self-employed, earning less than the minimum wage
under current labor laws; or
b. Employed as a daily wage worker earning less than
the minimum wage under current labor laws.
Notes:
Only net earnings, not gross earnings, are to be considered
that is, the total of the earnings less expenses necessary in
the creation of such earnings or income and less living and
other incidental expenses.
Cariaga v LTBCo & MRR
Cariaga, a medical student, was on board the LTB bus bound
for Laguna when, upon reaching the train crossing, it bumped
the engine of the moving train of the MRR. He was hospitalized
for his serious injuries which reduced his intelligence and made
him incapable of finishing his studies. He sued the LTB and
MRR for actual, compensatory, exemplary, and moral damages
and attorneys fees. The trial court held LTB liable for
compensatory damages.
The Supreme Court held that the MRR was not guilty of
contributory negligence and that its driver made many warnings
upon the crossing. The SC increased the award of
compensatory damages, taking into account the income he
should have earned had he been able to finish his studies and
pass the boards (which is now impossible because of his
injuries). Moral damages, compensatory damages, and
attorneys fees werent granted, however, since the cause of
action did not arise out of a quasi-delict resulting to physical
injuries.
Pan Am v IAC
Pangan entered into two agreements where he bound himself
to supply films to Prime Films and Hafa Adai Org to be
exhibited in the US and Guam respectively. On the date of
departure to Guam, he was informed, after checking in his
baggages, that his name was not in the manifest. Thus, he had
to transfer from economy class to first class. He arrived in
Guam on time. The two pieces of luggage, however, were
missing.
The Court held that petitioners liability should be limited to
$600 as stipulated at the conditions printed at the back of the
ticket. This is also because Pangan failed to declare a higher
value for his luggage and to pay the additional charges.
As for Pangans demand for actual damages, the Court did not
grant this because evidence reveals that the proximate cause
of the cancellation of the contract was Pangans failure to
deliver the promotional and advertising materials on the date
agreed upon. For this, petitioner cannot be held liable (1)
Pangan had not declare the value of the luggage he had
checked in and had not paid the additional charges; (2)
petitioner was not privy to the contracts and its attention was
not called to the condition requiring delivery of the materials on
or before a certain date.
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Villa-Rey v CA
The respondents are the siblings of the victim, Policronio
Quintos, who died in an accident where the bus he was riding
hit a bullcart filled with hay. On top of the hay was a bamboo
pole which penetrated through the glass windshield and landed
on the face of the victim, rendering him unconscious. Suffering
multiple wounds, the victim eventually died, single, with no
descendants or ascendants. Action was brought by
respondents against petitioner, as owner and operator of said
passenger bus for breach of contract of carriage. The trial court
and CA both found accident was due to negligence of the bus
driver. Both parties appealed only on the amount of damages
recoverable.
The Court affirmed the computation made by CA on the basis
of life expectancy and net earning capacity of the deceased.
PAL v CA
Nicanor Padilla died in a plane crash. Natividad, his mother and
only legal heir, filed a complaint for damages against PAL. RTC
awarded P477k as award for expected income of the
deceased. PAL appealed claiming that the amount was
excessive it should have been computed based on the LE of
the heir and not of the deceased, per US courts.
The Court held that the basis of the computation is the life
expectancy of the deceased and not of his beneficiaries, per
Civil Code and jurisprudence. The RTC, however,
miscalculated the amount. It should be P417k and not P477k.
Victory Liner v Gammad
Respondents were the heirs of the deceased who was killed in
a bus crash involving petitioners bus. Petitioner was unable to
overturn the presumption of breach so it was held liable for
damages. Moral damages were awarded, among others,
separately from exemplary damages, as they were different
from one another. SC also discussed the basis and ways in
which moral damages may be awarded in a case based on
culpa contractual.
C. Moral
Civil Code Art 2206 (3), 2216, 2217, 2219, 2220
Art 2206. The amount of damages for death caused by a crime
or quasi-delict shall be at least three thousand pesos, even
though there may have been mitigating circumstances. In
addition:
(3) The spouse, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for
mental anguish by reason of the death of the deceased.
Art 2216. No proof of pecuniary loss is necessary in order that
moral, nominal, temperate, liquidated or exemplary damages,
may be adjudicated. The assessment of such damages, except
liquidated ones, is left to the discretion of the court, according
to the circumstances of each case.
Art 2217. Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar
injury. Though incapable of pecuniary computation, moral
damages may be recovered if they are the proximate result of
35

the defendant's wrongful act for omission.
Art 2219. Moral damages may be recovered in the following
and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27, 28,
29, 30, 32, 34, and 35.
The parents of the female seduced, abducted, raped, or
abused, referred to in No. 3 of this article, may also recover
moral damages.
The spouse, descendants, ascendants, and brothers and
sisters may bring the action mentioned in No. 9 of this article, in
the order named.
Art 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule
applies to breaches of contract where the defendant acted
fraudulently or in bad faith.
When can moral damages be claimed?
1. Breach of contract of carriage with bad faith
2. Death by the passenger
3. Mental anguish by descendants and ascendants of the
deceased by reason of his/her death
Definition of bad faith:
A breach of a known duty through some motive of
interest or ill-will; or
Self-enrichment or fraternal interest, and not
personal ill-will, may well have been the motive; but
it is malice nevertheless;
Overbooking exceeding 10%;
Wanton disregard of rights and dignity as a human
being;
Inattention to and lack of care for the interest of its
passengers who are entitled to its utmost
consideration, particularly as to their convenience
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Fores v Miranda
Respondent was one of the passengers of a jeepney driven by
Eugenio Luga. While the vehicle was descending the Sta. Mesa
bridge at an excessive speed, the driver lost control, and the
jeepney swerved to the bridge wall. Serious injuries were
suffered by the respondent. The court of appeals awarded
moral damages him.
The Court revoked the grant of moral damages and held that, it
has been repeatedly ruled that moral damages are not
recoverable in damage actions predicted on a breach of the
contract of transportation. Where the injured passenger does
not die, moral damages are not recoverable unless it is proved
that the carrier was guilty of malice or bad faith. We think it is
clear that the mere carelessness of the carrier's driver does not
per se constitute of justify an inference of malice or bad faith on
the part of the carrier; and in the case at bar there is no other
evidence of such malice to support the award of moral
damages by the Court of Appeals.
Air France v Carrascoso
Rafael was made to vacate his first class seat by the
petitioners manager while on the third leg of his flight at
Bangkok despite having booked a round trip first class ticket.
The manager claimed a white man had a better right to his seat
and so Rafael was forced to transfer to a different
compartment. In suing the petitioner, Rafael claimed that he
suffered inconveniences, embarrassments, and humiliations
which caused him mental anguish.
The trial court and the CA awarded him moral and exemplary
damages and this was affirmed by the Court which ruled that
though he averred a breach in the contract of carriage and
there was no allegation of bad faith, an act that may breach the
contract may give rise to quasi-delict and that bad faith can be
inferred from the circumstances as set forth in his complaint.
Although the relationship of passenger and carrier is
contractual, the act that broke the contract may be a tort.
Lopez v Pan Am
Plaintiffs Senator Fernando Lopez, wife Maria Lopez, son-in-
law Alfredo Montelibano,, Jr., and daughter Milagros
Montelibano reserved and bought first class tickets for
defendant PAN-AMs Tokyo to San Francisco flight. They flew
from MNL to Tokyo and when they arrived, PAN-AM refused to
provide first class accommodations and instead made them
ride tourist class. Plaintiffs filed with the CFI a complaint for
damages claiming that PAN-AM breached the contract in bad
faith. CFI ruled in their favor but awarded damages less than
what they prayed for, so both plaintiffs and defendant appealed
to SC.
SC ruled that PAN-AM acted in bad faith when its employees
breached their duty to inform the plaintiffs that the reservations
were cancelled and instead, kept the situation secret from
plaintiffs so that plaintiffs would still buy tickets on the
impression that they had first class accommodations. SC
awarded plaintiffs a total of P200K moral damages, P75K
exemplary, and P50K attys fees..
Ortigas v Lufthansa
Ortigas had first class tickets for his Rome-HK flight aboard
Lufthansa. An employee upon seeing his Philippine passport
told him that his seat would be given to a Belgian but promised
that hed be transferred to first class in the other leg of their
36

journey. This didnt happen.
SC ruled that Lufthansas breach constituted bad faith which
entitled Ortigas to moral damages. It reasoned that such
discriminatory acts which were not only violative of their
contractual obligations but also offensive to human dignity and
national or racial pride constitute about the most justifiable
ground for the award of moral damages, for the resulting injury
cannot but cause mental anguish, besmirched reputation,
wounded feelings, moral shock and social humiliation (Art
2217, NCC). They are to be considered as infecting with bad
faith the breach of contract committed, under Art 2220.
Cathay Pacific v Vasquez
The Spouses Vazquez filed a complaint against Cathay Pacific
because they were upgraded to first class against their will on a
flight from Hong Kong to Manila due to their membership in the
airlines frequent flyer program. The RTC ruled in their favor
and awarded them moral damages. The CA reduced the RTC
award but otherwise affirmed the decision.
The SC found that while there was a breach of contract of
carriage, the same cannot constitute bad faith. Under the CAB
regulations 3 , overbooking that does not exceed 10% is not
considered deliberate and does not amount to bad faith. While
the flight was overbooked, there was no evidence that it was
booked beyond 10%.
Air France v Gillego
Gillego will attend a human rights conference in Budapest and
Tokyo, so he boarded a plane bound for Paris. He requested to
move his connecting flight to Budapest to an earlier schedule,
which was approved. Upon reaching Budapest, he could not
locate his luggage. Depsite repeated follow-up inquiries, Air
France ignored and failed to deliver the luggage to his hotel.
Hence, he had to buy clothes, medicines for his hypertension,
and had to make again another speech, all of which are
contained in his luggage. Upon his return to the Philippines, he
filed a complaint for damages.
The Court granted his prayer for moral damages, because Air
France repeatedly ignored his follow-up calls. This indifferent
attitude without due regard to Gillego amounted to bad faith,
warranting the grant of moral damages. In determining moral
damages, status of the plaintiff is a factor.
Notes:
In Air France, Ortigas and Lopez- breach did not
result in death. Thus, there is a need to prove fraud
or bad faith to merit the award of moral damages
Moral damages need not be proved by evidence
Even if there is no allegation of bad faith, moral
damages may still be awarded if bad faith can be
found by the Court
D. Exemplary
Civil Code Art 2229, 2232, and 2233
Art 2229. Exemplary or corrective damages are imposed, by
way of example or correction for the public good, in addition to
the moral, temperate, liquidated or compensatory damages.
Art 2232. In contracts and quasi-contracts, the court may award
exemplary damages if the defendant acted in a wanton,
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fraudulent, reckless, oppressive, or malevolent manner.
Art 2233. Exemplary damages cannot be recovered as a matter
of right; the court will decide whether or not they should be
adjudicated.
When can exemplary damages be awarded?
1. By way of example or correction for the public good, in
addition to actual, moral, temperate, or liquidated
damages;
2. In breach of contract of carriage, if carrier or agent
acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner.
Mercenas v CA
M/T Tacloban (barge-type oil tanker) collided with M/V Don
Juan ( inter-island vessel carrying 750 passengers). When the
collision occurred, the sea was calm, the weather fair and
visibility good. As a result, M/V Don Juan sank and the
passengers perished. Petitioner was the parent of the
passenger who died. They file an action for damages alleging
the negligence of Capt. Santisteban (captain of Don Juan) and
Negros Navigation (owner of Don Juan).
The Court held that the award for exemplary damages is proper
since the behaviour of the captain of Don Juan in this instance
playing mahjong, before and up to the time of collision
constitutes behaviour that is simply unacceptable on the part of
the master of a vessel to whose hands the lives and welfare of
at least seven hundred fifty (750) passengers had been
entrusted. There is also evidence that Don Juan; was carrying
more passengers than she had been certified as allowed to
carry.
E. Nominal, Temperate and Liquidated
Civil Code Art 2221, 2224, and 2226
Art 2221. Nominal damages are adjudicated in order that a right
of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by
him.
Art 2224. Temperate or moderate damages, which are more
than nominal but less than compensatory damages, may be
recovered when the court finds that some pecuniary loss has
been suffered but its amount cannot, from the nature of the
case, be provided with certainty.
Art 2226. Liquidated damages are those agreed upon by the
parties to a contract, to be paid in case of breach thereof.
When are nominal damages awarded?
For the vindication/recognition of a violated or
invaded right.
When are temperate damages awarded?
More than nominal but less than actual damages,
awarded when the court finds that some pecuniary
loss has been suffered but amount cannot be
provided with certainty.
When are liquidated damages awarded?
When agreed upon by the parties90.
Note:
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Nominal and temperate damages cannot F. Attorneys Fees & Interest
beawarded with actual damages.
Civil Code Art 2208 and 2210

Alitalia v IAC Art 2208. In the absence of stipulation, attorney's fees and
Dr. Pablo was supposed to present her paper at a U.N. Meeting expenses of litigation, other than judicial costs, cannot be
in Ispra, Italy and booked a flight on ALITALIA for this purpose. recovered, except:
When she arrived in Milan, her luggage containing her scientific (1) When exemplary damages are awarded;
papers and presentation materials could not be found. She (2) When the defendant's act or omission has compelled
returned to Manila without attending the meeting and filed the the plaintiff to litigate with third persons or to incur expenses to
present action for damages. It turned out that her luggage was protect his interest;
in fact forwarded to Ispra, Italy but only on the day after her (3) In criminal cases of malicious prosecution against the
scheduled appearance. The CFI awarded her P20,000 in plaintiff;
nominal damages and P5,000 in attorneys fees. The IAC (4) In case of a clearly unfounded civil action or
affirmed the decision and increased nominal damages to proceeding against the plaintiff;
P40,000. (5) Where the defendant acted in gross and evident bad
faith in refusing to satisfy the plaintiff's plainly valid, just and
The Court affirmed the decision because while no actual demandable claim;
damages can be awarded in her favor, her luggage having (6) In actions for legal support;
been eventually returned to her without damage, she still (7) In actions for the recovery of wages of household
suffered some special species of injury when she lost the helpers, laborers and skilled workers;
opportunity to present her paper because of ALITALIAs breach (8) In actions for indemnity under workmen's
of its contract of carriage in delaying the transportation of her compensation and employer's liability laws;
luggage. (9) In a separate civil action to recover civil liability arising
from a crime;
Saludo v CA (10) When at least double judicial costs are awarded;
Petitioners mother died. Her body was to be shipped from (11) In any other case where the court deems it just and
Chicago to the Philippines. Along the way, her body was lost equitable that attorney's fees and expenses of litigation should
and ended up in Mexico. be recovered.
In all cases, the attorney's fees and expenses of litigation must
The Court held that the airlines were not negligent. However, be reasonable.
Trans World acted apathetic toward petitioners inquiries about
the location of their mothers body. Petitioners had the right to Art 2210. Interest may, in the discretion of the court, be allowed
be treated with due courtesy. Hence, nominal damages were upon damages awarded for breach of contract.
awarded.
Summary of Damages:
JAL v CA
Private respondents were on board JAL flight from San When Allowed
Franciso, California bound for Manila with overnight stopover at Actual 5. Proven pecuniary losses
Narita Japan. Last leg of their flight was cancelled because of a. Loss of earning capacity
NAIAs indefinite closure after the Mt. Pinatubo eruption. Action
for damages were filed by stranded passengers after PAL
b. Loss of support;
refused to pay their hotel and accommodation expenses for c. Medical and funeral expenses.
their unexpected stay in Japan from June 16 to June 22. 6. For breach of contract of carriage:
a. Good faith carrier: Natural and
The Court held that when JAL was prevented from resuming its probable consequence of the
flight to Manila due to the effects of Mt. Pinatubo eruption, a breach + forseeable or reasonaby
force majeure, whatever losses or damages in the form of hotel foreseen at the time of constitution
and accommodation expenses the stranded passengers of obligation;
incurred, cannot be charged to JAL. However, nominal b. Bad faith carrier: All damages
damages were awarded. JAL reneged on its obligation to look reasonable attributed to non-
after the comfort and convenience of its passengers when it performance of obligation
declassified private respondents from transit passengers to 7. For quasi-delict (Air France): Natural and
new passengers as a result of which private respondents were probable consequences of the act;
obliged to make the necessary arrangements themselves 8. P50k for death;
for the next flight to Manila. Moral 1. Breach of contract of carriage with bad faith
2. Death by the passenger
Savellano v Northwest 3. Mental anguish by descendants and
Nominal damages was awarded by the Court to petitioners who ascendants of the deceased by reason of
were greatly inconvenienced by respondent airline on account his/her death
of changing their stop overs without obtaining their consent, as Exemplary 1. By way of example or correction for the
well as greatly inconveniencing them throughout the journey. public good, in addition to actual, moral,
The prayer for moral damages failed because petitioners were temperate, or liquidated damages
not able to prove bad faith in the breach of the contract of 2. In breach of contract of carriage, if carrier or
carriage, unlike the ruling in Lopez, Zulueta and Ortega. agent acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner

38

Nominal For the vindication/recognition of a violated or
invaded right
Temperate More than nominal but less than actual damages,
awarded when the court finds that some
pecuniary loss has been suffered but amount
cannot be provided with certainty
Liquidated When agreed upon by the parties
IV. Code of Commerce Provisions on Overland
Transportation
A. Scope of Overland Transportation
Scope:
Overland Transportation: applies to transport on
land and small bodies of water (inlet, bay, stream,
river, lake, brook, canal, as long as the sieve is not
very large). If large, then it is admiralty.
Code of commerce involves:
o Overland Transportation
o Maritime admiralty
Code of commerce governs only COMMERCIAL
CONTRACTS, thus:
o If it is a commercial contract involving a
common carrier- use Civil Code first then Code
of Commerce if relevant
o If it is a commercial contract involving a private
carrier- use Code of Commerce first then Civil
Code on Torts, NOT on common carriers
Elements:
1. Object: Merchandise or any article of commerce
2. The carrier is a merchant or habitually engaged in
transportation for the public
B. Nature of Contract
Code of Commerce Art 349
Art 349. A contract of transportation by land or water ways of
any kind shall be considered commercial:
(1) When it has for its object merchandise or any article of
commerce.
(2) When, whatever its object may be, the carrier is a
merchant or is habitually engaged in transportation
for the public.
Notes:
Scope: Commercial Contracts
C. Effect of Civil Code
Civil Code Art 1766 & 2270
Art 1766. In all matters not regulated by this Code, the rights
and obligations of common carriers shall be governed by the
Code of Commerce and by special laws.
Art. 2270. The following laws and regulations are hereby
repealed:
(1) Those parts and provisions of the Civil Code of 1889
which are in force on the date when this new Civil
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Code becomes effective;
(2) The provisions of the Code of Commerce governing
sales, partnership, agency, loan, deposit and
guaranty;
(3) The provisions of the Code of Civil Procedure on
prescription as far as inconsistent with this Code; and
(4) All laws, Acts, parts of Acts, rules of court, executive
orders, and administrative regulations which are
inconsistent with this Code.
Notes:
The civil code did not expressly repeal the
provisions of the Code of Commerce on overland
transportation; it makes such provisions suppletory
to the provisions of the Civil Code on CCs
D. Contract of Carriage
i. Bill of Lading
1. Definition, Subject Matter
Code of Commerce Art 352
Art 352. The bills of lading, or tickets in cases of transportation
of passengers, may be diverse, some for persons and others
for baggage; but all of them shall bear the name of the carrier,
the date of shipment, the points of departure and arrival, the
cost, and, with respect to the baggage, the number and weight
of the packages, with such other manifestations which may be
considered necessary for their easy identification.
Definition-
It may be defined as a written acknowledgment of the
receipt of goods and an agreement to transport and to
deliver them at a specified place to a person named or on
his order. It comprehends all methods of transportation.
It is also a document of title, a document used in the
ordinary course of business in the sale or transfer of hoods,
as proof of the possession or control of goods, or
authorizing or purporting to authorize the possessor of the
document to transfer or receive, either by indorsement or
by delivers, goods represented by such document
Nature:
1. Each bill is a contract in itself and the parties are bound
by its terms (repository of the terms and conditions of
the contract)
2. A bill of lading is also a receipt (acts as a document to
indicate that carrier has received the goods)
3. It is also a symbol of the goods covered by it.
Parties to a Bill of Lading:
1. Shipper
2. Carrier
3. Consignee
2. Forms, Contents
Code of Commerce Art 350 & 351
Art 350. The shipper as well as the carrier of merchandise or
goods may mutually demand that a bill of lading be made,
stating:
(1) The name, surname and residence of the shipper.
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(2) The name, surname and residence of the carrier.
(3) The name, surname and residence of the person to
whom or to whose order the goods are to be sent or
whether they are to be delivered to the bearer of said
bill.
(4) The description of the goods, with a statement of their
kind, of their weight, and of the external marks or
signs of the packages in which they are contained.
(5) The cost of transportation.
(6) The date on which shipment is made.
(7) The place of delivery to the carrier.
(8) The place and the time at which delivery to the
consignee shall be made.
(9) The indemnity to be paid by the carrier in case of
delay, if there should be any agreement on this matter.
Art. 351. In transportation made by railroads or other
enterprises subject to regulation rate and time schedules, it
shall be sufficient for the bills of lading or the declaration of
shipment furnished by the shipper to refer, with respect to the
cost, time and special conditions of the carriage, to the
schedules and regulations the application of which he requests;
and if the shipper does not determine the schedule, the carrier
must apply the rate of those which appear to be the lowest, with
the conditions inherent thereto, always including a statement or
reference to in the bill of lading which he delivers to the shipper.
Classes of a bill of lading:
Definition
Negotiable Goods will be delivered to the bearer, or to the
order of any person named in such document.
Non-nego Goods to be delivered to a specified person.
Clean Does not indicate any defect in the goods
Foul Indicates that the goods covered by it are in
bad condition.
Spent Covers goods that have already been
delivered by the CC without a surrender of a
signed copy of the B/L.
Through Issued by the CC who is obliged to use the
facilities of other carriers as well as his own
facilities for the purpose of transporting the
goods from the city of the seller to the city of
the buyer, which B/L is honored by the
subsequent interested carriers who do not
issue their own ladings.
On-Board States that the goods have been received on
board the vessels which is to carry the goods.
Received for States that the goods have been received for
Shipment shipment; issued when conditions are not
normal and there is an insufficiency of shipping
space.
Custody Issued by the CC to whom the goods have
been delivered for shipment but the steamer
indicated in the B/L which is to carry the goods
has not yet reached the port where the goods
are held for shipment.
Port Issued by the CC when the goods to be
shipped are already in the port where the goods
are held for shipment
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3. Function
Code of Commerce Art 353
Art 353. The legal evidence of the contract between the shipper
and the carrier shall be the bills of lading, by the contents of
which the disputes which may arise regarding their execution
and performance shall be decided, no exceptions being
admissible other than those of falsity and material error in the
drafting.
After the contract has been complied with, the bill of lading
which the carrier has issued shall be returned to him, and by
virtue of the exchange of this title with the thing transported, the
respective obligations and actions shall be considered
cancelled, unless in the same act the claim which the parties
may wish to reserve be reduced to writing, with the exception of
that provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return
the bill of lading subscribed by the carrier, because of its loss or
of any other cause, he must give the latter a receipt for the
goods delivered, this receipt producing the same effects as the
return of the bill of lading.
Functions of a Bill of Lading:
Contract
o Form of legal evidence between shipper and
carrier
Receipt
Symbol (Document of Title)
A bill of can either be a contract or a receipt:
One can argue that a provision is just an evidence of
receipt, and was not meant to contain the stipulations of
the parties.
Ex: Carla, the consignee received the Bill of Lading
from Ralph, the Shipper. The Bill of Lading stipulated
that the goods were received in good condition when in
reality, it wasnt. Carla can go to court and argue that
the bill of lading was just evidence of receipt and not a
contractual arrangement between the consignee and
the shipper.
ii. Refusal to Transport
Code of Commerce Art 356
Art 356. Carriers may refuse packages which appear unfit for
transportation; and if the carriage is to be made by railway, and
the shipment is insisted upon, the company shall transport
them, being exempt from all responsibility if its objections, is
made to appear in the bill of lading.
General Rule: Common carrier is duty bound to accept cargo
without discrimination.
E: If discrimination is reasonable and necessary.
Accepted instances for refusal to transport
1. Goods are dangerous objects or substances;
2. Goods are unfit for transportation;
3. Acceptance will result in overloading;
40

4. Goods are contraband/illegal;
5. Goods are injurious to health;
6. Goods will be exposed to untoward danger;
7. Goods like livestock will be exposed to disease;
8. Strike;
9. Failure to tender goods on time.
iii. Doubtful Declaration of Contents
Code of Commerce Art 357
Art 357. If by reason of well-founded suspicion of falsity in the
declaration as to the contents of a package the carrier should
decide to examine it, he shall proceed with his investigation in
the presence of witnesses, with the shipper or consignee in
attendance.
If the shipper or consignee who has to be cited does not attend,
the examination shall be made before a notary, who shall
prepare a memorandum of the result of the investigation, for
such purpose as may be proper.
If the declaration of the shipper should be true, the expense
occasioned by the examination and that of carefully repacking
the packages shall be for the account of the carrier and in a
contrary case for the account of the shipper.
Ability to inspect contents of a doubtful package- If by
reason of well-founded suspicion of falsity in the declaration as
to the contents of a package the carrier should decide to
examine it, he shall proceed with his investigation in the
presence of:
Witnesses, with the shipper or consignee inattendance;
or
Before a notary, who shall prepare a memorandum of
the result of the investigation, for such purposes as may
be proper.
iv. No Bill of Lading
Code of Commerce Art 51 & 354
Art 51. Commercial contracts shall be valid and shall give rise
to obligations and causes of action in suits, whatever the form
and language in which they may be executed, the class to
which they may belong, and the amount they may involve,
provided their existence is shown by any means established by
the civil law. However, the testimony of witness alone shall not
be sufficient to prove the existence of a contract which involves
an amount exceeding 1,500 pesetas unless supported by some
other evidence.
Art 354. In the absence of a bill of lading, disputes shall be
determined by the legal proofs which the parties may present in
support of their respective claims, according to the general
provisions established in this Code for commercial contracts.
Notes:
The Civil code and other related laws will govern in the
absence of a bill of lading.
E. Responsibility of the Carrier
i. When it commences
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Code of Commerce Art 355
Art 355. The responsibility of the carrier shall commence
from the moment he receives the merchandise, personally or
through a person charged for the purpose, at the place
indicated for receiving them.
From the moment he/she receives the merchandise
personally or through an agent
ii. Route
Code of Commerce Art 359
Art 359. If there is an agreement between the shipper and
the carrier as to the road over which the conveyance is to be
made, the carrier may not change the route, unless it be by
reason of force majeure; and should he do so without this
cause, he shall be liable for all the losses which the goods
he transports may suffer from any other cause, beside
paying the sum which may have been stipulated for such
case.
When on account of said cause of force majeure, the carrier
had to take another route which produced an increase in
transportation charges, he shall be reimbursed for such
increase upon formal proof thereof.
GR: Carrier must follow the route stipulated (or else
shall be liable for losses + payment of damage)
o Exception: Force Majeure requires the change
in route
When there is no agreed route, the carrier must select
one which may be the shortest, least expensive and
practically passable
iii. Care of Goods
Code of Commerce Art 361, 362
Art 361. The merchandise shall be transported at the risk
and venture of the shipper, if the contrary has not been
expressly stipulated. As a consequence, all the losses and
deterioration which the goods may suffer during the
transportation by reason of fortuitous event, force majeure,
or the inherent nature and defect of the goods, shall be for
the account and risk of the shipper. Proof of these accidents
is incumbent upon the carrier.
Art 362. Nevertheless, the carrier shall be liable for the
losses and damages resulting from the causes mentioned in
the preceding article 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, unless the shipper has committed
fraud in the bill of lading, representing the goods to be of a
kind or quality different from what they really were.
If, notwithstanding the precautions referred to in this article,
the goods transported run the risk of being lost, on account
of their nature or by reason of unavoidable accident, there
being no time for their owners to dispose of them, the carrier
may proceed to sell them, placing them for this purpose at
the disposal of the judicial authority or of the officials
designated by special provisions.
Civil Code, Art 1734. 1735
Art 1734. Common carriers are responsible for the loss,
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destruction, or deterioration of the goods, unless the same is the loss, destruction
due to any of the following causes only: or deterioration
1) Flood, storm, earthquake, lightning, or other natural Damage due to defect of CC must exercise
disaster or calamity; goods diligence to forestall
2) Act of the public enemy in war, whether or lessen the loss
international or civil; See Art 366 of Code
3) Act or omission of the shipper or owner of the of Commerce
goods; Order or Act of Competent Said public authority
4) The character of the goods or defects in the Authority had the power to
packing or in the containers; issue the order
5) Order or act of competent public authority.
iv. Delivery
Art 1735. In all cases other than those mentioned in Nos. 1,
2, 3, 4, and 5 of the preceding article, if the goods are lost, 1. Condition of goods
destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they Code of Commerce 363-367
prove that they observed extraordinary diligence as required
in article 1733.
Art 363. Outside of the cases mentioned in the second
It is the shipowners burden to prove that goods were paragraph of Article 361, the carrier shall be obliged to
damages by reason of some fact which legally exempts deliver the goods shipped in the same condition in which,
him from liability. according to the bill of lading, they were found at the time
CC are liable for loss, destruction and deterioration of they were received, without any damage or impairment, and
goods unless: failing to do so, to pay the value which those not delivered
o There is exercise of Extraordinary Diligence may have at the point and at the time at which their delivery
should have been made.
(EOD) under 1733
o Loss is due to 1734
The civil code has clearer definitions on the level of If those not delivered form part of the goods transported, the
diligence required of common carriers consignee may refuse to receive the latter, when he proves
o Civil Code: EOD that he cannot make use of them independently of the
o Code of Commerce implies ordinary diligence others.
Where goods run the risk of loss due to their nature, Art
362 provides for the remedy for sale by the CC of the Art 364. If the effect of the damage referred to in Article 361
goods, placing them at the disposal of judicial authority is merely a diminution in the value of the goods, the
or persons designated/ obligation of the carrier shall be reduced to the payment of
the amount which, in the judgment of experts, constitutes
1734 Requisites (Note that 1734 is a closed list, anything such difference in value.
outside it falls within 1735)
Natural Disaster Must have been Art 365. If, in consequence of the damage, the goods are
proximate and only rendered useless for sale and consumption for the purposes
cause for which they are properly destined, the consignee shall not
CC must exercise be bound to receive them, and he may have them in the
due diligence to hands of the carrier, demanding of the latter their value at
prevent or minimize the current price on that day.
the loss before,
during and after the If among the damaged goods there should be some pieces
occurrence of the in good condition and without any defect, the foregoing
disaster provision shall be applicable with respect to those damaged
CC was not guilty of and the consignee shall receive those which are sound, this
delay in transporting segregation to be made by distinct and separate pieces and
goods without dividing a single object, unless the consignee proves
Act of Public Enemy Must have been the impossibility of conveniently making use of them in this
proximate and only form.
cause
CC must exercise The same rule shall be applied to merchandise in bales or
due diligence to packages, separating those parcels which appear sound.
prevent or minimize
the loss before, Art 366. Within the twenty-four hours following the receipt of
during and after the the merchandise, the claim against the carrier for damage or
act of the public average be found therein upon opening the packages, may
enemy be made, provided that the indications of the damage or
Act or Omission of Shipper Must have been average which gives rise to the claim cannot be ascertained
proximate and only from the outside part of such packages, in which case the
cause claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the
The ship owner
transportation charges have been paid, no claim shall be
merely contributed to
42

admitted against the carrier with regard to the condition in
which the goods transported were delivered.
Art 367. If doubts and disputes should arise between the
consignee and the carrier with respect to the condition of the
goods transported at the time their delivery to the former is
made, the goods shall be examined by experts appointed by
the parties, and, in case of disagreement, by a third one
appointed by the judicial authority, the results to be reduced
to writing; and if the interested parties should not agree with
the expert opinion and they do not settle their differences,
the merchandise shall be deposited in a safe warehouse by
order of the judicial authority, and they shall exercise their
rights in the manner that may be proper.
GR: Same condition when they were received
Partial delivery-the consignee may refuse to receive the goods
delivered, if he can prove that je cannot make use of them
independently of those not delivered.
Estoppel of Shipper by laches-neglect or delay of shipper to
demand immediately or within a reasonable time, the return of
the merchandise shipped or its value in chase of non-delivery
constitutes estoppel by laches.
When damage renders the goods useless for their purpose-
The effect are as follows:
1. If damage affects all gods, the consignee may abandon
all the goods to the CC who shall pay the corresponding
damages
2. If damage affects only some of the goods, the
consignee may abandon only the damaged goods (but
if the consignee can prove that it is impossible to
conveniently use the undamaged goods in that form,
without the damaged goods, the law authorizes the
consignee to abandon all the goods.
Report of damaged goods- The damage may either be:
Damage When claim must be made
Ascertainable only by opening Claim must be made within 24
of the package hours following the receipt
(point of receipt- when he is in
possession of the goods that
he may exercise over it the
ordinary control pertinent to
ownership)
Ascertainable from the outside Made at the time of receipt
part of the package
*In any case, the claim must be made before the payment of
transportation charges. If claim is not made, no cause of action
may accrue against the CC (condition precedent).
Stipulated period-period under 366 may be altered by
stipulation of parties. May be shortened or lengthened.
Code of Commerce Carriage of Goods by Sea
Act
File claim for apparent loss: upon receipt
File claim within 24 hrs from File claim within 3 days from
delivers delivery
Filing of claim is mandatory; Not mandatory
condition precedent for filing
an action for damages
Prescriptive period: 10 yrs Prescriptive period: 1 yr from
(contract) 6 yrs (no contract) discharge of goods
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Jurisprudence is clear that prescriptive period applies only if the
goods were actually delivered
2. To whom delivery made
Code of Commerce 368
Art 368. The carrier must deliver to the consignee, without
any delay or obstruction, the goods which he may have
received, by the mere fact of being named in the bill of
lading to receive them; and if he does not do so, he shall be
liable for the damages which may be caused thereby.
GR: To consignee
But delivery may be hindered by Stoppage in transit
the right of a seller of goods to stop them on their way
to the buyer and resume possession of them (as on
discovery of the buyer's insolvency)
Civil Code, 1523, 1532 and 1536
Art. 1523. Where, in pursuance of a contract of sale, the
seller is authorized or required to send the goods to the
buyer, delivery of the goods to a carrier, whether named by
the buyer or not, for the purpose of transmission to the buyer
is deemed to be a delivery of the goods to the buyer, except
in the case provided for in Article 1503, first, second and
third paragraphs, or unless a contrary intent appears.
Unless otherwise authorized by the buyer, the seller must
make such contract with the carrier on behalf of the buyer as
may be reasonable, having regard to the nature of the goods
and the other circumstances of the case. If the seller omit so
to do, and the goods are lost or damaged in course of
transit, the buyer may decline to treat the delivery to the
carrier as a delivery to himself, or may hold the seller
responsible in damages.
Unless otherwise agreed, where goods are sent by the seller
to the buyer under circumstances in which the seller knows
or ought to know that it is usual to insure, the seller must
give such notice to the buyer as may enable him to insure
them during their transit, and, if the seller fails to do so, the
goods shall be deemed to be at his risk during such transit.
(n)
Art. 1532. The unpaid seller may exercise his right of
stoppage in transitu either by obtaining actual possession of
the goods or by giving notice of his claim to the carrier or
other bailee in whose possession the goods are. Such notice
may be given either to the person in actual possession of the
goods or to his principal. In the latter case the notice, to be
effectual, must be given at such time and under such
circumstances that the principal, by the exercise of
reasonable diligence, may prevent a delivery to the buyer.
When notice of stoppage in transitu is given by the seller to
the carrier, or other bailee in possession of the goods, he
must redeliver the goods to, or according to the directions of,
the seller. The expenses of such delivery must be borne by
the seller. If, however, a negotiable document of title
representing the goods has been issued by the carrier or
other bailee, he shall not obliged to deliver or justified in
delivering the goods to the seller unless such document is
first surrendered for cancellation. (n)
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Art. 1536. The vendor is not bound to deliver the thing sold
in case the vendee should lose the right to make use of the
terms as provided in Article 1198. (1467a)
Art. 1198. The debtor shall lose every right to make use of
the period:
(1) When after the obligation has been contracted, he
becomes insolvent, unless he gives a guaranty or security
for the debt;
(2) When he does not furnish to the creditor the guaranties
or securities which he has promised;
(3) When by his own acts he has impaired said guaranties or
securities after their establishment, and when through a
fortuitous event they disappear, unless he immediately gives
new ones equally satisfactory;
(4) When the debtor violates any undertaking, in
consideration of which the creditor agreed to the period;
(5) When the debtor attempts to abscond. (1129a)
3. When to be made
Code of Commerce 370, 358
Art 358. If there is no period fixed for the delivery of the
goods the carrier shall be bound to forward them in the first
shipment of the same or similar goods which he may make
point where he must deliver them; and should he not do so,
the damages caused by the delay should be for his account.
Art 370. If a period has been fixed for the delivery of the
goods, it must be made within such time, and, for failure to
do so, the carrier shall pay the indemnity stipulated in the bill
of lading, neither the shipper nor the consignee being
entitled to anything else. If no indemnity has been stipulated
and the delay exceeds the time fixed in the bill of lading, the
carrier shall be liable for the damages which the delay may
have caused.
GR: Damages in case of delay is that which is
stipulated on or actual damages incurred
Question: What if the shipper ships daily?
A: At the first shipment possible as soon as order has
been made
F. Rights and Obligations of Shipper and/or Consignee
i. Right to damages
1. Conditions imposed on right
Code of Commerce 366, 357
Art 357. If by reason of well-founded suspicion of falsity in
the declaration as to the contents of a package the carrier
should decide to examine it, he shall proceed with his
investigation in the presence of witnesses, with the shipper
or consignee in attendance.
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If the shipper or consignee who has to be cited does not
attend, the examination shall be made before a notary, who
shall prepare a memorandum of the result of the
investigation, for such purpose as may be proper.
If the declaration of the shipper should be true, the expense
occasioned by the examination and that of carefully
repacking the packages shall be for the account of the
carrier and in a contrary case for the account of the shipper.
Art 366. Within the twenty-four hours following the receipt of
the merchandise, the claim against the carrier for damage or
average be found therein upon opening the packages, may
be made, provided that the indications of the damage or
average which gives rise to the claim cannot be ascertained
from the outside part of such packages, in which case the
claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the
transportation charges have been paid, no claim shall be
admitted against the carrier with regard to the condition in
which the goods transported were delivered.
Consignee must claim damages against the carrier the
damage within 24 hrs from:
Upon opening (if internal damage) , or
Upon receipt (upon general inspection)
Failure to file a claim within 24 hrs bars the filing of the
suit (rationale: memory of employee is basis of the
claim)
2. Amount of damages for loss
Art 732 Code of Commerce & Art 1749, 1750 NCC
Art 732. Lenders on bottomry or respondentia shall suffer, in
proportion to their respective interest, the general average
which may take place in the goods on which the loan is
made.In particular averages, in the absence of an express
agreement between the contracting parties, thelender on
bottomry or respondentia shall also contribute in proportion
to his respective interest, shouldit not belong to the kind of
risks excepted in the foregoing article.
Art. 1749. A stipulation that the common carrier's liability is
limited to the value of the goods appearing in the bill of
lading, unless the shipper or owner declares a greater value,
is binding.
Art. 1750. A contract fixing the sum that may be recovered.
by the owner or shipper for the loss, destruction, or
deterioration of the goods is valid, if it is reasonable and just
under the circumstances, and has been fairly and freely
agreed upon.
Note that other damages may be awarded on account of Art
2228 of the NCC
3. Amount of damages for delay
Code of Commerce 371 (3)
Art 371 . In case of delay through the fault of the carrier,
referred to in the preceding articles, the consignee may
leave the goods transported in the hands of the former,
44

advising him thereof in writing before their arrival at the point
of destination.
When this abandonment takes place, the carrier shall pay
the full value of the goods as if they had been lost or mislaid.
If the abandonment is not made, the indemnification for
losses and damages by reason of the delay cannot exceed
the current price which the goods transported would have
had on the day and at the place in which they should have
been delivered; this same rule is to be observed in all other
cases in which this indemnity may be due.
GR: In the absence of agreement as to specified time,
the common carrier is implied to have undertaken to
deliver the goods at the destination within a reasonable
time.
In determining what constitutes reasonable time, the
expected date of arrival in the bill of lading may be
considered. The nature of the goods may also be
considered such as when the goods may also be
considered such as when the goods shipped are
perishable food items.
Consequences of Delay: Excusable delay in carriage suspend,
but do not generally terminate the contract of carriage, and when
the cause is removed, the master must proceed with the voyage
and make delivery. During the delay or detention, the vessel
continues to be liable as a common carrier, not a
warehouseman, and remains duty-bound to exercise
extraordinary diligence
If delay is inexcusable, following consequences result:
Carrier is still liable even if natural disaster cause the
damage
The stipulation limiting the liability of the carrier is
inoperative
Carrier is liable for damage caused by delay
Consignee may exercise his right to abandon under
Article 371 of Code of Commerce
Damages when there is abandonment (par 2): Carrier shall
pay total value of the goods; subject to other Civil Code
provisions on damages.
Damages for Delay (par 3): When abandonment was not made,
provided there is no express agreement as to indemnity in the
Bill of Lading and there is no fraud on the part of the CC, and the
goods have a known current price at the place on the day they
should have been delivered, the damages shall not exceed such
value (subject to the Civil Code provisions on damages in case
of delay)
Damages contemplated under par 2 refer to current price of
goods, does not contemplate unearned profits. The reverse is
true for paragraph 3
Unreasonable delay = Abandonment
ii. Right to abandon
Code of Commerce 370, 371, 365, 363
Art 363. Outside of the cases mentioned in the second
paragraph of Article 361, the carrier shall be obliged to
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deliver the goods shipped in the same condition in which,
according to the bill of lading, they were found at the time
they were received, without any damage or impairment, and
failing to do so, to pay the value which those not delivered
may have at the point and at the time at which their delivery
should have been made.
If those not delivered form part of the goods transported, the
consignee may refuse to receive the latter, when he proves
that he cannot make use of them independently of the
others.
Art 365. If, in consequence of the damage, the goods are
rendered useless for sale and consumption for the purposes
for which they are properly destined, the consignee shall not
be bound to receive them, and he may have them in the
hands of the carrier, demanding of the latter their value at
the current price on that day.
If among the damaged goods there should be some pieces
in good condition and without any defect, the foregoing
provision shall be applicable with respect to those damaged
and the consignee shall receive those which are sound, this
segregation to be made by distinct and separate pieces and
without dividing a single object, unless the consignee proves
the impossibility of conveniently making use of them in this
form.
The same rule shall be applied to merchandise in bales or
packages, separating those parcels which appear sound.
Art 370. If a period has been fixed for the delivery of the
goods, it must be made within such time, and, for failure to
do so, the carrier shall pay the indemnity stipulated in the bill
of lading, neither the shipper nor the consignee being
entitled to anything else. If no indemnity has been stipulated
and the delay exceeds the time fixed in the bill of lading, the
carrier shall be liable for the damages which the delay may
have caused.
Art 371. In case of delay through the fault of the carrier,
referred to in the preceding articles, the consignee may
leave the goods transported in the hands of the former,
advising him thereof in writing before their arrival at the point
of destination.
When this abandonment takes place, the carrier shall pay
the full value of the goods as if they had been lost or mislaid.
If the abandonment is not made, the indemnification for
losses and damages by reason of the delay cannot exceed
the current price which the goods transported would have
had on the day and at the place in which they should have
been delivered; this same rule is to be observed in all other
cases in which this indemnity may be due.
Right of Abandonment: Exceptional but limited right. The right
must be exercised during the intervening period between the
moment when the fault of the CC produces a delay, which is the
generative cause of the action, until the moment just before the
arrival of the goods at the place of delivery, by communicating
such abandonment to the CC in writing. Where these conditions
do not concur, the refusal to accept cannot be effective.
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When may consignee abandon the goods?
1. (363) In case of partial non-delivery, where the
consignee proves that he cannot make use of the
goods capable of delivery independently of those not
delivered
2. (365) Goods are rendered uses for sale and
consumption for the purposes of which they are
properly destined
3. (371) Delay through carriers fault
Note:
The right to abandon must be exercised after the happening of
the cause but before the arrival of the goods.
iii. Right to change consignment
Code of Commerce 360
Art 360. The shipper, without changing the place where the
delivery is to be made, may change the consignment of the
goods which he delivered to the carrier, provided that at the
time of ordering the change of consignee the bill of lading
signed by the carrier, if one has been issued, be returned to
him, in exchange for another wherein the novation of the
contract appears.
The expenses which this change of consignment occasions
shall be for the account of the shipper.
The shipper may exercise this right by delivering a
novated bill of lading, without changing the destination
iv. Obligation to pay transportation charges
Code of Commerce 374, 375, 376
Art 374. The consignees to whom remittance may have
been made may not defer the payment of the expenses and
transportation charges in the goods that they received after
24 hrs have elapsed from the time of the delivery, and in
case of delay in making this payment, the carrier may
demand the judicial sale of the goods he transported to a
sufficient amount to cover the transportation charges and the
expenses incurred.
Art 375. The goods transported shall be specifically bound to
answer for the transportation charges and for the expenses
and fees caused by the same during their transportation,
and until the time of their delivery.
This special right shall be limited to 8 days aftaer the
delivery has been made, and after said prescription of the
carrier shall have no further right of action than that
corresponding to an ordinary creditor.
Art 376. The preference of the carrier to the payment of what
is owed him for the transportation and expenses of the
goods delivered to the consignee shall not be cut off by
the bankruptcy of the latter, provided it is claimed within the
eight days mentioned in the preceding article.
Civil Code 2241(9)
Art 2241 (9). With reference to specific movable property of
the debtor, the following claims or liens shall be preferred:
9) Credits for transportation, upon the goods carried,
for the price of the contract and incidental
expenses, until their delivery and for thirty days
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thereafter;
Sanctions for enforcement of payment- There are 2 sanctions
for the enforcement by the CC of the payment of expenses and
transportation charges:
1. Art 374- Judicial sale
2. Art 375- Creating a lien in favor of the CC (note that 8
days has been increased to 30 days by the Civil Code
2241(9))
*Note that under Art 375, this does not constitute a
limitation of action as an action based on written
contract prescribes within 10 years. However, what the
article contemplates is that the lien is considered a
preferred credit.
v. Obligation to return bill of lading
Code of Commerce 353(2)
Art 353 (2). After the contract has been complied with, the
bill of lading which the carrier has issued shall be returned to
him, and by virtue of the exchange of this title with the thing
transported, the respective obligations and actions shall be
considered cancelled, unless in the same act the claim
which the parties may wish to reserve be reduced to writing,
with the exception of that provided for in Article 366.
After the contract of transportation has been complied
with, the bill of lading shall be returned to the issuing
CC in exchange for the goods transported which are
delivered to the shipper or consignee. The effect of
which is that the respective obligations and actions of
the parties against each other shall be considered
canceled.
Summary of rights and obligations:
Rights of Shipper 1. Damages
2. Abandonment
3. Change consignment (360)
Obligations of 1. Pay transport charges
Shipper/Consignee 2. To return bill of lading at time of
taking delivery of goods
Obligations of 1. To take care of goods (if CC-
carrier Extraordinary diligence)
2. Delivery goods without delay
(including right to leave goods in the
hands of the judicial authority and
consider it delivered3)
3. Not to change route
G. Applicability of provisions
3
Not part of syllabus, nonetheless, should be mentioned:
Art 369: Judicial deposit- Should the consignee not be found at
the domicile indicated in the bill of lading, or should refuse to
pay the transportation charges and expenses, or to receive the
goods, deposit of the goods shall be ordered by thee municipal
judge, where there is no judge of first instance, to be placed at
the disposal of the shipper/sender, without prejudice to a
person having better right. This deposit having all effects of a
delivery.
46

Code of Commerce 379
Art 379. After the contract has been complied with, the bill of
lading which the carrier has issued shall be returned to him,
and by virtue of the exchange of this title with the thing
transported, the respective obligations and actions shall be
considered cancelled, unless in the same act the claim
which the parties may wish to reserve be reduced to writing,
with the exception of that provided for in Article 366.
Also applicable to contractors or agents contracted to
act for the owner, shipper or consignee
V. Admiralty and Maritime Commerce
A. Concept of Admiralty; Jurisdiction over admiralty cases
BP 129, Secs 19(3), 33(1), as amended by RA 7691
Sec 19. Jurisdiction in civil cases. Regional Trial Courts
shall exercise exclusive original jurisdiction.
3) In all actions in admiralty and maritime jurisdiction
where the demand or claim exceeds Three hundred
thousand pesos (P300,000.00) or, in Metro Manila,
where such demand or claim exceeds Four
hundred thousand pesos (P400,000.00)
Sec 33. Jurisdiction of Metropolitan Trial Courts, Municipal
Trial Courts and Municipal Circuit Trial Courts in Civil Cases.
Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts shall exercise:
1) Exclusive original jurisdiction over civil actions and
probate proceedings, testate and intestate,
including the grant of provisional remedies in
proper cases, where the value of the personal
property, estate, or amount of the demand does not
exceed Three hundred thousand pesos
(P300,000.00) or, in Metro Manila where such
personal property, estate, or amount of the demand
does not exceed Four hundred thousand pesos
(P400,000.00), exclusive of interest, damages of
whatever kind, attorney's fees, litigation expenses,
and costs, the amount of which must be specifically
alleged: Provided, That interest, damages of
whatever kind, attorney's fees, litigation expenses,
and costs shall be included in the determination of
the filing fees: Provided, further, That where there
are several claims or causes of actions between
the same or different parties, embodied in the same
complaint, the amount of the demand shall be the
totality of the claims in all the causes of action,
irrespective of whether the causes of action arose
out of the same or different transactions
International Harvester v Aragon
Respondent company sued petitioner (agent of the vessel) for
the lost cargoes. The action was filed before the Municipal
Court of Manila. Petitioner filed a MTD on the ground that the
case should have been filed before the Court of First Instance
because it has jurisdiction on admiralty cases. MTD was denied
by the judge.
Held: Municipal Court has NO jurisdiction. There are 2 rules on
admiralty cases: the US Rule (subject matter of the suit) and
the English Rule (locality rule). We adopt the US Rule
whether or not a contract is maritime depends not on the place
where the contract is made and is to be executed, making the
locality the test, but on the subject matter of the contract,
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making the true criterion a maritime service or a maritime
transaction. SC rejected the English where jurisdiction is
conferred to contracts made upon and to be performed upon
navigable waters.
In this case, what is involved is a suit for lost cargoes which is a
maritime transaction so jurisdiction is with CFI.
.
Jurisdiction: RTCs & MeTCs (400k/300k) have jurisdiction over
admiralty and maritime cases
B. Vessels
i. Meaning
Lopez v Duruelo
Plaintiff Lopez wanted to travel to Iloilo via San Jacinto ship. He
then boarded the motorboat Jison from the port to the ship.
However, the blades of the propeller of the ship hit the
motorboat causing the latter to sink. Plaintiff was thrown into
the water and sustained serious injuries from the revolving
blades. He filed a complaint for damages against the operators
of Jison, who demurred on the ground that the plaintiff had no
cause of action after failing to file the protest required by Article
835 of the Code of Commerce.
The Court overruled the demurrer after finding that the
motorboat Jison was not the vessel contemplated in the said
Article. Hence, the filing of protest within 24 hours from the
occurrence of the collision was not a condition precedent for
the plaintiff to maintain his present complaint against the
defendants.
.
What is a vessel?
1. For Code of Commerce- Those engaged in maritime
commerce or commerce by sea, whether in foreign or
coastwise trade.
2. For registration under Admin Code: Every sort of boar,
craft or other artificial contrivance used, or capable of
being used, as a means of transportation on water
Examples of vessels:
1. Merchant ships
2. Launches
3. Lorchas
4. Those engaged in transport of passengers and freight
The following are not examples of vessels:
1. Mere accessory by nature to another vessel
2. For pleasure only (yacht)
3. Warships, patrol vessels, pontoons, health service,
harbor police vessels, floating storehouses, coast guard
vessels, fishing vessels, towboats.
4. Those of minor nature and not engaged in maritime
commerce
ii. Nature and acquisition of
Code of Commerce Arts 573* & 583 and Art 712 NCC
Art 573. Merchant vessels constitute property which may be
acquired and transferred by any of the means recognized by
law. The acquisition of a vessel must appear in a written
instrument, which shall not produce any effect with respect
to third persons if not inscribed in the registry of vessels.
The ownership of a vessel shall likewise be acquired by
47

possession in good faith, continued for three years, with a
just title duly recorded.
In the absence of any of these requisites, continuous
possession for ten years shall be necessary in order to
acquire ownership.
A captain may not acquire by prescription the vessel of
which he is in command.
Art 712 NCC. Ownership is acquired by occupation and by
intellectual creation.
Ownership and other real rights over property are acquired
and transmitted by law, by donation, by testate and intestate
succession, and in consequence of certain contracts, by
tradition.
They may also be acquired by means of prescription.
May be acquired through:
Intellectual creation
Donation
Succession
Consequence of certain contracts, by tradition
Prescription
iii. Registration; certificates issued; distinctions
RA 9295, Sec 10(1)
Sec 10. Jurisdiction; Power; and Duties of MARINA. - The
MARINA shall have the power and authority to:
1) Register vessels
Where registered? Marina
Registration v CPC: The former is for ownership purposes, the
CPC is for regulation
iv. Significance of registration of transactions affecting
vessels
Arroyo v Yu
Lorchas were mortgaged to Puaco then to PNB, but only
registered with customs in 1929. Yu had a judgment order
against the owners of the lorchas, but the SC held that PNB still
had a superior right over the mortgage, as there was
constructive registration (the customs officer did not perform his
duty; PNB had no fault).
. A vessel may not be detained, attached or levied upon in
Rubiso v Rivera
Both Rubiso and Rivera were alleging that they are the owners
of the pilot boat Valentina. Rivera acquired by purchase the
boat on a date prior to that of the purchase made at public
auction by Rubiso; but the sale to Rivera was entered in the
customs registry only on March 17, while its sale at public
auction to Rubiso was recorded in the office of the Collector of
Customs on January 27 and in the commercial registry on
March 4.
The Supreme Court ruled in favor of Rubiso, saying that the
requisite of registration in the registry is indispensable in order
that the purchaser's rights may be maintained against a claim
filed by a third person. As such, Rivera's rights cannot prevail
over those acquired by Rubiso inasmuch as, though the latter's
acquisition of the vessel at public auction was subsequent to its
purchase by Rivera, nevertheless said sale at public auction
was antecedently recorded in the office of the Collector of
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Customs; while the private purchase made by Rivera on a prior
date was not recorded in the office of the Collector of Customs
until many days afterwards.
.
C. Persons Participating in Maritime Commerce
i. Ship owners and ship agents
Code of Commerce 586-608; 618
Art 586. The shipowner and the ship agent shall be civilly
liable for the acts of the captain and for the obligations
contracted by the latter to repair, equip, and provision the
vessel, provided the creditor proves that the amount claimed
was invested for the benefit of the same. By ship agent is
understood the person entrusted with provisioning or
representing the vessel in the port in which it may be found.
Art 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which may arise from
the conduct of the captain in the care of the goods which he
loaded on the vessel; but he may exempt himself therefrom
by abandoning the vessel with all her equipments and the
freight it may have earned during the voyage.
Art 588. Neither the shipowner nor the ship agent shall be
liable for the obligations contracted by the captain, if the
latter exceeds the powers and privileges pertaining to him by
reason of his position or conferred upon him by the former.
Nevertheless, if the amounts claimed were invested for the
benefit of the vessel, the responsibility therefor shall devolve
upon its owner or agent.
Art 589. If two or more persons should be part owners of a
merchant vessel, a partnership shall be presumed as
established by the co-owners.
This partnership shall be governed by the resolutions of the
majority of the members.
If the part owners should not be more than two, the
disagreement of views, if any, shall be decided by the vote
of the member having the largest interest. If the interests are
equal, it should be decided by lot. The person having the
smallest share in the ownership shall have one vote; and
proportionately the other part owners as many votes as they
have parts equal to the smallest one.
execution in its entirety, for the private debts of a part owner,
but the proceedings shall be limited to the interest which the
debtor may have in the vessel, without interfering with the
navigation.
Art 590. The co-owners of a vessel shall be civilly liable in
the proportion of their interests in the common fund, for the
results of the acts of the captain, referred to in Article
587.Each co-owner may exempt himself from this liability by
the abandonment, before a notary, of the part of the vessel
belonging to him.
Art 591. All the part owners shall be liable, in proportion to
their respective ownership, for the expenses for repairing the
vessel, and for other expenses which are incurred by virtue
of are solution of the majority.
They shall likewise be liable in the same proportion for the
expenses for the maintenance, equipment, and provisioning
of the vessel, necessary for navigation.
48

Art 592. The resolution of the majority with regard to the
repair, equipment, and provisioning of the vessel in the port
of departure shall bind the minority, unless the minority
members renounce their interests, which must be acquired
by the other co-owners, after a judicial appraisement of the
value of the portion or portions assigned.
The resolutions of the majority relating to the dissolution of
the partnership and sale of the vessel shall also be binding
on the minority.
The sale of the vessel must be made at public auction,
subject to the provisions of the law of civil procedure, unless
the co-owners unanimously agree otherwise, saying always
the right of repurchase and redemption provided for in Article
575.
Art 593. The owners of a vessel shall have preference in her
charter over other persons, under the same conditions and
price. If two or more of them should claim this right, the one
having the greater interest shall be preferred; and should
they have equal interests, the matter shall be decided by lot.
Art 594. The co-owners shall elect the manager who is to
represent them in the capacity of ship agent.
The appointment of director or ship agent shall be revocable
at the will of the members.
Art 595. The ship agent, whether he is at the same time the
owner of the vessel, or a manager for an owner or for an
association of co-owners, must have the capacity to trade
and must be recorded in the merchant's registry of the
province.
The ship agent shall represent the ownership of the vessel,
and may, in his own name and in such capacity, take judicial
and extrajudicial steps in matters relating to commerce.
Art 596. The ship agent may discharge the duties of captain
of the vessel, subject in every case to the provision of Article
609.
If two or more co-owners apply for the position of captain,
the disagreement shall be decided by a vote of the
members; and if the vote should result in a tie, it shall be
decided in favor of the co-owner having the larger interest in
the vessel.
If the interests of the applicants should be equal, and there
should be a tie, the matter shall be decided by lot.
Art 597. The ship agent shall designate and come to terms
with the captain, and shall contract in the name of the
owners, who shall be bound in all that refer to repairs, details
of equipment, armament, provisions of food and fuel, and
freight of the vessel, and, in general, in all that relate to the
requirements of navigation.
Art 598. The ship agent may not order a new voyage, or
make contracts for a new charter, or insure the vessel,
without the authorization of its owner or resolution of the
majority of the co-owners, unless these powers were
granted him in the certificate of his appointment.
If he insures the vessel without authorization therefore, he
shall be subsidiarily liable for the solvency of the insurer.
Art 599. The ship agent managing for an association shall
render to his associates an account of the results of each
voyage of the vessel, without prejudice to always having the
books and correspondence relating to the vessel and to its
voyages at their disposal.
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Art 600. After the account of the managing agent has been
approved by a relative majority, the co-owners shall pay the
expenses in proportion to their interest, without prejudice to
the civil or criminal actions which the minority may deem fit
to institute afterwards.
In order to enforce the payment, the managing agent shall
be entitled to an executory action ("accion ejecutiva"), which
shall be instituted by virtue of a resolution of the majority,
and without further proceedings than the acknowledgment of
the signatures of the persons who voted for the resolution.
Art 601. Should there be any profits, the co-owners may
demand of the managing agent the amount corresponding to
their interests by means of an executory action ("accion
ejecutiva"), without any other requisite than the
acknowledgment of the signatures on the instrument
approving the account.
Art 602. The ship agent shall indemnify the captain for all the
expenses he may have incurred with funds of his own or of
others, for the benefit of the vessel.
Art 603. Before the vessel sets out to sea the ship agent
may at his discretion discharge the captain and members of
the crew whose contracts are not for a definite period or
voyage, paying them the salaries earned according to their
contracts, and without any indemnity whatsoever, unless
there is an express and specific agreement in respect
thereto.
Art 604. If the captain or any other member of the crew
should be discharged during the voyage, they shall receive
their salary until they return to the port where the contract
was made, unless there should be just cause for the
discharge, all in accordance with Article 636 and following of
this Code.
Art 605. If the contracts of the captain and members of the
crew with the ship agent should be for a definite period or
voyage, they may not be discharged until after the fulfillment
of their contracts, except by reason of insubordination in
serious matters, robbery, theft, habitual drunkenness, or
damage caused to the vessel or to its cargo through malice
or manifest or proven negligence.
Art 606. If the captain should be a co-owner of the vessel, he
may not be discharged unless the ship agent returns to him
the amount of his interest therein, which, in the absence of
agreement between the parties, shall be appraised by
experts appointed in the manner established in the law of
civil procedure.
Art 607. If the captain who is a co-owner should have
obtained the command of the vessel by virtue of a special
agreement contained in the articles of association, he may
not be deprived of his office except for the causes
mentioned in Article 605.
Art 608. In case of the voluntary sale of the vessel, all
contracts between the ship agent and the captain shall
terminate, reserving to the latter his right to the indemnity
which may pertain to him, according to the agreements
made with the ship agent.
The vessel sold shall remain subject to the security of the
payment of said indemnity if, after the action against the
49

vendor has been instituted, the latter is found to be
insolvent.
Art 618. The captain shall be civilly liable to the ship agent,
and the latter to the third persons who may have made
contracts with the former:
1) For all the damages suffered by the vessel and its
cargo by reason of want of skill or negligence on
his part. If a misdemeanor or crime has been
committed, he shall be liable in accordance with the
Penal Code.
2) For all the thefts committed by the crew, reserving
his right of action against the guilty parties.
3) For the losses, fines, and confiscations imposed an
account of violation of customs, police, health, and
navigation laws and regulations.
4) For the losses and damages caused by mutinies on
board the vessel or by reason of faults committed
by the crew in the service and defense of the same,
if he does not prove that he made timely use of all
his authority to prevent or avoid them.
5) For those caused by the misuse of the powers and
the non-fulfillment of the obligations pertaining to
him in accordance with Articles 610 and 612.
6) For those arising by reason of his going out of his
course or taking a course which he should not have
taken without sufficient cause, in the opinion of the
officers of the vessel, at a meeting with the
shippers or supercargoes who may be on board.
No exceptions whatsoever shall exempt him from
this obligation.
7) For those arising by reason of his voluntarily
entering a port other than that of his destination,
outside of the cases or without the formalities
referred to in Article 612.
8) For those arising by reason of non-observance of
the provisions contained in the regulations on
situation of lights and maneuvers for the purpose of
preventing collisions.
Code of Commerce Provisions Summarized (A2015)
GR: Both the shipowner and the ship agent shall be civilly
liable for the acts of the captain and for the obligations
(including repair, equip, and provision of vessel) (Art. 586)
XPN: If the obligations were contracted by the captain ultra
vires. (xpn to xpn: if the amount claimed was invested for the
benefit of the vessel) (Art. 588)
Rules on Co-ownership of the vessels (Art 589 et seq)
If two or more persons should be part owners of a
merchant vessel, a partnership shall be presumed
as established by the co-owners
Issues will be resolved by majority vote of the
members (determine the larger interest first; then if
there is tie in interest, decide by lot)
Liability of part-owners
The vessel may answer for the private debt of a
part owner but only limited to his interest and the
navigation should not be interfered
They shall be liable in proportion to their interest
o PVD: A co-owner may exempt himself by
the abandonment of his part (before the
notary)
They shall be liable for the repair of the vessel
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incurred by the resolution of the majority.
Ship Agent & his duties discussed infra.
Standard Oil v Castelo
Castelo lent his interisland steamer to Chumbuque for a year
through a contact of character. Soon after, consignment with
Standard Oil took place wherein the shipper sent the vessels
agent petroleum to be shipped to the port of Casiguran in
Sorsogon. The petroleum was placed in the vessels deck. On
the way to Sorsogon, a violent storm passed by which led the
captain to jettison the entire consignment of petroleum for
everyones safety. Standard Oil filed a suit against Castelo
(being the ship owner) for the payment of the lost petroleum.
CFI Manila ruled in Standard Oils favor.
SC agreed with the CFI but modified the amount of judgment.
The Court ruled that the loss of the petroleum was a general
average loss due to the rule that jettisoned goods carried on
deck, according to the custom of trade, by steam vessels
navigating coastwise and inland waters, are entitled to
contribution as a general average loss. In addition to that, SC
ruled that it is the vessel owner who is liable to pay Standard
Oil the amount of the lost petroleum for the fact that the ship
owner has more capital and that it has complete & exclusive
control of the crew and the ship. Finally, the Court held that the
liquidation of the general average is not a condition precedent
to the liability of ship owner.
Ship agents- person entrusted with provisioning/representing
the vessel in the port in which it may be found.
Co-ownership of vessels- If 2 or more persons should be part
owners of a merchant vessel, a partnership shall be presumed
1. Responsibilities and liabilities
Responsibilities of Ship Agents:
1. To trade and represent the ownership of the vessel, and
may, is his own name and in such capacity, take judicial
and extrajudicial steps in matters relating to commerce;
2. To discharge the duties of captain of the vessel (but
must be qualified to do so);
3. To contract in the name of the owners, who shall be
bound in all that refer to repairs, details of equipment,
armament, provisions of food and fuel, and freight of the
vessel, and in general, in all that relate to the
requirement of navigation;
4. To order a new voyage, or make contracts for a new
charter, or insure the vessel, (but needs authorization
otherwise, he shall be subsidiarily liable);
5. To account for the results of each voyage;
6. To indemnify the captain for expenses incurred
7. To discharge the captain and members of the crew
whose contracts are for an indefinite period.
8. To indemnify the captain in case of voluntary sale of the
vessel
Liabilities of ship owner and agents
1. Acts of the captain;
2. Contracts entered into by the captain to repair, equip,
and provision the vessel
3. Indemnities in favor of 3rd persons which may arise from
the captains conduct
4. Damages to 3rd persons for torts committed by the
captain EXCEPT for collisions
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5. Damages in case of collisions due to fault, negligence,
or want of skill of captain, sailing mate or any member
of the complement
Yu Con v Ipil
Plaintiff Yu Con is suing defendants for the return of his P450
which was to be transported along with his goods on the vessel
Maria from port of Cebu to town of Catmon. The money was
allegedly stolen from the vessel on the night it was set to sail.
The Court found that the loss was due to the fault and
negligence of the master and the supercargo of the vessel. The
owner was likewise found negligent as the employer, who has
the power of appointment over the master and supercargo
whose negligence was the proximate cause of the loss suffered
by the plaintiff.
. also extinguished. Limited liability likewise extends to ships
Manila Steamship v Abdulhaman
Respondent and his family were on board petitioners vessel
when it collided with a motorship owned by Lim Hong To. The
formers vessel sank which led to the death of respondents
children and loss of belongings. He filed a damages suit
against both ship owners and the trial court found them
solidarily liable for damages. However, this was modified by the
CA which absolved Lim Hong To and only held petitioner liable.
The Supreme Court affirmed the trial court and held that
petitioner was responsible in tort for the collision and that Lim
Hong To was liable for damages for allowing his ship to operate
without licensed officers. Thus, the latter cannot be allowed to
limit his liability to the value of his vessels.
Wing Kee Compradoring Co v Bark Moninhaela
Plaintiff sold goods, wares, and merchandise for the use of the
crew of the Bark Monongahela, owned by Victor S. Fox & Co.,
thru its agent, Admiral Line. However, it remained unpaid so
plaintiff filed an action for recovery for sum of P17,675.54
against agent Admiral Line. The latter tried to escape liability by
claiming that at the time the complaint was filed, it was no
longer the agent of Bark Monongahela.
The Court ruled that based on Art. 586, the agent, Admiral Line,
is liable to plaintiff, but only for those supplies furnished and
delivered during its agency (March 16-August 2, 1921), but not
for those supplies furnished after agency has ceased (August
3-16, 1921).
NDC v CA
En route Manila, the vessel Doa Nati which was carrying
goods from California and Tokyo collided with a Japanese
vessel at Ise Bay Japan. Respondents, as the insurer, paid the
consignees the total amount of damages (P344,977.86) and
instituted a complaint against petitioners NDC and MPC to
recover the said amount. RTC ordered petitioners to pay the
amount and held that the collision was due to the negligence
and fault of the captains of both ships. CA affirmed in toto.
HELD: MPC, although it is merely an agent of NDC, should be
held solidarily liable with the latter since the obligation arose
from a tortious act and not from a contract. Furthermore, in
case of a collision, both the owners and the agent are civilly
responsible for the acts of the captain.
2. The Doctrine of Limited Liability (DLL)
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Code of Commerce Art 587
ARTICLE 587. The agent shall also be civilly liable for the
indemnities in favor of third persons which arise from the
conduct of the captain in the care of the goods which the
vessel carried; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the
freight he may have earned during the voyage.
The DLL is a defense of vessel owners/agents from being
liable to injured parties
Also called the no vessel, no liability doctrine, it provides that
liability of ship owner is limited to ship owners interest over the
vessel. Consequently, in case of loss, the ship owners liability is
appurtenances, equipment, freightage, and insurance proceeds.
The ship owners or agents liability is merely co-extensive with
his interest in the vessel, such that a total loss of the vessel
results in the liabilitys extinction. The vessels total destruction
extinguishes maritime liens because there is no longer any res to
which they can attach. (Monarch Insurance v. CA, G.R. No.
92735, June 8, 2000)
Provisions on limited liability: 587, 590, 837
General Rules:
A ship agent is liable notwithstanding the insolvency of
the principal/owner
o He may exempt himself from liability by:
abandoning the vessel with all her equipment
and the freight it may have earned during the
voyage the effect of abandonment is to
extinguish the liability of the ship agent.
The ship agents liability is confined to that which he is
entitled as a matter of right to abandon; the vessel with
all her equipment and the freight4 it may have earned
during the voyage and to the insurance thereof.
Limited liability is not applicable when no abandonment
is made
Doctrine also applies to claims due to death or injuries
to passengers (Yancgo v Laserna)
There is no prescriptive period within which the ship
owner can make an abandonment. He may do for so
long as he is not stopped from invoking the same or
commit acts inconsistent with abandonment.
Real & Hypothecary: The DLL is also called real and
hypothecary nature of maritime law.
Interest is limited to the thing hypothecated
The ship owners liability is limited to the res (vessel)
which when lost, the liability of the owner is
extinguished except for unpaid freight and salvaged
goods and equipment.
Effect of Abandonment: An abandonment amounts to an offer
of the value of the vessel, of her equipment, and freight money
earned. results in the cessation of the responsibility of the
owner/agent.
Abandonment cannot be refused by creditors. This
applies to all cases where the owner/agent may be held
liable for the negligent or illicit acts of the captain.
4
The charge for transporting goods.
51

Effect of loss or destruction of the vessel: The ship agents
liability is merely co-extensive with his interest in the vessel such
that the total loss thereof results in its extinction the total
destruction of the vessel extinguishes a maritime lien as there is
no longer any res to which it can attach
Three cases where the loss of the vessel extinguishes the
liability of the ship owner:
1. Under 587- arising from conduct of captain in the
vigilance of goods and for safety of passengers and for
any liability arising from negligent or illicit acts of the
captain
2. Under 643- wages of the captain and the crew and for
advances made by the ship agent if the vessel is lost by
shipwreck or capture
3. Under 837- collision
Exception to applicability of DDL:
1. Ship owner is at fault (DDL is premised on the
condition that death or injury is the result of captains
fault or negligence)
2. Workmens Compensation as such has nothing to do
with maritime commerce; it is an item in the cost of
production which may be included in the budget of any
well-managed industry
3. Total destruction of the vessel does not affect the
liability of the owner for repairs on the vessel
completed before its loss owners of a vessel are
liable for necessary repairs, its liability for repair
remains unaffected by the loss of thing
4. Unlicensed captain, with an arrangement that the
steamship company will be take on full liability (Manila
Steamship v Abdulhaman)
5. In case there is no total loss
6. Collision between two negligence vessels
7. Vessel is insured (Note that Prof Angeles was not so
amenable to this Exception)
Reason for limited liability This doctrine had its origin when
maritime trade and sea voyage was attended by innumerable
hazards and perils to offset against these adverse conditions
and to to promote shipbuilding and investment in maritime
commerce
Evidence of this real nature of the maritime:
(1) the limitation of the liability of the agents to the actual
value of the vessel and the freight money, and
(2) the right to retain the cargo and the embargo and
detention of the vessel even in cases where the
ordinary civil law would not allow more than a personal
action against the debtor or person liable.
It will be observed that these rights are correlative, and
naturally so, because if the agent can exempt himself
from liability by abandoning the vessel and freight
money, thus avoiding the possibility of risking his whole
fortune in the business, it is also just that his maritime
creditor may for any reason attach the vessel itself to
secure his claim without waiting for a settlement of his
rights by a final judgment, even to the prejudice of a
third person.
Manila Steamship v Abdulhaman (supra)
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Yangco v Laserna
SS Negros, a steamer owned by Yangco, capsized and sank
due to the negligence of its captain (i.e decided to sail even
though the captain was warned that there was a signal no. 2
typhoon coming up and that the ship was overloaded). Several
passengers died. Laserna et. al. filed separate civil action to
recover damages, due to the death of his relatives. Yangco
sought to exercise his right of abandonment provided under
587 despite the fact that there was a total loss of this ship. The
CFI denied the abandonment sought by Yangco, this was
affirmed by the CA. The issue that confronted the Court was
WON Yangco could still be held to answer for damages despite
his exercise of his right of abandonment.
The Court held that Yangco should be absolved from all
liabilities due to his exercise of the right of abandonment. The
reason for the limited liability is the real and hypothecary nature
of maritime law as distinguished from civil law and mercantile
law. As evidence of this real nature of the maritime law we have
(1) the limitation of the liability of the agents to the actual value
of the vessel and the freight money, and (2) the right to retain
the cargo and the embargo and detention of the vessel even in
cases where the ordinary civil law would not allow more than a
personal action against the debtor or person liable.
Abueg v San Diego
The petitioners are widows of the deceased captains of the
ships owned by defendant that sunk and was eventually lost
due to a typhoon. Abueg et al filed a suit for damages and the
lower court granted their prayer, the Workmans Compensation
Act as the legal basis for such grant. San Diego argued that
under 587, he is absolved from liability because the ships were
totally destroyed.
The Court held that Art 587 is not applicable when the
damages sought is under the Workmans Compensation Act. It
is not the liability for the damage or loss of the cargo or injury
to, or death of, a passenger by or through the misconduct of the
captain or master of the ship; nor the liability for the loss of the
ship as result of collision; nor the responsibility for wages of the
crew, but a liability created by a statute to compensate
employees and laborers in cases of injury received by or
inflicted upon them, while engaged in the performance of their
work or employment, or the heirs and dependents and laborers
and employees in the event of death caused by their
employment. Such compensation has nothing to do with the
provisions of the Code of Commerce regarding maritime
commerce. It is an item in the cost of production which must be
included in the budget of any well-managed industry.
Aboitiz Shipping v General Accident and Life Insurance Corp
An Aboitiz ship sank on a voyage, Investigation by the Board of
Marine Inquiry showed that the sinking was due to force
majeure and that the vessel was at that time, sea worthy. A lot
of passengers filed their claims for recovery.
The Court held that because of the lack of finding of negligence
on the part of the ship owner, first DLL applies, second, the
execution should be stayed until everyone is allowed to present
their claims so that no party will be unduly prejudiced because
it filed their claims late.
52

Aboitiz Shipping v General Accident and Life Insurance Corp
Malayan Insurance Company (respondent in first case), Asia
Traders Insurance Corp. and Allied Guarantee Insurance Corp.
(respondents in second case), and Equitable Insurance Corp.
(respondent in third case) filed damages suits with the RTC to
recover lost cargo from the sinking of M/V P. Aboitiz. All three
RTCs found that there was negligence on the part of Aboitiz in
failing to ensure the seaworthiness of the vessel. The CA
affirmed all three decisions, thus, Aboitiz appealed the
decisions to the SC. The three petitions were consolidated and
the SC affirmed the CA.
The SC held that since there was negligence on the part of
Aboitiz, the shipowner, then the limited liability rule does not
apply and this case falls under the exception, thus Aboitiz can
be held liable for damages not limited to the value of the vessel,
its appurtenances, and freightage earned in the voyage.
3. Specific Rights and Prerogatives
Code of Commerce Arts 575, 593, 594, 596, 601
ARTICLE 575. Part owners of vessels shall enjoy the
right of option of purchase and withdrawal in the sales made
to strangers; but they can only exercise it within the nine
days following the record of the sale in the registry and by
delivering the price at once.
ARTICLE 593. The owners of a vessel shall have
preference in her charter to other persons, offering equal
conditions and price. If two or more of the former should
claim said right the one having greater interest shall be
preferred, and should they have an equal interest it shall be
decided by lot.
ARTICLE 594. The part owners shall elect the manager
who is to represent them in the capacity of agent.
The appointment of director or agent shall be revocable at
the will of the members.
ARTICLE 596. The agent may discharge the duties of
captain of the vessel, subject, in every case, to the
provisions contained in Article 609.
If two or more co-owners request the position of captain, the
disagreement shall be decided by a vote of the members;
and if the vote should result in a tie, the position shall be
given to the part owner having the larger interest in the
vessel.
If the interest of the petitioners should be the same, and
there should be a tie, the matter shall be decided by lot.
ARTICLE 601. Should there be any profits, the co-owners
may demand of the managing agent the amount due them,
by means of an executory action without further requisites
than the acknowledgment of the signatures of the instrument
approving the account.
ii. Captains and Master
1. Qualifications and licensing
RA 5173, Sec 3 ( e )
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Philippine Coast Guard:
(e) To issue licenses and certificates to officers, pilots, major
and minor patrons and seamen, as well as suspend and
revoke such licenses and certificates;
Code of Commerce Art 609
ARTICLE 609. Captains and masters of vessels must be
Filipino * having legal capacity to bind themselves in
accordance with this Code, and must prove that they have
the skill, capacity, and qualifications required to command
and direct the vessel, as established by marine laws,
ordinances, or regulations, or by those of navigation, and
that they are not disqualified according to the same for the
discharge of the duties of that position.
If the owner of a vessel desires to be the captain thereof and
does not have the legal qualifications therefor, he shall limit
himself to the financial administration of the vessel, and shall
intrust her navigation to a person possessing the
qualifications required by said ordinances and regulations.
Captains- Those who govern vessels that navigate the high
seas or ships of large dimensions and importance, although they
may be engaged in coastwise trade.
Masters- Those who command smaller ships, engaged
exclusively in coastwise trade. (inter-island)
In maritime commerce, masters and captain mean the same
thing
Role of captains:
General agent of ship owner
Technical director of the vessels and commander (inter-
orient v NLRC)
Represents the government of the country under whose
flag he navigates
2. Powers and Duties
Code of Commerce Art 610, 611, 612, 622, 624, 625
ARTICLE 610. The following powers are inherent in the
position of captain or master of a vessel:
1. To appoint or make contracts with the crew in the
absence of the agent and propose said crew, should said
agent be present; but the agent shall not be permitted to
employ any member against the captain's express refusal.
2. To command the crew and direct the vessel to the
port of its destination, in accordance with the instructions he
may have received from the agent.
3. To impose, in accordance with the agreements and
the laws and regulations of the merchants marine, on board
the vessel, correctional punishment upon those who do not
comply with his orders or who conduct themselves against
discipline, holding a preliminary investigation on the crimes
committed on board the vessel on the high seas, which shall
be turned over to the authorities, who are to take cognizance
thereof, at the first port touched.
4. To make contracts for the charter of the vessel in
the absence of the agent or of her consignee, acting in
accordance with the instructions received and protecting the
interests of the owner most carefully.
5. To adopt all the measures which may be necessary
53

to keep the vessel well supplied and equipped, purchasing
for the purpose all that may be necessary, provided there is
no time to request instructions of the agent.
6. To make, in similar urgent cases and on a voyage,
the repairs to the hull and engines of the vessel and to her
rigging and equipment which are absolutely necessary in
order for her to be able to continue and conclude her
voyage; but if she should arrive at a point where there is a
consignee of the vessel, he shall act in concurrence with the
latter.
ARTICLE 611. In order to comply with the obligations
mentioned in the foregoing article, the captain, when he has
no funds and does not expect to receive any from the agent,
shall procure the same in the successive order stated below:
1. By requesting said funds of the consignees or
correspondents of a vessel.
2. By applying to the consignees of the cargo or to the
persons interested therein.
3. By drawing on the agent.
4. By borrowing the amount required by means of a
bottomry bond.
5. By selling a sufficient amount of the cargo to cover
the amount absolutely necessary to repair the vessel, and to
equip her to pursue the voyage.
In the two latter cases he must apply to the judicial authority
of the port, if in Philippines * and to the Spanish * consul, if
in a foreign country; and where there should be none, to the
local authority, proceeding in accordance with the
prescriptions of Article 583, and with the provisions of the
law of civil procedure.
ARTICLE 612. The following obligations are inherent in
the office of captain:
1. To have on board before starting on a voyage a
detailed inventory of the hull, engines, rigging, tackle,
stores, and other equipments of the vessel; the navigation
certificate; the roll of the persons who make up the crew of
the vessel, and the contracts entered into with the crew; the
list of passengers; the health certificate; the certificate of the
registry proving the ownership of the vessel, and all the
obligations which encumber the same up to that date; the
charters or authenticated copies thereof; the invoices or
manifest of the cargo, and the instrument of the expert visit
or inspection, should it have been made at the port of
departure.
2. To have a copy of this Code on board.
3. To have three folioed and stamped books, placing
at the beginning of each one a note of the number of folios it
contains, signed by the maritime official, and in his absence
by the competent authority.
In the first book, which shall be called "log book," he shall
enter every day the condition of the atmosphere, the
prevailing winds, the course sailed, the rigging carried, the
horsepower of the engines, the distance covered, the
maneuvers executed, and other incidents of navigation. He
shall also enter the damage suffered by the vessel in her
hull, engines, rigging, and tackle, no matter what is its
cause, as well as the imperfections and averages of the
cargo, and the effects and consequence of the jettison,
should there be any; and in cases of grave resolutions which
require the advice or a meeting of the officers of the vessel,
or even of the passengers and crew, he shall record the
decision adopted. For the informations indicated he shall
make use of the binnacle book, and of the steam or engine
book kept by the engineer.
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In the second book, called the "accounting book," he shall
enter all the amounts collected and paid for the account of
the vessel, entering specifically article by article, the sources
of the collection, and the amounts invested in provisions,
repairs, acquisition of rigging or goods, fuel, outfits, wages,
and all other expenses. He shall furthermore enter therein a
list of all the members of the crew, stating their domiciles,
their wages and salaries, and the amounts they may have
received on account, either directly or by delivery to their
families.
In the third book, called "freight book," he shall record the
entry and exit of all the goods, stating their marks and
packages, names of the shippers and of the consignees,
ports of loading and unloading, and the freight earned. In the
same book he shall record the names and places of sailing
of the passengers and the number of packages of which
their baggage consists, and the price of the passage.
4. To make, before receiving the freight, with the
officers of the crew, and the two experts, if required by the
shippers and passengers, an examination of the vessel, in
order to ascertain whether she is watertight, and whether the
rigging and engines are in good condition; and if she has the
equipment required for good navigation, preserving a
certificate of the memorandum of this inspection, signed by
all the persons who may have taken part therein, under their
liability.
The experts shall be appointed one by the captain of the
vessel and the other one by the persons who request the
examination, and in case of disagreement a third shall be
appointed by the marine authority of the port.
5. To remain constantly on board the vessel with the
crew during the time the freight is taken on board and
carefully watch the stowage thereof; not to consent to any
merchandise or goods of a dangerous character to be taken
on, such as inflammable or explosive substances, without
the precautions which are recommended for their packing,
management and isolation; not to permit that any freight be
carried on deck which by reason of its disposition, volume,
or weight makes the work of the sailors difficult, and which
might endanger the safety of the vessel; and if, on account
of the nature of the merchandise, the special character of
the shipment, and principally the favorable season it takes
place, he allows merchandise to be carried on deck, he must
hear the opinion of the officers of the vessel, and have the
consent of the shippers and of the agent.
6. To demand a pilot at the expense of the vessel
whenever required by navigation, and principally when a
port, canal, or river, or a roadstead or anchoring place is to
be entered with which neither he, the officers nor the crew
are acquainted.
7. To be on deck at the time of sighting land and to
take command on entering and leaving ports, canals,
roadsteads, and rivers, unless there is a pilot on board
discharging his duties. He shall not spend the night away
from the vessel except for serious causes or by reason of
official business.
8. To present himself, when making a port in distress,
to the maritime authority if in Philippines * and to the Filipino
* consul if in a foreign country, before twenty-four hours
have elapsed, and make a statement of the name, registry,
and port of departure of the vessel, of its cargo, and reason
of arrival, which declaration shall be vised by the authority or
by the consul if after examining the same it is found to be
acceptable, giving the captain the proper certificate in order
to show his arrival under stress and the reasons therefor. In
the absence of marine officials or of the consul, the
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declaration must be made before the local authority.
9. To take the steps necessary before the competent
authority in order to enter in the certificate of the Commercial
Registry of the vessel the obligations which he may contract
in accordance with Article 583.
10. To put in a safe place and keep all the papers and
belongings of any members of the crew who might die on
the vessel, drawing up a detailed inventory, in the presence
of passengers as witnesses, and, in their absence, of
members of the crew.
11. To conduct himself according to the rules and
precepts contained in the instructions of the agent, being
liable for all that he may do in violation thereof.
12. To give an account to the agent from the port
where the vessel arrives, of the reason thereof, taking
advantage of the semaphore, telegraph, mail, etc., according
to the cases; notify him the freight he may have received,
stating the name and domicile of the shippers, freight
earned, and amounts borrowed on bottomry bond, advise
him of his departure, and give him any information and data
which may be of interest.
13. To observe the rules on the situation of lights and
evolutions to prevent collisions.
14. To remain on board in case of danger to the vessel,
until all hope to save her is lost, and before abandoning her
to hear the officers of the crew, abiding by the decision of
the majority; and if he should have to take a boat he shall
take with him, before anything else, the books and papers,
and then the articles of most value, being obliged to prove in
case of the loss of the books and papers that he did all he
could to save them.
15. In case of wreck he shall make the proper protest in
due form at the first port reached, before the competent
authority or the Filipino * consul, within twenty-four hours,
stating therein all the incidents of the wreck, in accordance
with case 8 of this article.
16. To comply with the obligations imposed by the laws
and rules of navigation, customs, health, and others.
ARTICLE 622. If when on a voyage the captain should
receive news of the appearance of privateers or men of war
against his flag, he shall be obliged to make the nearest
neutral port, inform his agent or shippers, and await an
occasion to sail under convoy or until the danger is over or
to receive final orders from the agent or shippers.
ARTICLE 623. If he should find himself being attacked by
a privateer and after having done all that was possible to
avoid the encounter and have resisted the delivery of the
equipment of the vessel or of its cargo, they should be
forcibly taken away from him, or he should be obliged to
deliver them, he shall make an entry in his freight book and
shall prove the fact before the competent authority at the first
port he touches.
After the force majeure has been proven, he shall be
exempted from liability.
ARTICLE 624. A captain whose vessel has gone through
a hurricane or who believes that the cargo has suffered
damages or averages, shall make a protest thereon before
the competent authority at the first port he touches within the
twenty-four hours following his arrival, and shall ratify it
within the same period when he arrives at the place of his
destination, immediately proceeding with the proof of the
facts, it not being permitted to open the hatches until this has
been done.
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The captain shall proceed in the same manner if, the vessel
having been wrecked, he is saved alone or with part of his
crew, in which case he shall appear before the nearest
authority, and make a sworn statement of the facts.
The authority or the consul abroad shall verify the said facts,
receiving a sworn statement of the members of the crew and
passengers who may have been saved, and taking the other
steps which may assist in arriving at the facts, drafting a
certificate of the result of the proceedings in the log book
and in that of the sailing mate, and shall deliver the original
records of the proceedings to the captain, stamped and
folioed, with a memorandum of the folios, which he must
rubricate, for their presentation to the judge or court of the
port of destination.
The statement of the captain shall be believed if it is in
accordance with those of the crew and passengers; if they
disagree, the latter shall be accepted, unless there is proof
to the contrary.
ARTICLE 625. The captain, under his personal liability, as
soon as he arrives at the port of destination, obtains the
necessary permission from the health and customs officers
and fulfills the other formalities required by the regulations of
the administration, shall turn over the cargo, without any
defalcation, to the consignees, and, in a proper case, the
vessel, rigging, and freights to the agent.
If, by reason of the absence of the consignee or on account
of the nonappearance of a legal holder of the invoices, the
captain does not know to whom he is to make the legal
delivery of the cargo, he shall place it at the disposal of the
proper judge or court or authority, in order that he may
decide with regard to its deposit, preservation, and custody.
The first three powers under 610 cannot be renounced as they
relates to public order and are vested in the captains as a
delegation of public authority
How to understand 612:
Divide the rights and duties under 3 categories:
(1) Duties BEFORE the voyage
(2) DURING the voyage- especially at the time
that the possibility of the collision arises
(3) AFTER the voyage
Although duties under 612 are inherent in the captain,
the civil liability arising from non-fulfillment thereof is not
limited to the captain, since while the captain is liable to
the ship agent, the latter is liable to third persons (618)
Inter Orient v NLRC
Capt. Tayongs instructions were to sail to South Africa.
However, as the vessels turbocharger was broken, he decided
to wait for the supplies to repair it before sailing to South Africa.
As a result, his arrival was delayed. Upon arrival, he was
summarily repatriated back to the Philippines where he filed a
complaint for illegal dismissal against petitioners.
The Court ruled that the Capt was illegally dismissed and was
not given an opportunity to defend himself. As captain of the
vessel, he must be left free to exercise his own best judgment.
In this case, his decision to wait for the supplies to repair the
turbo charger was reasonable.
(Prof Angeles read this portion to emphasize topic, hence
directly lifted)It is the right and duty of the captain, in the
exercise of sound discretion and in good faith, to do all things
with respect to the vessel and its equipment and conduct of the
55

voyage which are reasonably necessary for the protection and
preservation of the interests under his charge, whether those
be of the shipowners, charterers, cargo owners or of
underwriters.
It is a basic principle of admiralty law that in navigating a
merchantman, the master must be left free to exercise his own
best judgment. The requirements of safe navigation compel us
to reject any suggestion that the judgment and discretion of the
captain of a vessel may be confined within a straitjacket, even
in this age of electronic communications.
Indeed, if the ship captain is convinced, as a reasonably
prudent and competent mariner acting in good faith that the
shipowner's or ship agent's instructions (insisted upon by radio
or telefax from their offices thousands of miles away) will result,
in the very specific circumstances facing him, in imposing
unacceptable risks of loss or serious danger to ship or crew, he
cannot casually seek absolution from his responsibility, if a
marine casualty occurs, in such instructions
3. Prohibited Acts and Transactions
Code of Commerce Arts 613, 614, 615, 617, 621, 583
ARTICLE 613. A captain who navigates for freight in
common or on shares cannot make any transaction for his
exclusive account, and should he do so the profit shall
belong to the other persons in interest, and the losses shall
be for his own exclusive account.
ARTICLE 614. A captain who, having made an
agreement to make a voyage, should not fulfill his obligation,
without being prevented by an accident case or by force
majeure, shall pay for all the losses his action may cause,
without prejudice to criminal penalties which may be proper.
ARTICLE 615. Without the consent of the agent, the
captain cannot have himself substituted by another person;
and should he do so, besides being liable for all the acts of
the substitute and bound to the indemnities mentioned in the
foregoing article, the substitute as well as the captain may
be discharged by the agent.
ARTICLE 617. The captain cannot contract loans on
respondentia, and should he do so the contracts shall be
void.
Neither can he borrow money on bottomry for his own
transactions, except on the portion of the vessel he owns,
provided no money has been previously borrowed on the
whole vessel, and provided there does not exist any other
kind of lien or obligation thereon. When he is permitted to do
so, he must necessarily state what interest he has in the
vessel.
In case of violation of this article the principal, interest, and
costs shall be charged to the private account of the captain,
and the agent may furthermore have the right to discharge
him.
ARTICLE 621. A captain who borrows money on
bottomry, or who pledges or sells merchandise or provisions
in other cases and without the formalities prescribed in this
Code, shall be liable for the principle, interest, and costs,
and shall indemnify for the damages he may cause.
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The captain who commits fraud in his accounts shall
reimburse the amount defrauded, and shall be subject to the
provisions contained in the Penal Code.
ARTICLE 583. If the ship being on a voyage the captain
should find it necessary to contract one or more of the
obligations mentioned in Nos. 8 and 9 of Article 580, he shall
apply to the judge or court if he is in Filipino * territory, and
otherwise to the consul of Philippines, * should there be one,
and, in his absence to the judge or court or to the proper
local authority, presenting the certificate of the registry of the
vessel treated of in Article 612, and the instruments proving
the obligation contracted.
The judge or court, the consul or the local authority as the
case may be, in view of the result of the proceedings
instituted, shall make a temporary memorandum in the
certificate of their result, in order that it may be recorded in
the registry when the vessel returns to the port of her
registry, or so that it can be admitted as a legal and
preferred obligation in case of sale before the return, by
reason of the sale of the vessel by virtue of a declaration of
unseaworthiness.
The lack of this formality shall make the captain personally
liable to the creditors who may be prejudiced through his
fault.
General rules:
The duty of the captain are essentially personal due to
the confidence given to him arising from the fact that he
possesses the required technical ability and that he is a
man worthy of trust of the ship owner
iii. Other Officers and Crew
626-631: First mate- sailing mate or second in command
632-633: Second mate or third in command
Complement of a vessel or crew- all the persons on board,
from the captain to the cabin boy, necessary for the
management, maneuvers, and service. Includes the sailing
mates, engineers and other employees
Vessel- highly technical task
Crew- not directly involved in manning (cook)
1. Contracts and formalities
Code of Commerce Art 634
ARTICLE 634. The captain may make up his crew with
the number he may consider advisable, and in the absence
of Filipino * sailors he may ship foreigners residing in the
country, the number thereof not to exceed one-fifth of the
total crew. If in foreign ports the captain should not find a
sufficient number of Filipino * sailors, he may make up the
crew with foreigners, with the consent of the consul or
marine authorities.
The agreements which the captain may make with the
members of the crew and others who go to make up the
complement of the vessels, to which reference is made in
Article 612, must be reduced to writing in the account book
without the intervention of a notary public or clerk, signed by
the parties thereto, and vised by the marine authority if they
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are executed in Filipino * territory, or by the consuls or
consular agents of Philippines * if executed abroad, stating
therein all the obligations which each one contracts and all
the rights they acquire, said authorities taking care that
these obligations and rights are recorded in a concise and
clear manner, which will not give rise to doubts or claims. cd
The captain shall take care to read to them the articles of
this Code, which concern them, stating that they were read
in the said document.
If the book includes the requisites prescribed in Article 612,
and there should not appear any signs of alterations in its
clauses, it shall be admitted as evidence in questions which
may arise between the captain and the crew with regard to
the agreements contained therein and the amounts paid on
account of the same.
Every member of the crew may request a copy of the
captain, signed by the latter, of the agreement and of the
liquidation of his wages, as they appear in the book.
2. Duties and liabilities
Code of Commerce Art 635
ARTICLE 635. A sailor who has been contracted to serve
on a vessel cannot rescind his contract nor fail to comply
therewith except by reason of a legitimate impediment which
may have occurred.
Neither can he pass from the service of one vessel to
another without obtaining the written consent of the vessel
on which he may be.
If, without obtaining said permission, the sailor who has
signed for one vessel should sign for another one, the
second contract shall be void, and the captain may choose
between forcing him to fulfill the service to which he first
bound himself or look for a person to substitute him at his
expense.
Said sailor shall furthermore lose the wages earned on his
first contract to the benefit of the vessel for which he may
have signed.
A captain who, knowing that a sailor is in the service of
another vessel, should have made a new agreement with
him, without having requested the permission referred to in
the foregoing paragraphs, shall be personally liable to the
captain of the vessel to which the sailor first belonged for
that part of the indemnity, referred to in the third paragraph
of this article, which the sailor could not pay.
3. Rights
Code of Commerce Arts 636-647
ARTICLE 636. Should a fixed period for which a sailor
has signed not be stated, he cannot be discharged until the
end of the return voyage to the port where he enrolled.
ARTICLE 637. Neither can the captain discharge a sailor
during the time of his contract except for sufficient cause, the
following being considered as such:
1. The perpetration of a crime which disturbs order on
the vessel.
2. Repeated offenses of insubordination, against
discipline, or against the fulfillment of the service.
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3. Repeated incapacity or negligence in the fulfillment
of the service to be rendered.
4. Habitual drunkenness.
5. Any occurrence which incapacitates the sailor to
carry out the work under his charge, with the exception of
the provisions contained in Article 644.
6. Desertion.
The captain may, however, before setting out on a voyage
and without giving any reason whatsoever, refuse to permit
a sailor he may have engaged from going on board and may
leave him on land, in which case he will be obliged to pay
him his wages as if he had rendered services.
This indemnity shall be paid from the funds of the vessel if
the captain should have acted for reasons of prudence and
in the interest of the safety and good service of the former.
Should this not be the case, it shall be paid by the captain
personally. aisadc
After the vessel has sailed, and during the voyage and until
the conclusion thereof, the captain can not abandon any
member of his crew on land or on the sea, unless, by reason
of being guilty of some crime, his imprisonment and delivery
to the competent authority is proper in the first port touched,
which will be obligatory on the captain.
ARTICLE 638. If, the crew having been engaged, the
voyage is revoked by the will of the agent or of the
charterers before or after the vessel has put to sea or if the
vessel is in the same manner given a different destination
than that fixed in the agreement with the crew, the latter
shall be indemnified because of the rescission of the
contract according to the case, viz:
1. If the revocation of the voyage should be decided
before the departure of the vessel from the port, each sailor
engaged shall be given one month's salary, besides what
may be due him in accordance with his contract, for the
services rendered to the vessel up to the date of the
revocation.
2. If the agreement should have been for a fixed
amount for the whole voyage, there shall be graduated what
may be due for said month and days, calculating the same in
proportion to the estimated duration of the voyage, in the
judgment of experts, in the manner established in the law of
civil procedure; and if the proposed voyage should be of
such short duration that it is calculated at one month more or
less, the indemnity shall be fixed for fifteen days, discounting
in all cases the sums advanced.
3. If the revocation should take place after the vessel
has put to sea, the sailors engaged for a fixed amount for
the voyage shall receive the salary which may have been
offered them in full as if the voyage had terminated, and
those engaged by the month shall receive the amount
corresponding to the time they might have been on board
and to the time they may require to arrive at the port of
destination, the captain being obliged, furthermore, to pay
said sailors the passage to the said port or to the port of
sailing of the vessel, as may be convenient for them.
4. If the agent or the charterers of the vessel should
give said vessel a destination other than that fixed in the
agreement, and the members of the crew should not agree
thereto, they shall be given by way of indemnity half the
amount fixed in case No. 1, besides what may be owed
them for the part of the monthly wages corresponding to the
days which have elapsed from the date of their agreements.
If they accept the change, and the voyage, on account of the
greater distance or for other reasons, should give rise to an
increase of wages, the latter shall be privately regulated, or
through amicable arbitrators in case of disagreement. Even
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though the voyage may be to a nearer point, this shall not
give rise to a reduction in the wages agreed upon.
If the revocation or change of the voyage should originate
from the shippers or charterers, the agent shall have a right
to demand of them the indemnity which is justly due.
ARTICLE 639. If the revocation of the voyage should
arise from a just cause independent of the will of the agent
or charterers, and the vessel should not have left the port,
the members of the crew shall not have any other right than
to receive the wages earned up to the day on which the
revocation took place.
ARTICLE 640. The following shall be just causes for the
revocation of the voyage:
1. A declaration of war or interdiction of commerce
with the power to whose territory the vessel was bound.
2. The blockade of the port of destination or the
breaking out of an epidemic after the agreement.
3. The prohibition to receive in said port the goods
which make up the cargo of the vessel.
4. The detention or embargo of the same by order of
the Government, or for any other reason independent of the
will of the agent.
5. The inability of the vessel to navigate.
ARTICLE 641. If, after a voyage has been begun, any of
the first three causes mentioned in the foregoing article
should occur, the sailors shall be paid at the port the captain
may deem it advisable to make for the benefit of the vessel
and cargo, according to the time they may have served
thereon; but if the vessel is to continue the voyage, the
captain and the crew may mutually demand the enforcement
of the contract.
In case of the occurrence of the fourth cause, the crew shall
continue to be paid half wages, if the agreement is by month
but if the detention should exceed three months, the
engagement shall be rescinded and the crew shall be paid
what they should have earned, according to the contract, if
the voyage had been made. And if the agreement had been
made for a fixed sum for the voyage, the contract must be
complied within the terms agreed upon.
In the fifth case, the crew shall not have any other right than
be entitled to recover the wages earned; but if the disability
of the vessel should have been caused by the negligence or
lack of skill of the captain, engineer, or sailing mate, they
shall indemnify the crew for the loss suffered, always
reserving the criminal liability which may be proper.
ARTICLE 642. If the crew has been engaged to work on
shares they shall not be entitled, by reason of the
revocation, delay, or greater extension of the voyage, to
anything but the proportionate part of the indemnity paid into
the common funds of the vessel by the persons liable for
said occurrences.
ARTICLE 643. If the vessel and her freight should be
totally lost, by reason of capture or wreck, all rights of the
crew to demand any wages whatsoever shall be
extinguished, as well as that of the agent for the recovery of
the advances made.
If a portion of the vessel or freight should be saved, or part
of either, the crew engaged on wages, including the captain,
shall retain their rights on the salvage, so far as they go, on
the remainder of the vessel as well as value of the freightage
or the cargo saved; but sailors who are engaged on shares
shall not have any right whatsoever to the salvage of the
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hull, but only on the portion of the freightage saved. If they
should have worked to collect the remainder of the ship-
wrecked vessel, they shall be given an award in proportion
to the efforts made and to the risks encountered in order to
accomplish the salvage.
ARTICLE 644. A sailor who falls sick shall not lose his
right to wages during the voyage, unless the sickness is the
result of his own fault. At any rate, the costs of the
attendance and cure shall be defrayed from the common
funds, in the form of a loan.
If the sickness should be caused by an injury received in the
service or defense of the vessel the sailor shall be attended
and cured from the common funds, there being deducted
before anything else from the proceeds of the freight, the
cost of the attendance and cure.
ARTICLE 645. If a sailor should die during the voyage his
heir shall be given the wages earned and not received,
according to his engagement and the reason for his death,
namely
If he should have died a natural death and should have been
engaged on wages there shall be paid what may have been
earned up to the date of his death.
If the engagement had been made for a fixed sum for the
whole voyage there shall be paid half the amount earned if
the sailor died on the voyage out, and the whole amount if
he died on the return voyage.
And if the engagement had been made on shares and the
death should have occurred after the voyage was begun, the
heirs shall be paid the entire portion due the sailor; but
should the latter have died before the departure of the
vessel from the port, the heirs shall not be entitled to claim
anything.
If the death should have occurred in the defense of the
vessel, the sailor shall be considered as living, and his heirs
shall be paid, at the end of the voyage, the full amount of
wages or the full part of the profits due him as to the others
of his grade.
The sailor shall likewise be considered as present in the
event of his capture when defending the vessel, in order to
enjoy the same benefits as the rest; but should he have
been captured on account of carelessness or other accident
not related to the service, he shall only receive the wages
due up to the day of his capture.
ARTICLE 646. The vessel with her engines, rigging,
equipment, and freights shall be liable for the wages earned
by the crew engaged per month or for the trip, the liquidation
and payment ought to take place between one voyage and
the other.
After a new voyage has been undertaken, credits such as
the former shall lose their right of preference.
ARTICLE 647. The officers and the crew of the vessel
shall be exempted from all obligations contracted, if they
deem it proper, in the following cases:
1. If, before the beginning of the voyage, the captain
attempts to change it, or there occurs a naval war with the
power to which the vessel was destined.
2. If a disease should break out and be officially
declared epidemic in the port of destination.
3. If the vessel should change owner or captain.
ARTICLE 648. By the complement of a vessel shall be
understood all the persons embarked, from the captain to
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the cabin boy, necessary for the management, evolutions,
and service, and there shall, therefore, be understood as
included in the complement the crew, sailing mates,
engineers, stokers, and other persons not having a specific
name; but there shall not be included the passengers nor the
persons the vessel is only transporting.
iv. Supercargoes
Code of Commerce Arts 649-651
ARTICLE 649. Supercargoes shall discharge on board the
vessel the administrative duties which the agent or shippers
may have assigned them; they shall keep an account and
record of their transactions in a book which shall have the
same conditions and requisites as required for the
accounting book of the captain, and shall respect the latter in
his duties as chief of the vessel.
The powers and liabilities of the captain shall cease, when
there is a supercargo, with regard to that part of the
administration legitimately conferred upon the latter, but
shall continue in force for all acts which are inseparable from
his authority and office.
ARTICLE 650. All the provisions contained in the second
section of Title III, Book II, with regard to qualifications,
manner of making contracts, and liabilities of factors shall be
applicable to supercargoes.
ARTICLE 651. Supercargoes can not, without special
authorization or agreement, make any transaction for their
own account during the voyage, with the exception of the
ventures which, in accordance with the custom of the port of
destination, they are permitted to do.
Neither shall they be permitted to invest in the return trip
more than the profits from the ventures, unless there is a
special authorization thereto from the principals.
Supercargo- A person on board the vessel who functions as an
agent of the owner of the goods shipped as cargo on a vessel,
who has charge of the cargo on board, sells the same to the best
advantage in the foreign markets, buys cargo to be brought back
on the return voyage of the ship, and comes home with it.
PART TWO: TRANSPORTATION LAW
V. Admiralty and Maritime Commerce
D. Accidents and Damages in Maritime Commerce
i. Averages
1. Nature and Kinds
Code of Commerce Arts 806 to 808
Art 806. For the purposes of this code the following shall be
considered averages:
1. All extraordinary or accidental expenses which may
be incurred during the voyage in order to preserve the
vessel, the cargo, or both.
2. Any damages or deteriorations which the vessel may
suffer from the time it puts to sea from the port of
departure until it casts anchor in the port of
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destination, and those suffered by the merchandise
from the time they are loaded in the port of shipment
until they are unloaded in the port of their
consignment.
Art 807. The petty and ordinary expenses incident to
navigation, such as those of pilotage of coasts and ports,
those of lighterage and towage, anchorage, inspection, health,
quarantine, lazaretto, and other so-called port expenses, costs
of barges and unloading until the merchandise is placed on the
wharf, and any other usual expenses of navigation, shall be
considered ordinary expenses to be defrayed by the
shipowner, unless there is an express agreement to the
contrary.
Art 808. Averages shall be:
1. Simple or particular.
2. General or gross.
Averages consist of 2 items:
1. Expense to constitute an average, an expense must
be:
a. Extraordinary or accidental
b. Incurred during the voyage
c. Incurred in order to preserve the vessel, the
cargo, or both.
2. Damages or Deterioration to constitute an average, it
must:
a. Have been suffered from the time the vessel
puts to sea from the port of departure until it
casts anchor in the port of destination
b. Have been suffered by the merchandise from
the time they are loaded in the port of
shipment until they are unloaded in the port of
consignment.
1. Simple or Particular
a. Defined
Code of Commerce Art 809
Art 809. As a general rule, simple or particular averages shall
include all the expenses and damages caused to the vessel or
to her cargo which have not inured to the common benefit and
profit of all the persons interested in the vessel and her cargo,
and especially the following:
1. The losses suffered by the cargo from the time of its
embarkation until it is unloaded, either on account of
inherent defect of the goods or by reason of an
accident of the sea or force majeure, and the
expenses incurred to avoid and repair the same.
2. The losses and expenses suffered by the vessel in its
hull, rigging, arms, and equipment, for the same
causes and reasons, from the time it puts to sea from
the port of departure until it anchors and lands in the
port of destination.
3. The losses suffered by the merchandise loaded on
deck, except in coastwise navigation, if the marine
ordinances allow it.
4. The wages and victuals of the crew when the vessel
is detained or embargoed by legitimate order or force
majeure, if the charter has been contracted for a fixed
sum for the voyage.
5. The necessary expenses on arrival at a port, in order
to make repairs or secure provisions.
6. The lowest value of the goods sold by the captain in
arrivals under stress for the payment of provisions
59

and in order to save the crew, or to meet any other
need of the vessel, against which the proper amount
shall be charged.
7. The victuals and wages of the crew while the vessel
is in quarantine.
8. The loss inflicted upon the vessel or cargo by reason
of an impact or collision with another, if it is accidental
and unavoidable. If the accident should occur through
the fault or negligence of the captain, the latter shall
be liable for all the losses caused.
9. Any loss suffered by the cargo through the fault,
negligence, or barratry of the captain or of the crew,
without prejudice to the right of the owner to recover
the corresponding indemnity from the captain, the
vessel, and the freightage.
Distinguishing Feature: an expense incurred or damage suffered
which has not inured to the common benefit and profit of all
persons interested in the vessel and its cargo.
b. Effects
Code of Commerce Art 810
Art 810. The owner of the goods which gave rise to the
expense or suffered the damage shall bear the simple or
particular averages.
2. Gross or General
a. Defined
Code of Commerce Arts 811, 817 & 818
Art 811. As a general rule, general or gross averages shall
include all the damages and expenses which are deliberately
caused in order to save the vessel, its cargo, or both at the
same time, from a real and known risk, and particularly the
following:
1. The goods or cash invested in the redemption of the
vessel or of the cargo captured by enemies,
privateers, or pirates, and the provisions, wages, and
expenses of the vessel detained during the time the
settlement or redemption is being made.
2. The goods jettisoned to lighten the vessel, whether
they belong to the cargo, to the vessel, or to the crew,
and the damage suffered through said act by the
goods which are kept on board.
3. The cables and masts which are cut or rendered
useless, the anchors and the chains which are
abandoned, in order to save the cargo, the vessel, or
both.
4. The expenses of removing or transferring a portion of
the cargo in order to lighten the vessel and place it in
condition to enter a port or roadstead, and the
damage resulting therefrom to the goods removed or
transferred.
5. The damage suffered by the goods of the cargo by
the opening made in the vessel in order to drain it and
prevent its sinking.
6. The expenses caused in order to float a vessel
intentionally stranded for the purpose of saying it.
7. The damage caused to the vessel which had to be
opened, scuttled or broken in order to save the cargo.
8. The expenses for the treatment and subsistence of
the members of the crew who may have been
wounded or crippled in defending or saying the
vessel.
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9. The wages of any member of the crew held as
hostage by enemies, privateers, or pirates, and the
necessary expenses which he may incur in his
imprisonment, until he is returned to the vessel or to
his domicile, should he prefer it.
10. The wages and victuals of the crew of a vessel
chartered by the month, during the time that it is
embargoed or detained by force majeure or by order
of the government, or in order to repair the damage
caused for the common benefit.
11. The depreciation resulting in the value of the goods
sold at arrival under stress in order to repair the
vessel by reason of gross average.
12. The expenses of the liquidation of the average.
Art 817. If in lightening a vessel on account of a storm, in order
to facilitate its entry into a port or roadstead, part of the cargo
should be transferred to lighters or barges and be lost, the
owner of said part shall be entitled to indemnity, as if the loss
had originated from a gross average, the amount thereof being
distributed between the vessel and cargo from which it came.
If, on the contrary, the merchandise transferred should be
saved and the vessel should be lost, no liability may be
demanded of the salvage.
Art 818. If, as a necessary measure to extinguish a fire in a
port, roadstead, creek, or bay, it should be decided to sink any
vessel, this loss shall be considered gross average, to which
the vessels saved shall contribute.
Distinguishing Feature: Expense or damage suffered deliberately
in order to save the vessel, its cargo, or both from a real and
known risk it is the deliverance from an immediate peril, by a
common sacrifice, that constitutes the essence of general
average.
Requisites:
1. There must be a common danger the ship and cargo
are subject to the same danger and that the danger
arises from accidents of the sea, dispositions of the
authorities or faults of men, provided that the
circumstances producing the peril should be
ascertained and imminent.
2. For the common safety, part of vessel or the cargo or
both is sacrificed deliberately
3. From the expenses or damages caused follows the
successful saving of the vessel and cargo
4. The expenses or damages should have been incurred
or inflicted after taking legal steps and authority
b. Essential Requisites
Code of Commerce Arts 813, 814, & 860
Art 813. In order to incur the expenses and cause the damages
corresponding to gross average, there must be a resolution of
the captain, adopted after deliberation with the sailing mate and
other officers of the vessel, and after hearing the persons
interested in the cargo who may be present.
If the latter shall object, and the captain and officers or a majority
of them, or the captain, if opposed to the majority, should
consider certain measures necessary, they may be executed
under his responsibility, without prejudice to the right of the
shippers to proceed against the captain before the competent
judge or court, if they can prove that he acted with malice, lack of
skill, or negligence.
If the persons interested in the cargo, being on board the vessel,
have not been heard, they shall not contribute to the gross
average, their share being chargeable against the captain,
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unless the urgency of the case should be such that the time
necessary for previous deliberations was wanting.
Art 814. The resolution adopted to cause the damages which
constitute general average must necessarily be entered in the
log book, stating the motives and reasons for the dissent, should
there be any, and the irresistible and urgent causes which
impelled the captain if he acted of his own accord.
In the first case the minutes shall be signed by all the persons
present who could do so before taking action, if possible; and if
not, at the first opportunity. In the second case, it shall be signed
by the captain and by the officers of the vessel.
In the minutes, and after the resolution, shall be stated in detail
all the goods jettisoned, and mention shall be made of the
injuries caused to those kept on board. The captain shall be
obliged to deliver one copy of these minutes to the maritime
judicial authority of the first port he may make, within twenty-four
hours after his arrival, and to ratify it immediately under oath.
Art 860. If, notwithstanding the jettison of merchandise, breakage
of masts, ropes, and equipment, the vessel shall be lost running
the same risk, no contribution whatsoever by jettison of gross
average shall be proper.
The owners of the goods saved shall not be liable for the
indemnification of those jettisoned, lost, or damaged.
Formalities for incurring gross average:
1. There must be an assembly of the sailing mate and
other officers with the captain including those with
interests in the cargo.
2. There must be a resolution of the captain.
3. The resolution shall be entered in the log book, with the
reasons and motives and the votes for and against the
resolution.
4. The minutes shall be signed by the parties.
5. Within 24 hours upon arrival at the first port the captain
makes, he shall deliver one copy of these minutes to
the maritime juridical authority thereat.
*CONDITION PRECEDENT
Magsaysay Inc. vs Agan
A vessel belonging to A. Magsaysay Inc., carrying cargo
belonging to various shippers ran aground at the mouth of the
Cagayan river and had to be refloated for a fee. Upon arriving at
the port of destination, the shipowner delivered the cargo on
board to its respective shippers, asking each for their contribution
to the general average to be paid for the expenses of refloating
the vessel. Defendant Agan, one of the shippers, refused to
contribute, so the shipowner filed a suit. The trial court ruled in
favor of the shipowner and held Agan liable. The Supreme Court
reversed the decision of the lower court and held that Agan could
not be liable since the requisites of a general average were not
met.
c. Effects
Code of Commerce Art 812
Art 812. In order to satisfy the amount of the gross or general
averages, all the persons having an interest in the vessel and
cargo therein at the time of the occurrence of the average shall
contribute.
d. Jettison
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Code of Commerce Arts 815 & 816
Art 815. The captain shall direct the jettison, and shall order the
goods cast overboard in the following order:
1. Those which are on deck, beginning with those which
embarrass the maneuver or damage of the vessel,
preferring, if possible, the heaviest ones with the least
utility and value.
2. Those which are below the upper deck, always
beginning with those of the greatest weight and
smallest value, to the amount and number absolutely
indispensable.
Art 816. In order that the goods jettisoned may be included in the
gross average and the owners thereof be entitled to indemnity, it
shall be necessary insofar as the cargo is concerned that their
existence on board be proven by means of the bill of lading; and
with regard to those belonging to the vessel, by means of the
inventory prepared before the departure in accordance with the
first paragraph of Article 812.
Jettison is an example of a general average.
Jettison the least inconvenient first.
The owner of the vessel usually benefits most.
The contribution is proportional to benefit.
Proof of existence on board the vessel:
1. For cargoes Bill of Lading
2. For goods belonging to the vessel Inventory prior to
departure
d. Jason Clause
Jason Clause, Rule D, York-Antwerp Rules
Rights to contribution in general average shall not be affected,
though the event which gave rise to the sacrifice or expenditure
may have been due to the fault of one of the parties to the
adventure; but this shall not prejudice any remedies which may
be open against that party for such fault.
In conflict of laws, there is a problem in determining
what law will apply characterization.
The York Antwerp Rules is an international system of
rules which is the solution proposed to the problem of
conflicts of laws. This is because parties usually sought
to apply the laws of the country, which were the most
favorable in their case.
The York Antwerp Rules systematized the rules to be
used in determining liquidation, payment of averages,
etc.
Uniform set of rules to disable party to choose law.
The Jason Clause is not treaty or law, only values. The
Warsaw Convention on the other hand is a treaty.
This is a standard provision in maritime contracts.
ii. Arrival under Stress
1. Causes
Code of Commerce Arts 819 & 820
Art 819. If during the voyage the captain should believe that the
vessel cannot continue the trip to the port of destination on
account of the lack of provisions, well-founded fear of seizure,
privateers, or pirates, or by reason of any accident of the sea
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disabling it to navigate, he shall assemble the officers and shall
summon the persons interested in the cargo who may be
present, and who may attend the meeting without the right to
vote; and if, after examining the circumstances of the case, the
reason should be considered well-founded, the arrival at the
nearest and most convenient port shall be agreed upon, drafting
and entering the proper minutes, which shall be signed by all, in
the log book.
The captain shall have the deciding vote, and the persons
interested in the cargo, may make the objections and protests
they may deem proper, which shall be entered in the minutes in
order that they may make use thereof in the manner they may
consider advisable.
Art 820. An arrival shall not be considered lawful in the following
cases:
1. If the lack of provisions should arise from the failure to
take the necessary provisions for the voyage according
to usage and customs, or if they should have been
rendered useless or lost through bad stowage or
negligence in their care.
2. If the risk of enemies, privateers, or pirates should not
have been well known, manifest, and based on positive
and provable facts.
3. If the defect of the vessel should have arisen from the
fact that it was not repaired, rigged, equipped, and
prepared in a manner suitable for the voyage, or from
some erroneous order of the captain.
4. When malice, negligence, want of foresight, or lack of
skill on the part of the captain exists in the act causing
the damage.
Arrival Under Stress Arrival of a vessel at the nearest and most
convenient port, if during the voyage the vessel cannot continue
the trip to the post of destination due to:
1. Lack of provision
2. Well-founded fear of seizure, privateers, and pirates
3. By reason of any accident of the sea disabling it to
navigate.
2. Formalities
Code of Commerce Arts 819 & 822
Art 819. Supra
Art 822. If in order to make repairs to the vessel or because
there is danger that the cargo may suffer damage, it should be
necessary to unload, the captain must request authorization from
the competent judge or court for the removal, and carry it out
with the knowledge of the person interested in the cargo, or his
representative, should there be any.
In a foreign port, it shall be the duty, of the Philippine Consul,
where there is one, to give the authorization.
In the first case, the expenses shall be for the account of the ship
agent or owner, and in the second, they shall be chargeable
against the owners of the merchandise for whose benefit the act
was performed.
If the unloading should take place for both reasons, the
expenses shall be divided proportionately between the value of
the vessel and that of the cargo.
Formalities:
1. Assembly of the officers including all interested parties
2. Drafting and entering in the log book the proper
minutes, which shall be signed by all
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3. Entry in the log book of the objections and protests of
the persons interested in the cargo
3. Expenses
Code of Commerce Arts 821 & 822
Art 821. The expenses of an arrival under stress shall always be
for the account of the shipowner or agent, but they shall not be
liable for the damages which may be caused the shippers by
reason of the arrival provided the latter is legitimate.
Art 822. Supra
Requisites for the captain to unload the cargo arriving under
stress:
1. The unloading must be necessary to make repairs or
there must be danger that the cargo may suffer damage
2. The captain must be authorized by either a competent
court or Phil. Consul, depending on the port of arrival.
*Note that the requisites herein are different from when a captain
decides to arrive under stress
4. Responsibility of Captain
Code of Commerce Arts 823 to 825
Art 823. The custody and preservation of the cargo which has
been unloaded shall be entrusted to the captain, who shall be
responsible for the same, except in cases of force majeure.
Art 824. If the entire cargo or part thereof should appear to be
damaged, or there should be imminent danger of its being
damaged, the captain may request of the competent judge or
court, or of the consul in a proper case, the sale of all or of part
of the former, and the person taking cognizance of the matter
shall authorize it, after an examination and declaration of
experts, advertisements, and other formalities required by the
case, and an entry in the book, in accordance with the provisions
of Article 624.
The captain shall, in a proper case, justify the legality of his
conduct, under the penalty of answering to the shipper for the
price the merchandise would have brought if they had arrived in
good condition at the port of destination.
Art 825. The captain shall be responsible for the damages
caused by his delay, if after the cause of the arrival under stress
has ceased, he should not continue the voyage.
If the cause of arrival should have been the fear of enemies,
privateers, or pirates, a deliberation and resolution in a meeting
of the officers of the vessel and persons interested in the cargo
who may be present, in accordance with the provisions
contained in Article 819, shall precede the departure.
The captain has the duty to continue the voyage without delay
after the cause of the arrival under stress has ceased, otherwise,
he shall be liable for damages caused by the delay.
iii. Collision
Collision impact of two vessels both of which are moving
Allision striking of a moving vessel against one that is
stationary
Cases of Collision:
1. Due to the fault, negligence or lack of skill of the
captain, sailing mate, or the complement of the vessel
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under 826, the shipowner shall be liable for the
losses and damages
2. Due to the fault of both vessels under 827, each
vessel shall suffer its own losses, but as regards the
owners of the cargoes, both vessels shall be jointly and
severally liable
3. Where it cannot be determined which of the 2 vessels is
at fault under 828, each vessel shall suffer its own
losses, and both shall also be solidarily responsible for
the losses and damages caused to their cargoes
4. Collision due to fortuitous event or force majeure
under 830, each vessel shall bear its own damages
5. Where 2 vessels collide with each other without their
fault but by reason of the fault of a third vessel under
831, the owner of the third vessel causing the collision
shall be liable for the losses and damages.
6. A vessel which is properly anchored and moored may
collide with those nearby by reason of a storm or other
cause of force majeure under 832, the vessel run
into shall suffer its own damages and expenses.
Liability in case of Collision:
Code of Commerce Arts 837
The civil liability contracted by the shipowners in the cases
prescribed in this section, shall be understood as limited to the
value of the vessel with all her appurtenances and all the freight
earned during the voyage.
1. Causes & Effects
a. Fortuitous
Code of Commerce Arts 830 & 832
Art 830. If a vessel should collide with another, through fortuitous
event or force majeure, each vessel and its cargo shall bear its
own damages.
Art 832. If by reason of a storm or other cause of force majeure,
a vessel which is properly anchored and moored should collide
with those nearby, causing them damages, the injury occasioned
shall be considered as particular average of the vessel run into.
Each to his own damage: thus a particular damage
b. Causes & Effects
Code of Commerce Arts 826, 827, & 831
Art 826. If a vessel should collide with another, through or the
fault, negligence, or lack of skill of the captain, sailing mate, or
any other member of the complement, the owner of the vessel at
fault shall indemnify the losses and damages suffered, after an
expert appraisal.
Art 827. If the collision is imputable to both vessels, each one
shall suffer its own damages, and both shall be solidarily
responsible for the losses and damages occasioned to their
cargoes.
Art 831. If a vessel should be forced by a third vessel to collide
with another, the owner of the third vessel shall indemnify the
losses and damages caused, the captain thereof being civilly
liable to said owner.
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Where the obligation arises from tortious act and not
from contract, both the owner and the shipagent should
be declared liable.
Defense of due diligence of a good father of a family in
the selection and vigilance of the officers and crew
cannot be used to render nugatory the solidary liability
under 827.
Under the express provisions of 827, the shipowners
cannot successfully maintain an action against the other
for the loss or injury against his vessel
c. Inscrutable Fault
Code of Commerce Art 828
Art 828. The provisions of the preceding article are applicable to
the use in which it cannot be determined which of the two
vessels has caused the collision.
Relation of Art. 827 to 828:
Art. 828 must be considered an extension of Art. 827
The rule of liability under 827 is applicable not only to
the case where both vessels may be shown to be
actually blameworthy but also to the case where it is
obvious that only one was at fault but the proof does not
show which one.
Under Arts. 827 and 828, in case of collision between
two vessels at sea, both are solidarily liable for the loss
of cargo carried by either to the full extent of the value
thereof, not only in the case where both vessels may be
shown to be actually blameworthy but also in the case
where it is shown that only one was at fault but the
proof does not show it it makes no difference that the
negligence imputable to the two vessels may have
differed somewhat in character and degree and that the
negligence of the sunken ship was somewhat more
marked than that of the other.
The doctrine of last clear chance cannot be raised
under the express provision of Art. 827, when the
evidence disclosing that both vessels are blameworthy,
the owners of neither can successfully maintain an
action against the other for the loss or injury to his
vessel.
Can the principle of contributory negligence be used?
No. The Code of Commerce does not recognize this
principle.
A. Urrutia & Co. vs. Baco River Plantation
The case involves a collision between a steamer and a
schooner/sail vessel (Mangyan). The steamer was seen to be
sailing erratically before the collision. The schooner kept its
course steady until just before the actual contact. But the
movement was unsuccessful and the collision was not avoided.
Eight died as a result and the schooner sank.
The SC ruled that the steamer is liable. The presumption is that
in a collision between a steamer and a sail vessel, the steamer is
the one negligent and it must be shown that it took proer
measures to avoid the collision. Because the steamer has the
greater facility to maneuver, the schooner has the right to keep
its course.
Government vs. Phil. Streamship Co.
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Facts: The mate of the vessel Antipolo awoke and saw that the
vessel Isabel was almost on top of him. He immediately put his
helm hard to the starboard. However, the mate on Isabel, upon
realizing the proximity of Antipolo, placed his helm hard to the
port. The vessels collided and Isabel sank with all its cargoes
(including rice owned by the government).
Held: Both are at fault and are solidarily liable (Antipolo for
allowing Isabel to approach directly and Isabel for the mates
wrong course. If both vessels are at fault. They are liable
solidarily. But because Isabel has sunk, only Antipolos owner is
liable.
Smith Bell and Co. vs. CA
The M/V Don Carlos and the M/V Yotai Maru collided. The bow
of the Don Carlos rammed the portside of the Yotai Maru
inflicting a 3 cm. gaping hole near one of the hatches, through
which seawater rushed in, damaging all the cargo therein. The
insurance companies as subrogees of the consignees of the
damaged cargo filed actions for damages against Go Thong,
owner of the Don Carlos. In the first case, the CFI finding that the
Don Carlos was solely negligent had been affirmed all the way
up to the SC. In the second case, the CA reversed the CFIs
finding and held the Yotai Maru solely responsible. This petition
is assailing the CAs reversal on the ff grounds: (1) the rule of res
judicata should have applied; (2) the compromise agreement
between Go Thong and the owner of the Yotai Maru was not an
admission that Yotai Maru had been at fault; and (3) Don Carlos
negligence was the sole proximate cause of the collision.
The SC ruled in favor of the petitioners and ruled that the
question as to which vessel was negligent in the collision was
barred by conclusiveness of judgment and could no longer be
relitigated. It thus upheld the factual findings of the trial court that
Don Carlos was negligent in veering left while in the process of
overtaking another vessel, the M/V Don Francisco, causing it to
be in the Yotai Marus path.
iv. Shipwrecks
Code of Commerce Art 840 to 843
Art 840. The losses and deteriorations suffered by a vessel and
her cargo by reason of shipwreck or stranding shall be
individually for the account of the owners, the part which may be
saved belonging to them in the same proportion.
Art 841. If the wreck or stranding should be caused by the
malice, negligence, or lack of skill of the captain, or because the
vessel put to sea was insufficiently repaired and equipped, the
ship agent or the shippers may demand indemnity of the captain
for the damages caused to the vessel or to the cargo by the
accident, in accordance with the provisions contained in Articles
610, 612, 614, and 621.
Art 842. The goods saved from the wreck shall be specially
bound for the payment of the expenses of the respective
salvage, and the amount thereof must be paid by the owners of
the former before they are delivered to them, and with
preference over any other obligation if the merchandise should
be sold.
Art 843. If several vessels sail under convoy, and any of them
should be wrecked, the cargo saved shall be distributed among
the rest in proportion to the amount which each one is able to
take.
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If any captain should refuse, without sufficient cause, to receive
what may correspond to him, the captain of the wrecked vessel
shall enter a protest against him, before two sea officials, of the
losses and damages resulting therefrom, ratifying the protest
within twenty-four hours after arrival at the first port, and
including it in the proceedings he must institute in accordance
with the provisions contained in Article 612.
If it is not possible to transfer to the other vessels the entire
cargo of the vessel wrecked, the goods of the highest value and
smallest volume shall be saved first, the designation thereof to
be made by the captain with the concurrence of the officers of
his vessel.
Shipwreck (defined) Loss of a vessel at sea, either by being
swallowed up by the waves, by running against another vessel or
thing at sea, or on coast, in other words it renders the ship
incapable of navigation.
Under 841, in case the wreck or standing is due to (1)
malice, negligence, or lack of skill of the captain, or (2)
because the vessel put to sea was insufficiently
repaired and equipped, the captain shall be liable.
Where a ship and its cargo are saved together, the
salvage allowance should be charge against the ship
and cargo in proportion of their respective values, the
same as in general averages and neither is liable for
the salvage due to the other.
Where a personal action is brought by the salvor
against the owner of the ship, the liability of the latter is
limited to such part of the salvage compensation due for
the entire service as is proportionate to the value of the
ship.
Salvage Law (Act No. 2616)
Section 1. When in case of shipwreck, the vessel or its cargo
shall be beyond the control of the crew, or shall have been
abandoned by them, and picked up and conveyed to a safe
place by other persons, the latter shall be entitled to a reward for
the salvage.
Those who, not being included in the above paragraph, assist in
saving a vessel or its cargo from shipwreck, shall be entitled to a
like reward.
Sec. 2. If the captain of the vessel, or the person acting in his
stead, is present, no one shall take from the sea, or from the
shores or coast merchandise or effects proceeding from a
shipwreck or proceed to the salvage of the vessel, without the
consent of such captain or person acting in his stead.
Sec. 3. He who shall save or pick up a vessel or merchandise at
sea, in the absence of the captain of the vessel, owner, or a
representative of either of them, they being unknown, shall
convey and deliver such vessel or merchandise, as soon as
possible, to the Collector of Customs, if the port has a collector,
and otherwise to the provincial treasurer or municipal mayor.
Sec. 4. After the salvage is accomplished, the owner or his
representative shall have a right to the delivery of the vessel or
things saved, provided that he pays, or gives a bond to secure,
the expenses and the proper reward.
The amount and sufficiency of the bond, in the absence of
agreement, shall be determined by the Collector of Customs or
by the Judge of the Court of First Instance of the province in
which the things saved may be found.
Sec. 5. The Collector of Customs, provincial treasurer, or
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municipal mayor, to whom a salvage is reported, shall order:
a. That the things saved be safeguard and inventoried.
b. The sale at public auction of the things saved which
may be in danger of immediate loss or of those whose
conservation is evidently prejudicial to the interests of
the owner, when no objection is made to such sale.
c. The advertisement within the thirty days subsequent to
the salvage, in one of the local newspapers or in the
nearest newspaper published, of all the details of the
disaster, with a statement of the mark and number of
the effects requesting all interested persons to make
their claims.
Sec. 6. If, while the vessel or things saved are at the disposition
of the authorities, the owner or his representative shall claim
them, such authorities shall order their delivery to such owner or
his representative, provided that there is no controversy over
their value, and a bond is given by the owner or his
representative to secure the payment of the expenses and the
proper reward. Otherwise, the delivery shall nor be made until
the matter is decided by the Court of First Instance of the
province.
Sec. 7. No claim being presented in the three months
subsequent to the publication of the advertisement prescribed in
sub-section (c) of Section five, the things save shall be sold at
public auction, and their proceeds, after deducting the expenses
and the proper reward shall be deposited in the insular treasury.
If three years shall pass without anyone claiming it, one-half of
the deposit shall be adjudged to him who saved the things, and
the other half to the insular government.
Sec. 8. The following shall have no right to a reward for salvage
or assistance:
a. The crew of the vessel shipwrecked or which was in
danger of shipwreck;
b. He who shall have commenced the salvage in spite of
opposition of the captain or his representative; and
c. He who shall have failed to comply with the provisions
of Section three.
Sec. 9. If, during the danger, an agreement is entered into
concerning the amount of the reward for salvage or assistance,
its validity may be impugned because it is excessive, and it may
be required to be reduced to an amount proportionate to the
circumstances.
Sec. 10. In a case coming under the last preceding section, as
well as in the absence of an agreement, the reward for salvage
or assistance shall be fixed by the Court of First Instance of the
province where the things salvaged are found, taking into
account principally the expenditures made to recover or save the
vessel or the cargo or both, the zeal demonstrated, the time
employed, the services rendered, the excessive express
occasioned the number of persons who aided, the danger to
which they and their vessels were exposed as well as that which
menaced the things recovered or salvaged, and the value of
such things after deducting the expenses.
Sec. 11. From the proceeds of the sale of the things saved shall
be deducted, first, the expenses of their custody, conservation,
advertisement, and auction, as well as whatever taxes or duties
they should pay for their entrance; then there shall be deducted
the expenses of salvage; and from the net amount remaining
shall be taken the reward for the salvage or assistance which
shall not exceed fifty per cent of such amount remaining.
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Sec. 12. If in the salvage or in the rendering of assistance
different persons shall have intervened the reward shall be
divided between them in proportion to the services which each
one may have rendered, and, in case of doubt, in equal parts.
Those who, in order to save persons, shall have been exposed
to the same dangers shall also have a right to participation in the
reward.
Sec. 13. If a vessel or its cargo shall have been assisted or
saved, entirely or partially, by another vessel, the reward for
salvage or for assistance shall be divided between the owner,
the captain, and the remainder of the crew of the latter vessel, so
as to give the owner a half, the captain a fourth, and all the
remainder of the crew the other fourth of the reward, in
proportion to their respective salaries, in the absence of an
agreement to the contrary. The express of salvage, as well as
the reward for salvage or assistance, shall be a charge on the
things salvaged on their value.
Salvage (defined):
The compensation allowed to persons by whose
voluntary assistance a ship at sea or her cargo or both
have been saved in whole or in part from impending
sea peril, or such property recovered from actual peril
or loss, as in case of shipwrecks, derelict or recapture.
The service which one person, renders to the owner of
a ship or goods by his own labor preserving the goods
or ship which the owner or those entrusted with the care
of them either abandoned in distress at sea or are
unable to protect and secure.
Note that a permit is required to engage in the salvage
business.
Shipwreck means a ship which has received injuries rendering
her incapable of navigation; loss of a vessel at sea, either by
swallowing up by the waves, running against a thing at sea, or
on the coast.
Derelict A ship or her cargo which is abandoned and deserted
at sea by those who are in charge of it, without any hope of
recovering it, or without any intention of returning it if those in
charge of the property left it with the intention of finally leaving it,
it is a derelict and the change of their intention and an attempt to
return to it will not change its nature.
Rights of Finder of Derelict:
The finder who takes possession with the intention of saving her,
gains a right of possession which he can maintain against the
true owners. The owner does not renounce his right of property.
This is not presumed to be intentional, nor does the finder
acquire any such right. But the owner does abandon temporarily,
his right of possession, which is transferred to the finder who
becomes bound to preserve the property with good faith and
bring it to a place of safety for the owners use; in return, he
acquires a right to be paid for his service a reasonable and
proper compensation out of the property itself. He is not bound to
part possession until he is pad or the property is taken into the
possession of the law preparatory to the amount of salvage
being legally asserted.
Elements of Valid Salvage:
1. A marine peril
2. Service voluntarily rendered when not acquired as an
existing duty or from special contract
3. Success, in whole or in part, or that the services
rendered contributed to such success
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Distinction between salvage and towage is of importance to
the crew of the salvaging ship: if the contract for towage is in
fact towage, then the crew does not have interest or rights with
the remuneration pursuant to the contract; BUT if the owners of
the respective vessels are of a salvage nature, the crew of the
salvaging ship is entitled to salvage, and can look to the
salvaged vessel for its share.
Kinds of Salvage Service:
1. Voluntary wherein the compensation is dependent
upon success.
2. Rendered under a contract for a pier diem or per horam
wage, payable at all events.
Where the compensation is dependent upon success, it
may be very much larger than quantum meruit as a
reward for perilous services.
Such contracts for salvage will not be set aside unless
corruptly entered into, or made under fraudulent
representations, a clear mistake or suppression of
important facts, under compulsion or contrary to equity
and good conscience.
Reasons for allowing salvage compensation to salving
vessel:
1. To reward promptness, energy, efficiency, and heroic
endeavor in saving life and property in peril.
2. To compensate the use and service of the vessel as an
indispensable instrument for the salvage.
3. Recognizes the danger and risk to which the crew and
the vessel were exposed to in saving the ship and
property and life.
Erlanger & Galinger vs. Swedish East Asiatic Co.
Steamship Nippon ran aground at Scarborough Reef. Plaintiff
chartered a vessel to conduct salvage operations, and sought an
award for the services rendered.
For the salvage of the ship, the court affirmed the amount agreed
upon between the parties. For the salvage of copra and agar-
agar, certain percentages of the salvaged cargo were awarded
to the plaintiff, in consideration of justice and equity. The court
also ruled that Nippon was considered abandoned or derelict
such as to justify the plaintiff in conducting salvage operations,
and that these salvage operations were conducted with skill,
diligence, and efficiency.
Salvaging constitutes expenses and renumeration.
Atlantic, Gulf & Pacific Co. vs. Uchida Kisen Kaisha
Issue in this case is the amount of compensation to be awarded
to the plaintiffs for the salvage of the steamship Kyodo Maru
owned by the defendants-appellants, which sank after violently
coming in contact with a submerged lighter in the Manila harbor.
SC: This question of compensation involves two elements: (a)
The actual expenses incurred in the salvage operation =
P50,000, based on the statement of the expenses; and (b) the
reward for services rendered by the plaintiffs as salvors =
P50,000, applying Section 10 of Act No. 2616.
Barrios vs. Go Thong
Barrios is the captain of vessel Henryl owned by WLI. While on
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voyage, it received a distress signal from Don Alfredo (owned by
GT) which was stranded in the area of Negros. Henryl
successfully towed the vessel. WLI waived its claim for
compensation but Barrios asked for remuneration. GT refused to
pay.
SC ruled that GT is not liable for salvage compensation but only
for the towage. The case defines salvage as the compensation
allowed to persons by whose assistance a ship or cargo has
been saved, in whole or in part, from impending peril on the sea
or in recovering such property from actual loss, as in case of
shipwreck, derelict, or recapture.
The Court ruled that the elements of salvage are not satisfied in
the case at hand. There was no danger of the vessel capsizing,
in view of the fairness of the sea, and the condition of the
weather. Although Don Alfredo was drifting towards the open
sea, there was no danger of it floundering or being stranded
since it is actually far from any island or rocks.
E. Special Contracts of Maritime Commerce
i. Charter Parties
1. Definition
A charter party is a contract by virtue of which the
owner or agent of the vessel binds himself to transport
merchandise or persons for a fixed price. It is a contract
by which the owner or agent of the vessel leases for a
certain price the whole or portion of the vessel for the
transportation of goods or persons from one port to
another.
Towage is not a charter party; instead it is a contract for
the hire of services by virtue of which a vessel is
engaged to tow another vessel from one port to another
for a compensation.
A Primage is a small allowance or compensation
payable to the master and marines of a ship or vessel.
Demurrage is the sum fixed by the contract of carriage,
of which is allowed, as remuneration to the owner of the
ship for detention of his vessel beyond the number of
days allowed by the charter party for loading and
unloading.
Lay days are the days allowed to charter parties for
loading and unloading the cargo.
2. Kinds
Classes of Charter Party:
1. As to extent of vessel hired
a. Total
b. Partial the charterer does not as a rule
acquire to fix the date when the vessel should
depart, unless such right is expressly granted
in the contract
2. As to time
a. Until a fixed day for a determined number of
days or month
b. For a voyage
3. As to freightage
a. For a fixed amount for the whole cargo
b. For a fixed rate per ton
c. For so much per month
Demise or Bareboat Contract of Affreightment
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Charterer becomes liable to Owner remains liable as 1. Loan on Bottomry Defined
others caused by its carrier and must answer for A contract in the nature of a mortgage, by which the
negligence any breach of duty owner of the ship borrows money for the use,
Charterer regarded as owner Charterer is not regarded as equipment, and repair of the vessel and for a definite
pro hac vice for the voyage owner term, and pledges the ship (or the keel or bottom of the
Owner of vessel relinquishes The vessel owner retains ship) as a security for its repayment, with maritime or
possession, command, and possession, command and extraordinary interest on account of the maritime risks
navigation to charterer navigation of the ship to be borne by the lender, it being stipulated that if the
Common carrier is converted Common carrier is not ship be lost in the course of the specific voyage or
to private carrier converted to a private carrier during the limited time, by any of the perils enumerated
in the contract, the lender shall also lose his money.
Persons who make a charter:
1. Owner or owners of the vessel, either in whole or in Loan on Bottomry is characterized by:
part, who have legal control and possession of the 1. Loss of security extinguished the contract
vessel. 2. High interest
2. Charterer may subcharter entire vessel to 3rd person
only if not prohibited in original charter. (Art 679) 2. Loan on Respondentia Defined
3. Ship agent if authorized by the owner/s or given such One made on the goods laden on board the ship, and
power in the certificate of appointment. (Art 598) which are to be sold or exchanged in the course of the
4. Captain in the absence of the ship agent or consignee voyage, the borrowers personal responsibility being
and only if he acts in accordance with the instructions of deemed the principal security for the performance of the
the agent or owner and protects the latters interest. (Art contract, which is therefore called respondentia. The
609) lender must be paid his principal and interest, though
the ship perishes, provided that the goods are saved.
Requisites for a valid charter party:
1. Consent of the contracting parties 3. Character of Loan
2. Existing vessel which should be placed at the
disposition of the shipper Code of Commerce Art. 719
3. Freight
Art 719. A loan in which under any condition whatever, the
Planters Products vs CA supra repayment of the sum loaned and of the premium stipulated
depends upon the safe arrival in port of the goods on which it is
made, or of the price they may receive in case of accident, shall
Coastwise Lighterage Corp. vs. CA be considered a loan on bottomry or respondentia.

Pag-asa shipped molasses on Coastwises barges. The barge Real, unilateral, aleatory contract:
struck an object and sank, rendering the goods unfit for use. 1. Delivery of the amount loaned is necessary for the
Coastwise tried to disclaim liability by arguing that it was merely perfection of the contract.
a private carrier by virtue of its agreement with Pag-asa. 2. Although there are reciprocal benefits, the contract
produces obligations only for one party, the borrower
The SC examined the agreement and held that because it was a who must return the amount borrowed plus premium.
contract of affreightment. Coastwise retained its status as a 3. Lender really runs known risks.
common carrier and was liable accordingly.
Ordinary Loan Loan on Bottomry &
Caltex Phils. vs. Sulpicio Lines Respondentia
First lender has preference Last lender has preference
MT Vector left the port of Limay, Bataan carrying petroleum over subsequent lenders over previous ones
products of Caltex. It collided with a passenger vessel MV Dona Must be paid absolutely at all Loan is required to be paid
Paz, killing almost all the passengers and crew members of both events, WON thing given as only upon safe arrival of the
ships. Relatives of one of the deceased, Sebastian Caezal, filed security is lost or destroyed thing given as security at port
a complaint for damages against Sulpicio Lines, which thereafter of destination
filed a thrid party complaint against Vector Shipping (owner of Subject to Usury Law No limit as to the rate of
MT Vector) and Caltex. The trial court absolved Vector and interest in view of different
Caltex, but the CA held them jointly liable. Only Caltex appealed classes and various risks in a
from CAs ruling. maritime voyage

The SC held that Caltex is not liable because 1) the charter party Maritime Insurance vs. Bottomry & Respondentia Loans
between Caltex and Vector is a voyage charter, 2) MT Vector The borrower is in effect indemnified for his loss, at
retained its common carrier character, and 3) the charterer of a least, to the extent of the loan in case of loss of the
vessel has no obligation before transporting its cargo to ensure thing given as security, the borrower is under no
that the vessel it chartered complied with all legal requirements obligation to pay the loan.
as this duty rests upon the common carrier engaged in public
service. Marine Insurance Bottomry/Respondentia
Loans
ii. Loans on Bottomry and Respondentia Indemnity is paid after the loss Indemnity is paid in advance
has occurred by way of loan
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When marine peril occurs, the When marine peril causes the under penalty, should he not so state, of being held liable for
obligation of the insurer loss of the vessel or cargo, the said cargo if improperly delivered through his fault.
becomes absolute obligation of the borrower to
pay is extinguished Art 714. If before the vessel puts to sea the captain should die or
Consensual contract Real contract perfected from should cease to hold his position through any cause, the
the moment of delivery of the shippers shall have the right to demand of the new captain the
*governed by Insurance Code thing loaned. ratification of the first bills of lading, and the latter must do so,
provided that all the copies previously issued be presented or
When loss does not extinguish loan (Art. 731) returned to him, and it should appear from all examination of the
1. Where the loss is caused by inherent defect of the cargo that they are correct.
thing. The expenses arising from the examination of the cargo shall be
2. Where the loss is caused by fault or malice of the defrayed by the ship agent, without prejudice to the right of
borrower. action of the latter against the first captain if he ceased to be
3. Where loss is caused by barratry on the part of the such through his own fault. Should said examination not be
captain. made, it shall be understood that the new captain accepts the
4. Where loss is caused by damage to the vessel as a cargo as it appears from the bills of lading issued.
consequence of its engaging in contraband.
5. Where loss arose from having loaded merchandise on a ii. Probative Value
vessel different from that designated in the contract,
except if change is due to force majeure. Code of Commerce Arts. 709 & 710

F. Bill of Lading Art 709. A bill of lading drawn up in accordance with the
provisions of this title shall be proof as between all those
i. Contents interested in the cargo and between the latter and the insurers,
proof to the contrary being reserved for the latter.
Code of Commerce Arts. 706, 707, 713 & 714
Art 710. If the bills of lading do not agree, and no change or
Art 706. The captain of the vessel and the shipper shall have the erasure can be observed in any of them, those possessed by the
obligation of drawing up the bill of lading in which shall be stated: shipper or consignee signed by the captain shall be proof against
1. The name, registry, and tonnage of the vessel. the captain or ship agent in favor of the consignee or shipper;
2. The name of the captain and his domicile. and those possessed by the captain or ship agent signed by the
3. The port of loading and that of unloading. shipper shall be proof against the shipper or consignee in favor
4. The name of the shipper. of the captain or ship agent.
5. The name of the consignee, if the bill of lading is issued
in the name of a specified person. Notes
6. The quantity, quality, number of packages and marks of Bills of Lading are documents of title
the merchandise. It operates both a receipt for goods shipped AND a
7. The freightage and the primage stipulated. contract to transport and deliver the same
The bill of lading may be issued to bearer, to order, or in the o Being a contract, it is the law between the
name of a specified person, and must be signed within twenty- parties
four hours after the cargo has been received on board, the Provisions limiting liability must not be against the law
shipper being entitled to demand the unloading at the expense of or public policy
the captain should the latter not sign it, and, in every case, the Bills of Lading is prima facie evidence of the receipt of
losses and damages suffered thereby. the merchandise
Defects in the Bills of Lading may be cured by
Art 707. Four true copies of the original bill of lading shall be complementary documents like the insurance policy
made, and all of them shall be signed by the captain and the over the goods or commercial invoice
shipper. Of these, the shipper shall keep one and send another If the one who signed is an UNAUTHORIZED AGENT,
to the consignee; the captain shall take two, one for himself and the contract is unenforceable, unless the principal
another for the ship agent. ratifies
There may also be drawn up as many copies of the bill of lading Stipulation pour atroui- binds a party (beneficiary) not
as may be considered necessary by the person interested; but signatory to the contract as long as he has made known
when they are issued to order or to bearer, they shall be stated his acceptance of the benefit
in all the copies, be they the first four or the subsequent ones,
the destination of each one, stating whether it is for the agent, for Bill of Lading Charter Party
the captain, for the shipper, or for the consignee. If the copy sent
Private receipt which the An entire and complete
to the latter should have a duplicate, this circumstance and the
captain gives to accredit that contract
fact that it is not valid except in default of the first one must be
such goods belong to such
stated therein.
persons
It is a real contract for the It is a consensual contract
Art 713. If before the delivery of the cargo a new bill of lading
reason that its effects exist which can be dissolved by
should be demanded of the captain, on the allegation that the
only after the delivery of the means of indemnity for losses
failure to present the previous ones is due to their loss or to any
goods to be transported is and damages
other just cause, he shall be obliged to issue it, provided that
made
security for the value of the cargo is given to his satisfaction, but
without changing the consignment, and stating therein the
circumstances prescribed in the last paragraph of Article 707, Magellan Manufacturing Marketing Corp. vs. CA
68

MMMC and Choju Co. had agreement where anahaw fans were
to be exported to Japan. The letter of credit required an on-board
bill of lading and no transshipment, but these requirements
werent followed. Thus, the anahaw fans were not accepted and
had to be returned to Manila. The carriers charged MMMC for
the damages and demurrages, but MMMC abandoned the cargo
and then filed for damages against the respondent carriers for
the loss of profits. The RTC and CA both ruled for the
respondents, holding that the bill of lading clearly stated that
transshipment would occur.
The SC affirmed this, holding that by accepting the bill of lading,
MMMC had assented to its terms and allowed the carrier to act
in accordance w/ the stipulations therein.
G. Passenger on Sea Voyage
i. Nature of Contracts
Code of Commerce Art. 695
Art 695. The right to passage, if issued to a specified person,
may not be transferred without the consent of the captain or of
the consignee.
ii. Obligations of Passengers
Code of Commerce Arts. 693, 694, 699, 700, and 704
Art 693. If the passage price has not been agreed upon, the
judge or court shall summarily fix it, after a declaration of
experts.
Art 694. Should the passenger not arrive on board at the time
fixed, or should leave the vessel without permission from the
captain when the latter is ready to leave the port, the captain
may continue the voyage and demand the full passage price.
Art 699. If the contract is rescinded, before or after the
commencement of the voyage, the captain shall have a right to
claim payment of what he may have furnished the passengers.
Art 700. In all matters pertaining to the preservation of order and
discipline on board the vessel passengers shall be subject to the
orders of the captain, without any distinction whatsoever.
Art 704. The captain, in order to collect the passage-money and
expenses of sustenance, may retain the goods belonging to the
passenger, and in case of the sale of the same he shall be given
preference over other creditors acting the same way as in the
collection of freightage.
iii. Rights of Passengers
Code of Commerce Arts. 697 & 698
Art 697. If before the voyage is begun it is suspended through
the exclusive fault of the captain or ship agent, the passengers
shall have the right to a refund of their fares and to recover
losses and damages; but if the suspension is due to fortuitous
events, or to force majeure, or to any other cause independent of
the captain or ship agent, the passengers shall only be entitled to
the return of the fare.
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Art 698. In case a voyage already begun should be interrupted,
the passengers shall be obliged to pay the fare in proportion to
the distance covered, without right to recover for losses and
damages if the interruption is due to fortuitous event or to force
majeure, but with a right to indemnity if the interruption should
have been caused by the captain exclusively. If the interruption
should be caused by the disability of the vessel, and a
passenger should agree to await the repairs, he may not be
required to pay any increased price of passage, but his living
expenses during the stay shall be for his own account.
In case of delay in the departure of the vessel, the passengers
have the right to remain on board and to be furnished with food
for the account of the vessel unless the delay is due to fortuitous
events or to force majeure. If the delay should exceed ten days,
passengers requesting the same shall be entitled to the return of
the fare; and if it is due exclusively to the fault of the captain or
ship agent, they may also demand indemnity for losses and
damages.
A vessel exclusively devoted to the transportation of passengers
must take them directly to the port or ports of destination, no
matter what the number of passengers may be, making all the
stops indicated in its itinerary.
Sweet Lines vs. CA
4 passengers of Sweet Lines, Inc. purchased tickets from the
said shipping company. They were to board petitioner's
vessel, M/V Sweet Grace, bound for Catbalogan. Instead of
departing at midnight on July 8, 1972, the vessel set sail at 3AM.
of July 9 only to be towed back to Cebu due to engine trouble.
Repairs having been accomplished, the vessel lifted anchor
again on July 10 at 8AM. Instead of docking at Catbalogan,
which was the first port of call, the vessel proceeded direct to
Tacloban. The 4 passengers disembarked and boarded a
ferryboat to Catbalogan. They subsequently filed a suit for
breach of contract of carriage against Sweet Lines. The CFI and
CA ruled that there was no fortuitous event or force
majeure which prevented the vessel from fulfilling itsundertaking
of taking respondents to Catbalogan.
The SC upheld the rulings, deciding that mechanical defects in
the carrier are not considered a caso fortuito that exempts the
carrier from responsibility. Moreover, Sweet Line cannot rely on
the consitions printed at the back of its tickets because said
conditions cannot prevail over Articles 614 and 698 of the Code
of Commerce.
Trans-Asia Shipping vs. CA
Atty. Renato Arroyo was a passenger of Trans-Asias vessel M/V
Asia Thailand from Cebu City going to Cagayan De Oro City.
Upon boarding the vessel, he saw that repairs were being done
on the boats engine. Despite the repairs, the vessel still left the
port of Cebu City with just one engine functioning. The vessel
eventually stopped in the middle of the sea near Kawit Island.
Due to fear, some of the passengers (including Atty. Arroyo)
requested to be brought back to Cebu City. Atty. Arroyo was
forced to board another vessel of Trans-Asia the next day. This
led him to file a complaint for damages against Trans-Asia. RTC
CDO City dismissed Atty. Arroyos complaint and ruled that
Trans-Asia did not commit fraud and that negligence, bad faith or
negligence cannot be inferred from the evidence presented by
Atty. Arroyo. On appeal to the CA, the appellate court reversed
the RTC decision and awarded compensatory, moral, and
exemplary damages.
Upon reaching the Supreme Court, it ruled that while Trans-Asia
69

failed to fulfil its obligation to transport its passengers safely
under Arts. 1733 and 1755 NCC when it allowed its vessel to
leave the port even though the repairs on the engine are not yet
finished, Atty. Arroyo is not entitled to Actual Damages for his
failure to prove that he was not able receive his salary for the 13
th of November 1991 nor that his absence was not excused.
However, SC agreed with CA that Atty. Arroyo is entitled to
Moral and Exemplary damages due to Trans-Asias deliberate
disregard of its solemn duty to exercise extraordinary diligence
when it allowed its unseaworthy M/V Asia Thailand to leave the
port.
H. Carriage of Goods by Sea Act
Commonwealth Act No. 65
IN ACT TO DECLARE THAT PUBLIC ACT NUMBERED FIVE
HUNDRED AND TWENTY-ONE, KNOWN AS "CARRIAGE OF
GOODS BY SEA ACT," ENACTED BY THE SEVENTY-
FOURTH CONGRESS OF THE UNITED STATES, BE
ACCEPTED, AS IT IS HEREBY ACCEPTED BY THE
NATIONAL ASSEMBLY
WHEREAS, the Seventy-fourth Congress of the United
States enacted Public Act Numbered Five hundred and
twenty-one, entitled: "Carriage of Goods by Sea Act";
WHEREAS, the primordial purpose of the said Acts is to
bring about uniformity in ocean bills of lading and to
give effect to the Brussels Treaty, signed by the United
States with other powers;
WHEREAS, the Government of the United States has
left it to the Philippine Government to decide whether or
not the said Act shall apply to carriage of goods by sea
in foreign trade to and from Philippine ports;
WHEREAS, the said Act of Congress contains
advanced legislation, which is in consonance with
modern maritime rules and the practices of the great
shipping countries of the world;
WHEREAS, shipping companies, shippers, and marine
insurance companies, and various chambers of
commerce, which are directly affected by such
legislation, have expressed their desire that said
Congressional Act be made applicable and extended to
the Philippines; therefore,
Be it enacted by the National Assembly of the Philippines:
Section 1. That the provisions of Public Act Numbered Five
hundred and twenty-one of the Seventy-fourth Congress of the
United States, approved on April sixteenth, nineteen hundred
and thirty-six, be accepted, as it is hereby accepted to be made
applicable to all contracts for the carriage of goods by sea to and
from Philippine ports in foreign trade: Provided, That nothing in
the Act shall be construed as repealing any existing provision of
the Code of Commerce which is now in force, or as limiting its
application.
Section 2. This Act shall take effect upon its approval.
Approved: October 22,1936.
An Act Relating to the Carriage of Goods by Sea.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That every bill
of landing or similar document of title which is evidence of a
contract for the carriage of goods by sea to or from ports of the
United States, in foreign trade, shall have effect subject to the
provisions of the Act.
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TITLE I
Section 1. When used in this Act
a. The term "carrier" includes the owner or the charterer
who enters into a contract of carriage with a shipper.
b. The term "contract of carriage" applies only to contracts
of carriage covered by a bill of lading or any similar
document of title, insofar as such document relates to
the carriage of goods by sea, including any bill of lading
or any similar document as aforesaid issued under or
pursuant to a charter party from the moment at which
such bill of lading or similar document of title regulates
the relations between a carrier and a holder of the
same.
c. The term "goods" includes goods, wares, merchandise,
and articles of every kind whatsoever, except live
animals and cargo which by the contract of carriage is
stated as being carried on deck and is so carried.
d. The term "ship" means any vessel used for the carriage
of goods by sea.
e. The term "carriage of goods" covers the period from the
time when the goods are loaded on to the time when
they are discharged from the ship.
RISKS
Section 2. Subject to the provisions of section 6, under every
contract of carriage of goods by sea, the carrier in relation to the
loading handling, stowage, carriage, custody, care, and
discharge of such goods, shall be subject to the responsibilities
and liabilities and entitled to the rights and immunities hereinafter
set forth.
RESPONSIBILITIES AND LIABILITIES
Section 3.
1. The carrier shall be bound, before and at the beginning
of the voyage, to exercise due diligence to
a. Make the ship seaworthy;
b. Properly man, equip, and supply the ship;
c. Make the holds, refrigerating and cooling
chambers, and all other parts of the ship in
which goods are carried, fit and safe for their
reception carriage and preservation.
2. The carrier shall properly and carefully load, handle,
stow, carry, keep, care for, and discharge the goods
carried.
3. After receiving the goods into his charge the carrier, or
the master or agent of the carrier, shall, on demand of
the shipper, issue to the shipper a bill of lading showing
among other things
a. The leading marks necessary for identification
of the goods as the same are furnished in
writing by the shipper before the loading of
such goods starts, provided such marks are
stamped or otherwise shown clearly upon the
goods if uncovered, or on the cases or
coverings in which such goods are contained,
in such a manner as should ordinarily remain
legible until the end of the voyage.
b. Either the number of packages or pieces, or
the quantity or weight, as the case may be, as
furnished in writing by the shipper.
c. The apparent order and condition of the
goods: Provided, That no carrier, master, or
agent of the carrier, shall be bound to state or
show in the bill of lading any marks, number,
quantity, or weight which he has reasonable
70

ground for suspecting not accurately to
represent the goods actually received, or
which he has had no reasonable means of
checking.
4. Such a bill of lading shall be prima facie evidence of the
receipt by the carrier of the goods as therein described
in accordance with paragraphs (3) (a), (b), and (c) of
this section: Provided, That nothing in this Act shall be
construed as repealing or limiting the application of any
part of the Act, as amended, entitled "An Act relating to
bills of lading in interstate and foreign commerce,"
approved August 29, 1916 (U. S. C. title 49, secs. 81-
124), commonly known as the "Pomerene Bills of
Lading Act."
5. The shipper shall be deemed to have guaranteed to the
carrier the accuracy at the time of shipment of the
marks, number, quantity, and weight, as furnished by
him; and the shipper shall indemnify the carrier against
all loss damages, and expenses arising or resulting
from inaccuracies in such particulars. The right of the
carrier to such indemnity shall in no way limit his
responsibility and liability under the contract of carriage
or to any person other than the shipper.
6. Unless notice of loss or damage and the general nature
of such loss or damage be given in writing to the carrier
or his agent at the port of discharge before or at the
time of the removal of the goods into the custody of the
person entitled to delivery thereof under the contract of
carriage, such removal shall be prima facie evidence of
the delivery by the carrier of the goods as described in
the bill of lading. If the loss or damage is not apparent,
the notice must be given within three days of the
delivery.
Said notice of loss or damage maybe endorsed upon the receipt
for the goods given by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods
has at the time of their receipt been the subject of joint survey or
inspection.
In any event the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within
one year after delivery of the goods or the date when the goods
should have been delivered: Provided, That if a notice of loss or
damage, either apparent or concealed, is not given as provided
for in this section, that fact shall not affect or prejudice the right
of the shipper to bring suit within one year after the delivery of
the goods or the date when the goods should have been
delivered
In the case of any actual or apprehended loss or damage the
carrier and the receiver shall give all reasonable facilities to each
other for inspecting and tallying the goods.
7. After the goods are loaded the bill of lading to be issued
by the carrier, master, or agent of the carrier to the
shipper shall, if the shipper so demands, be a "shipped"
bill of lading Provided, That if the shipper shall have
previously taken up any document of title to such
goods, he shall surrender the same as against the issue
of the "shipped" bill of lading, but at the option of the
carrier such document of title may be noted at the port
of shipment by the carrier, master, or agent with name
or name the names of the ship or ships upon which the
goods have been shipped and the date or dates of
shipment, and when so noted the same shall for the
purpose of this section be deemed to constitute a
"shipped" bill of lading.
8. Any clause, covenant, or agreement in a contract of
carriage relieving the carrier or the ship from liability for
loss or damage to or in connection with the goods,
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arising from negligence, fault, or failure in the duties
and obligations provided in this section, or lessening
such liability otherwise than as provided in this Act,
shall be null and void and of no effect. A benefit of
insurance in favor of the carrier, or similar clause, shall
be deemed to be a clause relieving the carrier from
liability.
RIGHTS AND IMMUNITIES
Section 4.
1. Neither the carrier nor the ship shall be liable for loss or
damage arising or resulting from unseaworthiness
unless caused by want of due diligence on the part of
the carrier to make the ship seaworthy, and to secure
that the ship is properly manned, equipped, and
supplied, and to make to the holds, refrigerating and
cool chambers, and all other parts of the ship in which
goods are carried fit and safe for their reception,
carriage, and preservation in accordance with the
provisions of paragraph (1) of section 3. Whenever loss
or damage has resulted from unseaworthiness, the
burden of proving the exercise of due diligence shall be
on the carrier or other persons claiming exemption
under the section.
2. Neither the carrier nor the ship shall be responsible for
loss or damage arising or resulting from
a. Act, neglect, or default of the master, mariner,
pilot, or the servants of the carrier in the
navigation or in the management of the ship;
b. Fire, unless caused by the actual fault or
privity of the carrier;
c. Perils, dangers, and accidents of the sea or
other navigable waters;
d. Act of God;
e. Act of war,
f. Act of public enemies;
g. Arrest or restraint of princes, rulers, or people,
or seizure under legal process;
h. Quarantine restrictions;
i. Act or omission of the shipper or owner of the
goods, his agent or representative;
j. Strikes or lockouts or stoppage or restraint of
labor from whatever cause, whether partial or
general; Provided, That nothing herein
contained shall be construed to relieve a
carrier from responsibility for the carrier's own
acts;
k. Riots and civil commotions
l. Saving or attempting to save life or property at
sea;
m. Wastage in bulk or weight or any other loss or
damage arising from inherent defect, quality,
or vice of the goods;
n. Insufficiency of packing;
o. Insufficiency of inadequacy of marks;
p. Latent defects not discoverable by due
diligence; and
q. Any other cause arising without the actual fault
and privity of the carrier and without the fault
or neglect of the agents or servants of the
carrier, but the burden of proof shall be on the
person claiming the benefit of this exception to
show that neither the actual fault or privity of
the carrier nor the fault or neglect of the agents
or servants of the carrier contributed to the
loss or damage.
3. The shipper shall not be responsible for loss or damage
71

sustained by the carrier or the ship arising from any
cause without the act, fault, or neglect of the shipper,
his agents, or servants.
4. Any deviation in saving or attempting to save life or
property at sea, or any reasonable deviation shall not
be deemed to be an infringement or breach of this Act
or of the contract of carriage, and the carrier shall not
be liable for any loss or damage resulting therefrom:
Provided, however, That if the deviation is for the
purpose of loading cargo or unloading cargo or
passengers it shall, prima facie, be regarded as
unreasonable.
5. Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in
connection with the transportation of goods in an
amount exceeding $600 per package lawful money of
the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent
of that sum in other currency, unless the nature and
value of such goods have been declared by the shipper
before shipment and inserted in the bill of lading. This
declaration, if embodied in the bill of lading, shall be
prima facie evidence, but shall not be conclusive on the
carrier.
By agreement between the carrier, master, or agent of the
carrier, and the shipper another maximum amount than that
mentioned in this paragraph may be fixed: Provided, That such
maximum shall not be less than the figure above named. In no
event shall the carrier be liable for more than the amount of
damage actually sustained.
Neither the carrier nor the ship shall be responsible in any event
for loss or damage to or in connection with the transportation of
the goods if the nature or value thereof has been knowingly and
fraudulently misstated by the shipper in the bill of lading.
6. Goods of an inflammable, explosive, or dangerous
nature to the shipment whereof the carrier, master or
agent of the carrier, has not consented with knowledge
of their nature and character, may at any time before
discharge be landed at any place or destroyed or
rendered innocuous by the carrier without
compensation, and the shipper of such goods shall be
liable for all damages and expenses directly or indirectly
arising out of or resulting from such shipment. If any
such goods shipped with such knowledge and consent
shall become a danger to the ship or cargo, they may in
like manner be landed at any place, or destroyed or
rendered innocuous by the carrier without liability on the
part of the carrier except to general average, if any.
SURRENDER OF RIGHTS AND IMMUNITIES AND INCREASE
OF RESPONSIBILITIES AND LIABILITIES
Section 5. A carrier shall be at liberty to surrender in whole or in
part all or any of his rights and immunities or to increase any of
his responsibilities and liabilities under this Act, provided such
surrender or increase shall be embodied in the bill of lading
issued to the shipper.
The provisions of this Act shall not be applicable to charter
parties; but if bills of lading are issued in the case of a ship under
charter party, they shall comply with the terms of this Act.
Nothing in this Act shall be held to prevent the insertion in a bill
of lading of any lawful provision regarding general average.
SPECIAL CONDITIONS
Section 6. Notwithstanding the provisions of the preceding
sections, a carrier, master or agent of the carrier, and a shipper
shall, in regard to any particular goods be at liberty to enter into
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any agreement in any terms as to the responsibility and liability
of the carrier for such goods, and as to the rights and immunities
of the carrier in respect of such goods, or his obligation as to
seaworthiness (so far as the stipulation regarding seaworthiness
is not contrary to public policy), or the care or diligence of his
servants or agents in regard to the loading, handling stowage,
carriage, custody, care, and discharge of the goods carried by
sea: Provided, That in this case no bill of lading has been or shall
be issued and that the terms agreed shall be embodied in a
receipt which shall be a non-negotiable document and shall be
marked as such.
Any agreement so entered into shall have full legal effect:
Provided, That this section shall not apply to ordinary
commercial shipments made in the ordinary course of trade but
only to other shipments where the character or condition of the
property to be carried or the circumstances, terms, and
conditions under which the carriage is to be performed are such
as reasonably to justify a special agreement.
Section 7. Nothing contained in this Act shall prevent a carrier or
a shipper from entering into any agreement, stipulation,
condition, reservation, or exemption as to the responsibility and
liability of the carrier or the ship for the loss or damage to or in
connection with the custody and care and handling of goods
prior to the loading on and subsequent to the discharge from the
ship on which the goods are carried by sea.
Section 8. The provisions of this Act shall not affect the rights
and obligations of the carrier under the provisions of the
Shipping Act, 1916, or under the provisions of section 4281 to
4289, inclusive, of the Revised Statutes of the United States, or
of any amendments thereto; or under the provisions of any other
enactment for the time being in force relating to the limitation of
the liability of the owners of seagoing vessels.
TITLE II
Section 9. Nothing contained in this Act shall be construed as
permitting a common carrier by water to discriminate between
competing shippers similarly place in time and circumstances,
either (a) with respect to the right to demand and receive bills of
lading subject to the provisions of this Act; or (b) when issuing
such bills of lading, either in the surrender of any of the carrier's
rights and immunities or in the increase of any of the carrier's
responsibilities and liabilities pursuant to section 6, title I, of this
Act or (c) in any other way prohibited by the Shipping Act, 1916,
s amended.
Section 10. Section 25 of the Interstate Commerce Act is hereby
amended by adding the following proviso at the end of paragraph
4 thereof: "Provided, however, That insofar as any bill of lading
authorized hereunder relates to the carriage of goods by sea,
such bill of lading shall be subject to the provisions of the
Carriage of Goods by Sea Act."
Section 11. Where under the customs of any trade the weight of
any bulk cargo inserted in the bill of lading is a weight
ascertained or accepted by a third party other than the carrier or
the shipper, and the fact that the weight is so ascertained or
accepted is stated in the bill of lading, then, notwithstanding
anything in this Act, the bill of lading shall not be deemed to be
prima facie evidence against the carrier of the receipt of goods of
the weight so inserted in the bill of lading, and the accuracy
thereof at the time of shipment shall not be deemed to have
been guaranteed by the shipper.
Section 12. Nothing in this Act shall be construed as superseding
72

any part of the Act entitled "An act relating to navigation of
vessels, bills of lading, and to certain obligations, duties, and
rights in connection with the carriage of property," approved
February 13,1893, or of any other law which would be applicable
in the absence of this Act, insofar as they relate to the duties,
responsibilities, and liabilities of the ship or carrier prior to the
time when the goods are loaded on or after the time they are
discharged from the ship.
Section 13. This Act shall apply to all contracts for carriage of
goods by sea to or from ports of the United States in foreign
trade. As used in this Act the term "United States" includes its
districts, territories, and possessions: Provided, however, That
the Philippine legislature may by law exclude its application to
transportation to or from ports of the Philippine Islands. The term
"foreign trade" means the transportation of goods between the
ports of the United States and ports of foreign countries. Nothing
in this Act shall be held to apply to contracts for carriage of
goods by sea between any port of the United States or its
possessions, and any other port of the United States or its
possession: Provided, however, That any bill of lading or similar
document of title which is evidence of a contract for the carriage
of goods by sea between such ports, containing an express
statement that it shall be subject to the provisions of this Act,
shall be subjected hereto as fully as if subject hereto as fully as if
subject hereto by the express provisions of this Act: Provided,
further, That every bill of lading or similar document of title which
is evidence of a contract for the carriage of goods by sea from
ports of the United States, in foreign trade, shall contain a
statement that it shall have effect subject to the provisions of this
Act.
Section 14. Upon the certification of the Secretary of Commerce
that the foreign commerce of the United States in its competition
with that of foreign nations is prejudiced the provisions, or any of
them, of Title I of this Act, or by the laws of any foreign country or
countries relating to the carriage of goods by sea, the President
of the United States, may, from time to time, by proclamation,
suspend any or all provisions of Title I of this Act for such periods
of time or indefinitely as may be designated in the proclamation.
The President may at any time rescind such suspension of Title I
hereof, and any provisions thereof which may have been
suspended shall thereby be reinstated and again apply to
contracts thereafter made for the carriage of goods by sea. Any
proclamation of suspension or rescission of any such suspension
shall take effect on a date named therein, which date shall be not
less than ten days from the issue of the proclamation.
Any contract for the carriage of goods by sea, subject to the
provisions of this Act, effective during any period when title I
hereof, or any part thereof, is suspended, shall be subject to all
provisions of law now or hereafter applicable to that part of Title I
which may have thus been suspended.
Section 15. This Act shall take effect ninety days after the date of
its approval; but nothing in this Act shall apply during a period
not to exceed one year following its approval to any contract for
the carriage of goods by sea, made before the date on which this
Act is approved, nor to any bill of lading or similar document of
title issued, whether before or after such date of approval in
pursuance of any such contract as aforesaid.
Section 16. This Act may be cited as the "Carriage of Goods by
Sea Act."
Notes
Approved in 1936
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COGSA was enacted by the US Congress and was
made applicable to us while we were a US territory BUT
COGSA did not repeal the Code of Commerce so it
cannot be said that the latter only applies now to
domestic trade as collision is also provided for by CoC.
Scope of COGSA: All transportation of goods (NOT
PASSSENGERS) by sea in foreign trade to and from
Philippine ports
o Does not apply to purely domestic transport
FOR DOMESTIC TRANSPORT: In relation with the
Civil Code, CC is still primarily applicable to contract of
carriage of goods, COGSA is only suppletorily
applicable if Civil Code and Code of Commerce both
did not apply
o
Stipulation limiting
the carriers liability, contrary to sec 3(8) is VOID.
Prescriptive period of 1 year under Sec 3 (6)
Applies in case of loss (no delivery at all was made) or
damage NOT if there is conversion or misdelivery
o Loss contemplates only where no delivery at
all was made by the carrier of the goods
because the same had perished, gone out of
commerce, or disappeared in such a way that
their existence is unknown or they cannot be
recovered
o Hence, in case of misdelivery (delivery to the
wrong person) or conversion of the goods, the
rules on prescription found in the Civil Code
shall apply (10 yrs for contracts, 4 yrs for
tortious obligations)
Shipper, consignee or legal holder of bill may invoke
prescriptive period (not to insurer)
o Parties may agree to extend prescription
o Period does not apply to the action by an
insurer, as subrogee of the consignee
The ff do NOT toll the prescriptive period:
o Proposal for arbitration
o Making an extra-judicial demand of filing of
judicial action as provided for in Art 1155 of
NCC
Rationale behind the 3-day notice and relatively short
prescriptive period:
o To provide carrier an opportunity to look for
lost goods
o To discover who was at fault
o In case of transshipment, to determine, when
and where damage occurred
Notice/Protest period under different laws:
If loss or damage is If not apparent
apparent
COGSA
At the time of receipt Within 3 days from receipt
Code of Commerce
At the time of receipt Within 24 hours after receipt
WARSAW (Different categories)
Damage of Baggage Damage of goods Delay in
delivery
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Within 3 days from Within 7 days from Within 14 days
receipt receipt from receipt
Note that under COGSA, failure to comply with the notice
requirement does not affect the right of the shipper to bring
action provided he brings the same within 1 year, unlike notice
requirement in WARSAW and CoC where it is a condition
precedent.
Laws applicable to a contract for the carriage of goods by
sea:
Common Carrier Private Carrier
Coming to the Ph from foreign trade*
1) New Civil Code (Common 1) COGSA (Because more
Carriers) specific)
2) COGSA 2) Code of Commerce
3) Code of Commerce 3) New Civil Code (Provisions
NOT on common carriers, ie
torts, contracts)
From Phils to foreign country
Apply laws of such foreign country (1753)
*Nothing stops parties from stipulating that COGSA shall
primarily apply , even domestic carriers can stipulate such.
With respect to vessels destined for foreign ports, the COGSA
doesnt apply unless parties make it applicable
Eastern Shipping vs. IAC
ESLs vessel sank due to a fire which resulted to the total loss of
its ship and cargo. The consignees sought reimbursement from
its insurers and as subrogees, the insurers are not seeking
claims from the carrier. ESL disclaims liability by invoking
COGSA
The SC held that since the goods were transported from Japan
to Philippines, the applicable law is primarily the Civil Code of the
Philippines. Therefore, COGSA is only suppletory in character in
the absence of the provisions that govern the liability under the
Civil Code.
Ang vs. American Steamship Agencies
Yan Yue and Teves entered into a contract of carriage wherein
the former agreed to sell and ship certain articles on board the
carrier, Nisso Shipping Co, Ltd. in favour of Teves as evinced in
the bill of lading. Respondent American Steamship Agencies is
the carriers agent. However, upon the shipments arrival, Teves
didnt pay the demand draft of the ban and he endorsed the bill
of lading to petitioner Ang. Despite his non-payment, Teves got
the goods to the prejudice of Ang. Thus, the latter filed a
complaint against the former for the misdelivery of the goods, but
his action was dismissed on the ground of prescription, as
provided in the COGSA.
The SC held in the negative and ruled that the one year
prescriptive period does not apply, using the Civil Codes
definition of loss, since there was no loss or damage in this case.
In fact, there was misdelivery and in such case, the prescriptive
periods in the NCC (10 years and 4 years) are applicable.
F.H. Stevens vs. Nordeutscher
Plaintiff filed an action for recovery of value of thermometers
lost/damaged, against defendant, who owned vessel were said
goods were shipped. The complaint was filed within one-year
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prescriptive period, reckoning from the time defendant notified
plaintiff of delivery of goods. However, complaint was dismissed
upon ground of lack of jurisdiction over subject matter. At this
time, it was already twenty (20) days after expiration of period of
one year. The plaintiff then filed another case, which defendant
opposed for being filed beyond the one-year prescriptive period.
The Court ruled that prescriptive period is renewed and that
second case was filed within said period.
I. Air Transportation
Presidential Proclamation No. 201, s. 1955
MAKING PUBLIC THE ADHERENCE OF THE REPUBLIC OF
THE PHILIPPINES TO THE CONVENTION FOR THE
UNIFICATION OF CERTAIN RULES RELATING TO
INTERNATIONAL TRANSPORTATION BY AIR AND THE
ADDITIONAL PROTOCOL THERETO, 1929
WHEREAS, a Convention for the Unification of Certain Rules
Relating to International Transportation by Air and an Additional
Protocol thereto relating to Article 2 of the Convention were
signed at Warsaw by the plenipotentiaries of thirty-two countries;
WHEREAS, Article 38 of the aforesaid Convention provides that
a Government on behalf of which this Convention has not been
signed, shall be allowed to adhere thereto at any time after the
Convention has come into force, by means of a notification
addressed to the Government of the Republic of Poland;
WHEREAS, the Senate of the Congress of the Philippines, by its
Resolution No. 19 adopted on May 16, 1950, concurred in the
adherence by the Government of the Republic of the Philippines
to the said Convention and the said Protocol in accordance with
the Constitution of the Philippines, subject to the reservation, as
provided in the Additional Protocol, that the first paragraph of
Article 2 of the Convention shall not apply to international
transportation that may be performed by the Republic of the
Philippines;
WHEREAS, the Government of the Republic of the Philippines
has formally adhered to the said Convention its Additional
Protocol, and the Government of the Republic of Poland was
notified of said adherence on November 9, 1950, when the
instrument of adherence was registered in accordance with
Article 38 (2) of said Convention; and,
WHEREAS, the adherence of the Government of the Republic of
the Philippines, pursuant to Article 38 (3) of said Convention,
took effect as from the ninetieth day after November 9, 1950.
NOW, THEREFORE, be it known that I, Ramon Magsaysay,
President of the Philippines, in pursuance of the aforesaid
concurrence of the Senate of the Congress of the Philippines
and subject to the reservation as provided, in the Additional
Protocol that the first paragraph of Article 2 of the Convention
shall not apply to international transportation that may be
performed by the Republic of the Philippines, do hereby proclaim
and make public the said Convention and said Protocol, a copy
of which is hereto attached, to the end that the same and every
article and clause thereof may be observed and fulfilled with
good faith by the Republic of the Philippines and the citizens
74

thereof.
Warsaw Convention:
Coverage:
o ALL international transportation of persons,
baggage, or goods performed by aircraft
o Definition of international transport: Where
theres transport by air and there is appoint of
contact in 2 high contracting parties (countries
which have acceded to the convention)
What if within the Philippines? E.g.
Cebu to Manila the Convention will
not apply
However, if there is an agreed
stopping place outside of the
sovereignty, the Convention will apply
even though the stopping place is not
a party to the Convention
o If common carrier, Civil Code first applies, then
Warsaw Convention.
o Ex: Transportation by PAL from Manila to San
Francisco
Causes of Action
o The enumeration in the WC is not an exclusive
list.
Note that the Montreal Convention has amended
provisions in the Warsaw Convention
o On damages
o Currency to be used
i. Constitutionality
Santos vs. Northwest
Santos purchased a roundtrip ticket from NOA (San Francisco-
Manila, via Tokyo). When he checked-in at the NOA counter in
San Francisco, he was informed that he had no reservation for
his Tokyo to Manila flight. Thus, he had to be wait-listed. He filed
a complaint for damages in RTC Makati. RTC granted NOAs
MTD on the ground of lack of jurisdiction. CA affirmed. Petitioner
filed a petition for review before the SC questioning the
constitutionality of the Warsaw Convention and the ruling re:
jurisdiction.
The SC held that the Convention is constitutional. Petitioners
allegations are not convincing enough to overcome the
presumption that the Convention was first carefully studied and
examined to be constitutional before it was adopted and given
force. Also, the doctrine of rebus sic stantibus is inapplicable
since there is no formal act of rejection made by the PH
government.
ii. When Applicable
Warsaw Convention Art. 1(1)
Art. 1(1) This Convention applies to all international carriage of
persons, luggage or goods performed by aircraft for reward. It
applies equally to gratuitous carriage by aircraft performed by an
air transport undertaking.
Applicability
The transportation must be:
1. International transportation
2. Air Transportation
3. Carriage of passengers, baggage, or goods
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International transportation any transportation in which the
place of departure and the place of destination are situated
either:
a. Within the territories of two High Contracting Parties
regardless of whether or not there be a break in the
transportation or transshipment, or
b. Within the territory of a Single High Contracting Party, if
there is an agreed stopping place within territory subject
to the sovereignty, mandate or authority of another
power, even though that power is not a party to the
Convention
Transportation to be performed by several successive air carriers
shall be deemed to be one undivided transportation, if it has
been regarded by the parties as a single operation, whether it
has been agreed upon under the form of a single contract or of a
series of contracts, and it shall not lose its international character
merely because one contract or a series of contracts is to be
performed entirely within a territory subject to the sovereignty,
mandate, or authority of the same High Contracting Party
When Applicable:
a. When public policy is contradicted
b. If the requirement under the Convention are not
complied with
iii. Liabilities under the Convention
Warsaw Convention Arts. 17, 18, and 19
Art 17. The carrier is liable for damage sustained in the event of
the death or wounding of a passenger or any other bodily injury
suffered by a passenger, if the accident which caused the
damage so sustained took place on board the aircraft or in the
course of any of the operations of embarking or disembarking.
Art 18.
1. The carrier is liable for damage sustained in the
event of the destruction or loss of, or of damage to,
any registered luggage or any goods, if the
occurrence which caused the damage so sustained
took place during the carriage by air.
2. The carriage by air within the meaning of the
preceding paragraph comprises the period during
which the luggage or goods are in charge of the
carrier, whether in an aerodrome or on board an
aircraft, or, in the case of a landing outside an
aerodrome, in any place whatsoever.
3. The period of the carriage by air does not extend to
any carriage by land, by sea or by river performed
outside an aerodrome. If, however, such a carriage
takes place in the performance of a contract for
carriage by air, for the purpose of loading, delivery
or transshipment, any damage is presumed,
subject to proof to the contrary, to have been the
result of an event which took place during the
carriage by air.
Art 19. The carrier is liable for damage occasioned by delay in
the carriage by air of passengers, luggage or goods.
Northwest vs. Cuenca
Cuenca, an official representative of the Philippines to a
conference in Tokyo, was unceremoniously transferred from his
first class seat to economy by a rude Northwest agent. While
Northwest alleged that the Warsaw convention limited the liability
75

of an air carrier only in specific instances, SC ruled in favor of
Cuenca.
The Warsaw Convention merely declares an air carrier liable for
damages in the cases it enumerates, if the conditions
specified are present. It does not regulate or exclude liability for
other breaches of contract by the carrier.
Alitalia vs. IAC Supra
Dr. Pablo was supposed to present her paper at a U.N. Meeting
in Ispra, Italy and booked a flight on ALITALIA for this purpose.
When she arrived in Milan, her luggage containing her scientific
papers and presentation materials could not be found. She
returned to Manila without attending the meeting and filed the
present action for damages. It turned out that her luggage was in
fact forwarded to Ispra, Italy but only on the day after her
scheduled appearance. The CFI awarded her P20,000 in
nominal damages and P5,000 in attorneys fees. The IAC
affirmed the decision and increased nominal damages to
P40,000.
The Court affirmed the decision because while no actual
damages can be awarded in her favor, her luggage having been
eventually returned to her without damage, she still suffered
some special species of injury when she lost the opportunity to
present her paper because of ALITALIAs breach of its contract
of carriage in delaying the transportation of her luggage.
As for the topic of the warsaw convention, the case provided the
ruling that the Convention does not regulate or exclude liability
for other breaches of contract by the carrier or the misconduct of
its employees. The Convention is inapplicable where there is
proof of bad faith or malice.
Liability of Carrier for Damages:
a. Death, wounding or any other bodily injury of the
passenger if the accident causing it took place on board
the aircraft or in the course of its operations of
embarking or disembarking
b. Destruction, loss or damage to any baggage or goods,
if it took place during the transportation by air
c. Delay in the transportation of passenger, baggage or
goods
*Not an exclusive list
iv. Limitations of Liability
Warsaw Convention Art. 22
Art 22.
1. In the carriage of passengers the liability of the carrier
for each passenger is limited to the sum of 125,000
francs. Where, in accordance with the law of the Court
seized of the case, damages may be awarded in the
form of periodical payments, the equivalent capital
value of the said payments shall not exceed 125,000
francs. Nevertheless, by special contract, the carrier
and the passenger may agree to a higher limit of liability
2. In the carriage of registered luggage and of goods, the
liability of the carrier is limited to a sum of 250 francs
per kilogram, unless the consignor has made, at the
time when the package was handed over to the carrier,
a special declaration of the value at delivery and has
paid a supplementary sum if the case so requires. In
that case the carrier will be liable to pay a sum not
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exceeding the declared sum, unless he proves that that
sum is greater than the actual value to the consignor at
delivery.
3. As regards objects of which the passenger takes
charge himself the liability of the carrier is limited to
5,000 francs per passenger.
4. The sums mentioned above shall be deemed to refer to
the French franc consisting of 65 milligrams gold of
millesimal fineness 900. These sums may be converted
into any national currency in round figures.
Limit of Liability (Art. 22 as amended by Guatemala Protocol
of 1971)
1. Passengers
a. General Rule: $100,000 per passenger
b. Exception: Special Agreement to a higher limit
2. Checked-in Baggage
a. General Rule: $20 per kilogram
b. Exception: In case of special declaration of
value and payment of a supplementary sum by
consignor, carrier is liable to not more than the
declared sum unless it proves the sum is
greater than actual value
3. Hand-carried baggage
a. $1,000 per passenger
4. Goods to be shipped
a. General Rule: $20 per kilogram
b. Exception: In case of special declaration of
value and payment of a supplementary sum by
consignor, carrier is liable to not more than the
declared sum unless it proves the sum is
greater than actual value
Pan Am vs. IAC Supra
Pangan entered into two agreements where he bound himself to
supply films to Prime Films and Hafa Adai Org to be exhibited in
the US and Guam respectively. On the date of departure to
Guam, he was informed, after checking in his baggages, that his
name was not in the manifest. Thus, he had to transfer from
economy class to first class. He arrived in Guam on time. The
two pieces of luggage, however, were missing. Pangan then
filed a suit for damages, claiming above and beyond the amount
provided under the Warsaw Convention.
HELD: Petitioners liability should be limited to $600 as stipulated
at the conditions printed at the back of the ticket. This is also
because Pangan failed to declare a higher value for his luggage
and to pay the additional charges.
Regarding the validity of the Warsaw convention, IAC relied
upon a quotation from the Northwest Airlines Inc vs Cuenca to
sustain its view that limiting a carriers liability is against public
policy. In the Northwest case, it is quite clear that the Court
never intended to, and in fact never did, rule against the validity
of the provisions of the Warsaw Convention. Similarly, the
statement made by the Court in that case does not support IACs
view that the provisions of the Warsaw Convention are against
public policy.
v. When Limitations Unavailable
Warsaw Convention Art. 3 & 25
Art 3.
1. For the carriage of passengers the carrier must deliver
a passenger ticket which shall contain the following
76

particulars:
a. the place and date of issue;
b. the place of departure and of destination;
c. the agreed stopping places, provided that the
carrier may reserve the right to alter the
stopping places in case of necessity, and that
if he exercises that right, the alteration shall
not have the effect of depriving the carriage of
its international character;
d. the name and address of the carrier or
carriers;
e. a statement that the carriage is subject to the
rules relating to liability established by this
Convention.
2. The absence, irregularity or loss of the passenger ticket
does not affect the existence or the validity of the
contract of carriage, which shall none the less be
subject to the rules of this Convention. Nevertheless, if
the carrier accepts a passenger without a passenger
ticket having been delivered he shall not be entitled to
avail himself of those provisions of this Convention
which exclude or limit his liability.
Art 25.
1. The carrier shall not be entitled to avail himself of the
provisions of this Convention which exclude or limit his
liability, if the damage is caused by his wilful
misconduct or by such default on his part as, in
accordance with the law of the Court seized of the case,
is considered to be equivalent to wilful misconduct.
2. Similarly the carrier shall not be entitled to avail himself
of the said provisions, if the damage is caused as
aforesaid by any agent of the carrier acting within the
scope of his employment.
Q: In what cases can carrier NOT invoke limitations?
A:
1. Willful misconduct
2. Default amounting to willful misconduct according to
court where action is brought
3. Accepting passengers w/o passenger ticket
4. Accepting goods w/o air waybill or baggae w/o baggage
check
TWA vs CA
Vinluan purchased a first class ticket from TWA. Unfortunately, in
one of the legs of his journey, his first class accommodation was
ignored despite being confirmed twice for the reason that there
were no more seats available to him, hence, he was seated in
economy and received a refund for his payment. It must be
noted that when he protested, he was threatened by one of the
employees and that subsequent to the rejection of his ticket, he
saw TWA officers accommodating Caucasian passengers,
allowing them to sit in first place. Once Vinluan arrived in the
Philippines he filed a suit for damages against TWA.
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same have been delivered in good condition and in
accordance with the document of carriage.
2. In the case of damage, the person entitled to delivery
must complain to the carrier forthwith after the
discovery of the damage, and, at the latest, within three
days from the date of receipt in the case of luggage and
seven days from the date of receipt in the case of
goods. In the case of delay the complaint must be made
at the latest within fourteen days from the date on which
the luggage or goods have been placed at his disposal.
3. Every complaint must be made in writing upon the
document of carriage or by separate notice in writing
despatched within the times aforesaid.
4. Failing complaint within the times aforesaid, no action
shall lie against the carrier, save in the case of fraud on
his part.
Art 28.
1. An action for damages must be brought, at the option of
the plaintiff, in the territory of one of the High
Contracting Parties, either before the Court having
jurisdiction where the carrier is ordinarily resident, or
has his principal place of business, or has an
establishment by which the contract has been made or
before the Court having jurisdiction at the place of
destination.
2. Questions of procedure shall be governed by the law of
the Court seized of the case.
Art 29.
1. The right to damages shall be extinguished if an action
is not brought within two years, reckoned from the date
of arrival at the destination, or from the date on which
the aircraft ought to have arrived, or from the date on
which the carriage stopped.
2. The method of calculating the period of limitation shall
be determined by the law of the Court seised of the
case.
Passenger Ticket Baggage Check Air Waybill
Passenger Checked-in Goods to be
baggage shipped
1. Notice of Claim- Written
The complaint is a condition precedent. Without the complaint,
the action is barred except in case of fraud on the part of the
carrier. (Art. 26)
A Complaint must be made within:
Damage to Luggage 3 days from receipt
Damage to Goods 7 days from receipt
Delay to Luggage/Goods 14 days from receipt

The Court awarded damages to Vinluan. However, the basis for 2. Prescriptive Period
such is the civil code provisions, the Warsaw Convention was
inapplicable. The action must be filed within 2 years from:
a. Date of arrival at the destination
vi. Conditions on Imposition of Liability b. Date of expected arrival
c. Date which the transportation stopped (art. 29)
Warsaw Convention Arts. 26, 28, and 29
3. Jurisdiction
Art 26.
1. Receipt by the person entitled to delivery of luggage or
goods without complaint is prima facie evidence that the
77

The action for damages must be brought in the territory of one of
the High Contracting Parties before the Court having jurisdiction
over the claim. (Art. 28)
The Court which shall have jurisdiction:
a. Where the carrier is ordinarily resident
b. Where the carrier has his principal place of business
c. Where the carrier has an establishment by which the
contract has been made
d. At the place of destination
Santos vs. Northwest, supra
Luna vs. CA
Petitioners boarded Northwest but because of engine trouble,
they had to be transferred to Korean Airlines. When they arrived
in Seoul, their bags were nowhere to be found. They got their
bags only 4 days after. Luna and Alonso jointly filed a complaint
with RTC Pasig while Rodriguez solely filed his with RTC
Valenzuela. Both RTCs dismissed the two complaints and the
CA affirmed. In dismissing the complaints, the lower courts
applied the provisions of the Warsaw Convention only.
The Court reversed these rulings saying that the application of
the Convention doesnt operate to exclude the operation of other
applicable laws.
Lluillier vs. British Airways
Edna Lhuillier brought an action for damages against British
Airways after she was allegedly treated poorly by its flight
attendants on a flight from London to Rome. The RTC dismissed
the complaint upon Motion by the Airline, ruling that it had no
jurisdiction under the Warsaw Convention.
The SC agreed, applying the ruling in Santos III v. Northwest.
Under Article 28(1) of the Warsaw Convention, Edna should
have filed the complaint where British Airways was domiciled
and did business (London) or where the ticket was bought and
where she was headed (Rome). The fact that the action was
based on tort did not remove the case from the application of the
Warsaw Convention.
PAL vs. Savillo
Savillo bought tickets from PAL for his Ph to Indonesia trip. In
their stop-over in Singapore, Singapore airlines, wouldnt allow
them to board the plane to Jackarta because their tickets were
not endorsed by PAL. Savillo and his companions were then
stranded in Singapore and were forced to purchase to another
ticket to Indonesia. Because of their misfortune, they were not
able to carry on with the affairs they intended in jackarte (i.e.
participate in a golf tournament). Once Savillo arrived in the Ph,
he filed a suit for damages.
The SC awarded him damages under the Civil Code, as the
Warsaw Convention was inapplicable to their case.
United Airlines vs. Uy
Uy, a passenger of United airlines checked in his baggage but
was overweight and an employee of petitioner rebuked him
saying that he should have known the maximum weight
allowance per bag. Upon arrival in manila, he discovered that
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one of his bags had been slashed and its contents
stolen. Petitioner moved to dismiss the complaint invoking the
provisions of Article 29 of the Warsaw Convention.
Court held that although Convention provisions do not regulate
or exclude liabilities for other breaches of contract by the carrier
or misconduct of its officers and employees, or for some
particular or exceptional type of damage, it may not be invoked
to justify the disregard of some extraordinary type of damage.
Likewise, it has been held that the Convention does not preclude
the operation of the Civil Code and other pertinent laws. It does
not regulate, much less exempt, the carrier from liability for
damages for violating the rights of its passengers under the
contract of carriage, especially if willful misconduct on the part of
the carriers employees is found or established.
Hence, Uy may still claim damages under the NCC even if
beyond the prescriptive period of the Warsaw for the reason that
the delay was caused by tactics employed by the airline.
vii. Passenger Rights
DOTC-DTI Joint Administrative Order No. 1, s. 2012- See
Annex, p 81
Subject: Providing for a Bill of Rights for Air Passengers and
Carrier Obligations
1. Right to be Provided with Accurate Information Before
Purchase
a. Right to full, fair, and clear disclosure of the
services offered and all the terms and
conditions of the contract of carriage
b. Right to clear and non-misleading
advertisements of, and important reminders
regarding fares
c. Right against misleading and fraudulent sales
promotion practices
2. Right to Receive the Full Value of the Service
Purchased
a. Right to transportation and baggage
conveyance
b. Right to be processed for check-in
c. Right to sufficient processing time
d. Right to board aircraft for the purpose of flight
3. Right to Compensation
a. Right to compensation and amenities in case
of cancellation of flight
b. Right to compensation and amenities in case
of flight delay
c. Right to compensation for delayed, lost, and
damaged baggage
d. Right to compensation in case of death or
bodily injury of a passenger
e. Right to immediate payment of compensation
78
 Transpo (Atty Angeles) | E2018 | Cucueco | Fabon

ANNEX

EO 125, Sec 4 & 5

SEC 4. Mandate. The Ministry shall be the primary policy,

planning, programming, coordinating, implementing, regulating,
and administrative entity of the Executive Branch of the
government in the promotion, development and regulation of
dependable and coordinated networks of transportation and
communication system, as well as in the fast, sale, efficient and
reliable postal, transportation and communication services.

To accomplish such mandate, the Ministry shall have the

following objectives:

1. Promote the development of dependable and coordinated

networks of transportation and communication systems;

2. Guide government and private investment in the

development of the country's inter- model transportation and
communication systems in a most practical, expeditious, and
79

orderly fashion for maximum safety, service, and cost
effectiveness;
3. Impose appropriate measure so that technical, economic and
other condition for the continuing economic viability of the
transportation and communication entities are not jeopardized
and do not encourage inefficiency and distortion of traffic
patronage;
4. Develop an integrated plan for a nationwide transmission
system in accordance with the national and international
telecommunication service requirement including, among
others,radio and television broadcast relaying, leased channel
services and data transmission;
5. Guide government and private investment in the
establishment, operation and maintenance of an international
switching system for incoming and outgoing telecommunication
services;
6. Encourage the development of a domestic
telecommunication industry in coordination with the concern
entities particularly, the manufacture of communications/
electronics equipment and components to complement and
support as much as possible, the expansion, development,
operation and maintenance of the nationwide
telecommunications network;
7. Provide for a safe, reliable and efficient postal system for the
country.
Sec. 5. Powers and Functions. To accomplish its mandate, the
Department shall have the following powers and functions:
a. Formulate and recommend national policies and guidelines
for the preparation and implementation of integrated and
comprehensive transportation and communications systems at
the national, regional and local levels;
b. Establish and administer comprehensive and integrated
programs for transportation and communications, and for this
purpose, may call on any agency, corporation, or organization,
whether public or private, whose development programs
include transportation and communications as an integral part
thereof, to participate and assist in the preparation and
implementation of such program;
c. Assess, review and provide direction to transportation and
communication research and development programs of the
government in coordination with other institutions concerned;
d. Administer and enforce all laws, rules and regulations in the
field of transportation and communications;
e. Coordinate with the Department of Public Works and
Highways in the design, location, development, rehabilitation,
improvement, construction, maintenance and repair of all
infrastructure projects and facilities of the Department.
However, government corporate entities attached to the
Department shall be authorized to undertake specialized
telecommunications, ports, airports and railways projects and
facilities as directed by the President of the Philippines or as
provided by law;
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f. Establish, operate and maintain a nationwide postal system
that shall include mail processing, delivery services, and money
order services and promote the art of philately;
g. Issue certificates of public convenience for the operation of
public land and rail transportation utilities and services;
h. Accredit foreign aircraft manufacturers and/or international
organizations for aircraft certification in accordance with
established procedures and standards;
i. Establish and prescribe rules and regulations for identification
of routes, zones and/or areas of operations of particular
operators of public land services;
j. Establish and prescribe rules and regulations for the
establishment, operation and maintenance of such
telecommunications facilities in areas not adequately served by
the private sector in order to render such domestic and
overseas services that are necessary with due consideration for
advances in technology;
k. Establish and prescribe rules and regulations for the
operation and maintenance of a nationwide postal system that
shall include mail processing, delivery services, money order
services and promotion of philately;
l. Establish and prescribe rules and regulations for issuance of
certificates of public convenience for public land transportation
utilities, such as motor vehicles, trimobiles and railways;
m. Establish and prescribe rules and regulations for the
inspection and registration of air and land transportation
facilities, such as motor vehicles, trimobiles, railways and
aircrafts;
n. Establish and prescribe rules and regulations for the
issuance of licenses to qualified motor vehicle drivers,
conductors, and airmen;
o. Establish and prescribe the corresponding rules and
regulations for the enforcement of laws governing land
transportation, air transportation and postal services, including
the penalties for violations thereof, and for the deputation of
appropriate law enforcement agencies in pursuance thereof;
p. Determine, fix and/or prescribe charges and/or rates
pertinent to the operation of public air and land transportation
utility facilities and services, except such rates and/or charges
as may be prescribed by the Civil Aeronautics Board under its
charter, and, in cases where charges or rates are established
by international bodies or associations of which the Philippines
is a participating member or by bodies or associations
recognized by the Philippine government as the proper arbiter
of such charges or rates;
q. Establish and prescribe the rules, regulations, procedures
and standards for the accreditation of driving schools;
r. Administer and operate the Civil Aviation Training Center
(CATC) and the National Telecommunications Training Institute
(NTTI); and
s. Perform such other powers and functions as may be
80

prescribed by law, or as may be necessary, incidental, or
proper to its mandate or as may be assigned from time to time
by the President of the Republic of the Philippines
EO 292, Book 4, Title XV (Transportation & organizations for aircraft certification in accordance with
Communication)
SEC 1. Declaration of Policy.The State is committed to the
maintenance and expansion of viable, efficient, fast, safe and
dependable transportation and communications systems as
effective instruments for national recovery and economic
progress. It shall not compete as a matter of policy with private
enterprise and shall operate transportation and
communications facilities only in those areas where private
initiatives are inadequate or non-existent.
SEC 2. Mandate.The Department of Transportation and
Communications shall be the primary policy, planning,
programming, coordinating, implementing, regulating and
administrative entity of the Executive Branch of the government
in the promotion, development and regulation of dependable
and coordinated networks of transportation and
communications systems as well as in the fast, safe, efficient
and reliable postal, transportation and communications
services.
SEC 3. Powers and Functions.To accomplish its mandate,
the Department shall:
(1) Formulate and recommend national policies and guidelines
for the preparation and implementation of integrated and
comprehensive transportation and communications systems at
the national, regional and local levels;
(2) Establish and administer comprehensive and integrated
programs for transportation and communications, and for this
purpose, it may call on any agency, corporation or organization,
whether public or private, whose development programs
include transportation and communications as integral parts
thereof, to participate and assist in the preparation and
implementation of such programs;
(3) Assess, review and provide direction to transportation and
communications research and development programs of the
government in coordination with other institutions concerned;
(4) Administer and enforce all laws, rules and regulations in the
field of transportation and communications;
(5) Coordinate with the Department of Public Works and
Highways in the design, location, development, rehabilitation,
improvement, construction, maintenance and repair of all
infrastructure projects and facilities of the Department.
However, government corporate entities attached to the
Department shall be authorized to undertake specialized
telecommunications, ports, airports and railways projects and
facilities as directed by the President of the Philippines or as
provided by law;
(6) Establish, operate and maintain a nationwide postal system
that shall include mail processing, delivery services and money
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order services and promote the art of philately;
(7) Issue certificates of public convenience for the operation of
public land and rail transportation utilities and services;
(8) Accredit foreign aircraft manufacturers or international
established procedures and standards;
(9) Establish and prescribe rules and regulations for
identification of routes, zones or areas of operation of particular
operators of public land services;
(10) Establish and prescribe rules and regulations for the
establishment, operation and maintenance of such
telecommunications facilities in areas not adequately served by
the private sector in order to render such domestic and
overseas services that are necessary with due consideration for
advances in technology;
(11) Establish and prescribe rules and regulations for the
issuance of certificates of public convenience for public land
transportation utilities, such as motor vehicles, trimobiles and
railways;
(12) Establish and prescribe rules and regulations for the
inspection and registration of air and land transportation
facilities, such as motor vehicles, trimobiles, railways and
aircraft;
(13) Establish and prescribe rules and regulations for the
issuance of licenses to qualified motor vehicle drivers,
conductors and airmen;
(14) Establish and prescribe the corresponding rules and
regulations for enforcement of laws governing land
transportation, air transportation and postal services, including
the penalties for violations thereof, and for the deputation of
appropriate law enforcement agencies in pursuance thereof;
(15) Determine, fix or prescribe charges or rates pertinent to
postal services and to the operation of public air and land
transportation utility facilities and services, except such rates or
charges as may be prescribed by the Civil Aeronautics Board
under its charter and, in cases where charges or rates are
established by international bodies or associations of which the
Philippines is a participating member or by bodies or
associations recognized by the Philippine government as the
proper arbiter of such charges or rates;
(16) Establish and prescribe the rules, regulations, procedures
and standards for the accreditation of driving schools;
(17) Administer and operate the Civil Aviation Training Center
(CATC) and the National Telecommunications Training Institute
(NTTI); and
(18) Perform such other powers and functions as may be
provided by law.
SEC 4. Organizational Structure.The Department shall
consist of the Department Proper, the Department Regional
81

Offices, the Land Transportation Franchising and Regulatory
Board, and the Attached Agencies.
SEC. 24. Powers of the Board. - The Board shall have the
following general powers:
RA 9497 (2008), Sections 4, 21, 24, 35
SEC. 4. Creation of the Authority. - There is hereby created
an independent regulatory body with quasi-judicial and quasi-
legislative powers and possessing corporate attributes to be
known as the Civil Aviation Authority of the Philippines (CAAP),
hereinafter referred to as the "Authority" attached to the
Department of Transportation and Communications (DOTC) for
the purpose of policy coordination. For this purpose, the
existing Air Transportation Office created under the provisions
of Republic Act No. 776, as amended, is hereby abolished.
Notwithstanding the foregoing, nothing in this Act shall diminish
the powers and functions of the Civil Aeronautics Board (CAB)
as provided for under Republic Act. No. 776, also known as
"The Civil Aeronautics Act of the Philippines", as amended.
(a) Establishment of Authority Headed by a Director General -
The Authority shall beheaded by a Director General of Civil
Aviation, referred to in this Act as the "Director General," who
shall be appointed by the President of the Philippines and shall
be responsible for all civil aviation in the Philippines and the
administration of this Act. The Director General shall be
appointed based on the qualifications herein provided and shall
have a tenure of office for a period of four (4) years. His
appointment may be extended for another non-extendible term
of four (4) years and shall only be removed for cause in
accordance with the rules and regulations prescribed by the
Civil Service Commission.
(b) Responsibility of the Director General - The Director
General shall be responsible for the exercise of all powers and
the discharge of all duties of the Authority and shall have
control over all personnel and activities of the Authority.
SEC. 21. Policies. - In the exercise and performance of its
powers and duties under this Act, the Authority shall consider
the following, among other things, as being in the public interest
and in accordance with the public convenience and necessity:
(a) The development and utilization of the air potential
of the Philippines;
(b) The encouragement and development of an air
transportation system properly adapted to the present
and future of foreign and domestic commerce of the
Philippines;
(c) The regulation of air transportation in such manner
as to support sound economic condition in such
transportation and to improve the relations between air
carriers;
(d) Ensuring the safety, quality, reliability, and
affordability of air transport services for the riding
public; and
(e) The encouragement and development of a viable
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and globally competitive Philippine aviation industry.
(a) Provide comprehensive policy guidance for the
promotion and development of the Philippine aviation
industry, as provided for in this Act;
(b) Ensure that the Authority performs its functions in a
proper, efficient and effective manner;
(c) Decide the objectives, strategies and policies of the
Authority in accordance with the provisions of this Act;
(d) Determine the organizational structure of the
Authority in accordance with the provisions of this Act,
establish a human resources management system
based on merit and fitness, and adopt a rational
compensation and benefits scheme;
(e) Exercise appellate powers on any decisions,
findings and rulings of the Director General, to
issuesubpoena ad testificandum or subpoena duces
tecum requiring the attendance and testimony of
witnesses in any matter or inquiry pending before the
Board and require the production of books, papers,
contracts, agreements and all other documents
submitted for purposes of this section to be under oath
and verified by the person in custody thereof as to the
truth and correctness of data appearing in such books,
papers, tariffs, contracts, agreements and all other
documents;
(f) Exercise appellate powers to order the taking of
depositions in any proceeding, or investigation,
pending before the Board at any stage of such
proceeding or investigation;
(g) Use available services, equipment, personnel and
facilities of other agencies of the Philippine
Government, on a reimbursable basis when
appropriate and, on a similar basis, to co-operate with
those agencies in the establishment and use of
services, equipment and facilities of the Authority;
(h) Use the property of the Authority in such a manner
as may appear to the Authority to be requisite,
advantageous or convenient with a view to making the
best use of any of the property of the Authority in
relation to its functions under this Act;
(i) Invest such of the Authority's funds that are not
immediately required for operating expenses, or other
immediate obligations in any business venture the
Board may deem appropriate, or in such secured note,
government securities, and other negotiable
instruments that satisfy the guidelines prescribed by
the Board. Funds of the Authority shall be deposited in
such commercial and universal banks as the Board
may determine, subject to the requirements of existing
laws. The Board shall designate the officials
authorized to deposit in or withdraw funds from such
82

depository banks;
(j) Promulgate rules and regulations as may be
necessary in the interest of safety in air commerce
pertaining to the issuance of the airman's certificate
including the licensing of operating and mechanical
personnel, type certificate for aircraft, aircraft engines,
propellers and appliances, airworthiness certificates,
air carrier operating certificates, air agency
certificates, navigation facility and aerodrome
certificates; air traffic routes; radio and aeronautical
telecommunications and air navigation aids; aircraft
accident inquiries; aerodromes, both public and
private-owned; construction of obstructions to
aerodromes; height of buildings; antennae and other
edifices; registration of aircrafts; search and rescue;
facilitation of air transports; operations of aircrafts,
both for domestic and international, including
scheduled and non-scheduled; meteorology in relation
to civil aviation; rules of the air; air traffic services;
rules for prevention of collision of aircrafts,
identification of aircraft; rules for safe altitudes of flight;
and such other rules and regulations, standards,
governing other practices, methods and/or procedures
as the Director General may find necessary and
appropriate to provide adequately for safety regularity
and efficiency in air commerce and air navigation;
(k) Impose and fix reasonable charges and fees for
the use of government aerodromes or air navigation
facilities; for services rendered by the Authority in the
rating of any aerodrome or air navigation facilities, civil
aviation schools and instructors, aircraft repair
stations, and aircraft radio and aeronautical
telecommunications stations;
(l) Fix the reasonable charges to be imposed in the
use of privately-owned air navigation facilities and
aerodromes;
(m) Adopt a system for the registration of aircraft as
hereinafter provided;
(n) Determine and fix, landing fees, parking space
fees, royalties on sales or deliveries, direct or indirect,
to any aircraft for its use of aviation gasoline, oil and
lubricants, spare parts, accessories and supplies,
tools, other royalties, fees or rentals for the use of any
of the property under its management and control;
(o) Approve the annual and supplementary budget
plan and utilization of retained revenue;
(p) Exercise the corporate powers granted to the
Authority;
(q) Upon its own initiative or the recommendation of
the Director General or an application of a private
person, grant exemption from the requirements of
observing rules or regulations issued in accordance
with this Act: Provided, That said grant of exemption is
not prejudicial to flight safety;
(r) Formulate rules and regulations concerning
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compliance of the carrier and the public for the safe
transport of goods and materials by air pursuant to
international standards or Annexes to the Chicago
Convention; and
(s) In coordination with the appropriate government
agency tasked to provide airport security, shall:
(1) Prescribe reasonable regulation requiring
that all passengers and all property intended
to be carried in the aircraft cabin in
commercial air transport be screened by
weapon-detecting procedure or facilities
employed or operated by employees or
agents of the air operator or foreign air
operator prior to boarding the aircraft for such
transportation;
(2) Prescribe such other reasonable rules
and regulations requiring such parties,
methods and procedures as the Director
General may find necessary to protect
persons and property aboard aircraft
operating in commercial air transport against
acts of criminal violence and aircraft piracy;
and
(3) To the extent practicable, require uniform
procedures for the inspection, detention, and
search of persons and property in domestic
commercial air transport and international
commercial air transport to assure their
safety and to assure that they will receive
courteous and efficient treatment by air
operators and their agents and employees.
SEC. 35. Powers and Functions of the Director General. -
The Director General shall be the chief executive and operating
officer of the Authority. He shall have the following powers,
duties and responsibilities:
(a) To carry out the purposes and policies established
in this Act; to enforce the provisions of the rules and
regulations issued in pursuance to said Act; and he
shall primarily be vested with authority to take charge
of the technical and operational phase of civil aviation
matters;
(b) To designate and establish civil airways, to
acquire, control, operate and maintain along such
airways, navigation facilities and to chart such airways
and arrange for their publication including the
aeronautical charts or maps required by the
international aeronautical agencies, by utilizing the
equipment, supplies or assistance of existing agencies
of the government as far as practicable;
(c) To issue airman's certificate specifying the capacity
in which the holder thereof is authorized to serve as
airman in connection with aircraft and shall be issued
only upon the finding that the applicant is properly
qualified and physically able to perform the duties of
the position. The certificate shall contain such terms,
conditions and limitations as the Director General may
83

determine to be necessary to assure safety in air
commerce: Provided, however, That the airman's
license shall be issued only to qualified persons who
are citizens of the Philippines or qualified citizens of
countries granting similar rights and privileges to
citizens of the Philippines;
(d) To issue airworthiness certificate for aircraft which
shall prescribe the duration of such certificate, the type
of service for which the aircraft may be used, and such
other terms and conditions and limitations as are
required;
(e) To issue air carrier operating certificate in
accordance with the minimum safety standards for the
operation of the air carrier to whom such certificate is
issued. The air carrier operating certificate shall be
issued only to aircrafts registered under the provisions
of this Act;
(f) To issue type certificate for aircraft, aircraft engine,
propellers and appliances;
(g) To inspect, classify and rate any air navigation
facilities and aerodromes available for the use of
aircraft as to its suitability for such use and to issue a
certificate for such air navigation facility and
aerodrome; and to determine the suitability of foreign
aerodromes, air navigation facilities as well as air
routes to be used prior to the operation of Philippine-
registered aircraft in foreign air transportation and from
time to time thereafter as may be required in the
interest of safety in air commerce;
(h) To issue certificates of persons or civil aviation
schools giving instruction in flying, repair stations, and
other air agencies and provide for the examination and
rating thereof;
(i) To provide for the enforcement of the rules and
regulations issued under the provisions of this Act and
to conduct investigation for violations thereto. In
undertaking such investigation, to require
by subpoena ad testificandum or subpoena duces
tecum, the attendance and testimony of witnesses, the
production of books, papers, documents, exhibits
matter, evidence, or the taking of depositions before
any person authorized to administer oath. Refusal to
submit the reasonable requirements of the
investigation committee shall be punishable in
accordance with the provisions of this Act;
(j) To collect and disseminate information relative to
civil aeronautics and the development of air commerce
and the aeronautical industry; to exchange with
foreign governments, information pertaining to civil
aeronautics; and to provide for direct communication
on all matters relating to the technical or operational
phase of aeronautics with international aeronautical
agencies:
(k) To acquire and operate such aircraft as may be
necessary to execute the duties and functions of the
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Authority prescribed in this Act;
(l) To plan, design, acquire, establish, construct,
operate, improve, maintain, and repair necessary
aerodromes and other air navigation facilities;
(m) To collect and receive charges and fees for the
registration of aircraft and for the issuance and/or
renewal of licenses or certificates for aircraft, aircraft
engines, propellers and appliances, and airmen as
provided in this Act;
(n) To impose fines and/or civil penalties in respect
thereto;
(o) To participate actively with the largest possible
degree in the development of international
standardization of practices in aviation matters
important to safe, expeditious, and easy navigation,
and to implement as far as practicable the
international standards, recommended practices and
policies adopted by appropriate international
aeronautical agencies;
(p) To exercise and perform its powers and duties
under this Act consistent with any obligation assumed
by the Republic of the Philippines in any treaty,
convention or agreement on civil aviation matters;
(q) To cooperate, assist and coordinate with any
research and technical agency of the government on
matters relating to research and technical studies on
design, materials, workmanship, construction,
performance, maintenance and operation of aircraft,
aircraft engines, propellers, appliances, and air
navigation facilities including aircraft fuel and
oil: Provided, That nothing in this Act shall be
construed to authorize the duplication of the laboratory
research, activities or technical studies of any existing
governmental agency;
(r) To designate such prohibited and danger areas, in
consonance with the requirements of the international
aeronautical agencies and national security;
(s) To issue, deny, suspend, cancel or revoke any
certificate, license pertaining to aircraft, airmen and air
agencies: Provided, That any order denying,
suspending, cancelling, revoking the certificate or
license may he appealed to the Board, whose
decisions shall he final within fifteen (15) days from
the date of notification of such denial, cancellation or
revocation;
(t) To grant authorization to civil aircraft or persons to
carry instruments or photographic devices to be used
for aerial photography or taking of pictures by
photograph or sketching of any part of the Philippines;
and
(u) Pursuant to a board resolution, to enter into, make
and execute contracts of any kind with any person,
firm, or public or private corporation.
84

RA 776, Sections 5, 10(A), 11 & 12
SEC 5. Composition of the Board. - The Civil Aeronautics
Board shall be composed of the Secretary of Transportation
and Communications or his designated representative as
Chairman, the Assistant Secretary for Air Transportation of the
Department of Transportation and Communications as Vice-
Chairman, the Commanding General of the Philippine Air
Force* and two (2) members to be appointed by the President
of the Philippines. They shall hold office at the pleasure of the
President. No member of the Board shall have any pecuniary
interest in, or own any stock or bond of, any civil aeronautics
enterprise.
SEC 10. Powers and duties of the Board. - (A) Except as
otherwise provided herein, the Board shall have the power to
regulate the economic aspect of air transportation, and shall
have the general supervision and regulation of, the jurisdiction
and control over, air carriers, general sales agents, cargo sales
agents, and airfreight forwarders as well as their property,
property rights, equipment, facilities, and franchise, in so far as
may be necessary for the purpose of carrying out the provisions
of this Act.
SEC 11. Nature, terms and conditions. - Certificate of Public
Convenience and Necessity is a permit issued by the Board
authorizing a person to engage in air commerce and/or
transportation, foreign and/or domestic.
No person shall engage in air commerce unless there is in
force a permit issued by the Board. No general sales agent,
cargo sales agent or airfreight forwarder shall engage in any of
the activities mentioned in Section 3 paragraphs (jj), (kk) and
(ll) respectively, unless there is in force a permit or any other
form of authorization issued by the Board.
Any permit may be altered, amended, modified, suspended,
canceled or revoked 9 by the Board in whole or in part, upon
complaints or petition or upon the Board's initiative as
hereinafter provided, whenever the Board finds such action to
be in the public interest. There shall be attached to the exercise
of the privileges granted by the permit, or amendment thereto,
such reasonable terms, conditions, or limitations as, in the
judgment of the Board, the public interest may require. No
permit shall confer any proprietary, property, or exclusive right
in the use of any air space, civil airway, landing area of
government air navigation facility.
The permit shall, among others specify the terminal and
intermediate points, if any, between which the air carrier is
authorized to operate the service to be rendered, the time of
arrival and departure at each point, and the frequency of flights.
Provided, that no change in routes, rates, schedules or
frequency nor supplemental or additional flights to those
covered by an air commerce permit or franchise shall be
affected without prior approval of the Civil Aeronautics Board.
In so far as the operation is to take place within the Philippines,
the permit shall designate the terminal and intermediate points
only insofar as the Board shall deem practicable, and otherwise
shall designate only the general route or routes to be followed.
No carrier shall abandon any route, or part thereof for which a
permit has been issued, unless upon findings by the Civil
Aeronautics Board that such an abandonment is uneconomical
and is in the public interest.
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SEC 12. Citizenship requirement. - Except as otherwise
provided, in the Constitution and existing treaty or treaties,
permit authorizing a person to engage in domestic air
commerce and/or transportation shall be issued only to citizens
of the Philippines.
EO 125-A, Secs 9, 11, 13 (a)
Sec 9. Assistant Secretaries and Service Chiefs. The Secretary
shall also be assisted by eight(8) Assistant secretaries
appointed by the President upon the recommendation of the
secretary, each of whom shall respectively be responsible for
the following four (4) line offices, and shall report to the
respective Undersecretaries assigned over said respective
services and offices:
(a) Office of the Assistant Secretary for Administration and
Legal Affairs;
(1) Administrative Service, and
(2) Legal service
(b) Office of the Assistant Secretary for Finance and
Comptrollership;
(1) Finance and Management Service, and
(2) Comptrollership Service
(c) Office of the Assistant Secretary for Planning and Project
Development;
(1) Planning service, and
(2) Project Development Service
(d) Office of the Assistant secretary for Management
Information service and Project Management;
(1) Management Information Services, and
(2) Project Management Services
(e) Office of the Assistant Secretary for Land Transportation;
(f) Office of the Assistant Secretary for Postal Services;
(g) Office of the Assistant Secretary for Telecommunications;
(h) Office of the Assistant Secretary for Air Transportation.
Each of the Above-named services shall be headed by a
service chief appointed by the President upon the
recommendation of the Secretary
Sec. 11. Department Regional Offices. The Department shall
have three (3) Department Regional Offices in each of the
administrative regions of the country: the Department Regional
Office for land Transportation, the Department Regional Office
for Telecommunications and the Department Regional Office
for Postal Services. The present Regional Offices of the Land
Transportation Commission are hereby abolished and their
functions are transferred to the respective Department Regional
Offices for Land Transportation. The present Regional Offices
of the Bureau of Telecommunications are hereby abolished and
their functions are transferred to the respective Department
Regional Offices for Telecommunications. The present
Regional Offices of the Bureau of Posts are hereby abolished
and their functions are transferred to the corresponding
Department Regional Offices for Postal Services.
Each Department Regional Office shall be headed by a
Department Regional Director and assisted by a Department
Assistant Regional Director. The present Airport Offices of the
Bureau of Air Transportation are hereby abolished and their
functions are transferred to the Department Airport Offices. The
abolition of the herein Regional Offices and the transfer of their
functions shall be governed by the provisions of Section 15 (b)
85

hereof.
The Department Regional Offices shall essentially be line
in character and shall be responsible for the delivery of all front
line services of the Department.
For such purposes, the Department Regional Offices shall
have within their respective administrative regions, the following
functions
A. Implement laws, and policies, plans, programs,
projects, rules and regulations of the Department;
B. Provide efficient, and effective service to the
people;
C. Coordinate with regional offices of other
departments, offices and agencies;
D. Coordinate with local government units;e.
Perform such other functions as may be provided
by law
Sec. 13. Abolition/Transfer/Consolidation:
a. The Land Transportation Commission is hereby abolished and
its staff functions are transferred to the service offices of the
Department Proper and its line functions are transferred to the
Department Regional Offices for Land Transportation as
provided in Section 11 herein. Such transfer of functions is
subject to the provisions of Section 15 (b) hereof. The quasi-
judicial powers and functions of the Commission are transferred
to the Department. The corresponding position structure and
staffing pattern shall be approved and prescribed by the
Secretary pursuant to Section 16 hereof.
EO 202, Secs 1,2,4,5,6,7
Sec. 1. Creation of the Land Transportation Franchising and
Regulatory Board. There is hereby created in the Department
of Transportation and Communications, the Land
Transportation Franchising and Regulatory Board hereinafter
referred to as the "Board".
Sec. 2. Composition of the Board. The Board shall be
composed of a Chairman and two (2) members with the same
rank, salary and privileges of an Assistant Secretary, all of
whom shall be appointed by the President of the Philippines
upon recommendation of the Secretary of Transportation and
Communications. One (1) member of the Board shall be a
member of the Bar and shall have engaged in the practice of
law in the Philippines for at least five (5) years, another a holder
of a degree in civil engineering, and the other a holder of a
degree in economics, finance or management both with the
same number of years of experience and practice.
Sec. 4. Supervision and Control Over the Board. The Secretary
of Transportation and Communications, through his duly
designated Undersecretary, shall exercise administrative
supervision and control over the Land Transportation
Franchising and Regulatory Board.
Sec. 5. Powers and Functions of the Land Transportation
Franchising and Regulatory Board. The Board shall have the
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following powers and functions:
a. To prescribe and regulate routes of service,
economically viable capacities and zones or areas of
operation of public land transportation services
provided by motorized vehicles in accordance with the
public land transportation development plans and
programs approved by the Department of
Transportation and Communications;
b. To issue, amend, revise, suspend or cancel
Certificates of Public Convenience or permits
authorizing the operation of public land transportation
services provided by motorized vehicles, and to
prescribe the appropriate terms and conditions
therefor;
c. To determine, prescribe and approve and
periodically review and adjust, reasonable fares, rates
and other related charges, relative to the operation of
public land transportation services provided by
motorized vehicles;
d. To issue preliminary or permanent injunction,
whether prohibitory or mandatory, in all cases in which
it has jurisdiction, and in which cases the pertinent
provisions of the Rules of Court shall apply;
e. To punish for contempt of the Board, both direct
and indirect, in accordance with the pertinent
provisions of, and the penalties prescribed by, the
Rules of Court;
f. To issue subpoena and subpoena duces tecum and
summon witnesses to appear in any proceedings of
the Board, to administer oaths and affirmations;
g. To conduct investigations and hearings of
complaints for violation of the public service laws on
land transportation and of the Board's rules and
regulations, orders, decisions and/or rulings and to
impose fines and/or penalties for such violations;
h. To review motu proprio the decisions/actions of the
Regional Franchising and Regulatory Office herein
created;
i. To promulgate rules and regulations governing
proceedings before the Board and the Regional
Franchising and Regulatory Office: Provided, That
except with respect to paragraphs d, e, f and g hereof,
the rules of procedure and evidence prevailing in the
courts of laws should not be controlling and it is the
spirit and intention of said rules that the Board and the
Regional Franchising and Regulatory Offices shall use
every and all reasonable means to ascertain facts in
its case speedily and objectively and without regard to
technicalities of law and procedures, all in the interest
of due process;
j. To fix, impose and collect, and periodically review
and adjust, reasonable fees and other related charges
86

for services rendered;
k. To formulate, promulgate, administer, implement
and enforce rules and regulations on land
transportation public utilities, standards of
measurements and/or design, and rules and
regulations requiring operators of any public land
transportation service to equip, install and provide in
their utilities and in their stations such devices,
equipment facilities and operating procedures and
techniques as may promote safety, protection, comfort
and convenience to persons and property in their
charges as well as the safety of persons and property
within their areas of operations;
l. To coordinate and cooperate with other government
agencies and entities concerned with any aspect
involving public land transportation services with the
end in view of effecting continuing improvement of
such services; and
m. To perform such other functions and duties as may
be provided by law, or as may be necessary, or proper
or incidental to the purposes and objectives of this
Executive Order.
Sec. 6. Decision of the Board; Appeals therefrom and/or
Review thereof. The Board, in the exercise of its powers and
functions, shall sit and render its decisions en banc. Every such
decision, order, or resolution of the Board must bear the
concurrence and signature of at least two (2) members thereof.
The decision, order or resolution of the Board shall be
appealable to the Secretary within thirty (30) days from receipt
of the decision: Provided, That the Secretary may motu proprio
review any decision or action of the Board before the same
becomes final.
Sec. 7. Creation of Regional Franchising and Regulatory
Offices. There shall be a Regional Franchising and Regulatory
Office in each of the administrative regions of the country which
shall be headed by a Board Regional Manager having the rank,
salary and privileges of a Department Assistant Regional
Director. The Regional Franchising and Regulatory Offices
shall hear and decide uncontested applications/petitions for
routes, within their respective administrative regions: Provided,
That applications/petitions for routes extending their respective
territorial jurisdictions shall be heard and decided by the Board.
EO 292, Title XV, Secs 15-22
SEC 15. Land Transportation Franchising and Regulatory
Board.The quasi-judicial powers and functions with respect to
land transportation shall be exercised through the Land
Transportation and Regulatory Board, hereinafter referred to as
the Board.
SEC 16. Composition of the Board.The Board shall be
composed of a Chairman and two (2) members with the rank,
salary and privileges of an Assistant Secretary, all of whom
shall be appointed by the President of the Philippines upon
recommendation of the Secretary of Transportation and
Communications. One (1) member of the Board shall be a
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member of the Bar and shall have been engaged in the practice
of law in the Philippines for at least five (5) years, another a
holder of a degree in civil engineering, and the other a holder of
a degree in economics, finance or management both with the
same number of years of experience and practice.
SEC 17. Executive Director and Support Staff of the Board.
The Board shall have an Executive Director who shall also be
appointed by the President of the Philippines upon the
recommendation of the Secretary of Transportation and
Communications. He shall have the rank, salary and privileges
of a Department Service Chief. He shall assist the Board in the
performance of its powers and functions.
The Board shall be supported by the Technical Evaluation
Division, Legal Division, Management Information Division,
Administrative Division and Finance Division.
SEC 18. Supervision and Control Over the Board.The
Secretary of Transportation and Communications, through his
duly designated Undersecretary, shall exercise administrative
supervision and control over the Land Transportation
Franchising and Regulatory Board.
SEC 19. Powers and Functions of the Land Transportation
Franchising and Regulatory Board.The Board shall:
(1) Prescribe and regulate routes, economically viable
capacities, and zones or areas of operation of public land
transportation services provided by motorized vehicles in
accordance with the public land transportation development
plans and programs approved by the Department of
Transportation and Communications;
(2) Issue, amend, revise, suspend or cancel Certificates of
Public Convenience or permits authorizing the operation of
public land transportation services provided by motorized
vehicles, and prescribe the appropriate terms and conditions
therefor;
(3) Determine, prescribe, approve and periodically review and
adjust reasonable fares, rates and other related charges,
relative to the operation of public land transportation services
provided by motorized vehicles;
(4) Issue preliminary or permanent injunction, whether
prohibitory or mandatory, in all cases in which it has jurisdiction
and in which cases the pertinent provisions of the Rules of
Court shall apply;
(5) Punish for contempt of the Board, both direct and indirect, in
accordance with the pertinent provisions of, and the penalties
prescribed by, the Rules of Court;
(6) Issue subpoena and subpoena duces tecum and to
summon witnesses appear in any proceedings of the Board, to
administer oaths and affirmations, and, in appropriate cases, to
order the search and seizure of all vehicles and documents,
upon probable cause and as may be necessary for the proper
disposition of the cases before it;
(7) Conduct investigations and hearings of complaints for
violation of the public service laws on land transportation and of
87

the Boards rules and regulations, orders, decisions or rulings
and to impose fines or penalties for such violations;
(8) Review motu proprio the decisions/actions of the Regional
Franchising and Regulatory Offices;
(9) Promulgate rules and regulations governing proceedings
before the Board and the Regional Franchising and Regulatory
Office. However, except with respect to paragraphs 4, 5, 6 and
7 hereof, the rules of procedure and evidence prevailing in the
courts of law should not be controlling but rather the spirit and
intention of said rules. The Board and the Regional Franchising
and Regulatory Offices shall use every and all reasonable
means to ascertain facts in each case speedily and objectively
and without regard to technicalities of law and procedures, all in
the interest of due process;
(10) Fix, impose and collect, and periodically review and adjust,
reasonable fees and other related charges for services
rendered;
(11) Formulate, promulgate, administer, implement and enforce
rules and regulations on land transportation public utilities,
standards of measurements or design, and rules and
regulations requiring operators of any public land transportation
service to equip, install and provide in their utilities and in their
stations such devices, equipment, facilities and operating
procedures and techniques as may promote safety, protection,
comfort and convenience to persons and property in their
charges as well as the safety of persons and property within
their areas of operation;
(12) Coordinate and cooperate with other government agencies
and entities concerned with any aspect involving public land
transportation services with the end in view of effecting
continuing improvement of such services; and
(13) Perform such other functions and duties as may be
provided by law, or as may be necessary, or proper or
incidental to the purposes and objectives of the Department;
SEC 20. Decisions of the Board; Appeals therefrom or Review
Thereof.The Board, in the exercise of its powers and
functions, shall sit and render its decision en banc. Every such
decision, order, or resolution of the Board must bear the
concurrence and signature of at least two (2) members thereof.
The decision, order or resolution of the Board shall be
appealable to the Secretary within thirty (30) days from receipt
of the decision. However, the Secretary may motu proprio
review any decision or action of the Board before the same
becomes final.
SEC 21. Regional Franchising and Regulatory Offices.There
shall be a Regional Franchising and Regulatory Office in each
of the administrative regions of the country which shall be
headed by a Regional Director having the rank, salary and
privileges of a Department Assistant Regional Director. The
Regional Franchising and Regulatory Offices shall hear and
decide uncontested applications/petitions for routes, within their
respective administrative regions but that applications/petitions
for routes extending beyond their respective territorial
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jurisdiction shall be heard and decided by the Board.
SEC 22. Appeals.The decisions, orders or resolutions of the
Regional Franchising and Regulatory Offices shall be
appealable to the Board within thirty (30) days from receipt of
the decision.
EO 125, Secs 4, 14
SEC 4, supra
SEC 14. Attached Agencies and Corporation.
1. The following agencies and corporation are attached to the
Ministry: the Philippine National Railways, the Maritime Industry
Authority, the Philippine National Lines, the Philippine
Aerospace Development Corporation, the Metro Manila Transit
Corporation, the Office of Transportation Cooperatives, the
Philippine Ports Authority, the Philippine Merchant Marine
Academy, the Toll Regulator Board, the Light Rail Transit
Authority, the Transport Training Center, the Civil Aeronautics
Board, the National Telecommunications Commission and the
Manila International Airport Authority.
2. An Airport Security Center is hereby created within the
Manila International Airport Authority, to plan, supervise,
control, coordinate, integrate and direct intelligence and
operational activities of all police and military units, security and
safety service units, government monitoring and intelligence
units and other security operating units employed by
government entities and/or by private agencies in the Manila
International Airport. The center is under the direct supervision
and control of MIAA General Manager. Moreover, the Authority
shall be Authorized to organize a Manila International Airport
Police Force with all the police powers necessary to implement
the objectives of the Center.
3. The exercise of supervision and control by the Airport
Security Center does not include the transfer of appropriation,
equipment and personnel and the said authority; PROVIDED,
that the Airport Security Center may cause the deployment of
equipment and the personnel in such manner it deems
necessary in the discharge of its functions.
RA 9295, Secs 8, 10, 11
SEC. 8. Deregulation of the Domestic Shipping Industry. -
In order to encourage investments in the domestic shipping
industry by existing domestic ship operators and attract new
investment from new operators and investors, domestic ship
operators are hereby authorized to establish their own domestic
shipping rates: Provided, That effective competition is fostered
and public interest is served.
The MARINA shall monitor all shipping operations and exercise
regulatory intervention where it is established after due process
that public interest needs to be protected and safeguarded.
SEC. 10. Jurisdiction; Power; and Duties of MARINA. - The
MARINA shall have the power and authority to:
88

(1) Register vessels;
(2) Issue certificates of public convenience or any
extensions or amendments thereto, authorizing the
operation of all kinds. Classes and types of vessels in
domestic shipping: Provided, That no such certificate
shall be valid for a period of more than twenty-five (25)
years;
(3) Modify, suspend or revoke at any time upon notice
and hearing, any certificate, license or accreditation it
may have issued to any domestic ship operator;
(4) Establish and prescribe routes, zones or areas of
operations of domestic ship operators;
(5) Require any domestic ship operator to provide
shipping services to any coastal area, island or region
in the country where such services are necessary for
the development of the area, to meet emergency
sealift requirements, or when public interest so
requires;
(6) Set safety standards for vessels in accordance
with applicable conventions and regulations;
(7) Require all domestic ship operators to comply with
operational and safety standards for vessels set by
applicable conventions and regulations, maintain its
vessels in safe and serviceable conditions, meet the
standards of safety of life at sea and safe manning
requirements, and furnish safe, adequate, efficient,
reliable and proper service at all times;
(8) Inspect all vessels to ensure and enforce
compliance with safety standards and other
regulations;
(9) Ensure that all domestic ship operators shall have
the financial capacity to provide and sustain safe,
reliable, efficient and economic passenger or cargo
service, or both;
(10) Determine the impact which any new service shall
have to the locality it will serve;
(11) Adopt and enforce such rules and regulations
which will ensure compliance by every domestic ship
operator with required safety standards and other
rules and regulations on vessel safety;
(12) Adopt such rules and regulations which ensure
the reasonable stability of passengers and freight
rates and, if necessary, to intervene in order to protect
public interest;
(13) Hear and adjudicate any complaint made in
writing involving any violation of this law or the rules
and regulations of the Authority;
(14) Impose such fines and penalties on, including the
revocations of licenses of any domestic ship operator
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who shall fail to maintain its vessels in safe and
serviceable condition, or who shall violate or fail to
comply with safety regulations;
(15) Investigate any complaint made in writing against
any domestic ship operator, or any shipper, or any
group of shippers regarding any matter involving
violations of the provisions of this Act;
(16) Upon notice and hearing, impose such fines,
suspend or revoke certificates of public convenience
or other license issued, or otherwise penalize any ship
operator, shipper or group of shippers found violating
the provisions of this Act; and
(17) Issue such rules and regulations necessary to
implement the provisions of this Act: Provided, That
such rules and regulations cannot change or in any
way amend or be contrary to the intent and purposes
of this Act.
SEC. 11. Rates. - Every domestic ship operator shall have the
right to fix its own passenger orr cargo rates, or both.
DOTC-DTI Joint Administrative Order No. 1, s. 2012
SUBJECT: PROVIDING FOR A BILL OF RIGHTS FOR AIR
PASSENGERS AND
CARRIER OBLIGATIONS
WHEREAS, pursuant to the Republic Act No. 776, otherwise
known as the Civil Aeronautics Act of the Philippines, the
Department of Transportation and Communications (DOTC),
through the Civil Aeronautics Board (CAB), is mandated by law
to regulate the economic aspect of aviation, and develop and
promote the air potential of the Philippines, with due regard to
public interest and convenience;
WHEREAS, pursuant to Republic Act No. 7394, otherwise
known as the Consumer Act of the Philippines, the Department
of Trade and Industry (DTI) is the agency mandated to protect
the consumers against deceptive, unfair and unconscionable
sales acts or practices and from misleading advertisements and
fraudulent sales promotions, other than those falling under the
jurisdiction of the Department of Health;
WHEREAS, the Philippine aviation industry, under a liberalized
aviation regime, and especially with the emerging dominance of
low cost carriers, has dramatically expanded, as shown by the
unprecedented and consistent double digit growth rates of
domestic and international travel in the last five (5) years;
WHEREAS, it is the thrust of public policy to encourage the entry
of more players in the air transportation industry and promote
greater competition among air carriers, which, in turn will
enhance air service availability and create more options for
better, safer, and more efficient and affordable air transportation,
in support of trade, tourism and public convenience;
WHEREAS, it is equally the objective of public policy to maintain
a level playing field in the air transportation industry, conducive
to sound, healthy and fair competition among industry players,
89

as against disastrous and ruinous competition that can
undermine public interest;
WHEREAS, an air carrier ticket constitutes a contract of carriage
between an air carrier and a passenger, whereby the air carrier,
for consideration, obligates itself to transport a passenger by air
safely, efficiently and conveniently along a stipulated route at a
given date and time, subject to certain conditions and/or
restrictions;
WHEREAS, such a contract of carriage creates an asymmetrical
relationship between an air carrier and a passenger, considering
that, while a passenger has the option to buy or not to buy the
service, the decision of the passenger to buy the ticket binds
such passenger, by adhesion, to all the conditions and/or
restrictions attached to the air carrier ticket on an all-or-nothing
basis, without any say, whatsoever, with regard to the
reasonableness of the individual conditions and restrictions
attached to the air carrier ticket;
WHEREAS, there is a need to infuse a certain measure of
balance, fairness and reasonableness between the precarious
position of a passenger vis--vis the vast resources at the
disposal of the air carrier, especially in a liberalized and highly
competitive aviation environment, which, if unfettered can lead to
unsound business policies and practices of air carriers that are
prejudicial to the rights and interests of the passengers;
NOW, THEREFORE, this Order is hereby prescribed for the
information, guidance, and compliance of all concerned.
CHAPTER I
GENERAL PROVISIONS
Section 1. Title of Regulation. This Regulation shall be known
and cited as the Air Passenger Bill of Rights.
Section 2. Definition. For the purpose of this Regulation:
2.1 Air Carrier refers to a Philippine-based carrier operating
scheduled or non-scheduled domestic and/or international flights
to or from or serving a point within the Philippines, or a foreign
carrier operating scheduled or non-scheduled international flights
from the Philippines. Air carriers are also generally referred to as
airlines.
2.2 Baggage is any personal property carried by the
passenger, either by check-in or hand-carry. Off-loaded
Baggage refers to baggage which has been checked in but has
either not been put in or been subsequently removed from the
cargo hold of the carrier.
2.3 Cancellation is the act of calling off a flight. This shall
include the following instances:
(a) Cancellation by the air carrier before the estimated time of
departure (ETD) with or without its fault;
(b) Cancellation by the air carrier after an unduly long delay;
(c) Cancellation by the passenger holding a regular fare/ticket, or
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a situation deemed cancelled as contemplated in Section 12.2;
2.4 Check-in deadline refers to the point in time before the
published ETD on or before which a passenger must present
himself/herself to the air carrier at the latters check-in counter,
which is usually not less than forty-five (45) minutes before such
ETD.
2.5 Check-in period is the time when the air carriers check-in
counters are open for accepting and processing passengers
checking in for their flights, which starts at least two (2) hours
before the ETD in international airports and in other airports
designated by the DOTC. In other airports, the check-in period
shall start at least one (1) hour before the ETD.
2.6 Confirmed Reserved Seat means a seat on a specific date
and on a specific flight and class of service of a carrier, which
has been requested by a passenger, and which the carrier or its
agent has verified, by appropriate notation on the ticket, as being
reserved for the accommodation of the passenger.
2.7 Convention refers to the applicable international
agreement, convention, or treaty on carriage of goods or persons
by air signed and/or ratified by the Philippines.
2.8 Delay is the result of the deferment of a flight to a later time.
Terminal Delay is a delay that occurs while passengers are still
inside the terminal waiting for boarding, while Tarmac Delay is
a delay that occurs while passengers are already on board the
aircraft.
2.9 Denied Check-in takes place when a passenger, who has
presented himself/herself for check-in at the appointed area and
at the appointed time, is denied or not processed for boarding a
particular flight. Denied Boarding takes place when a
passenger, who holds a confirmed reserved seat, and who has
presented himself/herself for carriage at the proper time and
place and fully complied with the carriers check-in and
reconfirmation procedures, and who is acceptable for carriage
under the carriers tariff, was not allowed to board the aircraft.
2.10 Fare is payment in consideration for the carriage of a
passenger. Regular Fare is any fare that is offered on a regular
basis and does not qualify as promotional fare. Promotional
Fare, which is generally lower than a regular fare, is applied for
before, and approved as such by, the CAB.
2.11 Government requisition of space refers to a formal request
by the government or its agencies to an air carrier company for
the use of an aircraft, or any part thereof, for regulatory, safety,
security, and/or emergency purposes.
2.12 No-show is the failure of the passenger to appear at the
check-in counter within the check-in deadline or to show up at
the boarding gate at the time indicated on the boarding pass.
2.13 Overbooking is the practice by air carriers of selling
confirmed reserved space beyond the actual seat capacity of the
aircraft.
2.14 Passenger shall refer herein to a person actually travelling
by air. A person who is named in the flight ticket shall be
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considered a passenger for the purpose of these rules.
2.15 Person with disability or PWD includes those who have 4.2 The air carrier must also ensure that passengers receive an
long-term physical, mental, intellectual or sensory impairments,
which, in interaction with various barriers, may hinder their full
and effective participation in society on an equal basis with
others.
2.16 Sales Promotion means techniques intended for broad
consumer participation which contain promises of gain, such as
prizes, in cash or in kind, as reward for the purchase of a
product, security, service or winning in a contest, game,
tournament, and other similar competitions which involve
determination of winner/s and which utilize mass media and/or
widespread media of information. It also means techniques
purely intended to increase the sales, patronage and/or goodwill
of a product.
2.17 Senior citizen refers to any resident citizen of the
Philippines at least sixty (60) years old. Passengers may be
asked to present identification documents, in line with Republic
Act No. 9994, otherwise known as the Expanded Senior Citizens
Act of 2010, and its Implementing Rules and Regulations, in
order to avail of benefits and privileges reserved for senior
citizens.
Section 3. Scope. This Regulation shall apply to all aspects of
contracts of carriage for flights or portions of a flight into, from,
and within the territory of the Philippines operated by Philippine
air carriers, and flights or portions of a flight from the territory of
the Philippines operated by foreign air carriers.
Provided, that the compensation rules shall not apply to carriers
flying into the territory of the Philippines, if the laws of the country
of origin provide similar or higher compensation. Otherwise,
these rules shall apply in full.
CHAPTER II:
RIGHT TO BE PROVIDED WITH ACCURATE INFORMATION
BEFORE
PURCHASE
Section 4. Right to Full, Fair, and Clear Disclosure of the
Service Offered and All the Terms and Conditions of the
Contract of Carriage. Every passenger shall, before purchasing
any ticket for a contract of carriage by the air carrier or its
agents, be entitled to the full, fair, and clear disclosure of all the
terms and conditions of the contract of carriage about to be
purchased. The disclosure shall include, among others,
documents required to be presented at check-in, provisions on
check-in deadlines, refund and rebooking policies, and
procedures and responsibility for delayed and/or cancelled
flights. These terms and conditions may include liability
limitations, claim-filing deadlines, and other crucial conditions.
4.1 An air carrier shall cause the disclosure under this Section to
be printed on or attached to the passenger ticket and/or boarding
pass, or the incorporation of such terms and conditions of
carriage by reference. Incorporation by reference means that the
ticket and/or boarding pass shall clearly state that the complete
terms and conditions of carriage are available for perusal and/or
review on the air carriers website, or in some other document
that may be sent to or delivered by post or electronic mail to the
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passenger upon his/her request.
explanation of key terms identified on the ticket from any location
where the carriers tickets are sold, including travel agencies. In
case of online bookings, the air carrier must establish a system
wherein the purchaser is fully apprised of the required
disclosures under this Section twice prior to the final submission
of his/her online offer to purchase.
4.3 Aside from the printing and/or publication of the above
disclosures, the same shall likewise be verbally explained to the
passenger by the air carrier and/or its agent/s in English and
Filipino, or in a language that is easily understood by the
purchaser, placing emphasis on the limitations and/or restrictions
attached to the ticket.
4.4 The key terms of a contract of carriage, which should
include, among others, the rebooking, refunding, baggage
allowance and check-in policies, must be provided to a
passenger and shall substantially be stated in the following
manner and, if done in print, must be in bold letters:
(English)
NOTICE:
The ticket that you are purchasing is subject to the
following conditions/restrictions:
1. _______________
2. _______________
3. _______________
Your purchase of this ticket becomes a binding contract on
your part to follow the terms and conditions of the ticket
and of the flight. Depending on the fare rules applicable to
your ticket, non-use of the same may result in forfeiture of
the fare or may subject you to the payment of penalties and
additional charges if you wish to change or cancel your
booking.
For more choices and/or control in your flight plans, please
consider other fare types.
(Filipino)
PAALALA:
Ang tiket na ito ay binibili ninyo nang may mga kondisyon/
restriksyon:
1. ________________
2. ________________
3. ________________
Sa pagpili at pagbili ng tiket na ito, kayo ay sumasang-ayon
sa mga kondisyon at restriksyon na nakalakip dito, bilang
kontrata ninyo sa air carrier. Depende sa patakarang angkop
sa iyong tiket, ang hindi paggamit nito ay maaaring
magresulta sa pagwawalang bisa sa inyong tiket o sa
paniningil ng karagdagang bayad kung nais ninyong
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baguhin o kanselahin ang inyong tiket.
Para sa mas maraming pagpipilian at malawak na control sa
inyong flight, inaanyayahan kayong bumili ng iba pang
klase ng tiket galing sa air carrier.
4.5 Any violation of the afore-stated provisions shall be a ground
for the denial of subsequent applications for approval of
promotional fare, or for the suspension or recall of the approval
made on the advertised fare/rate.
Section 5. Right to Clear and Non-Misleading
Advertisements of, and Important Reminders Regarding
Fares. Advertisements of fares shall be clear and not
misleading.
5.1 Major restrictions, such as those on rebookability or
refundability, which may be attached to certain fare types, shall
be disclosed in full and in such a way that the passenger may
fully understand the consequences of purchasing such tickets
and the effect of non-use thereof.
5.2 Every air carrier causing the publication of fare
advertisements in any medium, shall likewise disclose the
following:
(a) Conditions and restrictions attached to the fare type;
(b) Refund and rebooking policies, if any;
(c) Baggage allowance policies;
(d) Government taxes and fuel surcharges;
(e) Other mandatory fees and charges;
(f) Contact details of the carrier (i.e. phone number, website, e-
mail, etc.); and
(g) Other information necessary to apprise the passenger of the
conditions and the full/total price of the ticket purchased.
Provided, that, in case of promotional fares, the additional
information shall be included:
(h) Number of seats offered on a per sector basis;
(i) The duration of the promo; and
(j) The CAB Approval No. of Fares.
Provided, further, that, where there are differing conditions, such
as fuel surcharge in relation to the points of destinations or
origin, the advertisements of these carriers may provide only the
range thereof and not the actual surcharge of each route.
5.3 The above-mentioned required disclosures shall occupy not
less than one-third (1/3) of the advertising material. A copy of the
same shall be printed on or attached to the ticket in English and
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Filipino.
In the case of broadcast media, it shall be enough that the air
carrier and/or advertising agent incorporate the foregoing terms
and conditions by reference, as provided for in Section 4.1.
Section 6. Right Against Misleading and Fraudulent Sales
Promotion Practices. Consistent with the declared policy of the
State to protect the interests of the consumers, which includes
protection from misleading and fraudulent sales promotion
practices, all sales promotion campaigns and activities of air
carriers shall be carried out with honesty, transparency and
fairness, and in accordance with the requirements of the
Consumer Act of the Philippines, and its Implementing Rules and
Regulations.
Air carriers shall provide to DTI a copy of its promotional
materials for post audit not later than the publication, release, or
launch date whichever is earlier.
It is understood that professional authorities for those engaged in
advertising, sales and promotion may impose additional
standards or measures to regulate their industry.
CHAPTER III
RIGHT TO RECEIVE THE FULL VALUE OF THE SERVICE
PURCHASED
Section 7. Right to Transportation and Baggage
Conveyance. Every passenger is entitled to transportation,
baggage conveyance and ancillary services, in accordance with
the terms and conditions of contract of carriage with the air
carrier. Thus, any violation of the terms and conditions of the
contract of carriage due to the fault or negligence of the air
carrier shall entitle the passenger to compensation or alternative
arrangements, as provided in this Air Passenger Bill of Rights,
which are acceptable to the passenger.
Section 8. Right to be Processed for Check-In. In accordance
with the usual air carrier procedures, a passenger holding a
confirmed ticket, whether promotional or regular, with complete
documentary requirements, and who has complied with the
check-in procedures, shall be processed accordingly at the
check-in counter within the check-in deadline. The airline shall,
therefore, and subject to infrastructure limitations, clearly
designate the boundaries of its assigned check-in area/s or
counter/s.
A passenger within the air carriers cordoned or other designated
check-in area as herein defined at least one (1) hour before the
published ETD shall not be considered late or a no-show, and
shall not be denied check-in. The carrier shall exert utmost
diligence in ensuring that passengers within the cordoned or
other designated check-in area and/or lined up at the check-in
counters are checked in for their flights before the check-in
deadline.
A passenger who is late in accordance with the preceding
paragraph may be denied check-in and directed to a standby or
rebooking counter, as the case may be, for proper processing.
Any dispute under this Section shall be resolved by the air carrier
on-site. For this purpose, the air carrier must present to the
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passenger proof, including, but not limited to, closed-circuit
television monitor recordings, processing or number slips issued
at the entrance of the check-in area, and other applicable or
available means, that the latter failed to appear within the
prescribed time for the check-in procedure.
Section 9. Right to Sufficient Processing Time. Passengers
shall be given enough time before the published ETD within
which to go through the check-in and final security processes.
For this purpose, air carriers operating in international airports
and in other airports designated by the DOTC shall open their
check-in counters in such airports at least two (2) hours before
the ETD. In other airports, air carriers shall open their check-in
counters at least one (1) hour before the ETD.
9.1 Air carriers operating in international airports and in other
airports designated by the DOTC shall open a separate
dedicated counter for a flight nearing check-in deadline to
facilitate the checking in of passengers at least one (1) hour
before the published ETD.
9.2 To ensure that PWDs and senior citizens shall have equal
access to air transportation services, air carriers shall at all times
and in all instances adhere to the mandate of Batas Pambansa
Blg. 344, otherwise known as An Act to Enhance the Mobility of
Disabled Persons by Requiring Certain Buildings, Institutions,
Establishments and Public Utilities to Install Facilities and Other
Devices, the provisions of the Expanded Senior Citizens Act of
2010, and other related laws. Accordingly, an air carrier shall
designate at least one (1) check-in counter which will prioritize
PWDs, senior citizens, and persons requiring special assistance
or handling. If this is not practicable, the air carrier shall instead
provide for priority handling and processing of such passengers.
The air carrier shall likewise coordinate with the appropriate
authorities for the use of proper airport equipment, entryways,
and/or aerobridges, as the case may be, when the same are
available, to facilitate transactions, movement, boarding, and/or
disembarkation of PWDs, senior citizens, and/or persons
requiring special equipment, at the airport.
Persons accompanying a PWD, a senior citizen, or a person
requiring special assistance or handling should also be
accommodated at the designated check-in counter mentioned in
the preceding paragraph. It is the duty of an air carrier or its
authorized agent to inform its passengers if additional costs will
be incurred for the use of facilities designed for passengers
needing special assistance in airports located in other countries.
It is the responsibility of a PWD to declare his/her need for
special assistance or handling to the airline, upon booking
his/her flight. If the PWD fails to do so, the airline may not be
held liable for any services it was not able to provide the
passenger and/or for any additional costs incurred for the use of
special assistance facilities.
Section 10. Right to Board Aircraft for the Purpose of Flight.
A passenger checked in for a particular flight has the right to
board the aircraft for the purpose of flight, except when there is
legal or other valid cause, such as, but not limited to, immigration
issues, safety and security, health concerns, non-appearance at
the boarding gate at the appointed boarding time, or government
requisition of space as provided for in Section 10.2. Other than
these causes, no passenger may be denied boarding without
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his/her consent.
10.1 While it is an accepted practice for an air carrier to
overbook its flights, any expense, consequence, or
inconvenience caused to affected passengers must be borne by
the air carrier, as follows:
(a) The air carrier shall determine the number of passengers in
excess of the actual seat capacity of the aircraft.
(b) The air carrier shall announce that the flight is overbooked,
and that it is looking for volunteers willing to give up their seats in
exchange for air carrier compensation.
(c) The air carrier shall provide the interested passengers or
volunteers a list of amenities and offers, which they can choose
from, which list of amenities shall always include the option to be
given priority booking in the next flight with available space or to
be endorsed to another air carrier upon payment of any fare
difference, and provided that space and other circumstances
permit such accommodation, at the option of the passenger,
and/or a cash incentive.
(d) In case the number of volunteers is not enough to resolve the
overbooking, the air carrier shall increase the compensation
package by certain degrees or by adding more
amenities/services until the required number of volunteers is
met.
10.2 Government agencies and/or officials wanting to acquire
aircraft space for official government purposes shall submit a
written request justifying the requisition to the CAB, which shall
then make the request to the air carrier concerned, detailing:
(a) The number, identities, and affiliation of the persons
requesting for space;
(b) The date and time (if applicable) of the flight; and
(c) The destination.
Should government requisition result in passengers having to
forego their confirmed space, the air carrier shall look for
volunteers in accordance with Section 10.1.
Provided, that the air carrier shall have the right to claim from the
requesting government entity the full-fare value of the seats
requisitioned by the latter.
10.3 The settling of compensation for passengers pursuant to
this Section shall not be an excuse for the undue delay of the
flights ETD.
CHAPTER IV
RIGHT TO COMPENSATION
Section 11. Right to Compensation and Amenities in Case of
Cancellation of Flight. In case of cancellation of flights, the
following shall be observed:
11.1 In case of flight cancellation attributable to the carrier, a
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passenger shall have the right to:
(a) Be notified beforehand via public announcement,
written/published notice and flight status update service (text);
(b) Be provided with the following, if he/she is already at the
airport at the time of the announcement of the flight cancellation:
sufficient refreshments or meals (e.g. snacks consisting of at
least a bottle of water and a sandwich, or breakfast, lunch, or
dinner, or a voucher for the same, as the case may be); hotel
accommodation (conveniently accessible from the airport);
transportation from the airport to the hotel, v.v.; free phone calls,
text or e-mails, and first aid, if necessary; and
(c) Reimbursement of the value of the fare, including taxes and
surcharges, of the sector cancelled, or both/all sectors, in case
the passenger decides not to fly the ticket or all the
routes/sectors; or
(d) Be endorsed to another air carrier without paying any fare
difference, at the option of the passenger, and provided that
space and other circumstances permit such re-accommodation;
or
(e) Rebook the ticket, without additional charge, to the next flight
with available space, or, within thirty (30) days, to a future trip
within the period of validity of the ticket. However, for rebooking
made in excess of the aforementioned thirty (30) days for a trip
likewise within the validity of the ticket, fees and/or fare
difference shall apply.
Provided, that in case a carrier cancels a flight at least twenty-
four (24) hours before the ETD, it shall not be liable for the
foregoing amenities, except, it shall be obliged to notify the
passenger, and, in accordance with the preceding provisions, to
rebook or reimburse the passenger, at the option of the latter.
11.2 In case the air carrier cancels the flight because of force
majeure, safety and/or security reasons, as certified by the Civil
Aviation Authority of the Philippines, a passenger shall have the
right to be reimbursed for the full value of the fare.
11.3 The provisions of this Section shall be the minimum
entitlement of a passenger in case of cancellation, and shall not
prohibit the air carrier from granting more favourable conditions
or recourses, as it may deem appropriate.
Section 12. Right to Compensation and Amenities in Case of
Flight Delay and Exceptions Thereto.
12.1 In case of Terminal Delay of at least three (3) hours after
the ETD, whether or not such is attributable to the carrier, a
passenger shall have the right to:
(a) Be provided with refreshments or meals (sufficient snacks,
breakfast, lunch, or dinner, as the case may be), free phone
calls, text or e-mails, and first aid, if necessary; and
(b) Rebook or refund his/her ticket in accordance with the
preceding Section or be endorsed to another carrier, in
accordance with the preceding Section.
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12.2 In case such Terminal Delay extends to at least six (6)
hours after the ETD for causes attributable to the carrier, it shall
be deemed cancelled for the purpose of making available to the
passenger the rights and amenities required to be provided in
case of actual cancellation, as provided for in Section 11.1; and
in addition, an affected passenger shall be given the following:
(a) Additional compensation equivalent to at least the value of
the sector delayed or deemed cancelled to be paid in the form of
cash or voucher, at the discretion of the air carrier; and
(b) The right to board the flight if it takes place more than six (6)
hours after the ETD and the affected passenger has not opted to
rebook and/or refund. For this purpose, the air carrier is obliged
to exert all efforts to contact the passenger for the flight.
12.3 A passenger shall likewise have the right to be provided
with sufficient food and beverage, in cases of Tarmac Delay of at
least two (2) hours after the ETD, reckoned from the closing of
the aircraft doors, or when the aircraft is at the gate with the
doors still open but passengers are not allowed to deplane.
12.4 The provisions of this Section shall be the minimum
entitlement of a passenger in case of delay and shall not prohibit
the air carrier from granting more favourable conditions or
recourses, as it may deem appropriate.
Section 13. Compensation under Section 10 as Liquidated
Damages. The compensation provided in Section 10, if accepted
by the passenger, shall constitute liquidated damages for all
damages incurred by the passenger as a result of the air
carriers failure to provide the passenger with a confirmed
reserved seat.
Provided that, while a confirmed reservation is necessary to
make a passenger eligible for compensation, a written
confirmation issued by the air carrier or its authorized agent
qualifies the passenger in this regard, even if the air carrier
cannot find the reservation in the electronic records, as long as
the passenger did not cancel the reservation or miss a
reconfirmation deadline.
Section 14. Right to Compensation for Delayed, Lost, and
Damaged Baggage. A passenger shall have the right to have
his/her baggage carried on the same flight that such passenger
takes, subject to considerations of safety, security, or any other
legal and valid cause.
14.1 In case a checked-in baggage has been off-loaded for
operational, safety, or security reasons, the air carrier shall
inform the passenger at the soonest practicable time and in such
manner that the passenger will readily know of the off-loading
(i.e. that his/her baggage has been off-loaded and the reason
therefor). If the passengers baggage has been off-loaded, the
air carrier should make the appropriate report and give the
passenger a copy thereof, even if it had already announced that
the baggage would be on the next flight.
The air carrier shall carry the off-loaded baggage in the next
flight with available space, and deliver the same to the
passenger either personally or at his/her residence. For every
twenty-four (24) hours of delay in such delivery, the air carrier
shall tender an amount of Two Thousand Pesos (Php2,000.00)
to the passenger, as compensation for the inconvenience the
94

latter experienced. A fraction of a day shall be considered as one
day for purposes of calculating the compensation.
For the purposes of this section, the twenty four (24)-hour period
shall commence one (1) hour from the arrival of the flight of the
passenger carrying such baggage.
14.2 Should such baggage, whether carried on the same or a
later flight, be lost or suffer any damage attributable to the air
carrier, the passenger shall be compensated in the following
manner:
(a) For international flights, the relevant convention shall apply.
(b) For domestic flights, upon proof, a maximum amount
equivalent to half of the amount in the relevant convention (for
international flights) in its Peso equivalent.
14.3 For compensation purposes, a passengers baggage is
presumed to have been permanently and totally lost, if within a
period of seven (7) days, counted from the time the passenger or
consignee should have received the same, the baggage is not
delivered to said passenger or consignee.
Section 15. Right to Compensation In Case of Death or
Bodily Injury of a Passenger. For international flights, in case
of death or bodily injury sustained by a passenger, the relevant
Convention and inter-carrier agreement shall apply. However, for
an international carriage performed under the 1966 Montreal
Inter-Carrier Agreement, which includes a point in the United
States of America as a point of origin, a point of destination or
agreed stopping place, the limit of liability for each passenger for
death, wounding or other bodily injury shall be the sum of
Seventy-Five Thousand United States Dollars (US$75,000.00),
inclusive of legal fees and costs. Provided, in the case of a claim
brought in a state where a provision is made for a separate
award for legal fees and costs, the limit shall be the sum of Fifty-
Eight Thousand United States Dollars (US$58,000.00), exclusive
of legal fees and costs.
For domestic flights, the compensation shall be based on the
stipulated amount in the relevant convention which governs
international flights, the same to be given in Peso
denominations.
Section 16. Right to Immediate Payment of Compensation.
An air carrier liable for any and all compensations provided by
these rules shall make the same available to the affected
passenger at the air carriers counters at the airport on the date
when the occasion entitling the passenger to compensation
occurred, or at the main office or any branch of the air carrier at
the discretion of the passenger. The air carrier shall tender a
check for the amount specified, or cash, or the document
necessary to claim the compensation or benefits mentioned
above; Provided, that such document shall be convertible to
cash within fifteen (15) days from the date when the occasion
entitling the passenger to such compensation occurred.
CHAPTER V
ADMINISTRATIVE MATTERS
Section 17. Air Carrier and CAB Complaint and Assistance
Desks. Air carriers shall provide Customer Service
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Representatives who can address common problems, such as
arranging for meals and hotel rooms for stranded passengers,
settling denied boarding compensation, arranging luggage
resolutions, and settling other routine claims or complaints, on
the spot. In addition, the CAB may provide Complaints and
Assistance Desks in all airports. These shall be manned by CAB
or CAB-deputized personnel, who shall assist passengers whose
rights to the service have not been fully satisfied by the air
carrier. The said personnel shall assist in the filing and
prosecution of the complaints of passengers whose rights have
been violated and who wish to go after the concerned air
carriers.
Section 18. Refund of Other Fees. Every air carrier must
refund checked baggage fees and other optional service fees
(i.e. insurance, donation to WWF, seat selector fee, etc.), if the
passenger did not use his/her ticket provided, that the said ticket
is refundable and that the passenger is not at fault. Provided,
further, that refund of checked baggage fees will also apply, if
the baggage was not delivered to the passenger within twenty-
four (24) hours from the arrival of flight, on top of the
compensation fee as mentioned in Section 14.1.
Section 19. Written Reports. Air carriers shall submit a monthly
report to the CAB on the following:
(a) The number of regular and promotional fare passengers who
have been denied boarding, or whose flights were delayed or
cancelled;
(b) The number of regular and promotional fare passengers
whose baggage was lost, damaged, or off-loaded; and
(c) The number of regular and promotional fare passengers who
died or sustained an injury during the course of the flight or
performance of the contract of carriage, as well as the reasons
and other circumstances of such occurrences.
Provided, that the air carriers shall maintain a database
containing the names, addresses, and/or other particulars of
such passengers, their flights, concerns or complaints, as well as
records of the air carriers personnel regarding the same, if any,
and other pertinent information, available to the CAB upon
request.
CHAPTER VI
FINAL PROVISIONS
Section 20. Periodic review. This Order shall be reviewed
periodically by an inter-agency body consisting of
representatives from the DOTC, the DTI, the CAB, and airport
operators, in consultation with the air carrier companies and/or
other directly affected stakeholders. Such review may include the
assessment, modification, removal, and/or update of provisions
in accordance with issues arising from the implementation of this
Order.
Section 21. Separability Clause. If any section(s) or any part of
this Regulation is declared unconstitutional by a competent
authority, the remaining sections or parts thereof shall not be
affected thereby.
Section 22. Repealing Clause. All other orders, guidelines,
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economic regulations, and other issuances of the CAB, the DTI
and the DOTC, which are inconsistent with these provisions, are
hereby amended, repealed or modified accordingly. Otherwise,
provisions not deemed inconsistent shall be of suppletory
application.

Section 23. Violations and Penalties. All violations of this Joint

Administrative Order shall be penalized in accordance with the
pertinent provisions of the Civil Aeronautics Act of the
Philippines, save for violations pertaining to Sections 5 and 6
which are governed by the relevant provisions of the Consumer
Act of the Philippines, the implementing agency of which is DTI.

Section 24. Effectivity. This Regulation shall take effect ten (10)
days after its publication in a newspaper of general application. A
copy of this Regulation shall be deposited with the University of
the Philippines Law Center in compliance with Revised
Administrative Code.

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