BREACH OF CONTRACT OF CARRIAGE issued electronic tickets (attached to the boarding passes).
They
G.R. No. 212038
SPOUSES JESUS FERNANDO and ELIZABETH S. FERNANDO,
Petitioners vs. NORTHWEST AIRLINES, INC., Respondent
On December 20, 2001, Jesus Fernando arrived at the LA Airport via
Northwest Airlines to join his family for Christmas, however upon
arrival at the airport it was found out that his documents reflect his
return ticket as August 2001. So he approached a Northwest
personnel to have his return ticket verified and validated, but the
latter merely glanced at his ticket and peremptorily said that the
ticket has been used and could not be considered as valid. He then
explained to the personnel that he was about to use the said ticket
on August 20 or 21, 2001 on his way back to Manila from LA but he
could not book any seat because of some ticket restrictions so he,
instead, purchased new business class ticket on the said date.
Hence, the ticket remains unused and perfectly valid.
He was then brought to interrogation room of the Immigration
where he was asked humiliating questions for more than 2 hours.
When he was finally cleared by the Immigration Officer, he was
granted only a twelve-day stay in the US, instead of the usual 6
months.
Another incident accured when the Fernandos were about to depart
from the LA Airport on January 29, 2002. It appears that when the
Fernandos reached the gate area where boarding passes need to be
presented, Northwest supervisor Linda Tang stopped them and
demanded for the presentation of their coupon type tickets. They
failed to present the same since, according to them, Northwest
showed to the supervisor. In the presence of the other passengers,
Linda Tang rudely pulled them out of the queue. Elizabeth Fernando
explained to Linda Tang that the matter could be sorted out by
simply verifying their electronic tickets in her computer and all she
had to do was click and punch in their Elite Platinum World Perks
Card number. But Linda Tang arrogantly told them that if they
wanted to board the plane, they should produce their credit cards
and pay for their new tickets, otherwise Northwest would order
their luggage off-loaded from the plane. The Fernandos then rushed
to the Northwest Airline Ticket counter to clarify the matter. They
were assisted by Northwest personnel Jeanne Meyer who was able
to ascertain that the Fernandos’ electronic tickets were valid.
However, because of this incident, the Fernandos missed scheduled
flight. They were able to depart, instead, the day after.
The Fernando’s thus filed a claim for damages. RTC ruled in favor of
the Fernandos. Such decision was affirmed by the CA.
ISSUE: WON there was breach of contract of carriage and whether it
was done in a wanton, malevolent or reckless manner amounting to
bad faith.
HELD: YES
 A contract of carriage is defined as one whereby a certain
person or association of persons obligate themselves to
transport persons, things, or goods from one place to
another for a fixed price. Undoubtedly, a contract of
carriage existed between Northwest and the Fernandos.
They voluntarily and freely gave their consent to an
 agreement whose object was the transportation of the
Fernandos from LA to Manila, and whose cause or
consideration was the fare paid by the Fernandos to
Northwest.
 When an airline issues a ticket to a passenger confirmed for
a particular flight on a certain date, a contract of carriage
arises. The passenger then has every right to expect that he
would fly on that flight and on that date. If he does not,
then the carrier opens itself to a suit for breach of contract
of carnage. When Northwest confirmed the reservations of
the Fernandos, it bound itself to transport the Fernandos on
their flight on 29 January 2002.
 In an action based on a breach of contract of carriage, the
aggrieved party does not have to prove that the common
carrier was at fault or was negligent. All that he has to prove
is the existence of the contract and the fact of its non-
performance by the carrier. As the aggrieved party, the
Fernandos only had to prove the existence of the contract
and the fact of its non-performance by Northwest, as
carrier, in order to be awarded compensatory and actual
damages. Therefore, having proven the existence of a
contract of carriage between Northwest and the Fernandos,
and the fact of non-performance by Northwest of its
obligation as a common carrier, it is clear that Northwest
breached its contract of carriage with the Fernandos. Thus,
Northwest opened itself to claims for compensatory, actual,
moral and exemplary damages, attorney’s fees and costs of
suit.
 The SC further ruled that Northwest acted in bad faith. In
ignoring Jesus Fernando’s pleas to check the validity of the
tickets in the computer, the Northwest personnel exhibited
an indifferent attitude without due regard for the
inconvenience and anxiety Jesus Fernando might have
experienced.
 Passengers do not contract merely for transportation. They
have a right to be treated by the carrier’s employees with
kindness, respect, courtesy and due consideration. So it is,
that any rule or discourteous conduct on the part of
employees towards a passenger gives the latter an action
for damages against the carrier.
o Further, the failure to promptly verify the validity of
the ticket connotes bad faith on the part of
Northwest.
o Bad faith does not simply connote bad judgment or
negligence. It imports a dishonest purpose or some
moral obliquity and conscious doing of a wrong. A
finding of bad faith entitles the offended party to
moral damages (Art. 2220).
 NOTE: the social and financial standing of a claimant may be
considered if he or she was subjected to contemptuous
conduct despite the offender’s knowledge of his or her
social and financial standing. (The Fernandos were affluent.
They own Fersal hotels, etc.)
 NOTE: The Fernandos are also entitled to exemplary
damages, attorney’s fees.
 NOTE: A contract of carriage is primarily intended to serve
the traveling public and thus, imbued with public interest.
Its business is mainly with the travelling public. It invites
people to avail of the comforts and advantages it offers. The
contract of air carriage, therefore, generates a relation
 attended with a public duty. Neglect or malfeasance of the
carrier’s employees, naturally, could give ground for an
action for damages.
SULPICIO LINES vs. NAPOLEON SESANTE
On Sept. 18, 1998, M/V Princess of the Orient, a passenger vessel
owned and operated by Sulpicio, sank near Fortune Island in
Batangas. Of the 388 recorded passengers, 150 were lost. Napoleon
Sesante, then a member of the Philippine National Police and a
lawyer, was one of the passengers who survived the sinking. He
sued the petitioner for breach of contract and damages. He alleged
that Sulpicio committed bad faith in allowing the vessel to sail
despite the storm signal.
In its defense, Sulpicio insisted on the seaworthiness of the M/V
Princess of the Orient; that the sinking had been due to force
majeure; that it had not been negligent; and that its officers and
crew had also not been negligent.
On Oct. 12, 2001, the RTC rendered judgment in favor of
respondent, ordering Sulpicio to pay P400,000 temperate damages,
P1 million moral damages, and costs of suit (BASIS: Arts. 1739, 1759,
NCC.) Napoleon died and was substituted by his heirs during the
pending the appeal in the CA.
The CA affirmed with modification the judgment of the Quezon City
RTC holding petitioner liable to pay temperate and moral damages
due to breach of contract of carriage. It however lowered the
temperate damages to the approximated the cost of Sesante's lost
personal belongings.
ISSUE: WON Sulpicio should be held liable.
HELD: YES.
The Court stressed that Sulpicio was guilty of breach of contract of
carriage contrary to its claims. It added that even assuming the
seaworthiness of the M/V Princess of the Orient, Sulpicio could not
escape liability considering that, as borne out by the findings of the
Board of Marine Inquiry (BMI), the immediate and proximate cause
of the sinking of the vessel had been the gross negligence of its
captain in maneuvering the vessel. Furthermore, the BMI observed
that M/V Princess of the Orient, which had a volume of 13,734 gross
tones, should have been capable of withstanding the then Storm
Signal No. 1 considering that the responding fishing boats of less
than 500 gross tons had been able to weather through the same
waves and winds to go to the succor of the sinking vessel and had
actually rescued several of the latter's distressed passengers.
Furthermore, the High Court held that the negligent acts of the
officers and crew of M/V Princess of the Orient could not be ignored
in view of the extraordinary duty of the common carrier to ensure
the safety of the passengers. The totality of the negligence by its
officers and crew coupled with the seeming indifference of the
petitioner to render assistance to Sesante, warranted the award of
moral damages. It further held that the award of temperate
damages was proper.
The High Court further said that Sulpicio and its agents on the scene
acted wantonly and recklessly. These actuations attending the
unfortunate sinking of the M/V Princess of the Orient were far
below the standard of care and circumspection that the law on
common carriers demanded. It held that the P1M would not be
excessive, but proper "in order to serve fully the objective of
exemplarity among those engaged in the business of transporting
passengers and cargo by sea."
NOTE: Moral damage may be awarded if the one which caused the
breach of contract acted in bad faith. The totality of negligence of
the crew and Sulpicio’s seemingly indifference to extend help to
Sulpico warrants the award of moral damages.
IN CARRIAGE OF PASSENGERS: PRESUMPTION OF FAULT AND
NEGLIGENCE
G.R. No. 170071 March 9, 2011
HEIRS OF JOSE MARCIAL K. OCHOA namely: RUBY B. OCHOA,
MICAELA B. OCHOA and JOMAR B. OCHOA, Petitioners, vs. G & S
TRANSPORT CORPORATION, Respondent.
On March 10, 1995, Jose Marcial Ochoa boarded and rode an Avis
taxicab owned and operated by G & S Transport, and driven by G&S
employee Bibiano Padilla. While going up the Santolan fly-over, it
overtook another cab driven by Pablo Clave and tried to pass a ten-
wheeler cargo truck. To avoid colliding with the truck, Padilla turned
the wheel to the left causing his taxicab to ram the railing throwing
itself off the fly-over and fell on the middle surface of EDSA below.
Padilla thereafter sustained injuries, while Jose Marcial, on the
otherhand, died.
On May 13, 1999, Jose Marcial’s heirs sued G&S for damages. The
heirs alleged that G & S, as a common carrier, is under legal
obligation to observe and exercise extraordinary diligence in
transporting its passengers to their destination safely and securely.
However, G & S failed to observe and exercise this extraordinary
diligence because its employee failed to transport Jose Marcial to
his destination safely. They averred that G & S is liable to them for
having breached the contract of common carriage. As an alternative
cause of action, they asserted that G & S is likewise liable for
damages based on quasi-delict pursuant to Article 21806 in relation
to Article 21767 of the Civil Code.
On its part, G & S claimed that the accident was caused by a
fortuitous event. According to G & S, the collision was totally
unforeseen since Padilla had every right to expect that the delivery
van would just overtake him and not hit the right side of the taxicab.
Therefore, what transpired was beyond Padilla’s control. There was
no negligence on his part but on the part of the driver of the
delivery van who bumped Padilla. It further averred that it exercised
the diligence required of a good father of a family in the selection
and supervision of its employees including Padilla. (It argued that it
has been carrying out seminars and periodic evaluations for their
drivers; monthly check-up of its automobiles; and has regularly
issued rules regarding the conduct of its drivers.)
The heirs, on the other hand, maintained that in order for a
fortuitous event to exempt one from liability, G & S must clearly
show that the proximate cause of the casualty was entirely
independent of human will and that it was impossible to avoid. And
since in the case at bar it was Padilla’s inexcusable poor judgment,
utter lack of foresight and extreme negligence which were the
immediate and proximate causes of the accident, same cannot be
considered to be due to a fortuitous event.
At any rate, the heirs contended that regardless of whether G & S
observed due diligence in the selection of its employees, it should
nonetheless be held liable for the death of Jose Marcial pursuant to
Article 1759 of the Civil Code. 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.
RTC ruled in favor of the heirs. Such was affirmed by the CA. The
appellate court gave weight to their argument that in order for a
fortuitous event to exempt one from liability, it is necessary that he
committed no negligence or misconduct that may have occasioned
the loss. CA noted that Padilla failed to employ reasonable
foresight, diligence and care needed to exempt G & S from liability
for Jose Marcial’s death. And just like the trial court, the CA found
insufficient the evidence adduced by G & S to support its claim that
it exercised due diligence in the selection and supervision of its
employees.
ISSUE: WON G&S should be held liable for damages to the heirs of
Jose Marcial
HELD: YES.
There existed a contract of carriage between G & S, as the owner
and operator of the Avis taxicab, and Jose Marcial, as the
passenger of said vehicle. As a common carrier, G & S "is bound to
carry [Jose Marcial] 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." However, Jose Marcial was
not able to reach his destination safely as he died during the
course of the travel. "In a contract of carriage, it is presumed that
the common carrier is at fault or is negligent when a passenger
dies or is injured. In fact, there is even no need for the court to
make an express finding of fault or negligence on the part of the
common carrier. This statutory presumption may only be
overcome by evidence that the carrier exercised extraordinary
diligence." Unfortunately, G & S miserably failed to overcome this
presumption. Both the trial court and the CA found that the
accident which led to Jose Marcial’s death was due to the reckless
driving and gross negligence of G & S’ driver, Padilla, thereby
holding G & S liable to the heirs of Jose Marcial for breach of
contract of carriage.
 NOTE: The acquittal of Padilla in the criminal case is
immaterial to the instant case for breach of contract. The
obligation in the latter did not arise from the criminal case
(Art. 31, NCC). Clearly, the breach of contract of carriage
herein is an independent civil action arising from contract
which is separate and distinct from the criminal action for
reckless imprudence case.
 NOTE: Proximate cause of the mishap: Padilla’s negligence;
overspeeding
 NOTE: The focal point of the heirs’ petition is the CA’s
deletion of the award of ₱6,537,244.96 for Jose Marcial’s
loss of earning capacity as well as the reduction of the
award of moral damages from ₱300,000.00 to ₱200,000.00.
 NOTE: Documentary evidence should be presented to
substantiate the claim for damages for loss of earning
capacity. However, failure to present documentary
evidence to support a claim for loss of earning capacity of
 the deceased need not be fatal to its cause. Testimonial
evidence suffices to establish a basis for which the court can
make a fair and reasonable estimate of the loss of earning
capacity. In the instant case, the testimony of Jose Marcial’s
wife that he was earning around ₱450,000.00 a year was
corroborated by a Certification issued by the USAID. The CA
nonetheless found the USAID Certification to be self-serving
and unreliable. The SC disagrees, on the ground of USAID’s
established credibility and the presumption of regularity.
Further, the USAID certification cannot be said to be self-
serving because it does not refer to an act or declaration
made out of court by the heirs themselves as parties to this
case.
 NOTE: The heirs are likewise entitled to moral damages
pursuant to Articles 1764 and 2206(3), NCC, considering the
mental anguish suffered by them by reason of Jose
Marcial’s untimely death.
SPOUSES PERENA vs. SPOUSES ZARATE
In June 1996, Nicolas and Teresita Zarate contracted Teodoro and
Nanette Pereña to transport the spouses Zarate’s son, Aaron
Zarate, to and from school. The Pereñas were owners of a van being
used for private school transport.
On August 22, 1996, the driver of the said private van, Clemente
Alfaro, while the children were on board including Aaron, decided
to take a short cut in order to avoid traffic. The usual short cut was
a railroad crossing of the Philippine National Railway (PNR).
Alfaro saw that the barandilla (the pole used to block vehicles
crossing the railway) was up which means it was okay to cross. He
then tried to overtake a bus. However, there was in fact an
oncoming train but Alfaro no longer saw the train as his view was
already blocked by the bus he was trying to overtake. The bus was
able to cross unscathed but the van’s rear end was hit. During the
collision, Aaron, was thrown off the van. His body hit the railroad
tracks and his head was severed. He was only 15 years old.
It turns out that Alfaro was not able to hear the train honking from
50 meters away before the collision because the van’s stereo was
playing loudly.
The Zarates sued PNR and the Pereñas (Alfaro became at-large).
Their cause of action against PNR was based on quasi-delict while
their cause of action against the Pereñas was based on breach of
contract of common carriage.
In their defense, the Pereñas invoked that as private carriers they
were not negligent in selecting Alfaro as their driver as they made
sure that he had a driver’s license and that he was not involved in
any accident prior to his being hired. In short, they observed the
diligence of a good father in selecting their employee.
PNR also disclaimed liability as they insist that the railroad crossing
they placed there was not meant for railroad crossing.
The RTC ruled in favor of the Zarates. The Court of Appeals affirmed
the RTC. In the decision of the RTC and the CA, they awarded
damages in favor of the Zarates for the loss of earning capacity of
their dead son.
ISSUE: WON the defense of due diligence of a good father by the
Pereñas is tenable.
HELD: NO.
 The defense of due diligence is not tenable in this case. The
Pereñas are common carriers. They are not merely private
carriers. The SC considered private transport for schools as
common carriers. The Pereñas, as the operators of a school
bus service were: (a) engaged in transporting passengers
generally as a business, not just as a casual occupation; (b)
undertaking to carry passengers over established roads by
the method by which the business was conducted; and (c)
transporting students for a fee. Despite catering to a limited
clientèle, the Pereñas operated as a common carrier
because they held themselves out as a ready transportation
indiscriminately to the students of a particular school living
within or near where they operated the service and for a
fee.
 Being a common carrier, what is required of the Pereñas is
not mere diligence of a good father. What is specifically
required from them by law is extraordinary diligence – a
fact which they failed to prove in court. Verily, their
obligation as common carriers did not cease upon their
exercise of diligently choosing Alfaro as their employee.
 NOTE: Prior to this case, the status of private transport for
school services or school buses is not well settled as to
whether or not they are private or common carriers – but
they were generally regarded as private carriers).
 NOTE: The Pereñas also argued that the award of loss of
earning capacity was improper as Aaron was merely a high
school student, hence, the award of such damages was
merely speculative.
o SC COUNTERED: Aaron was enrolled in a reputable
school (Don Bosco). He was of normal health and
was an able-bodied person. Further, the basis of the
computation of his earning capacity was not on
what he would have become. It was based on the
current minimum wage. The minimum wage was
validly used because with his circumstances at the
time of his death, it is most certain that had he
lived, he would at least be a minimum wage earner
by the time he starts working. This is not being
speculative at all. There was no speculation as to
what Aaron might be – but whatever he’ll become,
it is certain that he will at the least be earning
minimum wage.
LRTA vs. MARJORIE NAVIDAD
On 14 October 1993, drunk Nicanor Navidad entered the EDSA LRT
station after purchasing a token. While Navidad was standing on the
platform near the LRT tracks, Junelito Escartin, the security guard
assigned to the area approached Navidad. A misunderstanding or an
altercation between the two apparently ensued that led to a fist
fight. No evidence, however, was adduced to indicate how the fight
started or who, between the two, delivered the first blow or how
Navidad later fell on the LRT tracks. At the exact moment that
Navidad fell, an LRT train, operated by Rodolfo Roman, was coming
in. Navidad was struck by the moving train, and he was killed
instantaneously.
The heirs of Nicanor filed a complaint for damages against Escartin,
Rodolfo Roman, the LRTA, Metro Transit, and Prudent—the latter as
the agency of Escartin. Prudent, in its answer, denied liability and
averred that it had exercised due diligence in the selection and
supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and
Escartin, instead of presenting evidence, filed a demurrer T
The trial court ruled in favor of the heirs, and against Prudent and
Escartin. The complaint against LRTA and Roman were however
dismissed for lack of merit.
Upon appeal, the CA exonerated Prudent and, instead, held LRTA
and Roman jointly and severally liable. The appellate court
ratiocinated that while the deceased might not have then as yet
boarded the train, a contract of carriage theretofore had already
existed when the victim entered the place where passengers were
supposed to be after paying the fare and getting the corresponding
token therefor. In exempting Prudent from liability, the court
stressed that there was nothing to link the security agency to the
death of Navidad. It said that Navidad failed to show that Escartin
inflicted fist blows upon the victim and the evidence merely
established the fact of death of Navidad by reason of his having
been hit by the train owned and managed by the LRTA and
operated at the time by Roman. The appellate court further held
that the LRTA and Roman failed to present expert evidence to
establish the fact that the application of emergency brakes could
not have stopped the train.
ISSUE: WON LRTA is liable; WON Prudent is liable.
HELD: LRTA is liable. Prudent is not
 LRTAs liability is the contract of carriage and its obligation to
indemnify the victim arises from the breach of that contract
by reason of its failure to exercise the high diligence
required of the common carrier.
 A common carrier, both from the nature of its business and
for reasons of public policy, is burdened with the duty of
exercising utmost diligence in ensuring the safety of
passengers. Such duty of a common carrier to provide
safety to its passengers so obligates it not only during the
course of the trip but for so long as the passengers are
within its premises and where they ought to be in
pursuance to the contract of carriage.
 In case of death or injury, a carrier is presumed to have
been at fault or been negligent, and by simple proof of
injury, the passenger is relieved of the duty to still
establish the fault or negligence of the carrier or of its
employees and the burden shifts upon the carrier to prove
that the injury is due to an unforeseen event or to force
majeure.
 Prudent, on the other hand, may only be liable for tort
under Article 2176, in conjunction with Art 2180. The
premise, however, for the employers liability is negligence
or fault on the part of the employee. (***MERE DUE
 DILIGENCE IN THE SELECTION AND SUPERVISION OF EES IS
REQUIRED FOR THE ER TO BE EXEMPTED FROM LIABILITY**)
 There is nothing, however, that links Prudent to the death
of Nicanor, for the reason that the negligence of its
employee, Escartin, has not been duly proven.
 NOTE: There is also no showing that Roman himself is guilty
of any culpable act or omission, as such he must also be
absolved from liability. Needless to say, the contractual tie
between the LRTA and Navidad is not itself a juridical
relation between the latter and Roman; thus, Roman can be
made liable only for his own fault or negligence.
 NOTE: In the discharge of its commitment to ensure the
safety of passengers, a carrier may choose to hire its own
employees or avail itself of the services of an outsider or an
independent firm to undertake the task. In either case, the
common carrier is not relieved of its responsibilities under
the contract of carriage.
 NOTE: Liabilities of common carriers: Arts. 1755, 1756,
1759, 1763
 NOTE (!!!): They are liable for death of or injury to
passengers:
o Through the negligence or willful acts of its
employeee; or
o Willful acts or negligence of other passengers or of
strangers if the common carriers employees
through the exercise of due diligence could have
prevented or stopped the act or omission.
AGAPITA DIAZ vs. CA
Agapita Diaz operated a common carrier, a Tamaraw FX taxi plying
the route of Cagayan de Oro City to any point in Region 10. On July
20, 1996, Agapita’s taxi, driven by Arman Retes, was moving at an
excessive speed when it rammed into the rear portion of a Hino
cargo truck owned by Teodoro Lantoria and driven by Rogelio
Francisco. As a result, nine passengers of the taxi died including
Sherly Moneo.
On August 13, 1996, the heirs of Sherly Moneo filed an action for
breach of contract of carriage and damages against Agapita and
Retes. Agapita then filed a third-party complaint against Lantoria
and Francisco.
Both the trial court and the CA held Agapita and Retes jointly and
severally liable to pay the heirs of Sherly Moneo.
ISSUE: WON Agapita is liable for breach of contract of carriage.
HELD: YES.
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.
In a contract of carriage, it is presumed that the common carrier is
at fault or is negligent when a passenger dies or is injured. In fact,
there is even no need for the court to make an express finding of
fault or negligence on the part of the common carrier. This statutory
presumption may only be overcome by evidence that the carrier
exercised extraordinary diligence.
In the case at bar, Agapita failed to establish sufficient evidence to
rebut the presumption of negligence. The findings of the trial court,
as affirmed by the Court of Appeals, showed that the accident
which led to the death of Sherly Moneo was caused by the reckless
speed and gross negligence of Agapita’s driver who demonstrated
no regard for the safety of his passengers.
CARGO DAMAGE
GR. No. 187701 July 23, 2014
PHILAM INSURANCE VS HEUNG-A SHIPPING CORP.
 NOVARTIS imported from Jinsuk Trading 19 pallets of 200
rolls of Ovaltine Power 18 Glaminated plastic packaging
material. In order to ship the goods to the Philippines,
JINSUK engaged the services of Protop Shipping, a freight
forwarder, to forward the goods to their consignee,
NOVARTIS.
 Based on Bill of Lading issued by PROTOP, the cargo was on
freight prepaid basis and on "shipper’s load and count"
which means that the "container was packed with cargo by
one shipper where the quantity, description and condition
of the cargo is the sole responsibility of the shipper."
 PROTOP shipped the cargo through Dongnama Shipping
which in turn loaded the same on M/V Heung-A owned and
operated by Heung-A Shipping. Wallem, on the other hand,
is the ship agent of HEUNG-A in the Philippines. NOVARTIS
subsequently insured the shipment with Philam Insurance.
 When shipment reached NOVARTIS’ premises, it was
discovered that the boxes of the shipment were wet and
damp. Caparoso rejected the entire shipment. All 17 pallets
of the 184 cartons/rolls contained in the sea van were
found wet or water damaged. NOVARTIS thus filed a claim
under the insurance policy with PHILAM Insurance, who in
turn paid the insured value of the shipment. PHILAM then
sent a demand letter to WALLEM for reimbursement of the
insurance claims paid to NOVARTIS. When WALLEM ignored
the demand, PHILAM filed a complaint in the RTC.
 RTC ruled that the damage to the shipment occurred
onboard the vessel while in transit from Korea to the
Philippines. The RTC further observed that HEUNG-A failed
to present evidence showing that it exercised the diligence
required of a common carrier in ensuring the safety of the
shipment. CA agreed with the RTC that PROTOP, HEUNG-A
and WALLEM are liable for the damaged shipment. The fact
that HEUNG-A was not a party to the bill of lading did not
negate the existence of a contract of carriage between
HEUNG-A and/or WALLEM and NOVARTIS. A bill of lading is
not indispensable for the creation of a contract of carriage.
By agreeing to transport the goods contained in the sea van
provided by DONGNAMA, HEUNG-A impliedly entered into
a contract of carriage with NOVARTIS with whom the goods
were consigned. Hence, it assumed the obligations of a
common carrier to observe extraordinary diligence in the
vigilance over the goods transported by it.
Issue:
WON HEUNG-A remained responsible as the carrier, hence,
answerable for the damages incurred by the goods received for
transportation.
HELD: YES.
has two types:
 Despite its contract of affreightment with DONGNAMA,
HEUNG-A remained responsible as the carrier, hence,
answerable for the damages incurred by the goods
received for transportation. Common carriers are required
to render service with the greatest skill and foresight and
‘to use all reasonable means to ascertain the nature and
characteristics of the goods tendered for shipment, and to
exercise due care in the handling and stowage, including
such methods as their nature requires.
 Common carriers, as a general rule, are presumed to have
been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed. That is, unless they
prove that they exercised extraordinary diligence in
transporting the goods.
 Further, under Article 1742 of the Civil Code, even if the
loss, destruction, or deterioration of the goods should be
caused by the faulty nature of the containers, the common
carrier must exercise due diligence to forestall or lessen
the loss.
 NOTE: The Slot Charter Agreement did not change HEUNG-
A’s character as a common carrier.
 NOTE: CHARTER PARTY - a contract by which an entire ship,
or some principal part thereof, is let by the owner to
another person for a specified time or use; a contract of
affreightment by which the owner of a ship or other vessel
lets the whole or a part of her to a merchant or other
DELSAN TRANSPORT vs. AHAC
person for the conveyance of goods, on a particular voyage,
in consideration of the payment of freight. A charter party
1. A contract of affreightment whereby the use of
shipping space on vessels is leased in part or as a
whole, to carry goods for others. The charter-party
provides for the hire of vessel only, either for a
determinate period of time (time charter) or for a
single or consecutive voyage (voyage charter). The
ship owner supplies the ship’s stores, pay for the
wages of the master and the crew, and defray the
expenses for the maintenance of the ship. The
voyage remains under the responsibility of the
carrier and it is answerable for the loss of goods
received for transportation. The charterer is free
from liability to third persons in respect of the ship.
2. Charter by demise or bareboat charter under which
the whole vessel is let to the charterer with a
transfer to him of its entire command and
possession and consequent control over its
navigation, including the master and the crew, who
are his servants. The charterer mans the vessel with
his own people and becomes, in effect, the owner
for the voyage or service stipulated and hence liable
for damages or loss sustained by the goods
transported.
DURATION OF LIABILITY
Delsan Transport owns and operates the vessel MT Larusan. On
August 4, 1984 Delsan received on board MT Larusan a shipment of
automotive diesel at the Bataan Refinery Corp. for transportation
and delivery to the bulk depot of Caltex inBacolod City pursuant to a
contract of afreightment. The shipment was insured by AHAC.
On August 7, 1984, the shipment arrived at Bacolod and unloading
operations commenced at 1:30pm. At about 10:30pm the
discharging had to be stopped because the port bow mooring of
the vessel was intentionally cut or stolen by unknown persons.
Because of such, the vessel drifted westward dragged and severed
the rubber hose, causing the diesel oil to spill into the sea. To
avoid further spillage, the vessel’s crew tried water flushing but to
no avail. The shore tender, who was waiting for the completion of
the water flushing was surprised when the tanker signaled a red
light which meant stop pumping. Unaware of what happened, the
shore tender did not shut the tank gate valve. Because the gates
remained open, the diesel previously discharged from the vessel
into the shore tank backflowed. The vessel crew was not able to
inform the people at the depot about the incident due to the non-
availability of a pump boat. After almost an hour, the gauger and
an assistant surveyor from Caltex depot boarded the vessel and it
was only then that they found out about what happened.
Caltex then sought recovery of the loss but Delsan refused to pay.
As insurer, AHAC paid Caltex. AHAC, as the subrogee of Caltex
instituted civil cases against Delsan for the loss. The trial court
rendered decision in favor of AHAC. The CA affirmed the findings of
the lower court ruling that Delsan failed to exercise the
extraordinary diligence of a good father of a family in the handling
of its cargo. Delsan contends that there was contributory negligence
on the part of Caltex and that the loss due to backflow occurred
when the diesel oil was already completely delivered to Caltex.
Issues:
1. WON there was contributory negligence on the part of
Caltex; (NONE)
2. WON the loss through backflow should not be borne by
Delsan because it was already delivered to Caltex shore
tank; (SHOULD BE BOURNE BY DELSAN)
HELD:
a. There is no contributory negligence on the part of Caltex.
Common carriers are bound to observe extraordinary diligence in
the vigilance over the goods transported by them. They are
presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated. To overcome the
presumption of negligence in case of loss, destruction or
deterioration of the goods, the common carrier must prove that it
exercised extraordinary diligence. the proximate cause of the
spillage and backflow of the diesel oil was due to the severance of
the port bow mooring line of the vessel and the failure of the shore
tender to close the storage tank gate valve. Upon boarding on the
vessel by the two personnel of Caltex, they immediately reported
the same. The crew of the vessel should have exerted its most effort
to inform the shoe tender about the port bow mooring line was
severed.
b. Delsan should bear the loss. The cargo was still in the
custody of Delsan because the discharging has not yet been finished
when the backflow occurred. Article 1736 provides that the
extraordinary responsibility of common carrier last 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 a person who has the right to receive them. Since the
discharging has not yet been finished the carrier still has the
responsibility to guard and preserve the goods.