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CHAPTER 1
Unsworth Transportation Int’l (UTI) v. CA
Facts:
 Sylvex Purchasing Corporation
delivered to UTI a shipment of 27 drums
of various raw materials for
pharmaceutical manufacturing.
 The subject shipment was insured with
private respondent Pioneer Insurance
and Surety Corporation in favor of
Unilab.
 On the same day that the bill of lading
was issued, the shipment was loaded,
boarded on American President Lines’
vessel.
 On September 30, 1992, the shipment
arrived at the port of Manila. Oceanica
Cargo Marine Surveyors Corporation
(OCMSC) conducted a stripping survey
of the shipment located in petitioner’s
warehouse “ 1 Steel Drum with cut hole
on the side with spilling of 1%”.
 Shipment arrived in Unilab’s warehouse
and was immediately surveyed by an
independent surveyor, w/c stated “1
bag torn on side contents partly spilled,
1 drum #7 punctured and retaped on
bottom side content lacking, 5-drums
short deliver”
 Unilab filed a formal claim for the
damage against private respondent and
UTI.
 UTI avers that they are not common
carriers.
Issue: W/N UTI is a common carrier? Whether
they exercised required diligence?
Held:
 Yes, petitioner is a freight forwarder.
The term "freight forwarder" refers to a
firm holding itself out to the general
public to provide transportation of
property for compensation.
 A freight forwarders’ liability is limited to
damages arising from its own
negligence, including negligence in
choosing the carrier; however, where
the forwarder contracts to deliver goods
to their destination instead of merely
arranging for their transportation, it
becomes liable as a common carrier for
loss or damage to goods.
 A freight forwarder assumes the
responsibility of a carrier, which actually
executes the transport, even though the
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Atty. Golangco
forwarder does not carry the
merchandise itself.
 It is also evidenced by UTI’s issuance of
a bill of lading which acts as both receipt
and contract.
 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.
Unless they prove that they exercised
extraordinary diligence in transporting
the goods. They have the burden of
proving that they observed such
diligence in order to avoid responsibility.
 In this case, Pet. failed to rebut the
prima facie presumption of negligence in
the carriage of the subj. shipments
 SC however, affirms the Package
limitation rule under COGSA ($500 per
lost drum)
Philippine American General Insurance
Company v. PKS Shipping Company
Facts:
 Davao Union Marketing Corporation
(DUMC) contracted the services of
respondent PKS Shipping Company
(PKS Shipping) for the shipment to
Tacloban City of 75,000 bags of
cement worth P3,375,000.00.
 DUMC insured the goods for its full
value with petitioner Philippine
American General Insurance
Company (Philamgen).
 On the evening of 22 December
1988, while Limar I was being towed
by respondents tugboat, the barge
sank bringing down with it the entire
cargo of 75,000 bags of cement.
 DUMC filed a formal claim with
Philamgen for the full amount of the
insurance. Philamgen promptly
made payment; it then sought
reimbursement from PKS Shipping
of the sum paid to DUMC but the
shipping company refused to pay.
Issue: W/N Philamgen is a common carrier?
And W/N it has exercised the required proper
diligence.
Held:
 Yes, PKS is a common carrier. Art.
1732 of the Code, in conjunction with
Section 13(b) of the Public Service Act,
makes no distinction between one
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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). It also carefully avoids making
any distinction between a person or
enterprise offering transportation service
on a regular or scheduled basis and one
offering such service on an occasional,
episodic or unscheduled basis.
 Neither does it distinguish between a
carrier offering its services to the
`general public, i.e., the general
community or population, and one who
offers services or solicits business only
from a narrow segment of the general
population. We think that Article 1732
deliberately refrained from making such
distinctions.
 PKS Shipping has engaged itself in the
business of carrying goods for others,
although for a limited clientele,
undertaking to carry such goods for a
fee.
 PKS is a common carrier but it is
exempted from liability under Art. 1733
w/c provides “common carriers are
exempt from liability for loss, destruction,
or deterioration of the goods due to any
of the following causes:
(1) Flood, storm, earthquake, lightning,
or other natural disaster or calamity;
(2) Act of the public enemy in war,
whether international or civil;
(3) Act or omission of the shipper or
owner of the goods;
(4) The character of the goods or
defects in the packing or in the
containers; and
(5) Order or act of competent public
authority
 The testimonies and sworn marine
protests of the respective vessel
masters of Limar I and MT Iron Eagle,
that there was no way by which the
barges or the tugboats crew could have
prevented the sinking of Limar I. The
vessel was suddenly tossed by waves of
extraordinary height of six (6) to eight
(8) feet and buffeted by strong winds of
1.5 knots resulting in the entry of water
into the barges hatches.
 Appellate court did not err on its
decision.
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Atty. Golangco
Lara v. Valencia
Facts:
 Deceased was an inspector of the
Bureau of Forestry stationed in Davao.
The defendant (Valencia) is engaged in
the business of exporting logs from his
lumber concession in Cotabato.
 Lara went to said concession upon
instructions of his chief to classify the
logs of defendant. Work lasted for 6
days during which he contracted malaria
fever.
 Lara asked Valencia if he could take him
in his pick-up as there was then no other
means of transportation to Davao, to
which defendant agreed, the pick-up left
Parang bound for Davao taking along 6
passengers, including Lara. Seated in
the middle of the pickup, Lara was on a
bag. Before leaving Parang, defendant
invited Lara to sit with him on the front
seat but Lara declined.
 Upon reaching Km. 96, barrio Catidtuan,
Lara accidentally fell from the pick-up
and as a result he suffered serious
injuries resulting to his death
Issue: W/N Defendant Valencia should be liable
for the Pet. death?
Held:
 No. The passengers were merely
accommodation passengers who paid
nothing for the service and so they can
be considered as invited guests within
the meaning of the law.
 Defendant as owner and driver of the
pick-up owes to them merely the duty to
exercise reasonable care so that they
may be transported safely to their
destination. He is only required to
observe ordinary care, and is not in duty
bound to exercise extraordinary
diligence as required of a common
carrier by our law (Articles 1755 and
1756, NCC)
 No evidence to show that defendant
failed to observe ordinary diligence in
transporting the deceased.
 Defendant did not act with negligence
(Valencia, invited him to sit with him in
the front; was running at 40kph, a
reasonable speed)
 Lack of care on the part of the deceased
since pick up was open. Art. 1761
provides “A passenger must observe the
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diligence of a good father of a family to
avoid injury to himself.” Injury to the
passenger has been proximately caused
by his own negligence, hence, carrier
cannot be held liable.
Mecenas v. CA
Facts:
 M/T "Tacloban City," a barge-type oil
tanker of Philippine registry, owned by
the Philippine National Oil Company
(PNOC) and operated by the PNOC
Shipping and Transport Corporation
(PNOC Shipping), having unloaded its
cargo of petroleum products, left Negros
Occidental, and headed towards Bataan.
 M/V "Don Juan," also of Philippine
registry, owned and operated by the
Negros Navigation Co., Inc. (Negros
Navigation) left Manila bound for
Bacolod with 750 passengers listed in
its manifest.
 the "Tacloban City" and the "Don Juan"
collided at the Talbas Strait in the
vicinity of Mindoro. When the collision
occurred, the sea was calm, the weather
fair and visibility good. As a result of this
collision, the M/V "Don Juan" sank and
hundreds of its passengers perished.
Among the ill-fated passengers were the
parents of petitioners, the spouses
Perfecto Mecenas and Sofia Mecenas,
whose bodies were never found despite
intensive search by petitioners.
Issue: W/N private respondents acted recklessly,
that is, with gross negligence and is therefore
liable for the resulting heavy loss of lives
Held:
 Yes. SC believes that the behaviour of
the captain of the "Don Juan" in tills
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 750 passengers had been
entrusted. Whether or not Capt.
Santisteban was "off-duty" or "on-duty"
at or around the time of actual collision
is quite immaterial; there is, both
realistically speaking and in
contemplation of law, no such thing as
"off-duty" hours for the master of a
vessel at sea that is a common carrier
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upon whom the law imposes the duty of
extraordinary diligence.
 The record does not show that was the
first or only time that Capt. Santisteban
had entertained himself during a voyage
by playing mahjong with his officers and
passengers; Negros Navigation in
permitting, or in failing to discover and
correct such behaviour, must be
deemed grossly negligent.
 There is also evidence that the "Don
Juan" was carrying more passengers
than she had been certified as allowed
to carry.
 Don Juan did not carry enough boats
and life rafts for all the persons actually
on board that tragic night of 22 April
1980
 A presumption of gross negligence on
the part of the vessel (her officers and
crew) and of its ship-owner arises; this
presumption was never rebutted by
Negros Navigation.
 No necessity for passing upon the
degree of negligence or culpability
properly attributable to PNOC and
PNOC Shipping or the master of the
"Tacloban City," since they were never
impleaded here.
Brinas v. People
Facts:
 Juanito Gesmundo bought a train ticket
for his 55-year old mother Martina Bool
and his 3-year old daughter Emelita
Gesmundo, who were bound for Barrio
Lusacan, Tiaong, Quezon. Train No.
522 left Tagkawayan with the old
woman and her granddaughter among
the passengers.
 Upon approaching Barrio Lagalag in
Tiaong at about 8pm of that same night,
the train slowed down and the conductor
shouted 'Lusacan', 'Lusacan'.
Thereupon, the old woman walked
towards the left front door facing the
direction of Tiaong, carrying the child
with one hand and holding her baggage
with the other. When Martina and
Emelita were near the door, the train
suddenly picked up speed. As a result
the old woman and the child stumbled
and they were seen no more.
 It took three minutes more before the
train stopped at the next barrio, Lusacan,
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and the victims were not among the
passengers who disembarked thereat.
 Next morning, the Tiaong police
received a report that two corpses were
found along the railroad tracks at Barrio
Lagalag whom they identified as
Martina Bool and Emelita Gesmundo.
Issue: W/N the accused is guilty for being
negligent; W/N there was a breach of contract
Held:
 Yes, the petitioner-appellant was
assigned as conductor in the 2nd coach
where the victims were on board. The
appellant's announcement was
premature and erroneous, for it took a
full three minutes more before the next
barrio of Lusacan was reached. In
making the erroneous and premature
announcement, appellant was negligent.
 The proximate cause of the death of the
victims was the premature and
erroneous announcement of Briñas.
This prompted the victims to stand and
proceed to the nearest exit. Without
said announcement, the victims would
have been safely seated in their
respective seats when the train jerked
as it picked up speed.
 Yes, there was a breach of contract.
The source of the obligation sought to
be enforced in this case is culpa
contractual. We also note from the
appellant's arguments and from the title
of the civil case that the party defendant
is the Manila Railroad Company and
not petitioner-appellant Briñas.
De Gillaco v. Manila Railroad
Facts:
 Lieut. Tomas Gillaco, was a passenger
in the early morning train of the Manila
Railroad Company from Calamba,
Laguna to Manila;
 Emilio Devesa, a train guard of the
Manila Railroad Company assigned in
the Manila-San Fernando, La Union
Line, happened to be in said station
waiting for the same train which would
take him to Tutuban Station, where he
was going to report for duty;
 That Emilio Devesa had a long standing
personal grudge against Tomas Gillaco,
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Atty. Golangco
same dating back during the Japanese
occupation;
 That because of this personal grudge,
Devesa shot Gillaco with the carbine
furnished to him by the Manila Railroad
Company for his use as such train guard,
upon seeing him inside the train coach;
 That Tomas Gillaco died as a result of
the wound which he sustained from the
shot fired by Devesa.
Issue: W/N Manila Railroad Company is liable
for the act committed by its employee, Devesa.
Held:
 No. The act of guard Devesa in shooting
passenger Gillaco (because of a
personal grudge nurtured against the
latter since the Japanese occupation)
was entirely unforeseeable by the
Manila Railroad Co. The latter had no
means to ascertain or anticipate that the
two would meet, nor could it reasonably
foresee every personal rancor that might
exist between each one of its many
employees and any one of the
thousands of eventual passengers riding
in its trains.
 The shooting in question was therefore
unforeseeable and inevitable under the
given circumstances; and pursuant to
established doctrine, the resulting
breach of appellant's contract of safe
carriage with the late Tomas Gillaco was
excused thereby.
 A common carrier is held to a very high
degree of care and diligence in the
protection of its passengers; but,
considering the vast and complex
activities of modern rail transportation,
to require of appellant that it should
guard against all possible
misunderstanding between each and
every one of its employees and every
passenger that might chance to ride in
its conveyances at any time, strikes us
as demanding diligence beyond what
human care and foresight can provide.
 In fact, his tour of duty was to start at
9:00 a.m., two hours after the
commission of the crime. Devesa was
therefore under no obligation to
safeguard the passenger of the
Calamba-Manila train, where the
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deceased was riding; and the killing of
Gillaco was not done in line of duty.
Bachelor Express v. CA
Facts:
 Bus No. 800 owned by Bachelor
Express, Inc. and driven by Cresencio
Rivera was the situs of a stampede
which resulted in the death of
passengers Ornominio Beter and
Narcisa Rautraut.
 The bus came from Davao City on its
way to Cagayan de Oro City passing
Butuan City; that while at Butuan City,
the bus picked up a passenger; that
about 15 minutes later, a passenger at
the rear portion suddenly stabbed a PC
soldier which caused commotion and
panic among the passengers; that when
the bus stopped, passengers Ornominio
Beter and Narcisa Rautraut were found
lying down the road, the former already
dead as a result of head injuries and the
latter also suffering from severe injuries
which caused her death later.
 The passenger assailant alighted from
the bus and ran toward the bushes but
was killed by the police.
Issue: W/N Bachelor Express has observed
extraordinary diligence to safeguard the lives of
its passengers
Held:
 The sudden act of the passenger who
stabbed another passenger in the bus is
within the context of force majeure.
However, in order that a common carrier
may be absolved from liability in case of
force majeure, it is not enough that the
accident was caused by force majeure.
The common carrier must still prove that
it was not negligent in causing the
injuries resulting from such accident.
 The negligence of petitioner was
through its employees, exemplified by
the driver's belated stop and the
reckless opening of the doors of the bus
while the same was travelling at an
appreciably fast speed. At the same
time, the common carrier itself
acknowledged, that the bus was
commissioned to travel and take on
passengers and the public at large,
while equipped with only a solitary door
for a bus its size and loading capacity, in
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Atty. Golangco
contravention of rules and regulations
provided for under the Land
Transportation and Traffic Code.
 The bus driver did not immediately stop
the bus at the height of the commotion;
the bus was speeding from a full stop;
the victims fell from the bus door when it
was opened while the bus was still
running; the conductor panicked and
blew his whistle after people had
already fallen off the bus; and the bus
was not properly equipped with doors in
accordance with law.
 It is clear that the petitioners have failed
to overcome the presumption of fault
and negligence found in the law
governing common carriers.
 Petitioners failed to prove that the
deaths of the two passengers were
exclusively due to force majeure and not
to the failure of the petitioners to
observe extraordinary diligence in
transporting safely the passengers to
their destinations.
Compania Maritima v. CA
Facts:
 Compania Maritima, Inc. engaged the
services of private respondent, Atty.
Consulta, who represented them in 3
cases.
 Cases were resolved as follows:
(1) The trial court dismissed the third-
party claim and motion for the issuance
of a writ of preliminary injunction filed by
Atty Consulat
(2) After Atty. Consulta filed the
complaint with the Tanodbayan, pet.
transferred the handling of the case
(3) Dismissed on motion of both parties
 Atty. Consulta billed them 100,000;
50,000 and 5 Million respectively for his
services for the 3 cases
 Petitioners failed to pay the balance of
Atty’s fees.
 CA rendered decision against Compania
Maritima to pay the Atty’s fees. Hence,
this petition
Issue: W/N the amount of attorneys fees
awarded to the private respondent is reasonable.
Held:
 Amount was reasonable. The amount
of attorneys fees due is that stipulated in
the retainer agreement which is
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conclusive as to the amount of the
lawyers compensation.
 In the absence thereof, the amount of
attorneys fees is fixed on the basis of
quantum meruit, i.e., the reasonable
worth of his services. In determining the
amount of attorneys fees, the following
factors are considered: (1) the time
spent and extent of services rendered;
(2) the novelty and difficulty of the
questions involved; (3) the importance
of the subject matter; (4) the skill
demanded; (5) the probability of losing
other employment as a result of the
acceptance of the proffered case; (6)
the amount involved in the controversy
and the benefits resulting to the client;
(7) the certainty of compensation; (8)
the character of employment; and (9)
the professional standing of the lawyer.
 The value of the properties involved was
considerable. As already stated, Atty.
Consulta rendered professional services
not only in the trial court but in the Court
of Appeals and in this Court. There is no
question that through his efforts,
properties owned by petitioners were
saved from execution. (worth 51 Million)
 The issues were quite complex; the
pleadings filed by Atty. Consulta were
well-researched; and as a result of Atty.
Consulta’s efforts, the adverse parties
were induced to agree to the dismissal
of the case.
Standard Vacuum Oil Company vs. Luzon
Stevedoring Co.
Facts:
 Plantiff entered into a contract with
defendant to transport between the
ports of Manila and Nin Bay, Sangay,
Iloilo, barrels of bulk gasoline belonging
to plaintiff.
 Defendant's tugboat "Snapper" picked
up the barge; that the barge was placed
behind the tugboat, that the weather
remained good on February 3, 1947,
when it passed Batangas; that at about
3am of February 4, 1947,the engine of
the tugboat came to a dead stop; that
the engineer on board found out that the
trouble was due to a broken idler; that a
message was then sent to the
defendant's radio station in Manila
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Atty. Golangco
informing its official of the engine
trouble; that thereupon the defendant
redioed its tugboat Tamban' which was
docked at Batangas, ordering it to
proceed to the place where the
Snapper' was;
 that at about 6am of February 4, 1947,
the master of the Snapper' attempted to
cast anchor but the water areas around
the Island were so deep that the anchor
did not touch bottom;
 that in the afternoon of the same day
the weather become worse as the wind
increased in intensity and the waves
were likewise increased in size and
force; that due to the rough condition of
the sea the anchor chains of the
Snapper and the four barges broke one
by one which ultimately caused it to sink,
that the gasoline it had on board leaked
out. Defendant as a result, failed to
transport it to its place of destination.
Issue: W/N the failure to deliver the gasoline to
its place of destination is due to accident or
force majeure and therefore exempts the
defendant from liability.
Held:
 No. The loss of the gasoline certainly
cannot be said to be due to force
majeure or unforeseen event but to the
failure of defendant to extend adequate
and proper help
 Defendant did not use reasonable
diligence in putting the tugboat in such a
condition as would make its use safe for
operation. (No Special permit from
Bureau of customs because it was
never dry-dock)
 Defendant also failed to carry on board
the necessary spare parts. When the
idler was broken, the engineer of the
tugboat examined it for the first time and
it was only then that he found that there
were no spare parts to use except a
worn out spare driving chain.
 Another circumstance refers to the
deficiency or incomplete in the man
power of the tug boat. It was only
manned by one master, who was merely
licensed as a bay, river and lake patron.
 More than twenty-four hours had
elapsed before the tug "Tamban"
showed up to extend help. The delay
was caused not so much because of the
7
lack of available ships in the vicinity
where the "Snapper" stalled but
because defendant did not have in
readiness any tugboat sufficient in
tonnage and equipment to attend to the
rescue.
CHAPTER 2
De Guzman v. CA
Facts: Ernesto Cendana was a junk dealer.
He buys scrap materials and brings those that
he gathered to Manila for resale using 2 six-
wheeler trucks. On the return trip to
Pangasinan, respondent would load his
vehicle with cargo which various merchants
wanted delivered, charging fee lower than the
commercial rates. Petitioner Pedro de Guzman
contracted with respondent for the delivery
of 750 cartons of Liberty Milk. Only 150
boxes were delivered to petitioner because
the truck carrying the boxes was hijacked
along the way. Petitioner commenced an action
claiming the value of the lost merchandise.
Petitioner argues that respondent, being a
common carrier, is bound to exercise
extraordinary diligence, which it failed to do.
Private respondent denied that he was a
common carrier, and so he could not be held
liable for force majeure.
Issues: (1) Whether or not private respondent is
a common carrier. Yes
(2) Whether private respondent is liable for the
loss of the goods. No
Held:
(1) Article 1732 makes no distinction
between one whose principal business
activity is the carrying of persons or goods
or both, and one who does such carrying
only as an ancillary activity. Article 1732 also
carefully avoids making any distinction between
a person or enterprise offering transportation
service on a regular or scheduled basis and one
offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services
to the "general public," i.e., the general
community or population, and one who offers
services or solicits business only from a narrow
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Atty. Golangco
segment of the general population. It appears to
the Court that private respondent is properly
characterized as a common carrier even though
he merely "back-hauled" goods for other
merchants from Manila to Pangasinan, although
such backhauling was done on a periodic or
occasional rather than regular or scheduled
manner, and even though private respondent's
principal occupation was not the carriage of
goods for others. There is no dispute that private
respondent charged his customers a fee for
hauling their goods; that fee frequently fell below
commercial freight rates is not relevant here. A
certificate of public convenience is not a
requisite for the incurring of liability under the
Civil Code provisions governing common
carriers.
(2) Article 1734 establishes the general rule that
common carriers are responsible for the loss,
destruction or deterioration of the goods which
they carry, "unless the same is due to any of the
following causes only:
a. Flood, storm, earthquake, lightning, or other
natural disaster or calamity;
b. Act of the public enemy in war, whether
international or civil;
c. Act or omission of the shipper or owner of the
goods;
d. The character of the goods or defects in the
packing or in the containers; and
e. Order or act of competent public authority."
The hijacking of the carrier's truck - does not fall
within any of the five (5) categories of exempting
causes listed in Article 1734. Private respondent
as common carrier is presumed to have been at
fault or to have acted negligently. This
presumption, however, may be overthrown by
proof of extraordinary diligence on the part of
private respondent. We believe and so hold that
the limits of the duty of extraordinary
diligence in the vigilance over the goods carried
are reached where the goods are lost as a result
of a robbery which is attended by "grave or
irresistible threat, violence or force." we hold
that the occurrence of the loss must
reasonably be regarded as quite beyond the
control of the common carrier and properly
8
regarded as a fortuitous event. It is
necessary to recall that even 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.
FABRE VS. CA
Facts: Petitioners Fabre, Jr. and his wife were
owners of a Mazda minibus. They used the bus
principally in connection with a bus service for
school children which they operated in Manila
driven by Porfirio Cabil. On November 2, 1984
private respondent Word for the World
Christian Fellowship Inc. (WWCF) arranged
with the petitioners for the transportation of
33 members of its Young Adults Ministry
from Manila to La Union and back in
consideration of which, petitioners were paid the
amount of P3,000.00.
The usual route to Caba, La Union was through
Carmen, Pangasinan. However, the bridge at
Carmen was under repair, so that petitioner
Cabil, who was unfamiliar with the area (it
being his first trip to La Union), was forced to
take a detour through the town of Ba-ay in
Lingayen, Pangasinan. At 11:30 that night,
petitioner Cabil came upon a sharp curve on the
highway. The road was slippery because it was
raining, causing the bus, which was running at
the speed of 50 kilometers per hour, to skid to
the left road shoulder. The bus hit the left traffic
steel brace and sign along the road and rammed
the fence of one Jesus Escano, then turned over
and landed on its left side, coming to a full stop
only after a series of impacts. The bus came to
rest off the road. A coconut tree which it had hit
fell on it and smashed its front portion. Because
of the mishap, several passengers were injured
particularly Amyline Antonio.
Issue: Whether the spouses Fabre are common
carriers?
Held:
Yes. Spouses Fabre are common carriers. The
Supreme Court held that this case actually
involves a contract of carriage. Petitioners, the
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Fabres, did not have to be engaged in the
business of public transportation for the
provisions of the Civil Code on common
carriers to apply to them. As this Court has
held: 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.
The above article makes no distinction
between one whose principal business
activity is the carrying of persons or goods
or both, and one who does such carrying
only as an ancillary activity (in local idiom,
as "a sideline"). Article 1732 also carefully
avoids making any distinction between a person
or enterprise offering transportation service on a
regular or scheduled basis and one offering
such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its
services to the "general public," i.e., the
general community or population, and one
who offers services or solicits business only
from a narrow segment of the general
population. We think that Article 1732
deliberately refrained from making such
distinctions.
Facts: Rodolfo Cipriano, representing
CIPTRADE, entered into a hauling contract
with Jibfair Shipping Agency Corporation
whereby the former bound itself to haul the
latter’s 2000m/tons of soya bean meal from
Manila to Calamba. CIPTRADE subcontracted
with petitioner Estrellita Bascos to transport
and deliver the 400 sacks of soya beans.
Petitioner failed to deliver the cargo, and as a
consequence, Cipriano paid Jibfair the
amount of goods lost in accordance with
their contract. Cipriano demanded
reimbursement from petitioner but the latter
refused to pay. Cipriano filed a complaint for
breach of contract of carriage. Petitioner denied
that there was no contract of carriage since
CIPTRADE leased her cargo truck, and that the
hijacking was a force majeure.
Issues: Was petitioner a common carrier? Was
the hijacking referred to a force majeure?
9
Held: (1) Article 1732 of the Civil Code defines a
common carrier as "(a) person, corporation or
firm, or association engaged in the business of
carrying or transporting passengers or goods or
both, by land, water or air, for compensation,
offering their services to the public." The test to
determine a common carrier is "whether the
given undertaking is a part of the business
engaged in by the carrier which he has held
out to the general public as his occupation
rather than the quantity or extent of the
business transacted." In this case, petitioner
herself has made the admission that she was in
the trucking business, offering her trucks to
those with cargo to move.
(2) Common carriers are obliged to observe
extraordinary diligence in the vigilance over
the goods transported by them. Accordingly,
they are presumed to have been at fault or to
have acted negligently if the goods are lost,
destroyed or deteriorated. There are very few
instances when the presumption of negligence
does not attach and these instances are
enumerated in Article 1734. In those cases
where the presumption is applied, the common
carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption.
The presumption of negligence was raised
against petitioner. It was petitioner's burden to
overcome it. Thus, contrary to her assertion,
private respondent need not introduce any
evidence to prove her negligence. Her own
failure to adduce sufficient proof of
extraordinary diligence made the
presumption conclusive against her.
HERMINIO L. NOCUM vs. LAGUNA TAYABAS
BUS COMPANY
FACTS:
A man with a box which is folded and tied with
abaca went up the baggage compartment of the
bus no. 120 then about to make a trip to Laguna,
where he already was and said box was placed
under the seat. They left Azcarraga at about
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11:30 in the morning and when the explosion
occurred, he was thrown out. 37 passengers
were injured. The bus conductor, Sancho
Mendoza, testified that the box belonged to a
passenger whose name he does not know and
who told him that it contained miscellaneous
items and clothes. He helped the owner in
loading the baggage which weighed about
twelve (12) kilos and because of company
regulation, he charged him for it twenty-five
centavos (P0.25). From its appearance there
was no indication at all that the contents were
explosives or firecrackers. Neither did he open
the box because he just relied on the word of the
owner.
Dispatcher Nicolas Cornista of defendant
company (Laguna Tayabas Bus Co) added that
they were not authorized to open the baggages
of passengers because instruction from the
management was to call the police if there were
packages containing articles which were against
regulations.
ISSUE:
1. Whether or not the the lower court erred in not
absolving the defendant company from liability
fir the reason of failure to exercise the diligence
required of a common carrier.
HELD:
1. Yes. According to the lower court, "if proper
and rigid inspection were observed by the
defendant, the contents of the box could have
been discovered and the accident avoided.
Refusal by the passenger to have the package
opened was no excuse because, as stated by
Dispatcher Cornista, employees should call the
police if there were packages containing articles
against company regulations." But it is Our
considered opinion that the law does not
require as much. Article 1733 is not as
unbending for it reasonably qualifies the
extraordinary diligence required of common
carriers for the safety of the passengers
transported by them to be "according to all the
circumstances of each case." In fact, Article
10
1755 repeats this same qualification: "A
common carrier is bound to carry the
passengers safely as far as human care and
foresight can provide, using the utmost diligence
of very cautious persons, with due regard for
all the circumstances."
Fairness demands that in measuring a common
carrier's duty towards its passengers, allowance
must be given to the reliance that should be
reposed on the sense of responsibility of all
the passengers in regard to their common
safety. It is to be presumed that a passenger
will not take with him anything dangerous to
the lives and limbs of his co-passengers, not
to speak of his own. Not to be lightly considered
must be the right to privacy to which each
passenger is entitled. He cannot be subjected to
any unusual search, when he protests the
innocuousness of his baggage and nothing
appears to indicate the contrary, as in the case
at bar
"In assuming the liability of a railroad to its
passengers for injury done by another
passenger, only where the conduct of this
passenger had been such before the injury as to
induce a reasonably prudent and vigilant
conductor to believe that there was reasonable
ground to apprehend violence and danger to the
other passengers, and in that case asserting it to
be the duty of the conductor of the railroad train
to use all reasonable means to prevent such
injury, and if he neglects this reasonable duty,
and injury is done, that then the company is
responsible; that otherwise the railroad is not
responsible." (Clarke v. Louisville)
Explosive or Dangerous Contents. — A carrier is
ordinarily not liable for injuries to passengers
from fires or explosions caused by articles
brought into its conveyances by other
passengers, in the absence of any evidence that
the carrier, through its employees, was aware of
the nature of the article or had any reason to
anticipate danger therefrom. ((Bogard v. Illinois)
We deem it unnecessary to rule whether or not
there was any fortuitous event in this case.
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BATANGAS LAGUNA TAYABAS BUS
COMPANY & ARMANDO PON vs.
INTERMEDIATE APPELLATE COURT
FACTS:
The collision between Bus of the Batangas
Laguna Tayabas Bus Company (BLTB) driven
by Armando Pon and Bus of Superlines
Transportation Company (Superlines) driven by
Ruben Dasco took place at the highway
traversing Barangay Isabong, Tayabas, Quezon
in the afternoon of August 11, 1978, which
collision resulted in the death of Aniceto
Rosales, Francisco Pamfilo and Romeo Neri
and in several injuries to Nena Rosales (wife
of Anecito) and Baylon Sales, all passengers of
the BLTB Bus. The evidence shows that as
BLTB Bus tried to overtake a Ford Fiera car just
as Superlines bus was coming from the opposite
direction. Driver of the BLTB Bus made a
belated attempt to slacken the speed of his bus
and tried to return to his proper lane. It was an
unsuccessful try as the two (2) buses collided
with each other.
The lower court exonerated 1 defendants
Superlines and its driver Dasco from liability and
attributed sole responsibility to defendants BLTB
and its driver Pon, and ordered them jointly and
severally to pay damages to the plaintiffs.
ISSUE:
1.Whether or not driver of BLTB bus, Armando
Pon liable.
2. Whether or not BLTB is liable?
HELD:
1. Yes. The liability of the driver springs from
quasi delict. The proximate cause of the collision
resulting in the death of three and injuries to two
of the passengers of BLTB was the sole
negligence of the driver of the BLTB Bus,
who recklessly operated and drove said bus in a
1 It is no surprise then that the driver of the Superlines bus
was exonerated by the lower court. He had a valid reason to
presuppose that no one would overtake in such a dangerous
situation.
11
lane where overtaking is not allowed by Traffic
Rules and Regulations
A driver abandoning his proper lane for the
purpose of overtaking another vehicle in
ordinary situation has the duty to see that the
road is clear and not to proceed if he can not do
so in safety.
Driver Pon failed to follow such rule when the
overtaking took place on an ascending curved
highway divided into two lanes by a continuous
yellow line.
2. Yes. The liability of BLTB Company springs
from contract
The liability of the bus co. is primary, direct and
immediate in view of the fact that the death of or
injuries to its passengers was through the
negligence of its employee and such liability
does not cease even upon proof that BLTB had
exercised all the diligence of a good father of a
family in the selection and supervision of its
employees.
By the contract of carriage, the carrier BLTB
assumed the express obligation to transport the
passengers to their destination safely and to
observe extraordinary diligence with a due
regard for all the circumstances, and any injury
that might be suffered by its passengers is right
away attributable to the fault or negligence of the
carrier The bus company and driver are
solidarily liable.
PHILIPPINE AIRLINES, INC. v. CA and
PEDRO ZAPATOS
G.R. No. L-82619 September 15, 1993
FACTS:
On August 2, 1976, Pedro Zapatos was among
the 21 passengers of PAL Flight 477 that took
off from Cebu bound for Ozamiz City. The
routing of this flight was Cebu-Ozamiz-Cotabato.
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Before landing at Ozamiz City, the pilot received
a radio message that the airport was closed due
to heavy rains and that he should proceed to
Cotabato City instead.
Upon arrival at Cotabato City, the PAL Station
Agent informed the passengers of their options
as follows:
1. To return to Cebu on Flight 560 of the
same day and then to Ozamiz City on August 4,
1975;
2. Take the next flight to Cebu the
following day; or
3. Remain at Cotabato and take the next
available flight to Ozamiz City on August 5, 1975.
The PAL Agent likewise informed them that
Flight 560 bound for Manila:
1. Would make a stop-over at Cebu to
bring some of the diverted passengers;
2. That there were only 6 seats available
as there were already confirmed passengers for
Manila; and
3. That the basis for priority would be the
check-in sequence at Cebu (PAL Flight 477).
Pedro chose to return to Cebu but was not
accommodated because he checked-in as
passenger No. 9 on Flight 477. He insisted on
being given priority over the confirmed
passengers in the accommodation, but the
Station Agent refused Pedro’s demand
explaining that his predicament was not due to
PAL's own doing but to be a force majeure. As
a result, Pedro was left at the airport and could
not even hitch a ride in the Ford Fiera loaded
with PAL personnel. PAL neither provided Pedro
with transportation from the airport to the city
proper nor food and accommodation for his stay
in Cotabato City.
On November 25, 1976, Pedro filed a complaint
for damages for breach of contract of carriage
12
against PAL, before the then CFI, now Regional
Trial Court, of Misamis Occidental, at Ozamiz
City. PAL filed its answer denying that it
unjustifiably refused to accommodate private
respondent.
Lower Court Decision
CFI held PAL liable in damages for breach of
contract.
Appellate Court Decision
CA affirmed the lower court decision. PAL then
sought recourse to Supreme Court by way of a
petition for review on certiorari.
ISSUE:
Whether or not PAL breached its obligation to
Pedro Zapatos.
HELD:
Yes. PAL is liable in damages for breach of
contract. PAL asserts that:
1. It should not be charged with the task of
looking after the passengers' comfort and
convenience because the diversion of the flight
was due to a fortuitous event;
2. If made liable, an added burden is given
to PAL which is over and beyond its duties
under the contract of carriage;
3. Granting arguendo that negligence
exists, PAL cannot be liable in damages in the
absence of fraud or bad faith;
4. Pedro failed to apprise PAL of the
nature of his trip and possible business losses;
and
5. Pedro himself is to be blamed for
unreasonably refusing to use the free ticket
which PAL issued.
Duty of Common Carrier: Extraordinary
Diligence
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The position taken by PAL clearly illustrates its
failure to grasp the exacting standard required
by law. 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. Undisputably, PAL's
diversion of its flight due to inclement weather
was a fortuitous event. Nonetheless, such
occurrence did not terminate PAL's contract with
its passengers. Being in the business of air
carriage [and the sole one to operate in the
country], PAL is deemed equipped to deal with
situations as in the case at bar.
If the cause of non-fulfillment of the contract is
due to a fortuitous event, it has to be the sole
and only cause
It has not been disputed by PAL that Ozamis
City has no all-weather airport and has to cancel
its flight to Ozamis City or by-pass it in the event
of inclement weather. Knowing this fact, it
becomes PAL’s duty to provide all means of
comfort and convenience to its passengers
when they would have to be left in a strange
place in case of such by-passing. The steps
taken by PAL towards this end has not been put
in evidence, especially for those 7 others who
were not accommodated in the return trip to
Cebu, only 6 of the 21 having been so
accommodated. Pedro had to leave on the next
flight 2 days later. If the cause of non-fulfillment
of the contract is due to a fortuitous event, it has
to be the sole and only cause (Art. 1755 CC., Art.
1733 C.C.) Since part of the failure to comply
with the obligation of common carrier to deliver
its passengers safely to their destination lay in
the PAL’s failure to provide comfort and
convenience to its stranded passengers using
extra-ordinary diligence, the cause of non-
fulfillment is not solely and exclusively due to
fortuitous event, but due to something which
defendant airline could have prevented, PAL is
thus liable to Pedro.
13
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.
Hence, PAL necessarily would still have to
exercise extraordinary diligence in safeguarding
the comfort, convenience and safety of its
stranded passengers until they have reached
their final destination. On this score, PAL grossly
failed considering the then ongoing battle
between government forces and Muslim rebels
in Cotabato City and the fact that the Pedro
Zapatos was a stranger to the place
Other issues tackled; Damages
Anent the plaint that PAL employees were
disrespectful and inattentive toward private
respondent, the records are bereft of evidence
to support the same. Thus, the ruling of
respondent Court of Appeals in this regard is
without basis. On the contrary, private
respondent was attended to not only by the
personnel of PAL but also by its Manager."
In the light of these findings, we find the award
of moral damages of Fifty Thousand Pesos
(P50,000.00) unreasonably excessive; hence,
we reduce the same to Ten Thousand Pesos
(P10,000.00). Conformably herewith, the award
of exemplary damages is also reduced to five
Thousand Pesos (5,000.00). Moral damages are
not intended to enrich the private respondent.
They are awarded only to enable the injured
party to obtain means, diversion or amusements
that will serve to alleviate the moral suffering he
has undergone by reason of the defendant's
culpable action.
With regard to the award of actual damages in
the amount of P5,000.00 representing private
respondent's alleged business losses
occasioned by his stay at Cotabato City, we find
the same unwarranted. Private respondent's
testimony that he had a scheduled business
"transaction of shark liver oil supposedly to have
been consummated on August 3, 1975 in the
morning" and that "since (private respondent)
was out for nearly two weeks I missed to buy
about 10 barrels of shark liver oil," are purely
speculative. Actual or compensatory damages
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cannot be presumed but must be duly proved
with reasonable degree of certainty. A court
cannot rely on speculation, conjecture or
guesswork as to the fact and amount of
damages, but must depend upon competent
proof that they have suffered and on evidence of
the actual amount thereof.
CONRADA VDA. DE ABETO, CARMELO
ABETO, CECILIA ABETO, CONCEPCION
ABETO, MARIA ABETO, ESTELA ABETO,
PERLA ABETO, PATRIA ABETO and
ALBERTO ABETO v.
PHILIPPINE AIR LINES, INCORPORATED
G.R. No. L-28692 July 30, 1982
FACTS:
On November 23, 1960, listed as the No. 18
passenger, Judge Quirico Abeto boarded the
PAL’s PI-C133 plane at the Mandurriao Airport,
Iloilo City for Manila. The plane did not reach its
destination. After three weeks, it was
ascertained that the plane crashed at Mt. Baco,
Province of Mindoro. All the passengers,
including Judge Abeto, must have been killed
instantly. Among the articles recovered on the
site of the crash was a leather bag with the
name "Judge Quirico Abeto." Subsequently, the
heirs of Judge Abeto were compelled to file a
case against because PAL would not hear their
demands for settlement of damages. PAL tried
to prove that the plane crash at Mt. Baco was
beyond the control of the pilot, arguing the
following:
1. The plane at the time of the crash was
certified airworthy;
2. There was navigational error but no
negligence or malfeasance on the part of the
pilot.
14
3. The plane had undergone checks for
quality control;
4. Further, deviation from its prescribed
route was due to the bad weather conditions
which caused the plane to drift to Mt. Baco.
Under the circumstances, PAL argues that the
crash was a fortuitous event and, therefore, it
cannot be held liable under the provisions of
Article 1174 of the New Civil Code. Besides,
appellant tried to prove that it had exercised all
the cares, skill and diligence required by law on
that particular flight in question.
Lower Court Decision
PAL’s pilot was negligent for the following
reasons:
1. That the Pilot of the plane disobeyed
instruction given in not following the route of
Amber 1 prescribed by the CAA in Violation of
Standard Regulation.
2. The defendant failed to perform the pre-
flight test on plane PIC-133 before the same
took off from Mandurriao Airport to Manila in
order to find out a possible defect of the plane.
3. When the PAL allowed during the flight
in question, student Officer Rodriguez on
training.
4. When the Pilot during the flight in
question failed or did not report his position over
Romblon which is a compulsory reporting point.
ISSUE:
Whether or not PAL is liable for violation of its
contract of carriage.
HELD:
Yes. PAL’s pilot was negligent.
The prescribed airway of plane PI-C133 that
afternoon of November 23, 1960, with Capt. de
Mesa, as the pilot, was Iloilo-Romblon-Manila,
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denominated as airway "Amber l," and the
prescribed elevation of the flight was 6,000 ft.
The pilot did not follow the designated route for
his flight between Romblon and Manila.
The weather was clear and he was supposed to
cross airway "Amber I" over Romblon; instead,
he made a straight flight to Manila in violation of
air traffic rules, thus, crashed the plane at Mt.
Baco. According to PAL’s witness, Ramon A.
Pedroza, Administrative Assistant of the PAL,
this tragic crash would have not happened had
the pilot continued on the route indicated. The
provisions of the Civil Code on this question of
liability are clear and explicit.
1. Article 1733 binds common carriers,
"from the nature of their business and by
reasons of public policy, ... to observe
extraordinary diligence in the vigilance ... for the
safety of the passengers transported by them
according to all the circumstances of each
case."
2. Article 1755 establishes the standard of
care required of a common carrier, which is, "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."
3. Article 1756 fixes the burden of proof by
providing that "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 extra-
ordinary diligence as prescribed in Articles 1733
and 1755."
4. Lastly, Article 1757 states that "the
responsibility of a common carrier for the safety
of passengers ... cannot be dispensed with or
lessened by stipulation, by the posting of notices,
by statements on tickets, or otherwise."
15
MALAYAN INSURANCE CO., INC., vs.
PHILIPPINES FIRST INSURANCE CO., INC.
and REPUTABLE FORWARDER SERVICES,
INC. G.R. No. 184300, July 11, 2012
FACTS:
Since 1989, Wyeth and Reputable (Carrier) had
been annually executing a contract of carriage,
whereby Reputable undertook to transport and
deliver the Wyeth’s products to its customers,
dealers or salesmen.
On November 18, 1993, Wyeth procured a
Marine Policy from Philippines First Insurance.
Subsequently, on December 1, 1993, Wyeth
executed its annual contract of carriage with
Reputable.
On October 6, 1994, Reputable received from
Wyeth 1,000 boxes of Promil Infant Formula
worth P2,357,582.70 to be delivered to Mercury
Drug Corporation in Libis, Quezon City.
Unfortunately, on the same date, the truck
carrying Wyeth’s products was hijacked by
about 10 armed men. Thus, Philippines First,
pursuant to the Marine Policy, indemnified
Wyeth. Philippines First then demanded
reimbursement from Reputable, having been
subrogated to the rights of Wyeth, but such
demand was ignored. Consequently, Philippines
First instituted an action for sum of money
against Reputable alleging that Reputable is a
"private corporation engaged in the business of
a common carrier."
In its answer, Reputable claimed that:
1. It is a private carrier;
2. It cannot be made liable under the
contract of carriage with Wyeth since the
contract was not signed by Wyeth’s
representative; and
3. The cause of the loss was force majeure,
i.e., the hijacking incident.
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Subsequently, Reputable impleaded Malayan as
third-party defendant in an effort to collect the
amount covered in the SR Policy. According to
Reputable, "it was validly insured with Malayan
for P1,000,000.00 with respect to the lost
products under the latter’s Insurance Policy and
that the SR Policy covered the risk of robbery or
hijacking.
Lower Court Decision
RTC found Reputable liable to Philippines First
for the amount of indemnity it paid to Wyeth. In
turn, Malayan was found by the RTC to be liable
to Reputable to the extent of the policy coverage.
Dissatisfied, both Reputable and Malayan filed
their respective appeals from the RTC decision.
Reputable asserted that the RTC erred in
holding that its contract of carriage with Wyeth
was binding despite Wyeth’s failure to sign the
same. For its part, Malayan invoked Section 5
of its SR Policy. It argued that inasmuch as
there was already a marine policy issued by
Philippines First securing the same subject
matter against loss and that since the monetary
coverage/value of the Marine Policy is more
than enough to indemnify the hijacked cargo,
Philippines First alone must bear the loss.
Appellate Court Decision
The CA ruled, among others, that:
1. Reputable is a private carrier and should
be bound by the contractual stipulations in the
contract of carriage.
2. Reputable is estopped from assailing
the validity of the contract of carriage on the
ground of lack of signature of Wyeth’s
representative/s;
3. Reputable is liable under the contract for
the value of the goods even if the same was lost
due to fortuitous event; and
4. Section 12 of the SR Policy prevails
over Section 5, it being the latter provision;
however, since the ratable proportion provision
16
of Section 12 applies only in case of double
insurance, which is not present, then it should
not be applied and Malayan should be held
liable for the full amount of the policy coverage,
that is, P1,000,000.00.
Malayan contends that the CA erred when it
held that Reputable is a private carrier and
should be bound by the contractual stipulations
in the contract of carriage. This argument is
based on its assertion that Philippines First
judicially admitted in its complaint that Reputable
is a common carrier and as such, Reputable
should not be held liable pursuant to Article
1745(6) of the Civil Code. Necessarily, if
Reputable is not liable for the loss, then there is
no reason to hold Malayan liable to Reputable.
ISSUES:
1. Whether Reputable is a private carrier;
2. Whether Reputable is strictly bound by
the stipulations in its contract of carriage with
Wyeth, such that it should be liable for any risk
of loss or damage, for any cause whatsoever,
including that due to theft or robbery and other
force majeure;
3. Whether the RTC and CA erred in
rendering "nugatory" Sections 5 and Section 12
of the SR Policy; and
4. Whether Reputable should be held
solidarily liable with Malayan for the amount of
P998,000.00 due to Philippines First.
HELD:
1. Reputable is a private carrier.
Judicial admission is conclusive only as against
the pleader
Malayan relies on the alleged judicial admission
of Philippines First in its complaint that
Reputable is a common carrier. It is true that
judicial admissions, such as matters alleged in
the pleadings do not require proof, and need not
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be offered to be considered by the court. The
rule, however, also states that such admission is
conclusive as against the pleader, In this case,
the pleader who alleged that Reputable is a
common carrier was Philippines First. It cannot,
by any stretch of imagination, be made
conclusive as against Reputable whose nature
of business is in question.
Philippines First is NOT privy to the SR Policy
between Wyeth and Reputable but a mere
subrogee
Philippines First is not in any position to make
any admission, much more a definitive
pronouncement, as to the nature of Reputable’s
business and there appears no other connection
between Philippines First and Reputable which
suggests mutual familiarity between them.
Reputable’s contrary admission reduced the
admission of Philippines First into a mere
allegation
Moreover, records show that the alleged judicial
admission of Philippines First was essentially
disputed by Reputable in its answer when it
stated that it is actually a private or special
carrier. In addition, Reputable stated in its third-
party complaint that it is "a private carrier
engaged in the carriage of goods.” Such
allegation was, in turn, admitted by Malayan in
its answer to the third-party complaint.
Finally, Reputable serves only one customer,
Wyeth.
More importantly, the finding of the RTC and CA
that Reputable is a private carrier is warranted
by the evidence on record, primarily, the
unrebutted testimony of Reputable’s Vice
President and General Manager who expressly
stated in open court that Reputable serves only
one customer, Wyeth.
Under Article 1732 of the Civil Code, common
carriers are persons, corporations, firms, or
associations engaged in the business of carrying
or transporting passenger or goods, or both by
land, water or air for compensation, offering their
17
services to the public. On the other hand, a
private carrier is one wherein the carriage is
generally undertaken by special agreement and
it does not hold itself out to carry goods for the
general public. A common carrier becomes a
private carrier when it undertakes to carry a
special cargo or chartered to a special person
only. For all intents and purposes, therefore,
Reputable operated as a private/special carrier
with regard to its contract of carriage with Wyeth.
2. Reputable is bound by the terms of the
contract of carriage.
The extent of a private carrier’s obligation is
dictated by the stipulations of a contract it
entered into. The Civil Code provisions on
common carriers should not be applied where
the carrier is not acting as such but as a private
carrier. Public policy governing common carriers
has no force where the public at large is not
involved.
Thus, being a private carrier, the extent of
Reputable’s liability is fully governed by the
stipulations of the contract of carriage, one of
which is that it shall be liable to Wyeth for the
loss of the goods/products due to any and all
causes whatsoever, including theft, robbery and
other force majeure while the goods/products
are in transit and until actual delivery to Wyeth’s
customers, salesmen and dealers.
3. Other insurance vis-à-vis over insurance
(Insurance Related Issue; Skip)
Malayan posits that Sections 5 and 12 are
separate provisions applicable under distinct
circumstances. Malayan argues that "it will not
be completely absolved under Section 5 of its
policy if it were the assured itself who obtained
additional insurance coverage on the same
property and the loss incurred by Wyeth’s cargo
was more than that insured by Philippines First’s
marine policy. On the other hand, Section 12 will
not completely absolve Malayan if additional
insurance coverage on the same cargo were
obtained by someone besides Reputable, in
which case Malayan’s SR policy will contribute
or share ratable proportion of a covered cargo
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loss." Malayan’s position cannot be
countenanced. Both Sections presuppose the
existence of a double insurance. By the express
provision of Section 93 of the Insurance Code,
double insurance exists where the same person
is insured by several insurers separately in
respect to the same subject and interest.
In the present case, while it is true that the
Marine Policy and the SR Policy were both
issued over the same subject matter, i.e. goods
belonging to Wyeth, and both covered the same
peril insured against, it is, however, beyond cavil
that the said policies were issued to two different
persons or entities. Therefore, even though the
two concerned insurance policies were issued
over the same goods and cover the same risk,
there arises no double insurance since they
were issued to two different persons/entities
having distinct insurable interests. Necessarily,
over insurance by double insurance cannot
likewise exist. Hence, as correctly ruled by the
RTC and CA, neither Section 5 nor Section 12 of
the SR Policy can be applied.
4. Reputable is not solidarily liable with
Malayan.
There is solidary liability only when the
obligation expressly so states, when the law so
provides or when the nature of the obligation so
requires.
Where the insurance contract provides for
indemnity against liability to third persons, the
liability of the insurer is direct and such third
persons can directly sue the insurer. The direct
liability of the insurer under indemnity contracts
against third party [-] liability does not mean,
however, that the insurer can be held solidarily
liable with the insured and/or the other parties
found at fault, since they are being held liable
under different obligations.
The liability of the insured carrier or vehicle
owner is based on tort, in accordance with the
provisions of the Civil Code; while that of the
insurer arises from contract, particularly, the
18
insurance policy. Suffice it to say that Malayan's
and Reputable's respective liabilities arose from
different obligations- Malayan's is based on the
SR Policy while Reputable's is based on the
contract of carriage.
SPOUSES FERNANDO and LOURDES
VILORIA v. CONTINENTAL AIRLINES, INC.
G.R. No. 188288, January 16, 2012
FACTS:
The Spouses Viloria purchased from Continental
Airlines (CAI) tickets through the
misrepresentation of its travel agent Mager,
which the spouses now seek to be refunded.
CAI insists on the non-refundability and non-
transferability of its tickets, forcing the spouses
to file a complaint against them. The RTC ruled
in favor of the spouses, but the CA subsequently
reversed it, hence, this petition for review.
The facts show that on July 21, 1997 and while
in the US, Fernando purchased two (2) round
trip airline tickets from San Diego, California to
Newark, New Jersey via Continental Airlines
(CAI) priced at US$400.00 each from a travel
agency called “Holiday Travel” and was
attended to by a certain Margaret Mager.
Fernando agreed to buy the said tickets after
Mager informed them that there were no
available seats at Amtrak.
Subsequently, Fernando requested Mager to
reschedule their flight to Newark to an earlier
date. However, Mager informed him that flights
to Newark, New Jersey via CAI were already
fully booked and offered the alternative of a
round trip flight via Frontier Air. This led
Fernando to request for a refund but was
denied by Mager as the subject tickets are non-
refundable. Thus, Fernando decided to reserve
two (2) seats with Frontier Air.
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Fernando, however, saw an Amtrak station and
made inquiries and was told that seats are
actually available and he can travel on Amtrak
anytime and any day he pleased. Fernando then
confronted Mager, telling her that she had
misled them into buying the CAI tickets.
Fernando reiterated his demand for a refund but
Mager was firm in her position that the subject
tickets are non-refundable.
Upon returning to Philippines, Fernando sent a
letter to CAI , again reiterating his demands. His
request was denied in a letter dated March 24,
1998 and was advised that he may take the
subject tickets to any Continental ticketing
location for the re-issuance of new tickets and
that the subject tickets may be used as a form of
payment for the purchase of another Continental
ticket.
Fernando went to Continental’s ticketing office at
Makati City to have the subject tickets replaced
by a single round trip ticket to L.A. California
under his name. Therein, Fernando was
informed that Lourdes’ ticket was non-
transferable, thus, cannot be used for the
purchase of a ticket in his favor. He was also
informed that he would have to pay what will not
be covered by the value of his San Diego,
California to Newark, New Jersey round trip
ticket.
Fernando demanded for the refund of the
subject tickets as he no longer wished to have
them replaced. In addition to the dubious
circumstances under which the subject tickets
were issued, Fernando claimed that CAI’s act of
charging him with US$1,867.40 for a round trip
ticket to Los Angeles, which other airlines priced
at US$856.00, and refusal to allow him to use
Lourdes’ ticket, breached its undertaking under
its March 24, 1998 letter.
Spouses Viloria thereafter filed a complaint
against CAI, asking for a refund, moral damages,
exemplary damages and attorney’s fees. On the
other hand, CAI interposed the following
defenses:
19
1. Spouses Viloria have no right to ask for
a refund as the subject tickets are non-
refundable;
2. Fernando cannot insist on using the
ticket in Lourdes’ name for the purchase of a
round trip ticket to Los Angeles since the same
is non-transferable;
3. As Mager is not a CAI employee, CAI is
not liable for any of her acts;
4. CAI, its employees and agents did not
act in bad faith as to entitle Spouses Viloria to
moral and exemplary damages and attorney’s
fees. CAI also invoked the following clause
printed on the subject tickets:
“3. To the extent not in conflict with the foregoing
carriage and other services performed by each
carrier are subject to: (i) provisions contained in
this ticket, (ii) applicable tariffs, (iii) carrier’s
conditions of carriage and related regulations
which are made part hereof (and are available
on application at the offices of carrier), except in
transportation between a place in the United
States or Canada and any place outside thereof
to which tariffs in force in those countries apply.”
According to CAI, one of the conditions attached
to their contract of carriage is the non-
transferability and non-refundability of the
subject tickets.
Lower Court Decision
RTC ruled in favor of Spouses Viloria entitling
them to a refund in view of Mager’s
misrepresentation in obtaining their consent in
the purchase of the subject tickets.
Citing Articles 1868 and 1869 of the Civil Code,
the RTC ruled that Mager is CAI’s agent, hence,
bound by her bad faith and misrepresentation.
As far as the RTC is concerned, there is no
issue as to whether Mager was CAI’s agent in
view of CAI’s implied recognition of her status as
such in its March 24, 1998 letter.
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Furthermore, the RTC ruled that CAI acted in
bad faith in reneging on its undertaking to
replace the subject tickets when it charged
Fernando with the amount of US$1,867.40 for a
round trip ticket to Los Angeles and when it
refused to allow Fernando to use Lourdes’ ticket.
Appellate Court Decision
CA reversed the RTC’s Decision, holding that
CAI cannot be held liable for Mager’s act in the
absence of any proof that a principal-agent
relationship existed between CAI and Holiday
Travel. According to the CA, Spouses Viloria,
who have the burden of proof to establish the
fact of agency, failed to present evidence
demonstrating that Holiday Travel is CAI’s agent.
Furthermore, contrary to Spouses Viloria’s claim,
the contractual relationship between Holiday
Travel and CAI is not an agency but that of a
sale.
The CA also ruled that refund is not available to
Spouses Viloria as the word “non-refundable”
was clearly printed on the face of the subject
tickets, which constitute their contract with CAI.
Otherwise, it would violate the proscription
against impairment of contracts.
Finally, CA held that the matter of fixing the
prices for its services is CAI’s prerogative, which
Spouses Viloria cannot intervene.
ISSUES:
1. Does a principal-agent relationship exist
between CAI and Holiday Travel?
2. Assuming that an agency relationship
exists between CAI and Holiday Travel, is CAI
bound by the acts of Holiday Travel’s agents
and employees such as Mager?
3. Assuming that CAI is bound by the acts
of Holiday Travel’s agents and employees, can
the representation of Mager as to unavailability
of seats at Amtrak be considered fraudulent as
to vitiate the consent of Spouse Viloria in the
purchase of the subject tickets?
20
4. Is CAI justified in insisting that the
subject tickets are non-transferable and non-
refundable?
5. Is CAI justified in pegging a different
price for the round trip ticket to Los Angeles
requested by Fernando?
6. Alternatively, did CAI act in bad faith or
renege its obligation to Spouses Viloria to apply
the value of the subject tickets in the purchase
of new ones when it refused to allow Fernando
to use Lourdes’ ticket and in charging a higher
price for a round trip ticket to Los Angeles?
HELD:
1. A principal-agent relationship exists
between CAI and Holiday Travel.
The essential elements of agency are:
(1) there is consent, express or implied of the
parties to establish the relationship;
(2) the object is the execution of a juridical act in
relation to a third person;
(3) the agent acts as a representative and not
for himself, and
(4) the agent acts within the scope of his
authority.
Contrary to the findings of the CA, all the
elements of an agency exist in this case. The
first and second elements are present as CAI
does not deny that it concluded an agreement
with Holiday Travel, whereby Holiday Travel
would enter into contracts of carriage with third
persons on CAI’s behalf. The third element is
also present as it is undisputed that Holiday
Travel merely acted in a representative capacity
and it is CAI and not Holiday Travel who is
bound by the contracts of carriage entered into
by Holiday Travel on its behalf. The fourth
element is also present considering that CAI has
not made any allegation that Holiday Travel
exceeded the authority that was granted to it. In
fact, CAI consistently maintains the validity of
the contracts of carriage that Holiday Travel
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executed with Spouses Viloria and that Mager
was not guilty of any fraudulent
misrepresentation. That CAI admits the authority
of Holiday Travel to enter into contracts of
carriage on its behalf is easily discernible from
its letters, where it impliedly recognized the
validity of the contracts entered into by Holiday
Travel with Spouses Viloria. When Fernando
informed CAI that it was Holiday Travel who
issued to them the subject tickets, CAI did not
deny that Holiday Travel is its authorized agent.
Prior to Spouses Viloria’s filing of a complaint
against it, CAI never refuted that it gave Holiday
Travel the power and authority to conclude
contracts of carriage on its behalf. Estoppel is
primarily based on the doctrine of good faith and
the avoidance of harm that will befall an
innocent party due to its injurious reliance, the
failure to apply it in this case would result in
gross travesty of justice.
2. In actions based on quasi-delict, a
principal can only be held liable for the tort
committed by its agent’s employees if it has
been established by preponderance of evidence
that the principal was also at fault or negligent or
that the principal exercise control and
supervision over them.
An airline company is not completely exonerated
from any liability for the tort committed by its
agent’s employees. A prior determination of the
nature of the passenger’s cause of action is
necessary.
(1) If the passenger’s cause of action against the
airline company is premised on culpa aquiliana
or quasi-delict for a tort committed by the
employee of the airline company’s agent, there
must be an independent showing that the airline
company was at fault or negligent or has
contributed to the negligence or tortuous
conduct committed by the employee of its agent.
(2) On the other hand, if the passenger’s cause
of action for damages against the airline
company is based on contractual breach or
culpa contractual, the aggrieved party does not
have to prove that the common carrier was at
21
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.
Spouses Viloria’s cause of action on the basis of
Mager’s alleged fraudulent misrepresentation is
clearly one of tort or quasi-delict, there being no
pre-existing contractual relationship between
them. Therefore, it was incumbent upon
Spouses Viloria to prove that CAI was equally at
fault. However, the records are devoid of any
evidence by which CAI’s alleged liability can be
substantiated.
Also, a person’s vicarious liability is anchored on
his possession of control, whether absolute or
limited, on the tortfeasor. Without such control,
there is nothing which could justify extending the
liability to a person other than the one who
committed the tort. It is incumbent upon
Spouses Viloria to prove that CAI exercised
control or supervision over Mager by
preponderant evidence. The existence of control
or supervision cannot be presumed and CAI is
under no obligation to prove its denial or
nugatory assertion.
Therefore, without a modicum of evidence that
CAI was equally at fault or that CAI exercised
control over Holiday Travel’s employees, no
liability can be imposed on CAI for Mager’s
supposed misrepresentation.
3. Even on the assumption that CAI may
be held liable for the acts of Mager, still,
Spouses Viloria are not entitled to a refund.
Mager’s statement cannot be considered a
causal fraud that would justify the annulment of
the subject contracts that would oblige CAI to
indemnify Spouses Viloria and return the money
they paid for the subject tickets.
Article 1390, in relation to Article 1391 of the
Civil Code, provides that if the consent of the
contracting parties was obtained through fraud,
the contract is considered voidable and may be
annulled within four (4) years from the time of
the discovery of the fraud. Given the allegation
of Spouses Viloria that Fernando’s consent to
the subject contracts was supposedly secured
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by Mager through fraudulent means, it is plainly
apparent that their demand for a refund is
tantamount to seeking for an annulment of the
subject contracts on the ground of vitiated
consent.
Under Article 1338 of the Civil Code, there is
fraud when, through insidious words or
machinations of one of the contracting parties,
the other is induced to enter into a contract
which, without them, he would not have agreed
to. In order that fraud may vitiate consent, it
must be the causal (dolo causante), not merely
the incidental (dolo incidente), inducement to the
making of the contract. Also, fraud must be
serious and its existence must be established by
clear and convincing evidence. Mere
preponderance of evidence is not enough.
Spouses Viloria failed to prove by clear and
convincing evidence that Mager’s statement was
fraudulent. Specifically, Spouses Viloria failed to
prove that (a) there were indeed available seats
at Amtrak for a trip to New Jersey on August 13,
1997 at the time they spoke with Mager on July
21, 1997; (b) Mager knew about this; and (c)
that she purposely informed them otherwise.
4. Assuming the contrary, Spouses Viloria
are nevertheless deemed to have ratified the
subject contracts.
Even assuming that Mager’s representation is
causal fraud, the subject contracts have been
impliedly ratified when Spouses Viloria decided
to exercise their right to use the subject tickets
for the purchase of new ones. Under Article
1392 of the Civil Code, “ratification extinguishes
the action to annul a voidable contract.”
Ratification of a voidable contract is defined
under Article 1393 of the Civil Code. Implied
ratification may take diverse forms, such as by
silence or acquiescence; by acts showing
approval or adoption of the contract; or by
acceptance and retention of benefits flowing
therefrom.
22
Simultaneous with their demand for a refund on
the ground of Fernando’s vitiated consent
(annulment), Spouses Viloria likewise asked for
a refund based on CAI’s supposed bad faith
(resolution) in reneging on its undertaking to
replace the subject tickets with a round trip ticket
from Manila to LA. In doing so, Spouses Viloria
are actually asking for a rescission of the subject
contracts based on contractual breach.
However, annulment under Article 1390 of the
Civil Code and rescission under Article 1191
are two (2) inconsistent remedies.
Resolution Annulment
As to presence of essential elements of contract
All the elements to make the contract
valid are present. One of the essential
elements to a formation of a contract, which is
consent, is absent.
As to what stage of execution of the contract
that the defect is present The defect is in
the consummation stage of the contract when
the parties are in the process of performing their
respective obligations. The defect is already
present at the time of the negotiation and
perfection stages of the contract.
Accordingly, by pursuing the remedy of
rescission under Article 1191, the Vilorias had
impliedly admitted the validity of the subject
contracts, forfeiting their right to demand their
annulment. A party cannot rely on the contract
and claim rights or obligations under it and at the
same time impugn its existence or validity.
Indeed, litigants are enjoined from taking
inconsistent positions.
5. Contracts cannot be rescinded for a
slight or casual breach.
CAI cannot insist on the non-transferability of the
subject tickets.
Considering that the subject contracts are not
annullable on the ground of vitiated consent, the
next question is: “Do Spouses Viloria have the
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right to rescind the contract on the ground of
CAI’s supposed breach of its undertaking to
issue new tickets upon surrender of the subject
tickets?”
In its March 24, 1998 letter, CAI stated that
“non-refundable tickets may be used as a form
of payment toward the purchase of another
Continental ticket for $75.00, per ticket, reissue
fee ($50.00, per ticket, for tickets purchased
prior to October 30, 1997).”
Non-transferability cannot be inferred from CAI’s
letter
Clearly, there is nothing in the above-quoted
section of CAI’s letter from which the restriction
on the non-transferability of the subject tickets
can be inferred. Moreover, as CAI admitted, it
was only when Fernando had expressed his
interest to use the subject tickets for the
purchase of a round trip ticket between Manila
and L.A. that he was informed that he cannot
use the ticket in Lourdes’ name as payment.
Contrary to CAI’s claim, that the subject tickets
are non-transferable cannot be implied from a
plain reading of the provision printed on the
subject tickets stating that “[t]o the extent not in
conflict with the foregoing carriage and other
services performed by each carrier are subject
to: (a) provisions contained in this ticket, x x x
(iii) carrier’s conditions of carriage and related
regulations which are made part hereof (and are
available on application at the offices of carrier)
x x x.”
Common carrier must inform its passengers of
all the T/Cs of their contract to meet the required
EOD
As a common carrier whose business is imbued
with public interest, the exercise of extraordinary
diligence requires CAI to inform Spouses Viloria,
or all of its passengers for that matter, of all the
terms and conditions governing their contract of
carriage. CAI is proscribed from taking
23
advantage of any ambiguity in the contract of
carriage to impute knowledge on its passengers
of and demand compliance with a certain
condition or undertaking that is not clearly
stipulated. Since the prohibition on transferability
is not written on the face of the subject tickets
and CAI failed to inform Spouses Viloria thereof,
CAI cannot refuse to apply the value of Lourdes’
ticket as payment for Fernando’s purchase of a
new ticket.
6. CAI’s refusal to accept Lourdes’ ticket
for the purchase of a new ticket for Fernando is
only a casual breach.
The right to rescind a contract for non-
performance of its stipulations is not absolute
The general rule is that rescission of a contract
will not be permitted for a slight or casual breach,
but only for such substantial and fundamental
violations as would defeat the very object of the
parties in making the agreement. Whether a
breach is substantial is largely determined by
the attendant circumstances.
While CAI’s refusal to allow Fernando to use the
value of Lourdes’ ticket as payment for the
purchase of a new ticket is unjustified as the
non-transferability of the subject tickets was not
clearly stipulated, it cannot, however be
considered substantial. The endorsability of the
subject tickets is not an essential part of the
underlying contracts and CAI’s failure to comply
is not essential to its fulfillment of its undertaking
to issue new tickets upon Spouses Viloria’s
surrender of the subject tickets.
CAI’s right and exclusive prerogative to fix the
prices for its services
Moreover, Spouses Viloria’s demand for
rescission cannot prosper as CAI cannot be
solely faulted for the fact that their agreement
failed to consummate and no new ticket was
issued to Fernando. Spouses Viloria have no
right to insist that a single round trip ticket
between Manila and L.A. should be priced at
around $856.00 and refuse to pay the difference
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between the price of the subject tickets and the
amount fixed by CAI.
CAI had not obliged itself to protect Spouses
Viloria in its March 24, 1998 letter from any
fluctuation in the prices of tickets or that the
surrender of the subject tickets will be
considered as full payment for any ticket that the
petitioners intend to buy regardless of actual
price and destination.
There is also no showing that Spouses Viloria
were discriminated against in bad faith by being
charged with a higher rate. The only evidence
the petitioners presented to prove that the price
of a round trip ticket between Manila and L.A. at
that time was only $856.00 is a newspaper
advertisement for another airline company,
which is inadmissible for being “hearsay
evidence, twice removed.”
The records of this case demonstrate that both
parties were equally in default; hence, none of
them can seek judicial redress for the
cancellation or resolution of the subject
contracts and they are therefore bound to their
respective obligations thereunder.
Therefore, CAI’s liability for damages for its
refusal to accept Lourdes’ ticket for the purchase
of Fernando’s round trip ticket is offset by
Spouses Viloria’s liability for their refusal to pay
the amount, which is not covered by the subject
tickets. Moreover, the contract between them
remains, hence, CAI is duty bound to issue new
tickets for a destination chosen by Spouses
Viloria upon their surrender of the subject tickets
and Spouses Viloria are obliged to pay whatever
amount is not covered by the value of the
subject tickets.
Another consideration that militates against the
propriety of holding CAI liable for moral
damages is the absence of a showing that the
latter acted fraudulently and in bad faith. Article
2220 of the Civil Code requires evidence of bad
faith and fraud and moral damages are generally
not recoverable in culpa contractual except
when bad faith had been proven. The award of
exemplary damages is likewise not warranted.
24
Apart from the requirement that the defendant
acted in a wanton, oppressive and malevolent
manner, the claimant must prove his entitlement
to moral damages.
CHAPTER 4
Everett Steamship Corporation vs. CA and
Hernandez Trading Co. Inc.
Facts:
 Private respondent imported three
crates of bus spare parts, from its
supplier, Maruman Trading, a foreign
corporation based in Aichi, Japan. The
crates were shipped from Nagoya,
Japan to Manila on board a vessel
owned by petitioner’s principal, Everett
Orient Lines. The said crates were
covered by Bill of Lading.
 Upon arrival at the port of Manila, it was
Alitalia vs. IAC
discovered that the crate marked
Facts:
MARCO C/No. 14 was missing. Private
respondent, which thereafter made a
formal claim upon petitioner for the
value of the lost cargo amounting to
Y1,552,500.00 Yen. However, petitioner
offered to pay only One Hundred
Thousand (Y100,000.00) Yen, the
maximum amount stipulated under the
bill of lading which limits the liability of
petitioner.
 Respondent rejected the offer and
thereafter instituted a suit for collection
docketed to the RTC. RTC and CA
rendered judgment in favour of
respondent. Hence this petition.
Issue: Whether or not the limited liability clause
in the bill of lading is valid.
Held:
 Yes. ART. 1749. A stipulation that the
common carriers liability is limited to the
value of the goods appearing in the bill
of lading, unless the shipper or owner
declares a greater value, is binding.
 ART. 1750. A contract fixing the sum
that may be recovered by the owner or
shipper for the loss, destruction, or
deterioration of the goods is valid, if it is
reasonable and just under the
circumstances, and has been freely and
fairly agreed upon.
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 That said stipulation is just and
reasonable is arguable from the fact that
it echoes Art. 1750 itself in providing a
limit to liability only if a greater value is
not declared for the shipment in the bill
of lading.
 Pursuant to the afore-quoted provisions
of law, it is required that the stipulation
limiting the common carriers liability for
loss must be reasonable and just under
the circumstances, and has been freely
and fairly agreed upon.
 However, the shipper, Maruman Trading,
had the option to declare a higher
valuation if the value of its cargo was
higher than the limited liability of the
carrier. Considering that the shipper did
not declare a higher valuation, it had
itself to blame for not complying with the
stipulations.
 Dr. Felipa Pablo is an associate
professor in UP, and was invited to
take part at a meeting of the Department
of Research and Isotopes of the Joint
FAO-IAEA Division of Atomic Energy in
Food and Agriculture of the United
Nations in Ispra, Italy. To fulfill this
engagement, Dr. Pablo booked passage
on petitioner airline, ALITALIA.
 She arrived in Milan on the day before
the meeting in accordance with the
itinerary. She was however told by the
ALITALIA personnel there at Milan that
her luggage was "delayed inasmuch
as the same . . . was in one of the
succeeding flights from Rome to
Milan. Her luggage consisted of two (2)
suitcases: one contained her clothing
and other personal items; the other, her
scientific papers, slides and other
research material. But the other flights
arriving from Rome did not have her
baggage on board.
 By then feeling desperate, she went to
Rome to try to locate her bags herself.
There, she inquired about her suitcases
in the domestic and international
airports. However, her baggage could
not be found. Completely distraught
and discouraged, she returned to
25
Manila without attending the meeting in
Ispra, Italy. :
 Back in Manila, she instituted an action
demanding that ALITALIA make
reparation for the damages thus
suffered by her.
Issue: W/N the Warsaw Convention should be
applied thus limiting Alitalia’s liability.
Held:
 No. Under the Warsaw Convention,
an air carrier is made liable for damages
for:
1) the death, wounding or other bodily injury of a
passenger if the accident causing it took place
on board the aircraft or in the course of its
operations of embarking or disembarking;
2) The destruction or loss of, or damage to, any
registered luggage or goods, if the occurrence
causing it took place during the carriage by air;"
and
3) Delay in the transportation by air of
passengers, luggage or good
 The Convention also purports to limit the
liability of the carriers in different
manners. Warsaw Convention however
denies to the carrier availment:
"of the provisions 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….”
 The Convention does not thus
operate as an exclusive enumeration
of the instances of an airline's
liability, or as an absolute limit of the
extent of that liability.
 It should be deemed a limit of liability
only in those cases where the cause
of the death or injury to person, or
destruction, loss or damage to
property or delay in its transport is not
attributable to or attended by any
wilful misconduct, bad faith,
recklessness, or otherwise improper
conduct on the part of any official or
employee for which the carrier is
responsible, and there is otherwise no
special or extraordinary form of resulting
injury.
 In the case at bar, no bad faith or
otherwise improper conduct may be
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ascribed to the employees of petitioner
airline; and Dr. Pablo's luggage was
eventually returned to her. The fact is,
nevertheless, that some special species
of injury was caused to Dr. Pablo
because petitioner ALITALIA misplaced
her baggage and failed to deliver it to
her at the time appointed — a breach of
its contract of carriage, to be sure —
with the result that she was unable to
read the paper and make the scientific
presentation in Italy.
 Dr. Pablo also underwent profound
distress and anxiety, which gradually
turned to panic and finally despair; from
the time she learned that her suitcases
were missing up to the time when,
having gone to Rome, she finally
realized that she would no longer be
able to take part in the conference. As
she herself put it, she "was really
shocked and distraught and
confused."
Sabena Belgian World Airlines vs. CA
G.R. No. 104685. March 14, 1996
Facts:
 Plaintiff was a passenger on board of
defendant airline originating from
Casablanca to Brussels, Belgium on her
way back to Manila. Plaintiff checked in
her luggage which contained her
valuables, namely: jewelries, clothes,
shoes, bags, and accessories. She
stayed overnight in Brussels and her
luggage was left on board.
 Plaintiff arrived at Manila International
Airport and immediately submitted her
Tag No. 71423 to facilitate the release
of her luggage but the luggage was
missing. She then filed for an irregularity
report.
 She followed up her claim but the
luggage remained to be missing.
 On the occasion of plaintiffs following up
of her luggage claim, Brussels Office of
defendant found the luggage and that
they have broken the locks for
identification. Plaintiff was assured by
the defendant that it has notified its
Manila Office that the luggage will be
shipped to Manila on October 27, 1987.
But unfortunately plaintiff was informed
26
that the luggage was lost for the second
time.
 Plaintiff demanded from the defendant
the money value of the luggage and its
contents. Defendant refused to settle.
Issue: W/N the Airline is liable for damages for
the loss of plaintiff’s luggages?
Held:
 Yes. It remained undisputed that private
respondents luggage was lost while it
was in the custody of petitioner. It was
supposed to arrive on the same flight
that private respondent took in returning
to Manila. When she discovered that the
luggage was missing, she promptly
accomplished and filed a Property
Irregularity Report. She followed up her
claim on 14 September 1987, and filed,
on the following day, a formal letter-
complaint with petitioner. She felt
relieved when, on 23 October 1987, she
was advised that her luggage had finally
been found, with its contents intact
when examined, and that she could
expect it to arrive on 27 October 1987.
 She then waited anxiously only to be
told later that her luggage had been lost
for the second time.
 Petitioner ultimately guilty of gross
negligence in the handling of private
respondent’s luggage. The loss of said
baggage not only once by twice, said
the appellate court, underscores the
wanton negligence and lack of care
on the part of the carrier.
 The above findings, foreclose whatever
rights petitioner might have had to the
possible limitation of liabilities enjoyed
by international air carriers under the
Warsaw Convention.
The Warsaw Convention however
denies to the carrier availment of the
provisions 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, or if the damage is
(similarly) caused x x x by any agent of
the carrier acting within the scope of his
employment.
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 Convention should be deemed a limit of
liability only in those cases where the
cause of the death or injury to person,
or destruction, loss or damage to
property or delay in its transport is
not attributable to or attended by any
wilful misconduct, bad faith,
recklessness or otherwise improper
conduct on the part of any official or
employee for which the carrier is
responsible, and there is otherwise no
special or extraordinary form of resulting
injury.
 Convention must be applied, or ignored,
depending on the peculiar facts
presented by each case.
China Airlines vs. Chiok
Facts:
Daniel Chiok purchased from China Airlines, Ltd.
an airline passenger ticket for air transportation
covering Manila-Taipei-Hongkong-Manila. Said
ticket was exclusively endorsable to Philippine
Airlines, Ltd. Before he left for said trip, the trips
covered by the ticket were pre-scheduled and
confirmed by Chiok. When Chiok reached
Hongkong, he went to the PAL office and sought
to reconfirm his flight back to Manila. The PAL
office confirmed his return trip on board Flight
No. PR 311 and attached its own sticker.
On the next day, Chiok proceeded to Hongkong
International Airport for his return trip to Manila.
However, upon reaching the PAL counter, Chiok
saw a poster stating that PAL Flight No. PR
311 was cancelled because of a typhoon in
Manila. He was then informed that all the
confirmed ticket holders of PAL Flight No. PR
311 was automatically booked for its next flight,
which was to leave the next day. He then
informed PAL personnel that, being the founding
director of the Philippine Polysterene Paper
Corporation, he had to reach Manila the
following day because of a business option
which he had to execute on said date.
The following day Chiok went to the airport.
Carmen Chan, PAL’s terminal supervisor,
informed Chiok that his name did not appear in
PAL’s computer list of passengers and therefore
could not be permitted to board PAL Flight No.
PR 307. Thereafter, Chiok proceeded to PAL’s
Hongkong office and confronted PAL’s
reservation officer, Carie Chao, who previously
confirmed his flight back to Manila. Chao told
Chiok that his name was on the list and pointed
27
to the latter his computer number listed on the
PAL confirmation sticker attached to his plane
ticket, which number was ‘R/MN62’. Chiok was
not able to return to Manila on time.
Consequently, Chiok as plaintiff, filed a
Complaint for damages, against PAL and CAL,
with the Regional Trial Court Manila. He alleged
therein that despite several confirmations of his
flight, PAL refused to accommodate him in Flight
No. 307, for which reason he lost the business
option aforementioned. He also alleged that
PAL’s personnel, specifically Carmen,
ridiculed and humiliated him in the presence
of so many people.
Issue: Whether CAL is liable for damages.
Held:
Yes. It is significant to note that the contract of
air transportation was between petitioner and
respondent, with the former endorsing to PAL
the Hong Kong-to-Manila segment of the journey.
Such contract of carriage has always been
treated in this jurisdiction as a single operation.
Article 1, Section 3 of the Warsaw
Convention states:
“Transportation to be performed by several
successive air carriers shall be deemed, for the
purposes of this Convention, to be one
undivided transportation, if it has been regarded
by the parties as a single operation, whether it
has been agreed upon under the form of a
single contract or of a series of contract….”
 In the same way that we ruled against
British Airways and Lufthansa in the
aforementioned cases, we also rule that
CAL cannot evade liability to
respondent, even though it may have
been only a ticket issuer for the Hong
Kong-Manila sector.
 Moral damages cannot be awarded in
breaches of carriage contracts, except
in the two instances contemplated in
Articles 1764 and 2220 of the Civil Code,
which we quote:
Article 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
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applies to breaches of contract where the
defendant acted fraudulently or in bad faith.
 There is no occasion for us to invoke
Article 1764 here. We must therefore
determine if CAL or its agent (PAL) is
guilty of bad faith that would entitle
respondent to moral damages.
 The records amply establish that Chiok
secured repeated confirmations on
November 24, 1981. Hence, he had
every reason to expect that he would be
put on the replacement flight as a
confirmed passenger. Instead, he was
harangued and prevented from boarding
the original and the replacement flights.
Thus, PAL breached its duty to
transport him. After he had been
directed to pay the terminal fee, his
pieces of luggage were removed from
the weighing-in counter despite his
protestations.
 It is relevant to point out that the
employees of PAL were utterly
insensitive to his need to be in Manila,
and to the likelihood that his business
affairs in the city would be jeopardized
because of a mistake on their part. It
was that mistake that had caused the
omission of his name from the
passenger list despite his confirmed
flight ticket. By merely looking at his
ticket and validation sticker, it is evident
that the glitch was the airlines fault.
However, no serious attempt was made
by PAL to secure the all-important
transportation of respondent to Manila
on the following day. To make matters
worse, PAL allowed a group of non-
revenue passengers, who had no
confirmed tickets or reservations, to
board Flight PR 307.
 The acts of PALs employees,
particularly Chan, clearly fell short of the
extraordinary standard of care that the
law requires of common carriers.
CHAPTER 6
Yangco vs. Laserna
Facts:
• At about one o'clock in the afternoon of
May 26, 1927, the steamer S.S. Negros,
28
belonging to, Teodoro R. Yangco, left the port of
Romblon on its retun trip to Manila.
• Typhoon signal No. 2 was then up, of
which fact the captain was duly advised and his
attention thereto called by the passengers
themselves before the vessel set sail.
• The boat was overloaded as indicated
by the loadline which was 6 to 7 inches below
the surface of the water.
• The passengers, numbering about 180,
were overcrowded, the vessel's capacity being
limited to only 123 passengers.
• After two hours of sailing, the boat
encountered strong winds and rough seas
between the islands of Banton and Simara, and
as the waves splashed the ladies' dresses, the
awnings were lowered.
• As the sea became increasingly violent,
the captain ordered the vessel to to return to
port, but in the manuever, the vessel was caught
sidewise by a big wave which caused it to
capsize and sink.
• Many of the passengers died in the
mishap
• These heirs of victims instituted in the
Court of First Instance of Capiz separate civil
actions, G.R. No. 47447, G.R. 47448 and G.R.
No. 47449 against petitioner here to recover
damages for the death of the passengers
• The court awarded the heirs of Antolin
and Victorioso Aldana the sum of P2,000; the
heirs of Casiana Laserna, P590; and those of
Genaro Basana, also P590.
• After the rendition of the judgment to
this effcet, petitioner, by a verified pleading,
sought to abandon th evessel to the plainitffs in
the three cases, together with all its equipments,
without prejudice to his right to appeal.
• The abandonment having been denied,
an appeal was taken to the Court of Appeals,
wherein all the judgmnets were affirmed except
that which sums was increased to P4,000.
Petitioner, now deceased, appealed and is here
represented by his legal representative.
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Issue: May the shipowner or agent,
notwithstanding the total loss of the vessel as a
result of the negligence of its captain, be
properly held liable in damages for the
consequent death of its passengers?
Held:
• We are of the opinion and so hold that
this question is controlled by the provisions of
article 587 of the Code of Commerce. Said
article reads:
"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 provisions accords a shipowner or
agent the right of abandonment; and by
necessary implication, his liability is confined to
that which he is entitled as of right to abandon
— "the vessel with all her equipments and the
freight it may have earned during the voyage." It
is true that the article appears to deal only with
the limited liability of shipowners or agents for
damages arising from the misconduct of the
captain in the care of the goods which the vessel
carries, but this is a mere deficiency of language
and in no way indicates the true extent of such
liability. The consensus of authorities is to the
effect that notwithstanding the language of the
aforequoted provision, the benefit of limited
liability therein provided for, applies in all cases
wherein the shipowner or agent may properly be
held liable for the negligent or illicit acts of the
captain
• If the shipowner or agent may in any
way be held civilly liable at all for injury to or
death of passengers arising from the negligence
of the captain in cases of collisions or
shipwrecks, his liability is merely co-extensive
with his interest in the vessel such that a total
loss thereof results in its extinction. In arriving at
this conclusion, we have not been unmindful of
the fact that the ill-fated steamship Negros, as a
vessel engaged in interisland trade, is a
common carrier and that the as a vessel
29
engaged in interisland trade, is a common
carrier and that the relationship between the
petitioner and the passengers who died in the
mishap rests on a contract of carriage.
• But assuming that petitioner is liable for
a breach of contract of carriage, the exclusively
"real and hypothecary nature" of maritime law
operates to limit such liability to the value of the
vessel, or to the insurance thereon, if any. In the
instant case it does not appear that the vessel
was insured.
• Whether the abandonment of the vessel
sought by the petitioner in the instant case was
in accordance with law of not, is immaterial. The
vessel having totally perished, any act of
abandonment would be an idle ceremony.
Poliand Industrial Ltd. v. NDC
August 22,2005
Facts:
Asian Hardwood Limited, a Hong Kong
corporation, extended credit accommodations in
favor of GALLEON. At that time, GALLEON, a
domestic corporation organized in 1977 and
headed by its president, Roberto Cuenca, was
engaged in the maritime transport of goods. The
advances were utilized to augment GALLEONs
working capital depleted as a result of the
purchase of five new vessels and two second-
hand vessels in 1979 and competitiveness of the
shipping industry.
To finance the acquisition of the vessels,
GALLEON obtained loans from Japanese
lenders. GALLEON, executed a Deed of
Undertaking whereby DBP guaranteed the
prompt and punctual payment of GALLEONs
borrowings from the Japanese lenders. To
secure DBPs guarantee under the Deed of
Undertaking, GALLEON promised, among
others, to secure a first mortgage on the five
new vessels and on the second-hand vessels.
Thus, GALLEON executed a mortgage contract
over five of its vessels
Thereafter, NDC assumed the management and
operations of GALLEON although Cuenca
remained president until May 9, 1982. Using its
own funds, NDC paid Asian Hardwood on
January 15, 1982 as partial settlement of
GALLEONs obligations.
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LOI No. 1195 was issued directing the
foreclosure of the mortgage on the five vessels.
For failure of GALLEON to pay its debt despite
repeated demands from DBP, the vessels were
extrajudicially foreclosed on various dates and
acquired by DBP. DBP subsequently sold the
vessels to NDC for the same amount.
Asian Hardwood assigned its rights over the
outstanding obligation of GALLEON of
US$2,315,747.32 to World Universal Trading
and Investment Company embodied in a Deed
of Assignment executed on April 29, 1989.
World Universal, in turn, assigned the credit
to petitioner POLIAND sometime in July 1989
On September 24, 1991, POLIAND made
written demands on GALLEON, NDC, and DBP
for the satisfaction of the outstanding balance.
For failure to heed the demand, POLIAND
instituted a collection suit against NDC, DBP
and GALLEON. POLIAND claimed that under
LOI No. 1155 and the Memorandum of
Agreement between GALLEON and NDC,
defendants GALLEON, NDC, and DBP were
solidarily liable to POLIAND as assignee of the
rights of the credit advances/loan
accommodations to GALLEON. POLIAND also
claimed that it had a preferred maritime lien over
the proceeds of the extrajudicial foreclosure sale
of GALLEONs vessels mortgaged by NDC to
DBP.
Issue:
Whether POLIAND has a maritime lien
enforceable against NDC or DBP or both.
Held:
 Yes. POLIAND has a maritime lien.
Non-acquisition of ownership of
GALLEON notwithstanding, NDC is
liable to pay ASIAN HARDWOODs
successor-in-interest POLIAND
representing the proceeds of the loan
from Asian Hardwood which were spent
by GALLEON for ship modification and
salaries of crew, to satisfy the preferred
maritime liens over the proceeds of the
foreclosure sale of the 5 vessels.
Articles 578 and 580 of the Code
of Commerce, not applicable
 NDC cites Articles 578[47] and 580[48]
of the Code of Commerce to bolster its
argument that the foreclosure of the
vessels extinguished all claims against
30
the vessels including POLIANDs claim.
Article 578 of the Code of Commerce is
not relevant to the facts of the instant
case because it governs the sale of
vessels in a foreign port. Said provision
outlines the formal and registration
requirements in order that a sale of a
vessel on voyage or in a foreign port
becomes effective as against third
persons. On the other hand, the
resolution of the instant case depends
on the determination as to which
creditor is entitled to the proceeds of the
foreclosure sale of the vessels. Clearly,
Article 578 of the Code of Commerce is
inapplicable.
 Article 580, while providing for the order
of payment of creditors in the event of
sale of a vessel, had been repealed by
the pertinent provisions of Presidential
Decree (P.D.) No. 1521, otherwise
known as the Ship Mortgage Decree of
1978. Section 17 of P.D. No. 1521[50]
also provides that in the judicial or
extrajudicial sale of a vessel for the
enforcement of a preferred mortgage
lien constituted in accordance with
Section 2 of P.D. No. 1521, such
preferred mortgage lien shall have
priority over all pre-existing claims
against the vessel, save for those claims
enumerated under Section 17, which
have preference over the preferred
mortgage lien in the order stated therein.
Since P.D. No. 1521 is a subsequent
legislation and since said law in Section
17 thereof confers on the preferred
mortgage lien on the vessel superiority
over all other claims, thereby
engendering an irreconcilable conflict
with the order of preference provided
under Article 580 of the Code of
Commerce, it follows that the Code of
Commerce provision is deemed
repealed by the provision of P.D. No.
1521, as the posterior law.
Section 2 of P.D. No. 1521 recognizes the
constitution of a mortgage on a vessel:
xxx
If the mortgage on the vessel is constituted
for the purpose stated under Section 2, the
mortgage obtains a preferred status
provided the formal requisites enumerated
under Section 4[53] are complied with. Upon
enforcement of the preferred mortgage and
eventual foreclosure of the vessel, the
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proceeds of the sale shall be first applied to
the claim of the mortgage creditor unless
there are superior or preferential liens, as
enumerated under Section 17, namely:
Sec. 17 Preferred Maritime Lien, Priorities,
Other Liens.
a. Upon the sale of any mortgaged vessel in any
extra-judicial sale or by order of a district court of
the Philippines, x x x
The preferred mortgage lien shall have priority
over all claims against the vessel, except the
following claims in the order stated: (1)
expenses and fees allowed and costs taxed
by the court and taxes due to the
Government; (2) crew's wages; (3) general
average; (4) salvage including contract
salvage; (5) maritime liens arising prior in
time to the recording of the preferred
mortgage; (6) damages arising out of tort;
and (7) preferred mortgage registered prior
in time.
b. If the proceeds of the sale should not be
sufficient to pay all creditors included in one
number or grade, the residue shall be divided
among them pro rata. All credits not paid,
whether fully or partially shall subsist as ordinary
credits enforceable by personal action against
the debtor.
 There is no question that the mortgage
executed in favor of DBP is covered by
P.D. No. 1521. Contrary to NDCs
assertion, the mortgage constituted on
GALLEONs vessels in favor of DBP
may appropriately be characterized as a
preferred mortgage under Section 2,
P.D. No. 1521 because GALLEON
constituted the same for the purpose of
financing the construction, acquisition,
purchase of vessels or initial operation
of vessels.
31
DIFFERENT CHAPTERS: (Not sure which
particular chapter these belong, but they’re
from latter chapters)
AMERICAN AIRLINES, petitioner, vs. COURT
OF APPEALS, HON. BERNARDO LL. SALAS
and DEMOCRITO MENDOZA, respondents.
FACTS:
-Private respondent purchased from Singapore
Airlines in Manila conjunction tickets for Manila -
Singapore - Athens - Larnaca - Rome - Turin -
Zurich - Geneva - Copenhagen - New York.
-The petitioner was not a participating airline in
any of the segments in the itinerary under the
said conjunction tickets.
-In Geneva the petitioner decided to forego his
trip to Copenhagen and to go straight to New
York
-No direct flight under his conjunction tickets
from Geneva to New York,
-private respondent exchanged the unused
portion of the conjunction ticket for a one-way
ticket from Geneva to New York from the
petitioner airline.
-Petitioner issued its own ticket and claimed the
value of the unused portion of the conjunction
ticket from the IATA - Intl Air Transport Assoc.
clearing house in Geneva.
-Private respondent filed an action for damages
before the regional trial court of Cebu for the
alleged embarassment and mental anguish he
suffered at the Geneva Airport
-when Petitioners security officers prevented him
from boarding the plane, detained him for about
an hour and allowed him to board the plane only
after all the other passengers have boarded.
-The petitioner filed a motion to dismiss for lack
of jurisdiction of Philippine courts under Art. 28
(1) of the Warsaw Convention.
-The trial court denied the motion
-CA affirmed
-Both held that the suit may be brought in the
Philippines under the pool partnership
agreement among the IATA members
-which include Singapore Airlines and American
Airlines, wherein the members act as agents of
each other in the issuance of tickets
-contract of carriage perfected in Manila (private
respondent and Singapore Airlines)
-binds the petitioner as an agent of Singapore
Airlines
-petitioner has a place of business in Manila,
-the action may be brought in the place where
the contract was perfected and where the airline
has a place of business
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-Art 28 (1) of the Warsaw convention an action
for damages must be brought at the option of
the plaintiff either before the court of the
1) domicile of the carrier;
2) the carriers principal place of business;
3) the place where the carrier has a place of
business through which the contract was made;
4) the place of destination.
ISSUE:
WON Regional Trial Court of Cebu has
jurisdiction to take cognizance of the action for
damages filed by the private respondent against
herein petitioner
HELD:
Art 1(3) of the Warsaw Convention which states:
"Transportation to be performed by several
successive carriers shall be deemed, for the
purposes of this convention, to be one undivided
transportation, if it has been regarded by the
parties as a single operation, whether it has
been agreed upon under the form of a single
contract or a series of contracts, and it shall not
lose its international character merely because
one contract or series of contracts is to be
performed entirely within the territory subject of
the sovereignty, suzerainty, mandate or
authority of the same High contracting Party." Sc
juris
-The contract of carriage between the private
respondent and Singapore Airlines constitutes a
single operation.
-The number of tickets issued does not detract
from the oneness of the contract of carriage as
long as the parties regard the contract as a
single operation.
-When the petitioner accepted the unused
portion of the conjunction tickets, entered it in
the IATA clearing house and undertook to
transport the private respondent over the route
covered by the unused portion of the conjunction
tickets
--the petitioner tacitly recognized its commitment
under the IATA pool arrangement to act as
agent of the principal contracting airline,
Singapore Airlines
-Petitioner assumed the obligation to take the
place of the carrier originally designated in the
original conjunction ticket
-By constituting itself as an agent of the principal
carrier the petitioners undertaking should be
taken as part of a single operation under the
contract of carriage executed by the private
respondent and Singapore Airlines in Manila.
32
-The evident purpose underlying this Article is to
promote international air travel by facilitating the
procurement of a series of contracts for air
transportation through a single principal and
obligating different airlines to be bound by one
contract of transportation.
-Petitioners acquiescence to take the place of
the original designated carrier binds it under the
contract of carriage entered into by the private
respondent and Singapore Airlines in Manila.
-The third option of the plaintiff under Art 28 (1)
of the Warsaw Convention
-e.g., to sue in the place of business of the
carrier wherein the contract was made, is
therefore, Manila, and Philippine courts are
clothed with jurisdiction over this case.
SAN PABLO V. PANTRANCO SOUTH
EXPRESS INC.
Facts:
PANTRANCO is a domestic corporation
engaged in the land transportation business with
Public utility buses, service for passengers and
freight and various certificates for public
conveniences (CPC) to operate passenger
buses from Metro Manila to Bicol Region and
Eastern Samar.
PANTRANCO wrote to MARINA requesting
authority to lease/purchase a vessel named M/V
"Black Double" to be used for its project to
operate a ferryboat service that will provide
service to company buses and freight trucks that
have to cross San Bernardo Strait. Request was
denied by MARINA.
PANTRANCO nevertheless acquired the MV
"Black Double".It wrote the Chairman of the
Board of Transportation (BOT) that it proposes
to operate a ferry service to carry its passenger
buses and freight trucks in connection with its
trips to Tacloban.
Without awaiting action on its request
PANTRANCO started to operate said ferry
service.
Epitacio San Pablo and Cardinal Shipping
Corporation who are franchise holders of the
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ferry service in this area interposed their
opposition. They claim they adequately service
the PANTRANCO by ferrying its buses, trucks
and passengers. Opposition and subsequent
motion for reconsideration was denied by BOT.
hence, this petition.
Issue: Whether a ferry service is an extension of
the highway and thus is a part of the authority
originally granted PANTRANCO
Held:
NO. The contention of private respondent
PANTRANCO that its ferry service operation is
as a private carrier, not as a common carrier for
its exclusive use in the ferrying of its passenger
buses and cargo trucks is absurd. PANTRANCO
does not deny that it charges its passengers
separately from the charges for the bus trips and
issues separate tickets whenever they board the
MV "Black Double" that crosses Matnog to
Allen, 20 PANTRANCO cannot pretend that in
issuing tickets to its passengers it did so as a
private carrier and not as a common carrier.
The term "ferry" implied the continuation by
means of boats, barges, or rafts, of a
highway or the connection of highways
located on the opposite banks of a stream or
other body of water. The term necessarily
implies transportation for a short distance,
almost invariably between two points, which is
unrelated to other transportation. Ferry is often
employed to denote the right or franchise
granted by the state or its authorized
mandatories to continue by means of boats, an
interrupted land highway over the interrupting
waters and to charge toll for the use thereof by
the public. In this sense it has also been defined
as a privilege, a liberty, to take tolls for
transporting passengers and goods across a
lake or stream or some other body of water, with
no essential difference from a bridge franchise
except as to the mode of transportation,
While a ferry boat service has been considered
as a continuation of the highway when crossing
rivers or even lakes, which are small body of
waters - separating the land, however, when as
33
in this case the two terminals, Matnog and Allen
are separated by an open sea it can not be
considered as a continuation of the highway.
Respondent PANTRANCO should secure a
separate CPC for the operation of an
interisland or coastwise shipping service in
accordance with the provisions of law. Its
CPC as a bus transportation cannot be
merely amended to include this water service
under the guise that it is a mere private ferry
service.
ATO VS. SPS. DAVID
Facts: Spouses David and Elisea Rams
discovered that their parcel of land registered
under TCT No. T-58894 of the Baguio City land
records with an area of 985 sq meters was being
used as part of a runway and running shoulder
of the Loakan Airport being operated by
petitioner Air transportation Office. (ATO.) On
August 11, 1995, respondents agreed after
negotiations to convey the affected portion by
the deed of sale to the ATO in consideration of
the amount of 778,150.00 pesos. However, ATO
failed to pay after repeated demands.
Thus, respondents filed a collection suit against
ATO and some of its officials in the RTC. ATO
and it’s co-defendants, meanwhile, aver that the
RTC had no jurisdiction to entertain the action
without the State’s consent considering that the
deed of sale has been entered into in the
performance of governmental functions, thereby,
invoking Proclamation. No. 1358. It is therein
stated that President Marcos has reserved
certain parcels of land (including the one in
question) for the use of Loakan Airport.
Issue: Whether or not ATO could be sued
without the States consent?
Held: No. The Immunity of the State from suit,
known also as the ‘doctrine of state immunity’ is
provided in Art. XVI of the constitution: ‘Sec 3.:
The State may not be sued without it’s consent’.
TRANSPORTATION LAW CASE DIGESTS 2015-2016 | Patricia Derecho, Kristel Marajas, Marc Sta Ana
Atty. Golangco
In our view, the CA was correct in ascertaining
that the AT was an agency of the government,
NOT, performing a purely governmental function.
Also, the doctrine of sovereign immunity cannot
be invoked successfully to defeat a valid claim
for compensation arising from the taking without
just compensation.
Lastly, the issue has been rendered moot by the
passage of R.A. No. 9497, abolishing the ATO,
and the creation of the Civil Aviation Authority of
the Philippines (CAAP) in its stead, the latter
incurring the obligations of the former.
CHAPTER 18 - APPLICATION FOR CERT OF
PUB CONVENIENCE & NECESSITY
ANGELES C. VDA. DE LAT, CAROLINA LAT
PEREZ DE TAGLE, and PEDRO C. LAT, JR.,
vs. THE PUBLIC SERVICE COMMISSION and
ROBERTO C. DIAZ
FACTS:
-private respondent Roberto C. Diaz filed an
application with the respondent Public Service
Commission for a Certificate of Public
Convenience and Necessity
-to operate and maintain an ice plant service in
Davao City
-application was published in two newspapers of
general circulation
-copies thereof were sent to affected operators
including the herein petitioners
-Only the petitioners filed an Opposition to the
Application and the same was submitted on July
3,1970.
-the hearing of the Application and the
Opposition was set by the respondent
Commission
-however during the hearing neither the
oppositors nor their counsel was present.
34

-the respondent Commission declared the case

uncontested and received the evidence of the
private respondent.
-petitioners contend that they filed an Urgent
Motion for Postponement and of Hearing on the
ground that their counsel made the mistake of
noting down in his calendar the hearing
-petitioners filed a motion for reopening of the
case
-Commission issued an Order granting the
private respondent provisional authority to
operate the ice plant for six (6) months.
-respondent Commission did, that the private
respondent duly complied with the required
notice of hearing:
-publication
- their counsel agreed to the setting of the
hearing
-Their negligence cannot now be passed on to
the respondent Commission which only did the
right thing of proceeding with the case, which
had become uncontested.

-Petitioners then filed a motion for 2.

reconsideration but this was denied
-Commission handed down a Decision
approving the Application and granting him a
Certificate of Public Convenience
-PETITIONERS: petition for review asking that
the Decision rendered by the resp be set aside
and declared null and void, as it has been
rendered without due process.
-deprived of their day in court when they were
not allowed to cross-examine the witnesses of
the private respondent and to present their
evidence in support of their Opposition.
ISSUES:
1. Whether or not the petitioners were deprived
of their day in Court to make the proceeding in
the respondent Public Service Commission nun
and void.
2. Whether or not the private respondent was
validly awarded the questioned Certificate of
Public Convenience to operate an ice plant in
Davao City.
HELD:
1.
-The application was not outrightly approved
upon reception of the evidence of the private
respondent.
-resp took time to consider and weigh such
evidence
-granted only a provisional authority, which was
twice extended
-before the case was finally determined
-private respondent deserves to be awarded the
Certificate of Public Convenience.
-requisites fully satisfied:
the applicant must be a citizen of the Philippines,
or a corporation or co-partnership, association
60% belonging to Ph citizens
the applicant must be financially capable of
undertaking the proposed service and meeting
the responsibilities incident to its operations;
(3) the applicant must prove that the operation of
the public service proposed and the
authorization to do business wig promote the
public interest in a proper and suitable manner

-petitioners were given notice and opportunity to

be heard negating the petitioners' declaration
that they were deprived of their day in court.
TRANSPORTATION LAW CASE DIGESTS 2015-2016 | Patricia Derecho, Kristel Marajas, Marc Sta Ana
Atty. Golangco
35

-the allegation of the petitioners that the grant of

Certificate would result in ruinous competition
amounting to damage of their business is
unconvincing

-The grant is for the operation of a mere 2-ton

ice plant and only in Davao City whereas the
petitioners are big operators

-before ruinous competition may prosper, it must

be shown that the opponent would be deprived
of their profits on the capital invested in its
business.

-mere possibility of reduction in the earnings of a

business is not sufficient

TRANSPORTATION LAW CASE DIGESTS 2015-2016 | Patricia Derecho, Kristel Marajas, Marc Sta Ana
Atty. Golangco