NUECA vs.

MRC
FACTS:
Fermin Nueca brought 7 sacks of palay to MRC now PNR, in a station in Bario del Rosario
Camarines Sur, to be shipped in Libmanan of the same province. He paid P0.70 as freight charge and was
loaded on a freight wagon of the train.
Nueca then boarded without any permission. While traversing, the passenger coach and the
freight wagon were derailed, pinning Nueca down and killing him instantly.
Nuecas’s widow brought a case against MRC that the death was due to MRC’s negligence but
MRC argued that it has no liability against Nueca because he is not a passenger but a mere trespasser.
Thus, it is not obliged to exercise extraordinary diligence with regards to Nueca.

ISSUE:
Whether Nueca is considered a passenger?

RULING:
No. Nueca is not considered as a passenger. Thus, MRC did not owe Nueca extraordinary
diligence in transporting his person.
A passenger is further defined by SC as one who travels in a public conveyance by virtue of a
contract, express or implied, with the carrier upon payment of a fare. It is further stated that one who
secures free passage by fraud or stealth is precluded from recovery for injuries sustained through the
negligence of the carrier, for he has not assumed the status of a passenger.
The relation of a carrier and passenger commences when on puts himself in the care of the
carrier, or directly under its control with the bona fide intention of becoming a passenger, and is
accepted as such by the carrier and presents himself at the proper place and in a proper manner to be
transported.
BALIWAG TRANSIT, INC. vs.CA and SPS. SOTERO CAILIPAN, JR. and ZENAIDA LOPEZ and GEORGE L.
CAILIPAN.

Facts:
Sometime on 10 April 1985 a Complaint for damages arising from breach of contract of carriage
was filed by Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and their son George against Baliwag Transit.
The Complaint alleged that George, who was a passenger on one of petitioner’s bus on 17 December
1984, suffered multiple serious physical injuries when he was thrown off said bus driven in a careless and
negligent manner by Leonardo Cruz along Barangay Patubig, Marilao, Bulacan. He was confined in the
hospital for treatment, incurring medical expenses, which were borne by his parents in the sum of about
P200,000.00 plus other incidental expenses of about P10,000.00.
Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company, Inc., on its
third-party liability insurance in the amount of P50,000.00.
On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and Baliwag each filed
Motions to Dismiss on the ground that George, in consideration of the sum of P8,020.50 had executed a
"Release of Claims" dated 16 May 1985.
The Regional Trial Court of Bulacan, Branch 20, 1 dismissed the Complaint and Third-party Complaint,
ruling that since the contract of carriage is between Baliwag and George L. Cailipan, the latter, who is of
legal age, had the exclusive right to execute the Release of Claims despite the fact that he is still a
student and dependent on his parents for support.
The Spouses appealed to respondent Court of Appeals who ruled in favor of them.

Issue:
 What is the legal effect of the Release of Claims executed by George?

Ruling:
The Release of Claims executed by George, as the injured party, discharging Fortune Insurance
and Baliwag from any and all liability is valid. He was then of legal age, a graduating student of
Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37 in relation to Article
402, Civil Code). Thus, he could sue and be sued even without the assistance of his parents. Besides,
George is the real-party-in interest. There is no question regarding the genuineness and due execution of
the Release of Claims. It had the effect of a compromise agreement since it was entered into for the
purpose of making a full and final compromise adjustment and settlement of the cause of action
involved. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a
litigation or put an end to one already commenced (Article 2028, Civil Code).
Spouse Fabre vs CA
Facts:
Spouses Fabre were owners of a Mazda minibus which they operate as a school service. It was
driven by their long time driver Porfilio Cabil.
On November 2, 1984, private respondent Word of the World Christian Fellowship (WWCF)
engaged the spouses for the spouses for a trip to Caba, La Union, to which the spouses agreed for a
consideration of 3000php.
On the way to Caba, Cabil used an alternate route due to a detour in the usual route. They
passed by Lingayen instead of Carmen. Cabil was unfamiliar with the route because it is his first time to
drive to La Union. At 11:30 at night Cabil was driving at the speed of 50kph came upon a sharp curve.
The road was slippery because it was raining. The minibus hit a steel brace and turned over. A criminal
complaint was filed against the spouses but they alleged that they were not a common carrier.

Issue:
Whether the spouses Fabre are common carriers?

Held:
Yes they are a common carrier. Despite the fact that they operate the minibus as a school
service, they are considered common carriers. Common carriers are person, corporation, firm or
associations engaged in the business of carrying or transportation passengers or goods or both, by land,
water or air, for compensation, offering their services to the public.
A common carrier need not to be principally engaged in public transportation because the above
article does not make a distinction between one whose principal business is public transportation and
one who does such carrying and transporting as a ancillary activity.
Therefore, Spouses Fabre are common carriers, and is obliged to practice extra ordinary
diligence in the performance of the contract of transportation.
G.R. No. 92288 February 9, 1993
BRITISH AIRWAYS, INC., petitioner,
vs.
THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING AND GENERAL
SERVICES, respondents.

FACTS:
 First International Trading and General Services Co (FITGS)., a duly licensed domestic recruitment
and placement agency, received a telex message from its principal ROLACO Engineering and Contracting
Services in Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of said principal.

ROLACO paid to the Jeddah branch of British Airways, Inc. airfare tickets for 93 contract workers
with specific instruction to transport said workers to Jeddah on or before March 30, 1981.

As soon as British Airways received a prepaid ticket advice from its Jeddah branch to transport
the 93 workers, FITGS was immediately informed by British Airways that its ROLACO had forwarded 93
prepaid tickets. Thereafter, FITGS instructed its travel agent, ADB Travel and Tours. Inc., to book the 93
workers with petitioner but the latter failed to fly said workers, thereby compelling private respondent to
borrow money in the amount of P304,416.00 in order to purchase airline tickets from the other airlines
for the 93 workers it had recruited who must leave immediately since the visas of said workers are valid
only for 45 days and the Bureau of Employment Services mandates that contract workers must be sent
to the job site within a period of 30 days.

As a result of these incidents, FITGS sent a letter to petitioner demanding compensation for the
damages it had incurred by the latter's repeated failure to transport its contract workers despite
confirmed bookings and payment of the corresponding travel taxes. FITGS then filed a complaint for
damages against petitioner with the RTC of Manila.

RTC ruled in favor of FITGS ordering British Airways to pay actual, moral, exemplary damages
plus attorney’s fees.

British Airways appealed said decision but it was denied it. CA affirmed the decision of the trial
court. Motion for Reconsideration which was also denied.

ISSUE:

Whether there is a valid contract of carriage even in the absence of a ticket.

RULING:

Yes, there is a valid contract of carriage. There are two (2) aspects of contract of common
carriage of passengers, namely:

(a) the contract "to carry (at some future time)," which contract is consensual and is necessarily
perfected by mere consent (See Article 1356, Civil Code of the Philippines), and

(b) the contract "of carriage" or "of common carriage" itself which should be considered as a real
contract for not until the carrier is actually used can the carrier be said to have already assumed
the obligation of a carrier.

In the instant case, the contract "to carry" is the one involved which is consensual and is perfected by the
mere consent of the parties.
British Airways consent was manifested by its acceptance of the prepaid ticket advice that ROLACO
Engineering has prepaid the airfares of the appellee's contract workers advising the appellant that it
must transport the contract workers on or before the end of the scheduled flight date.

Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus
no ticket was yet issued, the fact remains that the passage had already been paid for and accepted. Thus,
the cause or consideration which is the fare paid for the passengers exists in this case.

The third essential requisite of a contract is an object certain. In this contract "to carry", such an object is
the transport of the passengers from the place of departure to the place of destination as stated in the
telex.

FITGS has fully complied with the obligation, namely, the payment of the fare and its willingness for its
contract workers to leave for their place of destination. On the other hand, the facts clearly show that
British Airways was remiss in its obligation to transport the contract workers on their flight despite
confirmation and bookings made by FITGS travelling agent.

Compañia Maritima vs Insurance Company Of North America

Facts:
The shipper, Compania Maritima, obliged the carrier (Macleod) to transport the cargo from
Davao to Manila. The cargo is to be loaded in the Bowline Knot owned by Compania, but Macleod has
sent its 2 lighters to take the cargo free of charge. However, the lighter sank resulting in the damage of
the cargo loaded therein.

Issue:
Whether a contract of carriage is perfected between the carrier (Macleod) and the shipper
(Compania Maritima) even if the loss occurred when the cargo was loaded on a barge owned by the
carrier.

Ruling:
Yes. There is a complete contract of carriage, because whenever the control and possession of
goods passes to the carrier and nothing remains to be done by the shipper, then it can be said with
certainty that the relation of shipper and carrier has been established.
The shipper delivering the cargo to the carrier-Macleod, and Macleod taking possession by placing it on
a lighter manned by its authorized employees, under which Macleod became entitled to the privilege
secured to him by law for its safe transportation and delivery, and the carrier to the full payment of its
freight upon completion of the voyage.
LRTA vs. NAVIDAD

Facts:
On October 14, 1993, Nicanor Navidad entered the EDSA LRT station after purchasing a token.
He was drunk at that time. Junelito Escartin , the security guard assigned to the area, approached
Navidad while he was standing on the platform near the LRT tracks. A misunderstanding or an altercation
between them ensured that led to a first sight. Navidad fell and an LRT train was approaching as a result
he was struck by it. He was then killed instantaneously. The LRT train was operated by petitioner Rodolfo
Roman.
The heirs of Navidad filed a complained for damages against Escartin, roman, LRTA, the metro transit
organization inc. and prudent for the death of Navidad. RTC held that prudent and Escartin were liable
and it ordered then to pay jointly and severally the damages for his death.
The CA exonerated prudent and Escartin from any liability for his death and held that LRTA and roman
jointly and severally liable. CA ruled that the contract of carriage had already existed when Navidad
entered the place where passengers were supposed to be after paying the fare and getting the
corresponding token.

Issue:
Whether LRTA and Ramon are liable for the death of Navidad.

Ruling:
SC help that contract of carriage was deemed created from the moment Navidad paid the fare at
the LRT station and entered the premise of the latter. LRTA and Roman failed to exercise utmost diligence
of a very cautious person imposed upon common carriers; Such duty to provide safety to its passengers
so obligate it not only during the course of the trip but for so long as the passengers are within its
premise and where they ought to be in pursuance to the contract of carriage
The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the
victim arises from the breach of that contract by reason of its failure to exercise the highest diligence
required of the common carrier.
There is a no showing that petitioner Roman himself is guilty of any culpable act or omission; he must be
absolved from liability.
Pedro De Guzman vs Court of Appeals
GR No L-47822, December 22, 1988

Facts:
Ernesto Cendana, a junk dealer, owned two six-wheeler trucks which he uses to transport bottles
and scrap metal he bought from Pangasinan to Manila for resale. On his return trip to Pangasinan, he
entered into a contract with Pedro de Guzman, authorized dealer of General Milk Company, Inc. to haul
750 boxes of Liberty filled milk from Rizal to Urdaneta on or before December 4, 1970 for lower freight
rates. 150 boxes were loaded on a truck driven by Cendana and were successfully delivered.
Unfortunately, the 600 remaining boxes, loaded on the other truck were hijacked along Paniqui, Tarlac by
armed men who took the truck, the cargo, the driver and the helper.
De Guzman filed an action demanding payment of the lost items plus damages for failing to
exercise extraordinary diligence.
Cendana contended that he was not a common carrier because transporting return loads of
freight was not his primary line of business but rather a sideline to his scrap iron business and argued
that he could not be responsible for the value of the lost goods.

Issue:
Whether or not Cendena is a common carrier.

Ruling:
Yes, Cendena is properly characterized as a common carrier even though he merely backhauled
goods for other merchants, and even if it was done on a periodic basis rather than on a regular basis,
and even if his principal occupation was not the carriage of goods.
 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. It also avoids
making a distinction between a person or enterprise offering transportation services on a regular or
scheduled basis and one offering service on an occasional, episodic or unscheduled basis. Neither does it
make a distinction between a carrier offering its services to the general public and one who offers
services or solicits business only from a narrow segment of population.

The presumption that Cendana was a common carrier and was at fault or to have acted
negligently, may be overthrown by proof of extraordinary diligence on his part.
First Philippine Industrial Corporation vs. Court of Appeals
G. R. No. 125948, December 29, 1998

Facts:
FPIC, a pipeline concession grantee, applied for a mayor’s permit with the mayor’s office in
Batangas City. However, prior to the issuance of the permit, the City treasurer demanded payment for a
local tax. FPIC refused to pay, contending that it is engaged in transporting petroleum products, thus
exempt from paying tax under the Local Government Code. On the other hand, the city treasurer asserts
that the exemption applies only to transportation contractors and persons engaged in the transportation
by hire and common carriers by air, land and water. Hence, pipelines are not included in the term
common carrier which refers solely to ordinary carriers such as trucks, ships, trains, and the like.

Issue:
Whether a pipeline can be considered a common carrier.

Ruling:
Yes, pipeline is considered a common carrier. The definition of common carrier makes no
distinction as to the means of transporting as long as it is by land, water, or air. It does not provide that
the passenger of goods should be by motor vehicles. Under the Petroleum Act of the Philippines Art. 86,
it provides that, pipeline concessionaire as common carrier shall have the preferential right to utilize
installations for the transportation of petroleum owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of such other petroleum as may be offered by
others for transport, and to charge without discrimination such rates.

SPOUSES PERENA VS. SPOUSES ZARATE

Facts:
The Spouses Perena operated a Kia Ceres school bus picking up students from their subdivision
in Paranaque to Don Bosco in Magallanes, Makati. Aaron, the son of the Spouses Zarate, was among the
students being transported by the school bus, which was driven by Clemente Alfaro. One day, the driver
took an alternate route from Paranaque to Makati by passing through the Philippine National Railway
Station. He engaged in a race with a passenger bus near the railway. While the bus was able to fully pass
through the railway, the Kia Ceres Van’s rear end was left along the railway. Though the train driver was
honking, it could not be heard by Alfaro because of the loud music that was playing in the van.
The train hit the rear end of the van where passenger Aaron was riding. The boy was dragged by the
train causing Aaron’s head to separate from his body. The Spouses Zarate instituted an action for breach
of contract of carriage impleading the PNR. The Spouses Perena defended that they exercised the
diligence of a good father of a family considering that the School Bus is a Private Carrier under prevailing
jurisprudence. The RTC ruled in favor of the Spouses Zarate. The PNR was afforded no liability by the
RTC. The Spouses Penera appealed to CA, which upheld the decision.
Issues:
Is a School Bus considered a private carrier?

Ruling:
No. The SC finally ruled that the school bus is a common carrier. Despite catering to a limited
clientèle, the Pereñas operated as a common carrier because they held themselves out as a ready
transportation indiscriminately to the students of a particular school living within or near where they
operated the service and for a fee.
The common carrier’s standard of care and vigilance as to the safety of the passengers is defined
by law. Given the nature of the business and for reasons of public policy, the common carrier is bound
"to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case."
The Pereñas, acting as a common carrier, were already presumed to be negligent at the time of the
accident because death had occurred to their passenger. The presumption of negligence, being a
presumption of law, laid the burden of evidence on their shoulders to establish that they had not been
negligent.26 It was the law no less that required them to prove their observance of extraordinary
diligence in seeing to the safe and secure carriage of the passengers to their destination.
PLANTERS PRODUCTS, INC. vs. COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI
KISEN KABUSHIKI KAISHA ( G.R. No. 101503 September 15, 1993)

Facts:
Planters Products, Inc. purchased from Mitsubishi International Corporation 9,329.7069 metric
tons (M/T) of Urea 46% fertilizer which the latter shipped in bulk aboard the cargo vessel M/V "Sun
Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha from Kenai, Alaska, U.S.A., to Poro
Point, San Fernando, La Union, Philippines. Prior to its voyage, a time charter-party on the vessel M/V
"Sun Plum" was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner. The
hatches containing the cargo remained closed and tightly sealed throughout the entire voyage.
It took eleven (11) days for PPI to unload the cargo because of the difficulty brought by the rainy weather
during the discharge period. After the discharge of the cargo, PPI found out that there was a shortage in
the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was
contaminated with dirt. PPI filed an action for damages with the Court of First Instance of Manila against
Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK. The defendant carrier
argued that the strict public policy governing common carriers does not apply to them because they
have become private carriers by reason of the provisions of the charter-party.

Issue:
Whether a common carrier becomes a private carrier by reason of a charter-party.

Ruling:
NO. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and
compliment were under the employ of the shipowner and therefore continued to be under its direct
supervision and control. Considering that the steering of the ship, the manning of the decks, the
determination of the course of the voyage and other technical incidents of maritime navigation were all
consigned to the officers and crew who were screened, chosen and hired by the shipowner. It is
therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the whole
or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the
case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its
crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a shipowner in a time or voyage
charter retains possession and control of the ship, although her holds may, for the moment, be the
property of the charterer.
Fisher vs. Yangco Steamship Co.

Facts:
Yangco Steamship Company is owner of large number of steam vessels duly licensed to engage
in coastwise trade within the Philippine Islands. The Board of the company passes a resolution which
was ratified by its stock holders prohibiting the acceptance for carriage of merchandise such as
dynamites, powder and other explosives. The acting Collector of Custom order that the YSC disregard the
resolution and accept such merchandise for carriage or transport. The customs suspended the issuance
of thee clearances for their vessels and it will not be issued unless they comply with the order of the
Custom to carry such merchandise or goods. However the YSC refuse to obey the order of the Custom.

Issue:
Whether the act of refusal to the order of the custom to carry explosive merchandise is lawful.

Ruling:
The SC said, the words "dynamite, powder or other explosives" are broad enough to include
matches, and other articles of like nature, and may fairly be held to include also kerosene oil, gasoline
and similar products of a highly inflammable and explosive character.

The refusal by a particular vessel, engaged as a common carrier of merchandise in the coastwise
trade of the Philippine Islands, to accept any or all of these explosives for carriage would constitute a
violation of the prohibitions against discriminations penalized under the statute, unless it can be shown
by affirmative evidence that there is so real and substantial a danger of disaster necessarily involved in
the carriage of any or all of these articles of merchandise as to render such refusal a due or a necessary
or a reasonable exercise of prudence and discretion on the part of the shipowner.

The SC cited decision of US SC stating that ""When, therefore, one devotes his property to a use
in which the public has an interest, he, in effect, grants to the public an interest in that use, and must
submit to be controlled by the public for the common good, to the extent of the interest he has thus
created. He may withdraw his grant by discontinuing the use, but so long as he maintains the use he
must submit to control." (Munn vs. Illinois, 94 U.S., 113)

LOADSTAR SHIPPING CO., INC., petitioner, vs. COURT OF APPEALS and THE MANILA INSURANCE CO.,
INC., respondents.

FACTS:
On 19 November 1984, LOADSTAR received on board its M/V Cherokee vessel 705 bales of
lawanit hardwood, 27 boxes and crates of tilewood assemblies and others ans 49 bundles of mouldings R
& W (3) Apitong Bolidenized. The goods were insured wirh MIC against various risks including TOTAL
LOSS BY TOTAL LOSS OF THE VESSEL. On 20 November 1984, on its way to Manila from the port of
Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off Limasawa Island. As a result of the
total loss of its shipment, the consignee made a claim with LOADSTAR which, however, ignored the
same. As a result, MIC paid the insured in full settlement of its claim, and the latter subrogated the rights
of the insured. MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel
was due to the fault and negligence of LOADSTAR and its employees. However, LOADSTAR denied any
liability for the loss of the shippers goods and claimed that they are a private carrier for they were not
issued a certificate of public convenience and that they exercised the ordinary diligence of a good father
and the sinking of its vessel was due to force majeure. The trial court dismissed the case of Loadstar
which was affirmed by the CA. Hence this apeeal.

ISSUE:
Whether M/V Cherokee a private or a common carrier?

HELD:
No. The SC hold that LOADSTAR is a common carrier. It is not necessary that the carrier be issued
a certificate of public convenience, and this public character is not altered by the fact that the carriage of
the goods in question was periodic, occasional, episodic or unscheduled as held in De Guzman vs CA
wherein it stated that 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 (in
local idiom, as a sideline. The records do not disclose that the M/V Cherokee, on the date in question,
undertook to carry a special cargo or was chartered to a special person only. There was no charter party.
The bills of lading failed to show any special arrangement, but only a general provision to the effect that
the M/V Cherokee was a general cargo carrier. Further, the bare fact that the vessel was carrying a
particular type of cargo for one shipper, which appears to be purely coincidental, is not reason enough to
convert the vessel from a common to a private carrier, especially where, as in this case, it was shown
that the vessel was also carrying passengers. Hence, Loadstar is liable to pay MIC the total amount it paid
to the insured.
Home Insurance Co. Vs American Steamship

FACTS:
Consorcio Pesqueru del Peru shipped 21,740 jute bags of Peruvian fish meal from Peru to Manila
through the vessel SS Crowborough which is owned by American Steamship Agencies.
Upon delivery to San Miguel Corporation, there were shortages amounting P12,033 which was
paid by Home Insurance Company. It claimed reimbursement from American Steamship but was refused
because in the Charter Party, it is the charterer and not the shipowner that would be liable for any loss,
damage or deterioration of goods due to the negligence of its agents and employees.
CFI ruled the stipulation as void for being contrary to public policy.

ISSUE:
Whether the stipulation is valid.

RULING:
The stipulation would be void only if the strict public policy governing common carriers is
applied. Such policy has no force where the public at large is not involved, as where a ship is totally
chartered for the use of a single party.
A common carrier undertaking to carry a special cargo or chartered to a special person becomes
a private carrier. Thus, the stipulation exempting the owner from liability due to the loss, damage, or
deterioration of goods due to negligence of its agents and employees is valid.
 San Pablo vs. Pantranco
Facts:
Pantranco South Express Inc. (PANTRANCO) is a domestic corporation transporting passengers
from Metro Manila to Bicol Region and Eastern Samar via a public utility bus. PANTRANCO requested to
the Maritime Industry Authority (MARINA) that it will lease/purchase a vessel named M/V "Black
Double" "to be used for its project to operate a ferryboat service from Matnog, Sorsogon and Allen,
Samar that will provide service to company buses and freight trucks that have to cross San Bernardo
Strait.
The request was denied as the said routes "are adequately serviced by existing/authorized
operators. Nevertheless, PANTRANCO communicated this to the Board of Transportation. Subsequently,
it acquired the vessel and started its operations. San Pablo and Cardinal Shipping, ferry franchise holders
opposed such operation. PANTRANCO contends it is a private ferryboat service across a small body of
water for the exclusive use of its buses, trucks and passengers as an incident to its franchise to convey
passengers and cargo on land from Pasay City to Tacloban so that it believes it need not secure a
separate certificate of public convenience (CPC).
The BOT ruled that The ferry boat service of PANTRANCO is a continuation of the highway
traversed by its buses from Pasay City to Samar, Leyte passing through Matnog (Sorsogon) through San
Bernardino Strait to Alien (Samar). It affirmed that PANTRANCO is a private carrier because it will be used
exclusively to transport its own buses, passengers and freight trucks traversing the said route. It will cater
exclusively to the needs of its own clientele (passengers on board- Pantranco buses) and will not offer
itself indiscriminately for hire or for compensation to the general public.

Issue:
Whether PANTRANCO can operate the ferry service without first securing a CPC

Ruling:
No. The SC holds that the water transport service between Matnog and Allen is not a ferry boat
service but a coastwise or interisland shipping service.
Ferry is service either by barges or rafts between rivers or streams which does not involve too
great distance or too long a time to navigate. Meanwhile, interisland or coastwise shipping is a line or
service which involves crossing the open sea. It involves more or less great distance and over more or
less turbulent or dangerous waters of the open sea. This case involves coastwise shipping service since
the distance to be traversed is approximately 23 kilometers and would take one and a half to two hours
to travel. Thus, PANTRANCO’S 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.
National Steel Corp.
Facts:

Plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping
Incorporated (VSI) as vessel owner, entered into a contract of voyage. NSC hired VSI to load and
transport steel products from Iligan City and to discharge the same in Manila.
Some of the conditions stipulated in the contract included among others that the charterer or
shipper, NSC in this case, must insure the cargo and that the ship owner, VSI in this case, shall not be
liable for damages in case of loss, destruction, or deterioration of the cargo unless there is willful
negligence on the part of the vessel’s officers. The contract was also under the terms of FIOST or the
freight in, freight out, stevedoring, and trading which means that the handling, loading, and unloading of
cargoes is the responsibility of the charterer (NSC). Further, owners (VSI) are not liable for the loss or
damage of the cargo resulting to unseaworthiness unless caused by lack of due diligence. The owners
(VSI) shall not be responsible for split, chafing, or any damage unless caused by negligence. Lastly, the
owner (VSI) must exercise due diligence before and at the beginning of the voyage to make the vessel
seaworthy and properly manned.
NSC’s shipment was then loaded on the vessel in three hatches covered by a bill of lading. Upon
arrival in Manila, the hatches were opened and it was discovered that the cargo was wet and rusty. Upon
investigation, it was found out that the wetting and rusting was caused by contact to sea water.
Hence, NSC filed a claim for damages claiming that VSI’s liability is that of a common carrier, that
VSI fialed to exercise extraordinary diligence, and that VSI must be held liable for damages.

Issue:
Whether VSI is a common carrier and that should it be held liable for damages.

Ruling:
The Trial Court’s findings which was affirmed by the Court of Appeals (CA) and the Supreme
Court (SC) are as follows:
a. Plaintiff’s claim is not supported by evidence. The defendant was able to prove its seaworthiness
backed by certificates of seaworthiness issued by competent authority.
b. The cargo was securely stored in three hatches covered with boards and double tarpaulins and
even dry-docked and checked by the Philippine Coast Guard in Cebu.
c. The stevedores hired by plaintiff to discharge the cargo were negligent in not closing the hatch
openings and simply covered the cargoes with tents in case of rains.
d. The vessel encountered rough seas and bad weather causing water to splash on the ships deck
despite its seaworthiness and that the plaintiff did not comply with a condition that it must
secure its cargo prior to loading it to the vessel.

e. Lastly, VSI is not a common carrier because it does not offer its services to the general public nor
does it offer its services to a large segment of a population rather, offers its services to
whomever and whenever it pleases further, the same is free to stipulate limitations as to its
liability.

Therefore, VSI is classified as a private carrier and is only required to exercise ordinary diligence and is
not liable for damages thus the petition is dismissed for lack of merit.
KILUSANG MAYO UNO LABOR CENTER vs. HON. JESUS B. GARCIA, JR.

Facts:
The Department of Transportation and Communication (DOTC) Secretary issued Memorandum
Circular No. 90-395 to Land Transportation Franchising and Regulatory Board (LTFRB) Chairman allowing
provincial bus operators to charge passengers rates within a range of 15% above and 15% below the
LTFRB official rate for a period of one year. The LTFRB said it is not legally feasible because the Public
Service Act prescribes that (a) the rates to be approved should be proposed by public service operators;
(b) there should be a publication and notice to concerned or affected parties in the territory affected;
and (c) a public hearing should be held for the fixing of the rates. Later on, the Provincial Bus Operators
Association of the Philippines, Inc. (PBOAP) applied for an across-the-board fare rate increase. It was
approved by the LTFRB. KMU Labor Center filed an opposition but it was dismissed by the LTFRB for lack
of merit.
Issue:
Whether regulatory bodies are authorized to delegate rate fixing power to provincial bus
operators

Ruling:
No, they are not authorized. The delegation is illegal and invalid and is tantamount to an undue
delegation of legislative authority. Potestas delegata non delegari potest. What has been delegated
cannot be delegated. The policy of allowing the provincial bus operators to change and increase their
fares at will would result not only to a chaotic situation but to an anarchic state of affairs. This would
leave the riding public at the mercy of transport operators who may increase fares every hour, every day,
every month or every year, whenever it pleases them or whenever they deem it "necessary" to do so.

Tatad vs. Garcia, Jr. 243 SCRA 436

FACTS:
In 1989, the government planned to build a railway transit line along EDSA (EDSA LRT III) to
provide a mass transit system and alleviate the congestion and growing transportation problem in the
metropolis.
Republic Act No. 6957 provides for two schemes for the financing, construction and operation of
government projects through private initiative and investment: Build-Operate-Transfer (BOT) or Build-
Transfer (BT).
No bidding was made but certain corporations were invited to prequalify. The only corporation to qualify
was the EDSA LRT. An agreement was then made between the government, through the Department of
Transportation and Communication (DOTC), and EDSA LRT Corporation, Ltd., in substitution of the EDSA
LRT Consortium under the BOT Law. The agreement provides that the EDSA LRT Corporation shall build
the facilities and shall supply the train cabs. Every phase that is completed shall be turned over to the
DOTC and the latter shall pay rent for the same for 25 years. By the end of 25 years, it was projected that
the government shall have fully paid EDSA LRT Consortium. Thereafter, EDSA LRT Consortium shall sell
the facilities to the government for $1.00.
However, Senators Francisco Tatad, John Osmeña, and Rodolfo Biazon opposed the implementation of
said agreement as they averred that EDSA LRT Consortium is a foreign corporation as it was organized
under Hongkong laws; that as such, it cannot own a public utility such as the EDSA railway transit
because this falls under the nationalized areas of activities. The petition was filed against Jesus Garcia, Jr.
in his capacity as DOTC Secretary.
ISSUE: Whether or not the EDSA LRT III, a public utility, can be owned by a foreign corporation.
HELD: Yes.
The SC ruled that EDSA LRT Consortium, under the agreement, does not and will not become the owner
of a public utility hence, the question of its nationality is misplaced. It is true that a foreign corporation
cannot own a public utility but in this case what EDSA LRT Consortium will be owning are the facilities
that it will be building for the EDSA railway project. There is no prohibition against a foreign corporation
to own facilities used for a public utility.
In law, there is a clear distinction between the “operation” of a public utility and the ownership of the
facilities and equipment used to serve the public. Ownership is defined as a relation in law by virtue of
which a thing pertaining to one person is completely subjected to his will in everything not prohibited by
law or the concurrence with the rights of another. The exercise of the rights encompassed in ownership
is limited by law so that a property cannot be operated and used to serve the public as a public utility
unless the operator has a franchise. The operation of a rail system as a public utility includes the
transportation of passengers from one point to another point, their loading and unloading at designated
places and the movement of the trains at pre-scheduled times.

Samar Mining Co., Inc. vs Nordeutscher Lloyd

G.R. No. L-28673, 1984

FACTS:
Samar Mining Co. Inc. of 1 crate Optima welded wedge wire sieves through the M/S
Schwabenstein, a vessel owned by Nordeutscher Lloyd, (represented in the Philippines by its agent, C.F.
Sharp & Co., Inc.), which shipment is covered by Bill of Lading No. 18 duly issued to consignee Samar
Mining. Upon arrival of the vessel at the port of Manila, the importation was unloaded and delivered in
good order and condition to the bonded warehouse of AMCYL. The goods were however never delivered
to, nor received by, the consignee at the port of destination Davao. When the letters of complaint sent to
Nordeutscher Lloyd failed to elicit the desired response, Samar Mining filed a formal claim for P1,691.93,
the equivalent of $424.00 at the prevailing rate of exchange at that time, against the former, but neither
paid.

Samar Mining filed a suit to enforce payment. Nordeutscher Lloyd and CF Sharp & Co. brought in
AMCYL as third party defendant. The trial court rendered judgment in favor of Samar Mining, ordering
Nordeutscher Lloyd, et. al. to pay the amount of P1,691.93 plus attorney’s fees and costs. However, the
Court stated that Nordeutscher Lloyd, et. al. may recoup whatever they may pay Samar Mining by
enforcing the judgment against third party defendant AMCYL, which had earlier been declared in default.
Nordeutscher Lloyd and C.F. Sharp & Co. appealed from said decision.

ISSUE:
Whether Nordeustscher Lloyd is liable for the loss of the goods as common carrier?

RULING:
NO. Nordeutscher Lloyd is not liable for the non-delivery of the said cargo/ AMCYL has the
obligation to deliver the cargo in Davao being the agent of Samar Mining Company Inc.,
The liability of the common carrier for the loss, destruction or deterioration of goods transported from a
foreign country to the Philippines is governed primarily by the New Civil Code. In all matters not
regulated by said Code, the rights and obligations of common carriers shall be governed by the Code of
Commerce and by special laws.
Article 1736. The extraordinary responsibility of the common carrier lasts from the time
the goods are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to
the consignee, or to the person who has a right to receive them, without prejudice to
the provisions of article 1738.
Article 1738. The extraordinary liability of the common carrier continues to be operative
even during the time the goods are stored in a warehouse of the carrier at the place of
destination, until the consignee has been advised of the arrival of the goods and has had
reasonable opportunity thereafter to remove them or otherwise dispose of them.
Article 1738 finds no applicability to the instant case. The said article contemplates a situation where the
goods had already reached their place of destination and are stored in the warehouse of the carrier. The
subject goods were still awaiting transshipment to their port of destination, and were stored in the
warehouse of a third party when last seen and/or heard of.
However, Article 1736 is applicable to the instant suit. Under said article, the carrier may be
relieved of the responsibility for loss or damage to the goods upon actual or constructive delivery of the
same by the carrier to the consignee, or to the person who has a right to receive them. In sales, actual
delivery has been defined as the ceding of corporeal possession by the seller and the actual
apprehension of corporeal possession by the buyer or by some person authorized by him to receive the
goods as his representative for the purpose of custody or disposal. By the same token, there is actual
delivery in contracts for the transport of goods when possession has been turned over to the consignee
or to his duly authorized agent and a reasonable time is given him to remove the goods. The court a quo
found that there was actual delivery to the consignee through its duly authorized agent, the carrier.
EASTERN SHIPPING LINES, INC., vs. INTERMEDIATE APPELLATE COURT (1987)

FACTS:
The M/S ASIATICA, a vessel operated by Eastern Shipping Lines, Inc., loaded at Kobe, Japan for
transportation to Manila, certain cargoes. Enroute for Kobe, Japan, to Manila, the vessel caught fire and
sank, resulting in the total loss of ship and cargo.
Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinary
fortuitous event, hence, it is not liable under the law.
Also on the grounds that the fire which caused the sinking of the ship is an exempting circumstance
under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is
established, the burden of proving negligence of the vessel is shifted to the cargo shipper.

ISSUE:
(1) Which law should govern and (2) Who has the burden of proof to show negligence of the
carrier?

Ruling:
On the Law Applicable
The law of the country to which the goods are to be transported governs the liability of the common
carrier in case of their loss, destruction or deterioration. 4 As the cargoes in question were transported
from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code.
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over goods, according to all the
circumstances of each case.
Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase
"natural disaster or calamity. " However, we are of the opinion that fire may not be considered a natural
disaster or calamity. It does not fall within the category of an act of God unless caused by lightning. And
even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil
Code, it is required under Article 1739 of the same Code that the "natural disaster" must have been the
"proximate and only cause of the loss," and that the carrier has "exercised due diligence to prevent or
minimize the loss before, during or after the occurrence of the disaster. " This Petitioner Carrier has
failed to establish satisfactorily.
In this case, it was found, as a fact, that there was "actual fault" of the carrier shown by "lack of
diligence" in that "when the smoke was noticed, the fire was already big; that the fire must have started
twenty-four (24) hours before the same was noticed; " and that "after the cargoes were stored in the
hatches, no regular inspection was made as to their condition during the voyage." The foregoing suffices
to show that the circumstances under which the fire originated and spread are such as to show that
Petitioner Carrier or its servants were negligent in connection therewith.
Hence, for failure to prove that they exercised extraordinary diligence, the petitioners are liable for
such loss.
NATIONAL DEVELOPMENT COMPANY AND MARITIME COMPANY OF THE PHILIPPINES VS THE COURT
OF APPEALS AND DEVELOPMENT INSURANCE AND SURETY COOPERATION

FACTS:
In accordance with the agreement entered into between defendants NDC and MCP, the former
appointed the latter as its agent to manage and operate DONA NATI VESSEL one of its vessel for and its
behalf and account.
E. Phillip Corporation loaded on board the vessel 1200 bales of American raw cotton consigned
to the order of Manila Banking Corporation, who represent Riverside Mills Corporation. Also loaded on
the same vessel were cargo of Kyotuko Boekui, Kaisa LTD. Consigned to the order of Manila Banking
Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of aluminium oil. All of these
were insured to the respondent insurer.
En route to Manila the vessel figured a collision with a Japanese vessel as a result of which 550
bales of raw cotton as well as the cargo of Kyokuto were lost and destroyed. The respondent paid the
insurance and filed an action for recovery against NDC and MCP.
NDC argued that the Carriage of Goods Sea Act should apply to the case at bar and not the civil
code or code of commerce. Under section 4(2) of the said act the carrier is not responsible for the loss,
damage arising from the act, neglect or default of the master or the servant of the carrier in the
navigation or in the management of the ship therefore they are not liable.

ISSUE:
Whether the COGSA is applicable

RULING:
The law of the country to which the goods are to be transported governs the liability of the
common carrier in case of their loss, destruction or deterioration , thus the Philippines civil code shall
governs such liability and in all matters not regulated by this code, the rights and obligation of the
common carrier shall be governed by the code of commerce. Hence a COGSA, a special law is merely
suppletory to the civil code, it is immaterial that the collision actually occurred in foreign country.
More specifically, code of commerce provides that if the collision is imputable to both vessels, each
one suffers its own losses and both shall be solidary responsible for losses and damages suffered by their
cargoes. Therefore, the Shipowner or carrier is not exempt from liability for damages arising from
collision due to fault or negligent of the captain. Because the Shipmaster or captain is merely an agent of
the Shipowner who has actual or constructive control or supervision of the voyage.

Gelisan vs Alday.
G.R no. L- 30212 September 30, 1987

Facts:
Defendant Gelisan is the owner of a freight truck bearing a plate number TH-2377. On January
1962, Gelisan and Espiritu entered into a lease contract under which Espiritu hired the same freight truck
for the purpose of hauling rice, sugar, flour and fertilizer at an agreed price of P18 per trip with the limits
of city of Manila. It also agreed that Espiritu shall bear and pay all losses and damages attending the
carriage. The contract however was not registered and was not approved by the Public Service
Commission
On February 1962, Espiritu and Alday agreed to haul the Fertilizer of AFC, a company which Alday had a
contract with. Espiritu and Alday agreed that Espiritu would haul the fertilizer of AFC from pier 4 North
Harbor to Mandaluyong . Espiritu however did not deliver the fertilizer to the bodega of AFC.
Alday was compelled to pay the value of the fertilizer and so he filed a complaint against Espiritu and
Gelisan.
Gelisan contended that he was not a privy to the contract and that the contract executed between him
and Espiritu exempts him from liability.

Issue:
Whether Gelisan is Liable?

Ruling:
Yes, the registered owner of a public service vehicle is responsible for damages that may arise
from the consequences incident to its operation or that may be caused to any of the passengers therein.
The lease contract cannot be sustained because it had been approved by the PSC.
If a property covered by a franchise is transferred or leased to another without obtaining approval, the
transfer is not binding upon the public and third persons.

Benedicto vs IAC 187 SCRA 547 (1990)

FACTS:
Greenhills Wood Industries bound itself to sell and deliver to Blue Star Mahogany, Inc. 100,000
board feet of sawn lumber. Dominador Cruz, a resident manager of Greenhills Wood Industries in
Maddela, contracted with Virgilio Licuden, the driver of a cargo truck to transport the sawn lumber to
the consignee Blue Star in Valenzuela, Bulacan. The cargo truck was registered in the name of Ma. Luisa
Benedicto. However, the sawn lumber was not delivered to the consignee at the expected date.
Greenhills filed a criminal case against the driver, Licuden for estafa and a civil case for recovery of the
value of the lost sawn lumber plus damages agains Benedicto.
Benedicto denied liability as she was a complete stranger to the contract of carriage. The truck was
earlier sold to Benjamin Tee but the truck had remained registered in her name because Tee had not yet
fully paid the amount of the truck, hence Tee had been operating the truck and Licuden was Tee’s
employee and not hers.

ISSUE:
Whether Benedicto shall be held liable.

HELD:
Yes. The prevailing doctrine on common carriers makes the registered owner liable for
consequences flowing from the operations of the carrier, even though the specific vehicle involved may
already have been transferred to another person. This doctrine rests upon the principle that in dealing
with vehicles registered under the Public Service Law, the public has the right to assume that the
registered owner is the actual or lawful owner thereof It would be very difficult and often impossible as a
practical matter, for members of the general public to enforce the rights of action that they may have for
injuries inflicted by the vehicles being negligently operated if they should be required to prove who the
actual owner is. The registered owner is not allowed to deny liability by proving the identity of the
alleged transferee. Thus, contrary to petitioner's claim, private respondent is not required to go beyond
the vehicle's certificate of registration to ascertain the owner of the carrier.
Philtranco Service Enterprises Inc. and Rogaciones Manilhig, petitioner.
v.
Heirs of the Late Ramon Acuesta, respondents.

Facts:
Sometime on March 24, 1990, the victim Ramon Acuesta was riding on his easy rider bicycle
along the Gomez St., Calbayug City and when the victim reached Magsaysay Blvd. also in Calbayug City
he was bumped by a Philtranco bus which was being pushed to a jump-start by few persons and driven
by Rogaciones Manilhig which caused the death of the victim (Ramon Acuesta).
The heirs of the victim Ramon Acuesta filed an action before the RTC of Calbayug City against the
driver and the Philtranco Service Enterprises Inc. which was then the employer of Manilhig, because of
the gross negligence, recklessness, violation of traffic rules and regulations of the bus driver. However,
Philtranco averred that it was the fault of the victim and that they exercised diligence of a good father of
a family in the selection and supervision of its employees and that Manilhig has an excellent record as
driver.

Issue:
Whether Philtranco Service Enterprises Inc. is liable because of the negligence and recklessness
of its bus driver.

Ruling:
The Supreme Court ruled that Philtranco is liable to the negligence and recklessness of its driver
because the action instituted by the private respondent is an action for damages on quasi-delict under
Art.2176 & 2180 of the Civil Code, where the obligation is imposed by Art.2176 is demandable not only
for one’s own acts or omissions, but also for those for whom one is responsible and an employer like
Philtranco was included in the said provision.
Moreover, the Court applied the Registered Owner Rule, wherein the liability of the Registered
Owner of a public service vehicle, like Philtranco, for damages arsing from tortious acts of the driver is
primary, direct and joint and several or solidary with the driver.
Thus, Philtranco is liable for the damages caused by the negligence and recklessness of its driver
Manilhig.

SANTOS VS SIBUG
GR L-26815

FACTS:
Santos owns a passenger jeep but had no certificate of public convenience (CPC) so he then
transferred his jeep to the name of Vidad so that it could be operated under Vidad’s CPC. They entered
into a Kabit System and for his protection, Vidad executed a re-transfer of the document to Santos.
Sibug was bumped by the jeep operated by Vidad and driven by Garagas which made him file
against them for damages. After awarding of damages, the sheriff levied on the jeep but here comes
Santos alleging actual ownership on the jeep and was only registered under Vidad for the use of his CPC.

ISSUE:
Whether the jeep would be levied under the name of Vidad.
RULING:
Although Santos was the true owner, Vidad is considered the operator of the vehicle because he
is the operator of record as regards the public and third persons even if the vehicle involved in the
accident has been sold to another where the sale is not approved by the Public Service Commission. As
the vehicle was registered in Vidad’s name, the levy on execution against the jeep should be enforced
notwithstanding the fact that the secret ownership belonged to another.
Santos as the kabit should not be allowed to defeat the levy on his vehicle and to avoid his
responsibilities as a kabit owner for he had led the public to believe that the vehicle belonged to Vidad.
This is one way of curbing the pernicious Kabit System that facilitates the commission of fraud against
the travelling public.
Were it allowed that a third person to prove that he is the real owner of a particular vehicle and
not the registered owner would tantamount to sanctioning the attempt of the registered owner in
evading responsibility and a collusion between a person and a registered owner for him to escape
responsibility.
LITA Enterprises, Inc. vs. IAC

FACTS:
Spouses Ocampo purchased in installment 5 Toyota Corona to be used as taxicabs. Since they
have no franchise to operate, they contracted with Lita Enterprise for the use of the latter’s CPC. To
effectuate the agreement, the cars were registered under the name of Lita Enterprise.
A year later 1 of the taxicabs was involved in an accident, where it collided with a motorcycle
whose driver was killed due to the head injuries obtained in the accident. Criminal charges as well as civil
complaints were filed against the driver and Lita Enterprise, where the trial court held Lita Enterprise
liable. The decision became final and executory and 2 out of the 5 Toyota Corana was levied.
Thereafter, the spouses decided to register the remaining taxicabs under their name but Lita
Enterprise refused to convey the registration to them. Thus, the spouses filed a complaint for Specific
Performance for the reconveyance of the registration against Lita Enterprise.
The CFI ruled in favor of the spouses and ordered the reconveyance. In and appeal with the IAC,
the court modified the decision and was ordered to pay the spouses for the market value of the
remaining 3 taxicabs since they are no longer serviceable and for its deterioration. Thus, the petitioner
Lita Enterprise moved for an appeal after its motions for reconsideration have been denied praying that
the decision be reversed, annulled or amended.

ISSUE:
Whether the registration constitutes “kabit system” and whether the courts should afford the
parties relief?

RULING:
Unquestionably, the parties herein operated under an arrangement, comonly known as the
"kabit system", whereby a person who has been granted a certificate of convenience allows another
person who owns motors vehicles to operate under such franchise for a fee. A certificate of public
convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees
thereof cannot be countenanced
Although not outrightly penalized as a criminal offense, the "kabit system" is invariably
recognized as being contrary to public policy and, therefore, void and inexistent under Article 1409 of
the Civil Code, It is a fundamental principle that the court will not aid either party to enforce an illegal
contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on the
part of both the trial and appellate courts to have accorded the parties relief from their predicament.
Article 1412 of the Civil Code denies them such aid
Both parties were in pari delicto, thus, no suit can be maintained for its specific performance, or
to recover the property agreed to be sold or delivered, or damages for its property agreed to be sold or
delivered, or damages for its violation.
"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored
maxim that must be applied to the parties in the case at bar. Having entered into an illegal contract,
neither can seek relief from the courts, and each must bear the consequences of his act.
R. No. L-65510 March 9, 1987 TEJA MARKETING AND/OR ANGEL JAUCIAN vs. HONORABLE
INTERMEDIATE APPELLATE COURT AND PEDRO N. NALE

FACTS:
On May 9, 1975, Pedro N. Nale bought from the plaintiff Teja Marketing a motorcycle with
complete accessories and a sidecar in the total consideration of P8,000.00. Pedro N. Nale gave a
downpayment of P1,700.00 with a promise to pay the balance within sixty days. He failed to comply and
upon his own request, the period was extended to one year in monthly installments. A chattel mortgage
was constituted as a security for the payment of the balance. The records of the Land Transportation
Commission (LTC) show that the motorcycle sold to Pedro N. Nale was first mortgaged to the Teja
Marketing by Angel Jaucian though Teja Marketing and Angel Jaucian are one and the same. Because it
was made to appear that way only as Pedro N. Nale had no franchise of his own and he attached the unit
to the plaintiff's MCH Line. The agreement of the parties here was for the plaintiff to undertake the
yearly registration of the motorcycle with the LTC. Pursuant to this agreement Pedro N. Nale gave the
plaintiff P90.00 for the mortgage fee and registration fee of the motorcycle. The plaintiff however failed
to register the motorcycle on that year on the ground that Pedro N. Nale failed to comply with some
requirements such as the payment of the insurance premiums and the bringing of the motorcycle to the
LTC for stenciling. The plaintiff saying that Pedro N. Nale was hiding the motorcycle from him. Lastly, the
plaintiff explained also that though the ownership of the motorcycle was already transferred to Pedro N.
Nale the vehicle was still mortgaged with the consent of Pedro N. Nale to the Rural Bank of Camaligan
for the reason that all motorcycle purchased from the plaintiff on credit was rediscounted with the bank.
Just the same Pedro N. Nale failed to pay the balance thus forcing the plaintiff to file an action for
damage in the City Court of Naga City. On his part, Pedro N. Nale did not dispute the sale and the
outstanding balance. He claimed that he was persuaded to buy the motorcycle because of the condition
that the plaintiff would be the one to register every year the motorcycle with the LTC. However, the
plaintiff failed to do so. Because of this, he suffered damages when he failed to claim any insurance
indemnity for the more than two times that the motorcycle figured in accidents aside from the loss of
the daily income. The City Court rendered judgment in favor of Teja Marketing and/or Angel Jaucian.
Dismissing the counterclaim and ordering Pedro N. Nale to pay plaintiff the unpaid balance with legal
rate of interest, attorney's fees, and expenses of litigation. On appeal to the CFI of Camarines Sur, the
decision was affirmed in toto. Pedro N. Nale filed a petition for review with the IAC. The IAC decision
states that the purchase of the motorcycle, pursuant to the "kabit system", without the prior approval of
the Board of Transportation was an illegal transaction. The parties being in pari delicto, neither of them
may bring an action against the other to enforce their illegal contract. Teja Marketing and/or Angel
Jaucian then filed a petition for review with the Supreme Court.

ISSUE:
Whether the IAC erred in applying the doctrine of "pari delicto."

RULING:
 NO. Unquestionably, the parties herein operated under an arrangement, commonly known as
the "kabit system" whereby a person who has been granted a certificate of public convenience allows
another person who owns motor vehicles to operate under such franchise for a fee. A certificate of
public convenience is a special privilege conferred by the government. Abuse of this privilege by the
grantees thereof cannot be countenanced. The "kabit system" has been identified as one of the root
causes of the prevalence of graft and corruption in the government transportation offices. Although not
outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to
public policy and, therefore, void and in existent under Article 1409 of the Civil Code. It is a fundamental
principle that the court will not aid either party to enforce an illegal contract, but will leave both where it
finds then. The defect of in existence of a contract is permanent and cannot be cured by ratification or by
prescription. The mere lapse of time cannot give efficacy to contracts that are null and void.
Magboo v. Bernardo (G.R. No. L-16790, 30 April 1963)

Facts:
On 24 October 1956, Bernardo and Roque entered into a contract where Roque would pay
Bernardo P8.00 for the privilege of driving Bernardo’s jeepney. They agreed that whatever Roque would
earn from the use of the jeepney would belong entirely to him (Roque).
On the same day, the jeepney was involved in an accident which resulted in the death of Cesar Magboo,
the 8-year old son of plaintiffs Magboo.
Roque was prosecuted for homicide through reckless imprudence, to which he pleaded guilty and was
accordingly sentenced with six months of arresto mayor and to pay indemnity. He served his sentence
but was not able to pay the indemnity because of insolvency.
Plaintiffs then filed an action against Bernardo for the enforcement of his subsidiary liability as the
employer of Roque.
Bernardo contended that his relation with Roque was that of lessor and lessee.

Issue:
Whether there is an employer-employee relationship between a jeepney owner and a jeepney
driver operating under the “boundary system”

Ruling:
Yes, there is an employer-employee relationship between the two. Operation under the
“boundary system” is not sufficient to withdraw the relationship between the parties from that of
employer and employee.
Furthermore, to exempt from liability the owner of a public vehicle who operates it under the “boundary
system” on the ground that he is a mere lessor would not only be to abet flagrant violations of the Public
Service Law but also to place the riding public at the mercy of reckless and irresponsible drivers –
reckless because the measure of their earning depends largely upon the number of trips they make and,
hence, the speed at which they drive, and irresponsible because most, if not all, of them are in no
position to pay the damages they might cause.
Thus, from the foregoing, Bernardo, being deemed as the employer of Roque, is liable to pay indemnity
to the plaintiffs.
 Ganzon v. CA, 161 SCRA 646
FACTS:
Around 1956, private respondent Gelacio Tumambing contracted the services of Mauro Ganzon
to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila.
Accordingly, per agreement, Ganzon sent and docked his lighter “Batman” to Mariveles, Bataan; and
Tumambing delivered the scrap iron to Niza, the captain of the lighter, for loading. When about half of
the iron was loaded, Mariveles Municipal Mayor Advincula arrived and demanded payment of a certain
sum of money from Tumambing. Upon the latter’s resistance and after heated argument, said Mayor
shot him and caused him to be injured. After sometime, the loading was resumed but this time, the
Acting-Mayor Basilio ordered Captain Niza to dump the scrap iron, in which the captain and his crew
complied with. The rest of the iron was then brought to NASSCO.
Tumambing filed a case against Ganzon. The latter argued that the goods are not yet placed under his
custody, hence, he is not liable. The Court of Appeals (CA) rendered a decision ordering Ganzon to pay
for damages in favor of Tuamambing. Hence, the petition for review on certiorari was filed by Ganzon
alleging errors in the said decision of CA.

ISSUE:
Whether the contract of carriage was perfected in order that the extraordinary responsibility in
the goods to commence.

RULING:
Contract of Carriage was deemed perfected. Petition is denied; SC affirmed the decision of CA.

RATIO:
The scraps were unconditionally placed in the possession and control of the common carrier, and
upon their receipt for its transportation, the contract of carriage was deemed perfected, hence,
extraordinary responsibility for the loss, destuction, and deterioration of the goods commenced.
According to Art. 1738, such responsibility would cease only upon the delivery of the carrier to the
consignee or person authorized to receive the same to effect receipt. Albeit, only part were loaded, the
contract is not impaired because the goods remained in the custody and control of the carrier.
Further, one may be exempted from being liable if observance of extraordinary diligence or presence of
force majeure is proven. In this case, petitioner Ganzon failed to prove that the “Order” of Acting-Mayor
Basilio is lawful. Hence, Ganzon’s defense that the loss of the scraps were due to an “order or act of
competent public authority”, applying Art. 1734, is erroneous because the said order did not constitute
valid authority for the petitioner to carry out.
EASTERN SHIPPING LINES, INC., vs. THE COURT OF APPEALS (1991)

FACTS:
A cargo was shipped on board the vessel "Japri Venture," owned and operated by the Eastern
Shipping Lines, Inc., at Kobe, Japan, for delivery to Stresstek Post-Tensioning Phils., Inc. in Manila.
It appears that while enroute from Kobe to Manila, the carrying vessel encountered "very rough
seas and stormy weather", the coils wrapped in burlap cloth and cardboard paper were stored in the
lower hatch of the vessel which was flooded with water about one foot deep; that the water entered the
hatch; that a survey of bad order cargo was conducted which showed that seven coils were rusty on one
side and that the "wetting (of the cargo) was caused by fresh water" that entered the hatch when the
vessel encountered heavy rain en route to Manila; and that all thirteen coils were extremely rusty and
totally unsuitable for the intended purpose.
 Petitioner claims it should not be held liable as the shipment was discharged and delivered
complete into the custody of the arrastre operator under clean tally sheets.

ISSUE:
Whether petitioner is liable for the damage and loss of such cargo.

HELD:
The facts were not disputed. That rain water (not sea water) found its way into the holds of
the Jupri Venture is a clear indication that care and foresight did not attend the closing of the ship's
hatches so that rain water would not find its way into the cargo holds of the ship.
Moreover, under Article 1733 of the Civil Code, common carriers are bound to observe "extra-
ordinary vigilance over goods . . . .according to all circumstances of each case," and Article 1735 of the
same Code states, to wit:
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence as required in
article 1733.
Since the carrier has failed to establish any caso fortuito, the presumption by law of fault or
negligence on the part of the carrier applies; and the carrier must present evidence that it has observed
the extraordinary diligence required by Article 1733 of the Civil Code in order to escape liability for
damage or destruction to the goods that it had admittedly carried in this case. No such evidence exists of
record. Thus, the carrier cannot escape liability.
G.R. No. 108897. October 2, 1997
SARKIES TOURS PHILIPPINES, INC. petitioner
vs.
HONORABLE COURT OF APPEALS (TENTH DIVISION), DR. ELINO G. FORTADES, MARISOL A. FORTADES
and FATIMA A. FORTADES., respondent.

FACTS:
On August 31, 1984, Fatima boarded petitioners De Luxe Bus No. 5 in Manila on her way to Legazpi
City. She brought three pieces of luggage containing all of her optometry review books, materials and
equipment, trial lenses, trial contact lenses, passport and visa, as well as her mother Marisol’s U.S.
immigration (green) card, among other important documents and personal belongings. These were kept
in the baggage compartment of the bus, but during a stopover at Daet, it was discovered that all but one
bag remained in the open compartment. The others, including Fatima’s things, were missing and could
have dropped along the way. Some of the passengers suggested retracing the route to try to recover the
lost items, but the driver ignored them and proceeded to Legazpi City.
Fatima asked assistance from the radio stations and even from Philtranco bus drivers who plied the
same route on August 31st. The effort paid off when one of Fatima’s bags was recovered. Marisol, her
mother, also reported the incident to the National Bureau of Investigations field office in Legazpi City, and
to the local police.
After more than nine months of fruitless waiting, respondents decided to file the case below to
recover the value of the remaining lost items, as well as damages and litigation expenses. They claimed
that the loss was due to petitioner’s failure to observe extraordinary diligence in the care of Fatima’s
luggage and that petitioner dealt with them in bad faith from the start. Petitioner, on the other hand,
disowned any liability for the loss on the ground that Fatima did not bring any piece of luggage with her,
and even if she did, none was declared at the start of the trip.
ISSUE:
Whether or not the petitioner, as a common carrier, is liable for the loss of the luggage?

HELD:
YES. The cause of the loss in the case at bar was petitioner’s negligence in not ensuring that the
doors of the baggage compartment of its bus were securely fastened. As a result of this lack of care,
almost all of the luggage was lost, to the prejudice of the paying passengers. Under the Civil Code,
common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods transported by them, and this liability
lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier
for transportation until the same are delivered, actually or constructively, by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to the person who
has a right to receive them, unless the loss is due to any of the excepted causes under Article 1734
thereof.
Where the common carrier accepted its passengers baggage for transportation and even had it
placed in the vehicle by its own employee, its failure to collect the freight charge is the common carriers
own lookout. It is responsible for the consequent loss of the baggage. In the instant case, defendant
appellant’s employee even helped Fatima and her brother load the luggage in the bus baggage
compartment, without asking that they be weighed, declared, receipted or paid for. Neither was this
required of the other passengers.
Valenzuela Hardwood and Industrial Supply, Inc. vs. Court of Appeals
G.R. No. 102316, June 30, 1997

FACTS:
Valenzuela Hardwood and Industrial Supply, Inc., entered into an agreement with Seven Brothers
Shipping Corporation to load on board its vessel M/V Seven Ambassador the logs of the former at the
port of Maconacon, Isabela for shipment to Manila. The charter party between Valenzuela Hardwood
and Seven Brothers stipulated that the ship owner shall not be responsible for loss, split, short- landing,
breakages and any kind of damages to the cargo. The logs were insured with South Sea Surety against
loss or damages. The vessel sank resulting to the loss of the insured logs. South Sea Surety issued check
to cover payment due on the policy but it was not accepted. Thus, the insurance company cancelled the
policy. When Valenzuela Hardwood demanded payment against the insurance company, it denied
liability. Thereby, Valenzuela Hardwood filed a formal claim against the insurance and shipping company.
The trial court ruled in favor of the plaintiff. Hence, defendants appealed to the Court of Appeals. The
Court of Appeals affirmed the trial court’s decision but modified it by holding that Seven Brothers was
not liable for the lost cargo since there was a non- liability clause stipulated by the parties.

ISSUE:
Whether the stipulation in the charter party executed between the Valenzuela Hardwood and
Seven Brothers exempting the latter from liability is valid.

HELD:
Yes. In this case, it is undisputed that Seven Brothers had acted as a private carrier in
transporting the logs. In a contract of private carriage, the parties may validly stipulate the responsibility
for the cargo rests solely on the charterer exempting the ship owner from liability for loss of or damage
to the cargo caused even by the negligence of the ship captain. The stipulation is valid because it is freely
entered into by the parties and the same is not contrary to law, morals, good customs, public order, or
public policy. In a contract of private carriage, parties may freely stipulate their duties and obligations
which perforce would be binding on them. Unlike in a contract involving a common carrier, private
carriage does not involve the general public. Hence, the provisions on common carriers protecting the
general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier.
Yobido vs CA

Facts:
Spouses Tito and Leny Tumboy together with their children boarded a Yobido liner bus bound to
Davao. Along Picop RD at KM17 at Agusan del Sur, the left front tire of the bus exploded, causing the bus
to fall in a ravine leading to the death of Tito and the injury of the other passengers.
As a result, a complaint was filed by Leni and her children against the owner and driver of Yobido bus
liner for breach of contract of carriage and damages plus attorney’s fees. The breach was caused by the
failure of the bus driver to exercise the diligence required of the carrier- that the bus was full of
passengers and cargoes on top, and was traversing a wet and uncemented road, and that the speed was
fast, and that the driver ignored Leny when she cautioned him of the speed.
However, the defendants raised an affirmative defense of caso fortuito. They assert that the tire was a
new Goodyear tire, mounted on the bus 5 days before the accident day, and that the bus was not full of
passengers and was traversing slow, and that the secretary of the bus liner said that drivers underwent
actual driving tests before they were employed.
The RTC dismissed the complaint for lack of merit and declared that the blowout was a caso fortuito
which is an extraordinary circumstance independent of the will of the defendants who should be
relieved of liability. CA reversed the decision.

Issue:
Whether the explosion of a newly installed tire of a passenger bus is a fortuitous event that
exempts the carrier from liability for the death of a passenger.

Ruling:
NO. Requisites of a fortuitous event:
a. The cause of the unforeseen or unexpected occurrence must be independent from the will from
human will
b. It must be impossible to foresee or if foreseeable is inevitable
c. Occurrence must be such that it prevents the defendants from performing their obligation in a
normal manner
d. Independent from human intervention in the aggravation of the injury
The explosion of the new tier is not considered a fortuitous event as there are human factors
involved.
The fact that the tier was new did not imply that it was free from manufacturing defect, or that it
was properly mounted on the vehicle. Neither is the fact that the tire was of a name of noted quality
result in the conclusion that it could explode within 5 days use.
It is settled that an accident caused by defects in the automobiles or through the negligence of its driver
is not caso fortuito that would exempt from liability for damages.
It may be impracticable to require carriers to test the strength of each parts of the vehicle for every trip,
but a due regard to the obligation of the carrier toward the travelling public demands adequate
periodical tests to determine the safety of passengers.
Petitioners failed to discharge its duty to overthrow the presumption of negligence with clear and
convincing evidence.
[G.R. No. L-9840. April 22, 1957.]
LU DO & LU YM CORPORATION, petitioner-defendant, v. I. V. BINAMIRA, respondent-plaintiff .
FACTS:
The Delta Photo Supply Company of New York shipped on board the M/S "FERNSIDE" at New
York, U.S.A., six cases of films and/or photographic supplies consigned to the order of respondent I. V.
Binamira. For this shipment, Bill of Lading No. 29 was issued. The ship arrived at the port of Cebu and
discharged her cargo on the same day, including the shipment in question, placing it in the possession
and custody of the arrastre operator of said port, the Visayan Cebu Terminal Company, Inc.

Lu Do, as agent of the carrier (Delta Photo Supply Company), hired the Cebu Stevedoring
Company, Inc. to unload its cargo. During the discharge, good order cargo was separated from the bad
order cargo on board the ship, and a separate list of bad order cargo was prepared by the checker of the
stevedoring company (Pascual Villamor). All the cargo unloaded was received at the pier by the Visayan
Cebu Terminal Company, Inc., arrastre operator of the port. The terminal company’s checker (Romeo
Quijano), also recorded and noted down the good cargo from the bad one. The shipment in question
was not included in the report of bad order cargo of both checkers, indicating that it was discharged
from the ship in good order and condition.

Three days after the goods were unloaded from the ship, Binamira took delivery of his six cases
of photographic supplies from the arrastre operator (Visayan Cebu Terminal Company, Inc). He
discovered that the cases showed signs of pilferage and, consequently, he hired marine surveyors, R. J.
del Pan & Company, Inc. to examine them. The finding that some films and photographic supplies were
missing valued at P324.63.

Lu Do filed an action in the RTC of Cebu against Binamira to recover the sum of P324.63 as value
of certain missing shipment. After trial, the court ordered Binamira to pay Lu Do the sum of P216.84,
with legal interest. On appeal, the Court of Appeals affirmed the judgment, hence the present petition
for review.

ISSUE:
Whether the carrier assumes liability for any loss or damage to the goods once they have been taken
into the custody of customs or other authorities.

RULING:
No, the carrier is not responsible for the loss in question, it appearing that the same happened after the
shipment had been delivered to the customs authorities.

It is true that, as a rule, a common carrier is responsible for the loss, destruction or deterioration of the
goods it assumes to carry from one place to another unless the same is due to any of the causes
mentioned in Article 1734 of the new Civil Code, and that, if the goods are lost, destroyed or
deteriorated, for causes other than those mentioned, the common carrier is presumed to have been at
fault or to have acted negligently, unless it proves that it has observed extraordinary diligence in their
care and that this extraordinary liability lasts from the time the goods are placed in the possession of the
carrier until they are delivered to the consignee, or "to the person who has the right to receive them."
These provisions, however, only apply when the loss, destruction or deterioration takes place while the
goods are in the possession of the carrier, and not after it has lost control of them.

The delivery of the cargo to the customs authorities is not delivery to the consignee, or "to the person
who has a right to receive them", contemplated in Article 1736, because in such case the goods are still
in the hands of the Government and the owner cannot exercise dominion over them. The parties,
however, may agree to limit the liability of the carrier considering that the goods have still to go through
the inspection of the customs authorities before they are actually turned over to the consignee.

In the bill of lading that was issued, both the carrier and the consignee have stipulated to limit the
responsibility of the carrier for the loss or damage that may be caused to the goods before they are
actually delivered whereby the carrier does not assume liability for any loss or damage to the goods
once they have been "taken into the custody of customs or other authorities", or when they have been
delivered at ship’s tackle.

Therefore, the carrier is not responsible for the loss in question, it appearing that the same happened
after the shipment had been delivered to the customs authorities.
AMERICAN PRESIDENT LINES, LTD. v. RICHARD A. KLEPPER, ET AL.
[G.R. No. L-15671. November 29, 1960.]

Facts:
Richard Klepper shipped one lift van containing personal and household effects from Yokohama,
Japan van to Manila on February 17, 1955. It reached Manila after 5 days and while the lift van was being
unloaded by the Gantry crane operated by Delgado Brothers, Inc., it fell on the pier and its contents were
spilled and scattered. As a result Klepper suffered damages totaling P6,729.50 arising out of the
breakage, denting and smashing of the goods. He filed an action to recover the damages against
American President Lines, Ltd., plus the sum of P2,000.00 as sentimental value of the damaged goods
and attorney’s fees.

American President Lines, Ltd. did not dispute its liability as common carrier, but it contends that the its
liability cannot exceed $500.00 as stipulated in the bill of lading Exhibit A and Section 4(5) of the Carriage
of Goods by Sea Act.

Issue:
Whether the liability of American President Lines, Ltd. should not exceed $500.00.

Ruling:
YES.Section 4 (5) of the Carriage of Goods by Sea Act states that the carrier shall not be liable in
an amount exceeding $500.00 per package unless the value of the goods had been declared by the
shipper and inserted in the bill of lading, this section is merely suppletory to the provisions of the Civil
Code.

The pertinent provision of the bill of lading; "17. In case of any loss or damage to or in
connection with goods exceeding in actual value $500 lawful money of the United States, per package, . .
. the value of the goods shall be deemed to be $500 per package . . . on which basis the freight is
adjusted and the Carrier’s liability, if any, shall be determined on the basis of a value of $500 per package
. . . or pro rata in case of partial loss or damage, unless the nature of the goods and a valuation higher
than $500 shall have been declared in writing by the shipper upon delivery to the Carrier and inserted in
this bill of lading and extra freight paid if required and in such case if the actual value of the goods per
package . . . shall exceed such declared value, the value shall nevertheless be deemed to be the declared
value and the Carrier’s liability, if any, shall not exceed the declared value and any partial loss or damage
shall be adjusted pro rata on the basis of such declared value."
 In accepting the bill of lading, the shipper, consignee and owner of the goods agree to be bound
by all its stipulations, exceptions and conditions, whether written, printed or stamped on the front or
back.

G.R. No. L-36481-2 October 23, 1982 AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees, vs.
PHILIPPINE STEAM NAVIGATION CO., defendant-appellant.

FACTS:
On November 6, 1963, appellees Clara Uy Bico and Amparo Servando loaded on board the
Philippine Steam Navigation Co's vessel, FS-176, for carriage from Manila to Pulupandan, Negros
Occidental, 1,528 cavans of rice valued at P40,907.50 and 44 cartons of colored paper, toys and general
merchandise valued at P1,070.50. Upon arrival of the vessel at Pulupandan, in the morning of November
18, 1963, the cargoes were discharged, complete and in good order, unto the warehouse of the Bureau
of Customs. At about 2:00 in the afternoon of the same day, said warehouse was razed by a fire of
unknown origin, destroying appellees' cargoes. Appellees' claims for the value of said goods were
rejected by the appellant because Philippine Steam Navigation contended that they executed a bill of
lading stating that the parties agreed to limit the responsibility of the carrier for the loss or damage that
may be caused to the shipment to wit : xxxx..Nor shall carrier be responsible for loss or damage caused
by force majeure, dangers or accidents of the sea or other waters; war; public enemies; . . . fire .
However, appellees defense was that the said stipulation does not bind them because it was printed in
fine letters on the back-of the bills of lading; and that they did not sign the same. Hence this appeal.

ISSUE:
Whether the stipulation limiting the validity of the carrier is valid.

HELD:
Yes. The Supreme Court sustained the validity of the stipulation; there is nothing therein that is
contrary to law, morals or public policy. The argument of the appellees overlooks the pronouncement of
this Court in Ong Yiu vs. Court of Appeals, promulgated June 29, 1979, 3 where the same issue was
resolved in this wise: While it may be true that petitioner had not signed the plane ticket , he is
nevertheless bound by the provisions thereof. 'Such provisions have been held to be a part of the
contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of
knowledge or assent to the regulation'. It is what is known as a contract of 'adhesion', in regards which it
has been said that contracts of adhesion wherein one party imposes a ready made form of contract on
the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent." In
addition, the reason for the lost of the cargoes was due to a fire and the cour ruled that where fortuitous
event or force majeure is the immediate and proximate cause of the loss, the obligor is exempt from
liability for non-performance. Furthermore, the court said that that since the warehouse belonged to
and was maintained by the government, it would be unfair to impute negligence to the appellant, the
latter having no control whatsoever over the same. Hence, Philippine Steamship, the appellants is not
liable to Servande and Bico.
Saludo vs CA
Facts:
 On Oct 23, 1976, Crispina Saludo died in Illinois, Chicago. Pomierski and Son Funeral Home made
the arrangements for the shipment of the remains from Chicago to Philippines.
On Oct 25, 1976, Pomierski secured a permit from the Philippine Vice Consul, Bienvenido Llaneta
for the disposition of the remains.
On Oct 26, 1976, Pomierski sealed the shipping case containing the remains that is hermetically
sealed casket – that is airtight and waterproof. On the same day, Pomierski hired CMAS (Continental
Mortuary Air Sevices that is a national service in US engaged in transporting and forwarding human
remains, to arrange the flight from Chicago to Philippines. CMAS booked the shipment with carrier, PAL,
thru its agent Air Care Int’l, with Pomierski as the shipper and Maria Saludo (daughter of Crispina) as the
consignee.
On Oct 27, 1976, PAL issued Pomierski PAL Airway Bill 079-01180454, where the remains will
board TWA Flight 131 (Trans World Airlines) from Chicago to San Francisco; same date, from San
Francisco to Philippines on board PAL 107; and Oct 29, 1976 (expected delivery) from Manila to Cebu on
board PAL 149. The Airway Bill contains the typewritten words: all documents have been examined.
human remains of crispina saludo. please return back first available flight to SFO. Thus, Air Care Intl and
TWA had no way of determining its contents, since the casket was hermetically sealed by Phil Vice
Consul and in an air pouch of CMAS. The misshipment when TWA 603, whose flight is 10 hours earlier
than TWA 131, had carried the shipment. TWA transshipped the remains to PAL at 2pm.
However, Maria and Saturnino Saludo, also to transfer the remains to Philippines, booked with
United Airlines from Chicago to California, and with PAL from California to Manila. Only to find out that
Pomierski had already booked with TWA flight from Chicago to California. Saludos changed reservations.
They went to the airport, but they saw no body in the look-out are. The TWA counter told them that
there is no body on that flight. Upon arrival at West Coast Terminal (San Francisco), the body is not at the
terminal. CMAS informed Pomierski (10min) that the remains were on plane to Mexico City, that there
were 2 bodies at the terminal and were somehow switched. CMAS told them that they are sending the
remains back to California via Texas
On Oct 28, 1976, the body arrived from Mexico on board American Airlines. The casket was
received by PAL (by Garry Marcial) and was it opened and resealed for shipment to Philippines (by
Crispin Patagas). The receipt (at 7:45pm) was evidenced by American Airline Freight System (thru Virgilio
Rosales).
On Oct 30, 1976, the body arrived in Manila (one-day delayed because Oct 29 was the expected
arrival).
Petitioners hold the airlines liable for breach of contract of carriage and for not exercising
extraordinary diligence in transporting the body. CFI absolved the PAL, and the CA affirmed the decision.

Issues and Ruling:

1. Whether PAL and TWA have the duty to exercise extraordinary diligence in transporting the body.
No, because such duty has not yet commenced.
For the duty to exercise ED to commence there must in fact have been delivery of the cargo
subject of the contract of carriage. Only when such fact of delivery has been unequivocally established
can the liability for loss, destruction, or deterioration of goods in the custody of the carrier, absent the
excepting causes under Art 1734, attach and the presumption of fault in Art1735.
In the case, there was no delivery of the cargo (body) to the carrier on Oct 26, 1976. The body
was only placed in the possession and control of PAL in Oct 28. It was only from Oct28 that PAL became
responsible for the body under their undertakings in Ariway bill 079-01180454.
2. Whether PAL and TWA shall be liable for the misshipment of body.
No, PAL and TWA shall not be held liable for the misshipment.
 The CC is entitled to fair representation of the nature and value of the goods to be carried, with
the concomitant right to rely thereon, and further noting that a carrier has no obligation to inquire into
the correctness or sufficiency of such info.
PAL thru Air Care Intl and TWA had not way to det the actual contents of the cargo, since the
casket was hermetically sealed by Phil Vice Consul in Chicago and in an air pouch of CMAS, to the effect
that Air care and TWA had to rely on the info furnished by shipper. Neither could they open the casket
for verification for they are prohibited.
No fault can be attributed to PAL and TW. The entire fault is exclusively with CMAS.

Macam vs. CA; China Ocean Shipping Co., and/or Wallem Shipping Inc.,

Facts:
On April 4, 1989, Benito Macam, an exporter of fresh fruits, shipped on board vessel Nen Jiang,
owned and operated by respondent China Ocean Shipping Co., through local agent respondent Wallem
Philippines Shipping, 3,500 boxes of watermelon and 1,611 boxes of fresh mangoes. Both were covered
by bills of lading and exported through a letter of credit issued by National Bank of Pakistan (Pakistan
Bank).
It was stipulated that one of the bills of lading must be surrendered duly endorsed in exchange
for the goods or delivery order. The shipment was bound to HK with Pakistan Bank as consignee and
Great Prospect Company of Kowloon (GPC) as notify party.
Macam’s depository bank, Consolidated Bank Corporation (SOLIDBANK) paid petitioner in
advance the value of the shipment.
Upon arrival in HK, the shipment was delivered by Wallem directly to GPC, not to Pakistan Bank
and without the required Bill of lading having been surrendered. GPC then failed to pay Pakistan Bank
and Pakistan Bank also refused to pay Macam. Macam was then constrained to return to Solidbank the
prepaid amount. Subsequently, Macam filed an action with the RTC of Manila for the recovery of the
amount of the shipment from the respondents.
Respondents contended that the shipment was delivered to GPC without presentation of the
bills of landing and bank guarantee per request of petitioner himself because the shipment consisted of
perishable goods. Moreover, they averred that it is a standard maritime practice, when immediate
delivery is of the essence, for the shipper to request the carrier to deliver the goods to the buyer upon
arrival at the port of destination without requiring presentation of the bill of lading as that usually takes
time.
The trial court held respondents to pay, contending that one of the bills of lading should have
been surrendered and the shipment should have been released to the consignee.
The CA reversed the ruling of the trial court. As established by previous similar transactions
between the parties, it held that shipped cargoes were sometimes actually delivered not to the
consignee but to notify party GPC without the need of the bills of lading or bank guarantee.

Issue:
Whether respondents are liable to petitioner for releasing the goods to GPC without the bills of
lading or bank guarantee.
Ruling:
No.The extraordinary responsibility of the common carriers lasts until actual or constructive
delivery of the cargoes to the consignee or to the person who has a right to receive them. PAKISTAN
BANK was indicated in the bills of lading as consignee whereas GPC was the notify party. However, in the
export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as
buyer/importer in his demand letter to respondent WALLEM and in his complaint before the trial
court. This premise draws the SC to conclude that the delivery of the cargoes to GPC as buyer/importer
which, conformably with Art. 1736 had, other than the consignee, the right to receive them was proper.