B.
NATURE OF A FRANCHISE
DOMINADOR RAYMUNDO vs. LUNETA
MOTOR CO., et. al.,
FACTS:
Nicanor DE GUZMAN, as proprietor of GUZCO
Transit, bought trucks from LUNETA Motor
Company. The purchase was made with
promissory notes backed by a chattel
mortgage on the trucks. De Guzman failed to
pay, hence Luneta sued him before the Manila
CFI. The Manila CFI issued a writ of
attachment against the properties of Guzco,
including its rights in 3 certificates of public
convenience (CPC) covering the Manila-
Cardona and Manila-Pililla routes. Nine days
after the attachment, or on July 16, 1932, De
Guzman sold the 3 attached CPCs plus
another CPC and several trucks to Dominador
Raymundo. The attached CPCs were sold on
auction, with Luneta emerging the highest
bidder. Raymundo and Luneta applied for
approval of the respective sales to them of the
CPCs before the Public Service Commission
(PSC). The two cases were consolidated, and
the PSC upheld the sale in favor of Luneta.
Raymundo was allowed to file a new petition
for the fourth unattached CPC he bought from
Guzco. Raymundo now appeals the PSC
decision. The SC now had to choose which
sale to uphold – the execution sale in favor of
Luneta or the voluntary “fire sale” in favor of
Raymundo, which was made after the property
had been levied upon.
ISSUE:
Whether or not a Certificate of Public
Convenience may be attached and sold on
execution
RULING:
Yes. The Court decided the case on this sole
issue and brushed the other matters aside,
especially considering that the CFI decision
with respect to the attachment had become
final. The SC also brushed aside Raymundo’s
contention that CPCs may not be sold
separately from motor vehicles, giving respect
to the policy decision of the PSC allowing sales
of CPCs without motor vehicles. Pertinent laws
and decisions do not prohibit the sale of CPCs.
This may be held to extend to involuntary
sales. Act 3108, as amended (the Public
Service Law) is the legal basis for the issuance
of CPCs. A CPC granted to an operator of
public utility vehicles grants a right in the
nature of a limited franchise (Public Utilities
Commission v. Garviloch). CPCs are not
included in the Code of Civil Procedure
exceptions to what properties may be attached.
Moreover, under the Code, property as defined
includes every species of legal title, inchoate,
complete, or even equitable.
A certification of public convenience is
included in the term "property" in the broad
sense of the term. Under the Public Service
Law, a certificate of public convenience can
be sold by the holder thereof because it has
considerable material value and is
considered as valuable asset.
While the Public Service Law and the Code of
Civil Procedure do not explicitly provide for the
attachability of CPCs, Act 667, Sec. 10 and
Sec. 56 of the Corporation Law expressly allow
for the sale on execution of franchises. The
language of the Code of Civil Procedure is
broad enough to include CPCs and franchises
as attachable property which may be sold on
execution.
Sec. 16 of the Public Service Law allows the
PSC to approve the “ sale, alienation,
mortgaging, encumbering, or leasing of
property, franchises, privileges, or rights or any
part thereof ”. If a CPC may be sold voluntarily,
then there is no reason to hold that it may be
sold involuntarily through a court process.
CPCs have acquired considerable material
value. In many cases, CPCs have become the
cornerstone for the business of bus
transportation.
1
The US SC has held that franchises are
property within the protection of the 14th
Amendment of the US Constitution. If the
holder of a franchise is guaranteed
constitutional rights of property, there should
be no reason for such holder to assume the
corresponding responsibilities or duties of
holding such property. In practice, the PSC has
approved foreclosure sales of CPCs to 3rd
parties. The Philippine Supreme Court has
approved attachment of CPCs due to chattel
mortgage or court writs. The decision of Judge
(later Justice) Anacleto Diaz upholding the
attachment of the 3 CPCs has become final, no
appeal having been taken. While the sale had
to be approved by the PSC, it nevertheless
respected the CFI decision as well.
Decision affirmed.
COGEO-CUBAO OPERATORS AND
DRIVERS ASSOCIATION vs. THE COURT
OF APPEALS, LUNGSOD
SILANGANTRANSPORT SERVICES, CORP.,
INC.
G.R. No. 100727 March 18, 1992
FACTS:
It appears that a certificate of public
convenience to operate a jeepney service was
ordered to be issued in favor of Lungsod
Silangan to ply the Cogeo-Cubao route
sometime in 1983 on the justification that
public necessity and convenience will best be
served, and in the absence of existing
authorized operators on the lined apply for. On
the other hand, defendant-Association was
registered as a non-stock, non-profit
organization with the Securities and Exchange
Commission on October 30, 1985 with the
main purpose of representing plaintiff-appellee
for whatever contract and/or agreement it will
have regarding the ownership of units, and the
like, of the members of the Association
Perturbed by plaintiffs' Board Resolution No. 9
adopting a Bandera' System under which a
member of the cooperative is permitted to
queue for passenger at the disputed pathway
in exchange for the ticket worth twenty pesos,
the proceeds of which shall be utilized for
Christmas programs of the drivers and other
benefits, and on the strength of defendants'
registration as a collective body with the
Securities and Exchange Commission,
defendants-appellants, led by Romeo Oliva
decided to form a human barricade on
November 11,1985 and assumed the
dispatching of passenger jeepneys. This
development as initiated by defendants-
appellants gave rise to the suit for damages.
Defendant-Association's Answer contained
vehement denials to the insinuation of take
over and at the same time raised as a defense
the circumstance that the organization was
formed not to compete with plaintiff-
cooperative. It, however, admitted that it is not
authorized to transport passengers.
ISSUE:
Whether or not the petitioner usurped the
property right of the respondent.
RULING:
Yes. Under the Public Service Law, a
certificate of public convenience is an
authorization issued by the Public Service
Commission for the operation of public
services for which no franchise is required by
law. In the instant case, a certificate of public
convenience was issued to respondent
corporation on January 24, 1983 to operate a
public utility jeepney service on the Cogeo-
Cubao route.
A certification of public convenience is included
in the term "property" in the broad sense of the
term. Under the Public Service Law, a
certificate of public convenience can be sold by
the holder thereof because it has considerable
material value and is considered as valuable
asset. Although there is no doubt that it is
2
private property, it is affected with a public
interest and must be submitted to the control of
the government for the common good. Hence,
insofar as the interest of the State is involved,
a certificate of public convenience does not
confer upon the holder any proprietary right or
interest or franchise in the route covered
thereby and in the public highways.
However, with respect to other persons and
other public utilities, a certificate of public
convenience as property, which represents
the right and authority to operate its
facilities for public service, cannot be taken
or interfered with without due process of
law. Appropriate actions may be maintained in
courts by the holder of the certificate against
those who have not been authorized to operate
in competition with the former and those who
invade the rights, which the former has
pursuant to the authority granted by the Public
Service Commission.
In the case at bar, the trial court found that
petitioner association forcibly took over the
operation of the jeepney service in the Cogeo-
Cubao route without any authorization from the
Public Service Commission and in violation of
the right of respondent corporation to operate
its services in the said route under its
certificate of public convenience.
C. SCOPE OF A FRANCHISE
SAN PABLO V. PANTRANCO SOUTH
EXPRESS, INC.
FACTS:
Pantranco – engaged in the land transportation
business with PUB service for passengers and
freight and various certificates for public
conveniences to operate passenger buses
from Metro Manila to Bicol Region and Eastern
Samar; through its counsel, it wrote toMaritime
Industry Authority (MARINA) requesting
authority to 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; request
was denied by MARINA
It nevertheless acquired the vessel MV “Black
Double”; it wrote the Chairman of the Board of
Transportation that it proposes to operate a
ferry service to carry its passenger buses and
freight trucks between Allen and Matnog in
connection with its trips to Tacloban City for the
purpose of continuing the highway, which is
interrupted by a small body of water, the said
proposed ferry operation being merely a
necessary and incidental service to its main
service and obligation of transporting its
passengers; that being so, it believed that
there was no need for it to obtain a separate
certificate for public convenience to operate a
ferry service Matnog to cater exclusively to its
passenger buses and freight trucks. BOT
granted the request. Cardinal Shipping
Corporation and the heirs of San Pablo filed
separate motions for reconsideration.
ISSUES:
1. Whether or not a ferry service is an
extension of the highway and thus is a part of
the authority originally granted PANTRANCO;
2. Whether or not a land transportation
company can be authorized to operate a ferry
service or coastwise or interisland shipping
service along its authorized route as an
incident to its franchise without the need of
filing a separate application for the same
RULING:
No. The Court defined ferry as continuation by
means of boats, barges, or rafts, of a highway
or the connection of highways located on the
opposite banks of a stream or other body of
water. The term necessarily implies
transportation for a short distance, almost
invariably between two points, which is
unrelated to other transportation
3
Ferry service- service either by barges or rafts,
even by motor or steam vessels, between the
banks of a river or stream to continue the
highway which is interrupted by the body of
water, or in some cases to connect two points
on opposite shores of an arm of the sea such
as bay or lake which does not involve too great
a distance or too long a time to navigate
(engaged in the coastwise trade),service
between the different islands, involving more or
less great distance and over more or less
turbulent and dangerous waters of the open
sea, to be coastwise or inter-island service;
considered coastwise or inter-island service
conveyance of passengers, trucks and cargo
from Matnog to Allen is certainly not a ferryboat
service but a coastwise or interisland shipping
service.
No. Under no circumstance can the sea
between Matnog and Allen be considered a
continuation of the highway. While a ferry
boat service has been considered as a
continuation of the highway when crossing
rivers or even lakes, which are small body
of waters – separating the land, however,
when as in this case the two terminals,
Matnog and Allen are separated by an open
sea it cannot be considered as a
continuation of the highway. PANTRANCO
should secure a separate CPC for the
operation of an interisland or coastwise
shipping. Its CPC as a bus transportation
cannot be merely amended to include this
water service under the guise that it is a mere
private ferry service.
D. PRIOR-OPERATOR RULE
BATANGAS TRANSPORTATION CO. VS
ORLANES 52 PHIL 455
FACTS:
Orlanes sought to have a CPC to operate a
line of auto trucks with fixed times of departure
between Taal and Bantilan, with the right to
receive passengers and freight from
intermediate points. The evidence is conclusive
that at the time of his application, Orlanes was
an irregular operator between Bantilan and
Taal, and that BTC was a regular operator
between Batangas and Rosario. Orlanes
sought to have his irregular operation changed
into a regular operation, and to set aside and
nullify the prohibition against him in his CPC
that he shall not have or receive any
passengers or freight at any of the points
served by the BTC, which holds a prior license
from the PSC.
His petition is based on the fact that to comply
with the growing demands of the public, the
BTC applied for a permit to increase the no. of
trip hours at and between the same places and
for an order that all irregular operators be
prohibited from operating unless they should
observe an interval of 2 hours before or one
hour after the regular hours of the BTC. The
PSC granted the petition of Orlanes.
ISSUE:
Whether or not a CPC should be issued to a
second operator in a field where, and in
competition with, a first operator who is already
operating a sufficient, adequate and
satisfactory service.
RULING:
No. Decision of PSC is revoked. An autobus
line is a public utility, and as such, is a
common carrier and an important factor in the
business affairs of the community. The PSC
has the power to specify and define the terms
and conditions upon which any public utility
shall operate and to make reasonable rules
and regulations for its operation, and to fix the
compensation that it shall receive for its service
to the public, and for good cause may suspend
or even revoke a license granted. It is not the
policy of the law for the PSC to issue a CPC to
a second operator to cover the same field and
in competition with a first operator who is
rendering sufficient, adequate and satisfactory
service, and who in all things and respects is
4
complying with the rules and regulations of the
PSC.
The power of the PSC to issue a CPC is
founded on the condition precedent that after a
full hearing and investigation, it shall find as a
fact that the proposed operation is for the
convenience of the public. So long as the first
operator keeps and performs his terms and
conditions of its license and complies with
the reasonable demands of the public, it
has more or less of a vested and
preferential right over another who seeks to
acquire a later license to operate over the
same route. To carry out the purpose and
intent for which the PSC was created, the law
contemplates that the first license will be
protected in his investment and will not be
subjected to ruinous competition. The primary
purpose of the PSC is to secure adequate,
sustained service for the public at the least
possible cost and to protect and conserve
investments, which have already been made
for that purpose.
A CPCN for the operation of an auto truck line
in occupied territory should not be granted
where there is no complaint as to existing rates
and the co. in the field is rendering adequate
service. It is the duty of the PSC to protect
rather than to destroy the investment of a
public utility. The policy of regulation upon
which the present public utility commission
plan is based and which tends to do away with
competition among public utilities as they are
natural monopolies, is at once the reason that
the regulation of an existing system of
transportation, which is properly serving a
given field, or may be required to do so, is to
be preferred to competition among several
independent systems. While requiring a proper
service from a single system for a territory
inconsideration for protecting it as a monopoly
for all the service required and in conserving its
resources, no economic waste results and
service may be furnished at a minimum cost.
E. KABIT SYSTEM
TEJA MARKETING V. INTERMEDIATE
APPELLATE COURT
G.R. No. L-65510, 9 March 1987, 148 SCRA
347
FACTS:
Pedro Nale bought from Teja Marketing a
motorcycle with complete accessories and a
sidecar. A chattel mortgage was constituted as
a security for the payment of the balance of the
purchase price. The records of the Land
Transportation Commission show that the
motorcycle sold to the defendant was first
mortgaged to the Teja Marketing by Angel
Jaucian though the Teja Marketing and Angel
Jaucian are one and the same, because it was
made to appear that way only as the defendant
had no franchise of his own and he attached
the unit to the plaintiff’s MCH Line. The
agreement also of the parties here was for the
plaintiff to undertake the yearly registration of
the motorcycle with the Land Transportation
Commission.
The plaintiff, however failed to register the
motorcycle on that year on the ground that the
defendant failed to comply with some
requirements such as the payment of the
insurance premiums and the bringing of the
motorcycle to the LTC for stenciling, the
plaintiff said that the defendant was hiding the
motorcycle from him. Lastly, the plaintiff also
explained that though the ownership of the
motorcycle was already transferred to the
defendant, the vehicle was still mortgaged with
the consent of the defendant to the Rural Bank
of Camaligan for the reason that all motorcycle
purchased from the plaintiff on credit was
rediscounted with the bank.
Teja Marketing made demands for the
payment of the motorcycle but just the same
Nale failed to comply, thus forcing Teja
Marketing to consult a lawyer and file an action
for damage before the City Court of Naga in
the amount of P546.21 for attorney’s fees and
5
P100.00 for expenses of litigation. Teja
Marketing also claimed that as of 20 February
1978, the total account of Nale was already P2,
731, 05 as shown in a statement of account;
includes not only the balance of P1, 700.00 but
an additional 12% interest per annum on the
said balance from 26 January 1976 to 27
February 1978; a 2% service charge; and
P546.21 representing attorney’s fees. On his
part, Nale did not dispute the sale and the
outstanding balance of P1,700.00 still payable
to Teja Marketing; but contends that because
of this failure of Teja Marketing to comply with
his obligation to register the motorcycle, Nale
suffered damages when he failed to claim any
insurance indemnity which would amount to no
less than P15,000.00 for the more than 2 times
that the motorcycle figured in accidents aside
from the loss of the daily income of P15.00 as
boundary fee beginning October 1976 when
the motorcycle was impounded by the LTC for
not being registered.
The City Court rendered judgment in favor of
Teja Marketing, dismissing the counterclaim,
and ordered Nale to pay Teja Marketing On
appeal to the Court of First Instance of
Camarines Sur, the decision was affirmed in
toto. Nale filed a petition for review with the
Intermediate Appellate Court. On 18 July 1983,
the appellate court set aside the decision under
review on the basis of doctrine of “pari delicto,”
and accordingly, dismissed the complaint of
Teja Marketing, as well as the counterclaim of
Nale; without pronouncements as to costs.
Hence, the petition for review was filed by Teja
Marketing and/or Angel Jaucian.
ISSUE:
Whether the defendant can recover damages
against the plaintiff?
RULING:
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 out
rightly 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. Upon this premise it
would be error to accord the parties relief from
their predicament.
E. Kabit System
G.R. No. 125817            January 16, 2002
ABELARDO LIM and ESMADITO
GUNNABAN, petitioners,
vs.
COURT OF APPEALS and DONATO H.
GONZALES, respondents.
BELLOSILLO, J.:
FACTS: Sometime in 1982 private respondent
Donato Gonzales purchased an Isuzu
passenger jeepney from Gomercino Vallarta,
holder of a certificate of public convenience for
the operation of public utility vehicles plying the
Monumento-Bulacan route. While private
respondent Gonzales continued offering the
jeepney for public transport services he did not
have the registration of the vehicle transferred
in his name nor did he secure for himself a
certificate of public convenience for its
operation. Thus Vallarta remained on record as
its registered owner and operator. On 22 July
1990, while the jeepney was running
6
northbound along the North Diversion Road
somewhere in Meycauayan, Bulacan, it
collided with a ten-wheeler-truck owned by
petitioner Abelardo Lim and driven by his co-
petitioner Esmadito Gunnaban. Gunnaban
owned responsibility for the accident,
explaining that while he was traveling towards
Manila the truck suddenly lost its brakes. To
avoid colliding with another vehicle, he
swerved to the left until he reached the center
island. However, as the center island
eventually came to an end, he veered farther to
the left until he smashed into a Ferroza
automobile, and later, into private respondent's
passenger jeepney driven by one Virgilio
Gonzales. The impact caused severe damage
to both the Ferroza and the passenger jeepney
and left one (1) passenger dead and many
others wounded. Petitioner Lim shouldered the
costs for hospitalization of the wounded,
compensated the heirs of the deceased
passenger, and had the Ferroza restored to
good condition. He also negotiated with private
respondent and offered to have the passenger
jeepney repaired at his shop. Private
respondent however did not accept the offer so
Lim offered him ₱20,000.00, the assessment of
the damage as estimated by his chief
mechanic. Again, petitioner Lim's proposition
was rejected; instead, private respondent
demanded a brand-new jeep or the amount of
₱236,000.00. Lim increased his bid to
₱40,000.00 but private respondent was
unyielding. Under the circumstances,
negotiations had to be abandoned; hence, the
filing of the complaint for damages by private
respondent against petitioners.
In his answer Lim denied liability by contending
that he exercised due diligence in the selection
and supervision of his employees. He further
asserted that as the jeepney was registered in
Vallarta’s name, it was Vallarta and not private
respondent who was the real party in interest.
On 1 October 1993 the trial court upheld
private respondent's claim and awarded him
₱236,000.00 with legal interest from 22 July
1990 as compensatory damages and
₱30,000.00 as attorney's fees. In support of its
decision, the trial court ratiocinated that as
vendee and current owner of the passenger
jeepney private respondent stood for all intents
and purposes as the real party in interest. Even
Vallarta himself supported private respondent's
assertion of interest over the jeepney for, when
he was called to testify, he dispossessed
himself of any claim or pretension on the
property.
Forthwith, petitioners appealed to the Court of
Appeals which, on 17 July 1996, affirmed the
decision of the trial court. In upholding the
decision of the court a quo the appeals court
concluded that while an operator under the
kabit system could not sue without joining the
registered owner of the vehicle as his principal,
equity demanded that the present case be
made an exception.
ISSUE: Does the new owner have any legal
personality to bring the action, or is he the real
party in interest in the suit, despite the fact that
he is not the registered owner under the
certificate of public convenience?
RULING: The new owner is the real party in
interest.
It is petitioners' contention that the Court of
Appeals erred in sustaining the decision of the
trial court despite their opposition to the well-
established doctrine that an operator of a
vehicle continues to be its operator as long as
he remains the operator of record. According to
petitioners, to recognize an operator under the
kabit system as the real party in interest and to
countenance his claim for damages is utterly
subversive of public policy.
Petitioners' attempt to illustrate that an
affirmance of the appealed decision could be
supportive of the pernicious kabit system does
not persuade.
The kabit system is an arrangement whereby a
person who has been granted a certificate of
public convenience allows other persons who
own motor vehicles to operate them under his
license, sometimes for a fee or percentage of
the earnings.Although the parties to such an
agreement are not outrightly penalized by law,
7
the kabit system is invariably recognized as
being contrary to public policy and therefore
void and inexistent under Art. 1409 of the Civil
Code.
In the early case of Dizon v. Octavio, the Court
explained that one of the primary factors
considered in the granting of a certificate of
public convenience for the business of public
transportation is the financial capacity of the
holder of the license, so that liabilities arising
from accidents may be duly compensated. The
kabit system renders illusory such purpose
and, worse, may still be availed of by the
grantee to escape civil liability caused by a
negligent use of a vehicle owned by another
and operated under his license. If a registered
owner is allowed to escape liability by proving
who the supposed owner of the vehicle is, it
would be easy for him to transfer the subject
vehicle to another who possesses no property
with which to respond financially for the
damage done. Thus, for the safety of
passengers and the public who may have been
wronged and deceived through the baneful
kabit system, the registered owner of the
vehicle is not allowed to prove that another
person has become the owner so that he may
be thereby relieved of responsibility
In the present case it is at once apparent that
the evil sought to be prevented in enjoining the
kabit system does not exist. First, neither of the
parties to the pernicious kabit system is being
held liable for damages. Second, the case
arose from the negligence of another vehicle in
using the public road to whom no
representation, or misrepresentation, as
regards the ownership and operation of the
passenger jeepney was made and to whom no
such representation, or misrepresentation, was
necessary. Thus it cannot be said that private
respondent Gonzales and the registered owner
of the jeepney were in estoppel for leading the
public to believe that the jeepney belonged to
the registered owner. Third, the riding public
was not bothered nor inconvenienced at the
very least by the illegal arrangement. On the
contrary, it was private respondent himself who
had been wronged and was seeking
compensation for the damage done to him.
Certainly, it would be the height of inequity to
deny him his right.
F. Private nature; rights and obligations of
parties inter se arising from transactions
relating to transportation
i. Absent a transportation contract
EN BANC
G.R. No. L-9907             June 30, 1958
LOURDES J. LARA, ET AL., plaintiffs-
appellants,
vs.
BRIGIDO R. VALENCIA, defendant-appellant.
BAUTISTA ANGELO, J.:
Facts: The deceased (Lara) was an inspector
of the Bureau of Forestry stationed in Davao.
The defendant is engaged in the business of
exporting logs from his lumber concession in
Cotabato. Lara went to said concession upon
instructions of his chief to classify the logs of
defendant which were about to be loaded on a
ship anchored in the port of Parang. The work
Lara of lasted for six days during which he
contracted malaria fever. In the morning of
January 9, 1954, Lara who then in a hurry to
return to Davao asked defendant if he could
take him in his pick-up as there was then no
other means of transportation, to which
defendant agreed, and in that same morning
the pick-up left Parang bound for Davao taking
along six passengers, including Lara.
Before leaving Parang, defendant invited Lara
to sit with him on the front seat but Lara
declined. When they continued their trip, the
sitting arrangement of the passengers
remained the same, Lara being seated on a
bag in the middle with his arms on a suitcase
and his head cove red by a jacket. Upon
reaching Km. 96, barrio Catidtuan, Lara
accidentally fell from the pick-up and as a
result he suffered serious injuries. Valencia
stopped the pick-up to see what happened to
Lara. He sought the help of the residents of
8
that place and applied water to Lara but to no
avail. They brought Lara to the nearest place
where they could find a doctor and not having
found any they took him to St. Joseph's Clinic
of Kidapawan. But when Lara arrived he was
already dead. From there they proceeded to
Davao City and immediately notified the local
authorities. An investigation was made
regarding the circumstances surrounding the
death of Lara but no criminal action was taken
against defendant.
It should be noted that the deceased went to
the lumber concession of defendant in Parang,
Cotabato upon instructions of his chief in order
to classify the logs of defendant which were
then ready to be exported and to be loaded on
a ship anchored in the port of Parang. It took
Lara six days to do his work during which he
contracted malaria fever and for that reason he
evinced a desire to return immediately to
Davao. At that time, there was no available bus
that could take him back to Davao and so he
requested the defendant if he could take him in
his own pick-up. Defendant agreed and,
together with Lara, other passengers tagged
along, most of them were employees of the
Government. Defendant merely
accommodated them and did not charge them
any fee for the service. It was also their
understanding that upon reaching barrio
Samoay, the passengers would alight and
transfer to a bus that regularly makes the trip to
Davao but unfortunately there was none
available at the time and so the same
passengers, including Lara, again requested
the defendant to drive them to Davao.
Defendant again accommodated them and
upon reaching Km. 96, Lara accidentally fell
suffering fatal injuries.
It therefore appears that the deceased, as well
his companions who rode in the pick-up of
defendant, were merely accommodation
passengers who paid nothing for the service
and so they can be considered as invited
guests within the meaning of the law. As
accommodation passengers or invited guests,
defendant as owner and driver of the pick-up
owes to them merely the duty to exercise
reasonable care so that they may be
transported safely to their destination. Thus,
"The rule is established by the weight of
authority that the owner or operator of an
automobile owes the duty to an invited guest to
exercise reasonable care in its operation, and
not unreasonably to expose him to danger and
injury by increasing the hazard of travel. This
rule, as frequently stated by the courts, is that
an owner of an automobile owes a guest the
duty to exercise ordinary or reasonable care to
avoid injuring him. Since one riding in an
automobile is no less a guest because he
asked for the privilege of doing so, the same
obligation of care is imposed upon the driver as
in the case of one expressly invited to ride" (5
Am. Jur., 626-627). Defendant, therefore, is
only required to observe ordinary care, and is
not in duty bound to exercise extraordinary
diligence as required of a common carrier by
our law (Articles 1755 and 1756, new Civil
Code).
ISSUE: Is there enough evidence to show that
defendant failed to observe ordinary care or
diligence in transporting the deceased from
Parang to Davao on the date in question.
The trial court answered the question in the
affirmative.
RULING: Even if we admit as true the facts
found by the trial court, still we find that the
same are not sufficient to show that defendant
has failed to take the precaution necessary to
conduct his passengers safely to their place of
destination for there is nothing there to indicate
that defendant has acted with negligence or
without taking the precaution that an ordinary
prudent man would have taken under similar
circumstances. It should be noted that Lara
went to the lumber concession of defendant in
answer to a call of duty which he was bound to
perform because of the requirement of his
office and he contracted the malaria fever in
the course of the performance of that duty. It
should also be noted that defendant was not in
9
duty bound to take the deceased in his own
pick-up to Davao because from Parang to
Cotabato there was a line of transportation that
regularly makes trips for the public, and if
defendant agreed to take the deceased in his
own car, it was only to accommodate him
considering his feverish condition and his
request that he be so accommodated. It should
also be noted that the passengers who rode in
the pick-up of defendant took their respective
seats therein at their own choice and not upon
indication of defendant with the particularity
that defendant invited the deceased to sit with
him in the front seat but which invitation the
deceased declined. The reason for this can
only be attributed to his desire to be at the
back so that he could sit on a bag and travel in
a reclining position because such was more
convenient for him due to his feverish
condition. All the circumstances therefore
clearly indicate that defendant had done what
Such speed (40 km per hour) is not
unreasonable considering that they were
traveling on a national road and the traffic then
was not heavy. We may rather attribute the
incident to lack of care on the part of the
deceased considering that the pick-up was
open and he was then in a crouching position.
Indeed, the law provides that "A passenger
must observe the diligence of a good father of
a family to avoid injury to himself" (Article 1761,
new Civil Code), which means that if the injury
to the passenger has been proximately caused
by his own negligence, the carrier cannot be
held liable.
All things considered, we are persuaded to
conclude that the accident occurred not due to
the negligence of defendant but to
circumstances beyond his control and so he
should be exempt from liability.
ii. Liability of a registered owner
G.R. No. 162267             July 4, 2008
PCI LEASING AND FINANCE, INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC.,
respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
FACTS: On October 19, 1990 at about 10:30
p.m., a Mitsubishi Lancer car with Plate
Number PHD-206 owned by United Coconut
Planters Bank was traversing the Laurel
Highway, Barangay Balintawak, Lipa City. The
car was insured with plantiff-appellee [UCPB
General Insurance Inc.], then driven by
Flaviano Isaac with Conrado Geronimo, the
Asst. Manager of said bank, was hit and
bumped by an 18-wheeler Fuso Tanker Truck
with Plate No. PJE-737 and Trailer Plate No.
NVM-133, owned by defendants-appellants
PCI Leasing & Finance, Inc. allegedly leased to
and operated by defendant-appellant Superior
Gas & Equitable Co., Inc. (SUGECO) and
driven by its employee, defendant appellant
Renato Gonzaga.
The impact caused heavy damage to the
Mitsubishi Lancer car resulting in an explosion
of the rear part of the car. The driver and
passenger suffered physical injuries. Plaintiff-
appellee paid the assured UCPB the amount of
P244,500.00 representing the insurance
coverage of the damaged car.
As the 18-wheeler truck is registered under the
name of PCI Leasing, repeated demands were
made by plaintiff-appellee for the payment of
the aforesaid amounts. However, no payment
was made. Thus, plaintiff-appellee filed the
instant case on March 13, 1991.3
PCI Leasing and Finance, Inc., (petitioner)
interposed the defense that it could not be held
liable for the collision, since the driver of the
truck, Gonzaga, was not its employee, but that
of its co-defendant Superior Gas & Equitable
Co., Inc. (SUGECO). In fact, it was SUGECO,
and not petitioner, that was the actual operator
of the truck, pursuant to a Contract of Lease
signed by petitioner and SUGECO.
10
After trial, the RTC rendered its Decision in
favor of plaintiff UCPB General Insurance
[respondent], ordering the defendants PCI
Leasing and Finance, Inc., [petitioner] and
Renato Gonzaga, to pay jointly and severally
the former. Aggrieved by the decision of the
trial court, petitioner appealed to the CA. CA
affirmed the RTC's decision. Petitioner filed a
Motion for Reconsideration which the CA
denied.
ISSUE: Whether petitioner, as registered
owner of a motor vehicle that figured in a
quasi-delict may be held liable, jointly and
severally, with the driver thereof, for the
damages caused to third parties.
RULING: YES. The registered owner is jointly
and severally liable.
CA found petitioner liable for the damage
caused by the collision since under the Public
Service Act, if the property covered by a
franchise is transferred or leased to another
without obtaining the requisite approval, the
transfer is not binding on the Public Service
Commission and, in contemplation of law, the
grantee continues to be responsible under the
franchise in relation to the operation of the
vehicle, such as damage or injury to third
parties due to collisions.
Petitioner claims that the CA's reliance on the
Public Service Act is misplaced, since the said
law applies only to cases involving common
carriers, or those which have franchises to
operate as public utilities. In contrast, the case
before this Court involves a private commercial
vehicle for business use, which is not offered
for service to the general public.
Petitioner's contention has partial merit, as
indeed, the vehicles involved in the case at bar
are not common carriers, which makes the
Public Service Act inapplicable.
However, the registered owner of the vehicle
driven by a negligent driver may still be held
liable under applicable jurisprudence involving
laws on compulsory motor vehicle registration
and the liabilities of employers for quasi-delicts
under the Civil Code.
The principle of holding the registered owner of
a vehicle liable for quasi-delicts resulting from
its use is well-established in jurisprudence.
Erezo v. Jepte,12 with Justice Labrador as
ponente, wisely explained the reason behind
this principle, thus:
The main aim of motor vehicle registration is to
identify the owner so that if any accident
happens, or that any damage or injury is
caused by the vehicle on the public highways,
responsibility therefor can be fixed on a definite
individual, the registered owner.
The above policy and application of the law
may appear quite harsh and would seem to
conflict with truth and justice. We do not think it
is so. A registered owner who has already sold
or transferred a vehicle has the recourse to a
third-party complaint, in the same action
brought against him to recover for the damage
or injury done, against the vendee or
transferee of the vehicle. The inconvenience of
the suit is no justification for relieving him of
liability; said inconvenience is the price he pays
for failure to comply with the registration that
the law demands and requires.
In synthesis, we hold that the registered owner,
the defendant-appellant herein, is primarily
responsible for the damage caused to the
vehicle of the plaintiff-appellee, but he
(defendant-appellant) has a right to be
indemnified by the real or actual owner of the
amount that he may be required to pay as
damage for the injury caused to the plaintiff-
appellant.13
For damage or injuries arising out of
negligence in the operation of a motor vehicle,
the registered owner may be held civilly liable
with the negligent driver either 1) subsidiarily, if
the aggrieved party seeks relief based on a
delict or crime under Articles 100 and 103 of
the Revised Penal Code; or 2) solidarily, if the
complainant seeks relief based on a quasi-
delict under Articles 2176 and 2180 of the Civil
11
Code. It is the option of the plaintiff whether to
waive completely the filing of the civil action, or
institute it with the criminal action, or file it
separately or independently of a criminal
action;15 his only limitation is that he cannot
recover damages twice for the same act or
omission of the defendant.16
In case a separate civil action is filed, the long-
standing principle is that the registered owner
of a motor vehicle is primarily and directly
responsible for the consequences of its
operation, including the negligence of the
driver, with respect to the public and all third
persons. In contemplation of law, the
registered owner of a motor vehicle is the
employer of its driver, with the actual operator
and employer, such as a lessee, being
considered as merely the owner's agent. This
being the case, even if a sale has been
executed before a tortious incident, the sale, if
unregistered, has no effect as to the right of the
public and third persons to recover from the
registered owner.19 The public has the right to
conclusively presume that the registered owner
is the real owner, and may sue accordingly.
In the case now before the Court, there is not
even a sale of the vehicle involved, but a mere
lease, which remained unregistered up to the
time of the occurrence of the quasi-delict that
gave rise to the case. Since a lease, unlike a
sale, does not even involve a transfer of title or
ownership, but the mere use or enjoyment of
property, there is more reason, therefore, in
this instance to uphold the policy behind the
law, which is to protect the unwitting public and
provide it with a definite person to make
accountable for losses or injuries suffered in
vehicular accidents.21 This is and has always
been the rationale behind compulsory motor
vehicle registration under the Land
Transportation and Traffic Code and similar
laws.
Petitioner presented a lengthy discussion of
the purported trend in other jurisdictions, which
apparently tends to favor absolving financing
companies from liability for the consequences
of quasi-delictual acts or omissions involving
financially leased property. The petition adds
that these developments have been legislated
in our jurisdiction in Republic Act (R.A.) No.
8556.
Petitioner's argument that the enactment of
R.A. No. 8556, especially its addition of the
new Sec. 12 to the old law, is deemed to have
absolved petitioner from liability, fails to
convince the Court.
The new law, R.A. No. 8556, notwithstanding
developments in foreign jurisdictions, do not
supersede or repeal the law on compulsory
motor vehicle registration. No part of the law
expressly repeals Section 5(a) and (e) of R.A.
No. 4136, as amended, otherwise known as
the Land Transportation and Traffic Code, to
wit:
Sec. 5. Compulsory registration of motor
vehicles. - (a) All motor vehicles and trailer of
any type used or operated on or upon any
highway of the Philippines must be registered
with the Bureau of Land Transportation (now
the Land Transportation Office, per Executive
Order No. 125, January 30, 1987, and
Executive Order No. 125-A, April 13, 1987) for
the current year in accordance with the
provisions of this Act.
Thus, the rule remains the same: a sale, lease,
or financial lease, for that matter, that is not
registered with the Land Transportation Office,
still does not bind third persons who are
aggrieved in tortious incidents, for the latter
need only to rely on the public registration of a
motor vehicle as conclusive evidence of
ownership.30 A lease such as the one involved
in the instant case is an encumbrance in
contemplation of law, which needs to be
registered in order for it to bind third parties.
II. Regulation of Transportation Industry
EN BANC
G.R. No. 158793             June 8, 2006
12
JAMES MIRASOL, RICHARD SANTIAGO,
and LUZON MOTORCYCLISTS
FEDERATION, INC., Petitioners,
vs.
DEPARTMENT OF PUBLIC WORKS AND
HIGHWAYS and TOLL REGULATORY
BOARD, Respondents.
DECISION
CARPIO, J.:
FACTS: On January 10, 2001, petitioners filed
before the trial court a Petition for Declaratory
Judgment with Application for Temporary
Restraining Order and Injunction in a civil case.
The petition sought the declaration of nullity of
the following administrative issuances for being
inconsistent with the provisions of Republic Act
2000, entitled "Limited Access Highway Act"
enacted in 1957.
Previously, pursuant to its mandate under R.A.
2000, DPWH issued on June 25, 1998
Department Order (DO) No. 215 declaring the
Manila-Cavite (Coastal Road) Toll Expressway
as limited access facilities.
Accordingly, petitioners filed an Amended
Petition on February 8, 2001 wherein
petitioners sought the declaration of nullity of
the aforesaid administrative issuances.
Moreover, petitioners prayed for the issuance
of a temporary restraining order and/or
preliminary injunction to prevent the
enforcement of the total ban on motorcycles
along the entire breadth of North and South
Luzon Expressways and the Manila-Cavite
(Coastal Road) Toll Expressway under DO
215.
On June 28, 2001, the trial court, thru then
Presiding Judge Teofilo Guadiz, after due
hearing, issued an order granting petitioners’
application for preliminary injunction.
On July 18, 2001, the DPWH acting thru the
TRB, issued Department Order No. 123
allowing motorcycles with engine displacement
of 400 cubic centimeters inside limited access
facilities (toll ways).
Consequently, on March 10, 2003, the trial
court issued the assailed decision dismissing
the petition but declaring invalid DO 123.
Petitioners moved for a reconsideration of the
dismissal of their petition; but it was denied by
the trial court.
The Issues
WHETHER DO 74, DO 215 AND THE TRB
REGULATIONS CONTRAVENE RA 2000;
AND
WHETHER AO 1 AND DO 123 ARE
UNCONSTITUTIONAL.
The Ruling of the Court
The petition is partly meritorious.
Validity of DO 74, DO 215 and the TRB
Regulations
Petitioners claim that DO 74,8 DO 215,9 and the
TRB’s Rules and Regulations issued under
them violate the provisions of RA 2000. They
contend that the two issuances unduly
expanded the power of the DPWH in Section 4
of RA 2000 to regulate toll ways. Petitioners
assert that the DPWH’s regulatory authority is
limited to acts like redesigning curbings or
central dividing sections. They claim that the
DPWH is only allowed to re-design the physical
structure of toll ways, and not to determine
"who or what can be qualified as toll way
users."10
RA 2000, otherwise known as the Limited
Access Highway Act, was approved on 22
June 1957. Section 4 of RA 2000 provides that
"[t]he Department of Public Works and
Communications is authorized to so design
any limited access facility and to so regulate,
restrict, or prohibit access as to best serve the
traffic for which such facility is intended." The
RTC construed this authorization to regulate,
restrict, or prohibit access to limited access
facilities to apply to the Department of Public
Works and Highways (DPWH).
The RTC’s ruling is based on a wrong premise.
The RTC assumed that the DPWH derived its
13
authority from its predecessor, the Department
of Public Works and Communications, which is
expressly authorized to regulate, restrict, or
prohibit access to limited access facilities
under Section 4 of RA 2000. However, such
assumption fails to consider the evolution of
the Department of Public Works and
Communications.
Thus, DO 74 and DO 215 are void because the
DPWH has no authority to declare certain
expressways as limited access facilities. Under
the law, it is the DOTC which is authorized to
administer and enforce all laws, rules and
regulations in the field of transportation and to
regulate related activities.
Since the DPWH has no authority to regulate
activities relative to transportation, the TRB 27
cannot derive its power from the DPWH to
issue regulations governing limited access
facilities. The DPWH cannot delegate a power
or function which it does not possess in the first
place. Since DO 74 and DO 215 are void, it
follows that the rules implementing them are
likewise void.
Whether AO 1 and DO 123 are
Unconstitutional
The RTC’s Decision dated 10 March 2003
declared DO 123 unconstitutional on the
ground that it violates the equal protection
clause by allowing only motorcycles with at
least 400 cubic centimeters engine
displacement to use the toll ways. The RTC
reasoned that the creation of a distinction
within the class of motorcycles was not based
on real differences.
We need not pass upon the constitutionality of
the classification of motorcycles under DO 123.
As previously discussed, the DPWH has no
authority to regulate limited access highways
since EO 546 has devolved this function to the
DOTC. Thus, DO 123 is void for want of
authority of the DPWH to promulgate it.
On the other hand, the assailed portion of AO 1
states:
Section 3. On limited access highways, it is
unlawful for any person or group of persons to:
(h) Drive any bicycle, tricycle, pedicab,
motorcycle or any vehicle (not motorized);
Petitioners assail the DPWH’s failure to provide
"scientific" and "objective" data on the danger
of having motorcycles plying our highways.
They attack this exercise of police power as
baseless and unwarranted. Petitioners belabor
the fact that there are studies that provide
proof that motorcycles are safe modes of
transport. They also claim that AO 1 introduces
an unreasonable classification by singling-out
motorcycles from other motorized modes of
transport. Finally, petitioners argue that AO 1
violates their right to travel.
Petitioners’ arguments do not convince us.
We now discuss the constitutionality of AO 1.
Administrative issuances have the force and
effect of law.30 They benefit from the same
presumption of validity and constitutionality
enjoyed by statutes.31 These two precepts
place a heavy burden upon any party assailing
governmental regulations. The burden of
proving unconstitutionality rests on such
party.32 The burden becomes heavier when the
police power is at issue.
The use of public highways by motor vehicles
is subject to regulation as an exercise of the
police power of the state. We find that AO 1
does not impose unreasonable restrictions. It
merely outlines several precautionary
measures, to which toll way users must
adhere. These rules were designed to ensure
public safety and the uninhibited flow of traffic
within limited access facilities. They cover
several subjects, from what lanes should be
used by a certain vehicle, to maximum vehicle
height. The prohibition of certain types of
vehicles is but one of these. None of these
rules violates reason. The purpose of these
rules and the logic behind them are quite
evident. A toll way is not an ordinary road. The
special purpose for which a toll way is
constructed necessitates the imposition of
14
guidelines in the manner of its use and
operation. Inevitably, such rules will restrict
certain rights. But the mere fact that certain
rights are restricted does not invalidate the
rules.
Neither do we find AO 1 oppressive.
Petitioners are not being deprived of their right
to use the limited access facility. They are
merely being required, just like the rest of the
public, to adhere to the rules on how to use the
facility. AO 1 does not infringe upon petitioners’
right to travel but merely bars motorcycles,
bicycles, tricycles, pedicabs, and any non-
motorized vehicles as the mode of traveling
along limited access highways. Several cheap,
accessible and practical alternative modes of
transport are open to petitioners. There is
nothing oppressive in being required to take a
bus or drive a car instead of one’s scooter,
bicycle, calesa, or motorcycle upon using a toll
way.
Petitioners complain that the prohibition on the
use of motorcycles in toll ways unduly deprive
them of their right to travel.
We are not persuaded.
A toll way is not an ordinary road. As a facility
designed to promote the fastest access to
certain destinations, its use, operation, and
maintenance require close regulation. Public
interest and safety require the imposition of
certain restrictions on toll ways that do not
apply to ordinary roads. As a special kind of
road, it is but reasonable that not all forms of
transport could use it.
The right to travel does not mean the right to
choose any vehicle in traversing a toll way. The
right to travel refers to the right to move from
one place to another. Petitioners can traverse
the toll way any time they choose using private
or public four-wheeled vehicles. Petitioners are
not denied the right to move from Point A to
Point B along the toll way. Petitioners are free
to access the toll way, much as the rest of the
public can. The mode by which petitioners wish
to travel pertains to the manner of using the toll
way, a subject that can be validly limited by
regulation.
Finally, petitioners assert that their possession
of a driver’s license from the Land
Transportation Office (LTO) and the fact that
their vehicles are registered with that office
entitle them to use all kinds of roads in the
country. Again, petitioners are mistaken. There
exists no absolute right to drive. On the
contrary, this privilege, is heavily regulated.
Only a qualified group is allowed to drive motor
vehicles: those who pass the tests
administered by the LTO. A driver’s license
issued by the LTO merely allows one to drive a
particular mode of transport.
2. Civil Aeronautics Board, RA. 776, as
amended, Secs. 5, 10 (A), (C); Secs. 11 & 12
G.R. No. L-24219           June 13, 1968
PHILIPPINE AIR LINES, INC., petitioner,
vs.
CIVIL AERONAUTICS BOARD, and
FILIPINAS ORIENT AIRWAYS, INC.,
respondents.
CONCEPCION, C.J.:
FACTS: Pursuant to Republic Act No. 4147,
granting thereto "a franchise to establish,
operate and maintain transport services for the
carriage of passengers, mail, industrial flights
and cargo by air in and between any and all
points and places throughout the Philippines
and other countries", on September 16, 1964,
Fairways filed with CAB the corresponding
application for a "certificate of public
convenience and necessity" and was objected
to by herein petitioner, Philippine Air Lines,
Inc., hereinafter referred to as PAL.
Subsequently, a CAB hearing officer began to
receive evidence on said application. After
several hearings before said officer, or on
December 14, 1964, Fairways filed an "urgent
petition for provisional authority to operate"
under a detailed "program of implementation"
attached to said petition, and for the approval
of its bond therefor, as well as the provisional
15
approval of its "tariff regulations and the
conditions of carriage to be printed at the back
of the passenger tickets." Despite PAL's
opposition thereto, in a resolution issued on
January 5, 1965, CAB granted said urgent
petition of Fairways
A reconsideration of this resolution having
been denied, PAL filed the present civil action
alleging that, in issuing said resolution, CAB
had acted illegally and in excess of its
jurisdiction or with grave abuse of discretion,
because:
ISSUES: (1) CAB is not empowered to grant
any provisional authority to operate, prior to the
submission for decision of the main application
for a certificate of public convenience and
necessity;
(2) CAB had no evidence before it that could
have justified the granting of the provisional
authority complained of;
(3) PAL was denied due process when CAB
granted said authority before the presentation
of its evidence on Fairway's main application;
and
(4) In granting said provisional authority, the
CAB had prejudged the merits of said
application.
The first ground is devoid of merit. Section 10-
C(1) of Republic Act No. 776, reading:
(C) The Board shall have the following specific
powers and duties:
(1) In accordance with the provisions of
Chapter IV of this Act, to issue, deny, amend,
revise, alter, modify, cancel suspend or revoke,
in whole or in part, upon petitioner complaint,
or upon its own initiative, any temporary
operating permit or Certificate of Public
Convenience and Necessity; Provided,
however, That in the case of foreign air
carriers, the permit shall be issued with the
approval of the President of the Republic of the
Philippines explicitly authorizes CAB to issue a
"temporary operating permit," and nothing
contained, either in said section, or in Chapter
IV of Republic Act No. 776, negates the power
to issue said "permit", before the completion of
the applicant's evidence and that of the
oppositor thereto on the main petition. Indeed,
the CAB's authority to grant a temporary permit
"upon its own initiative," strongly suggests the
power to exercise said authority, even before
the presentation of said evidence has begun.
Moreover, we perceive no cogent reason to
depart, in connection with the commercial air
transport service, from the policy of our public
service law, which sanctions the issuance of
temporary or provisional permits or certificates
of public convenience and necessity, before
the submission of a case for decision on the
merits.1 The overriding considerations in both
instances are the same, namely, that the
service be required by public convenience and
necessity, and, that the applicant is fit, as well
as willing and able to render such service
properly, in conformity with law and the
pertinent rules, regulations and requirements. 2
As regards PAL's second contention, we have
no more than PAL's assertion and conclusion
regarding the absence of substantial evidence
in support of the finding, in the order
complained of, to the effect that Fairways'
evidence had established " prima facie its
fitness, willingness and ability to operate the
services applied for and the public need for
more transportation service ...". Apart from
PAL's assertion being contradicted by the tenor
of said order, there is the legal presumption
that official duty has been duly performed.
Such presumption is particularly strong as
regards administrative agencies, like the CAB,
vested with powers said to be quasi-judicial in
nature, in connection with the enforcement of
laws affecting particular fields of activity, the
proper regulation and/or promotion of which
requires a technical or special training, aside
from a good knowledge and grasp of the
overall conditions, relevant to said field,
obtaining in the nation. The consequent policy
and practice underlying our Administrative Law
16
is that courts of justice should respect the
findings of fact of said administrative agencies,
unless there is absolutely no evidence in
support thereof or such evidence is clearly,
manifestly and patently insubstantial. 4 This, in
turn, is but a recognition of the necessity of
permitting the executive department to adjust
law enforcement to changing conditions,
without being unduly hampered by the rigidity
and the delays often attending ordinary court
proceedings or the enactment of new or
amendatory legislations. In the case at bar,
petitioner has not satisfactorily shown that the
aforementioned findings of the CAB are lacking
in the necessary evidentiary support.
Lastly, the provisional nature of the permit
granted to Fairways refutes the assertion that it
prejudges the merits of Fairways' application
and PAL's opposition thereto. As stated in the
questioned order, CAB's findings therein made
reflect its view merely on the prima facie effect
of the evidence so far introduced and do not
connote a pronouncement or an advanced
expression of opinion on the merits of the case.
WHEREFORE, the petition herein should be,
as it is hereby, dismissed.
G.R. No. 156087 May 8, 2009
KUWAIT AIRWAYS, CORPORATION,
Petitioner, vs. PHILIPPINE AIRLINES, INC.,
Respondent.
FACTS:
Kuwait and PAL entered into a Joint Services
Agreement. The commercial agreement
covered a twice weekly Kuwait Airways flight
on the route Kuwait-Bangkok-Manila and vice
versa. The agreement stipulated that "only 3rd
and 4th freedom traffic rights between Kuwait
and Manila and vice versa will be exercised.
No 5th freedom traffic rights will be exercised
between Manila on the one hand and Bangkok
on the other."
In essence, the Kuwait Airways flight was
authorized to board passengers in Kuwait and
deplane them in Manila, as well as to board
passengers in Manila and deplane them in
Kuwait. At the same time, with the limitation in
the exercise of Fifth Freedom traffic rights, the
flight was barred from boarding passengers in
Bangkok and deplaning them in Manila, or
boarding passengers in Manila and deplaning
them in Bangkok.
Some time later, delegates from the Philippines
and Kuwait met in Kuwait. The talks culminated
in a Confidential Memorandum of
Understanding (CMU). Among the members of
the Philippine Panel were officials of the CAB,
the DFA, and four officials of Philippine
Airlines.
Under the CMU, the two delegations agreed
that the unilateral operation and the exercise of
third and fourth freedom traffic rights shall not
be subject to any royalty payment or
commercial arrangements, as from the date of
signing of this [CMU].
After a while, PAL received a letter from
Dawoud M. Al-Dawoud, the Deputy Marketing
& Sales Director for International Affairs of
petitioner saying that the royalty agreement will
no longer be valid (yung sa previous
agreement before the CMU).
PAL answered: The old agreement was yet to
be terminated because the commercial
agreement could only be effectively terminated
on 31 October 1995, or the last day of the then
current traffic period. Thus, Philippine Airlines
insisted that the provisions of the Commercial
Agreement "shall continue to be enforced until
such date."
Kuwait refused to pay the royalties. PAL filed in
the Makati RTC. Kuwait argued that the signing
of the CMU terminated the commercial
agreement. RTC agreed with Philippine
Airlines. It asserted the obligatory force of
contracts between contracting parties as the
source of vested rights which may not be
modified or impaired. After recasting Kuwait
Airway’s arguments on this point as being that
"the CMU is superior to the Commercial
Agreement, the same having been supposedly
17
executed by virtue of the state’s sovereign
power," the RTC rejected the argument,
holding that "the fact that the CMU may have
been executed by a Philippine Panel consisting
of representatives of CAB, DFA, etc. does not
necessarily give rise to the conclusion that the
CMU is a superior contract, for the exercise of
the State’s sovereign power cannot be
arbitrarily and indiscriminately utilized
specifically to impair contractual vested rights."
Kuwait filed this petition for purely questions of
law.
ISSUE:
WoN the CMU terminated the Commercial
Agreement (with regard sa delegates, kasi
kasama sa delegates si CAB, so parang sabi ni
Kuwait na dahil signatory si CAB dapat
sumunod si PAL, gets ba? Sorry haha)
HELD:
No. We do not doubt that the CAB, in the
exercise of its statutory mandate, has the
power to compel Philippine Airlines to
immediately terminate its Commercial
Agreement with Kuwait Airways pursuant to the
CMU. Considering that it is the Philippine
government that has the sole authority to
charter air policy and negotiate with foreign
governments with respect to air traffic rights,
the government through the CAB has the
indispensable authority to compel local air
carriers to comply with government determined
policies, even at the expense of economic
rights. The airline industry is a sector where
government abjuration is least desired.
However, this is not a case where the CAB had
duly exercised its regulatory authority over a
local airline in order to implement or further
government air policy. What happened instead
was an officer of the CAB, acting in behalf not
of the Board but of the Philippine government,
had committed to a foreign nation the
immediate abrogation of Philippine Airlines’s
commercial agreement with Kuwait Airways.
And while we do not question that ability of that
member of the CAB to represent the Philippine
government in signing the CMU, we do
question whether such member could have
bound Philippine Airlines in a manner that can
be accorded legal recognition by our courts.
Imagine if the President of the Philippines, or
one of his alter egos, acceded to the demands
of a foreign counterpart and agreed to shut
down a particular Filipino business or
enterprise, going as far as to co-sign a
document averring that the business "will be
shut down immediately." Granting that there is
basis in Philippine law for the closure of such
business, could the mere declaration of the
President have the legal effect of immediately
rendering business operations illegal?
G.R. No. 115381 December 23, 1994
KILUSANG MAYO UNO LABOR CENTER,
petitioner, vs. HON. JESUS B. GARCIA, JR.,
the LAND TRANSPORTATION
FRANCHISING AND REGULATORY BOARD,
and the PROVINCIAL BUS OPERATORS
ASSOCIATION OF THE PHILIPPINES,
respondents.
FACTS:
On June 26, 1990; then Secretary of DOTC,
Oscar M. Orbos, issued Memorandum Circular
No. 90-395 to then LTFRB Chairman,
Remedios A.S. Fernando allowing provincial
bus operators to charge passengers rates
within a range of 15% above and 15% below
the LTFRB official rate for a period of one (1)
year.
In return, Fernando submitted to Orbos a
memorandum finding the implementation of the
fare range scheme "not legally feasible” on the
ff grounds:
1. Section 16(c) of the Public Service Act
prescribes the following for the fixing and
determination of rates — (a) the rates to be
approved should be proposed by public service
operators; (b) there should be a publication
18
and notice to concerned or affected parties in
the territory affected; (c) a public hearing
should be held for the fixing of the rates;
hence, implementation of the proposed fare
range scheme on August 6 without complying
with the requirements of the Public Service Act
may not be legally feasible.
2. To allow bus operators in the country to
charge fares fifteen (15%) above the present
LTFRB fares in the wake of the devastation,
death and suffering caused by the July 16
earthquake will not be socially warranted and
will be politically unsound; most likely public
criticism against the DOTC and the LTFRB will
be triggered by the untimely motu propio
implementation of the proposal by the mere
expedient of publicizing the fare range scheme
without calling a public hearing, which scheme
many as early as during the Secretary's
predecessor know through newspaper reports
and columnists' comments to be Asian
Development Bank and World Bank inspired.
3. More than inducing a reduction in bus fares
by fifteen percent (15%) the implementation of
the proposal will instead trigger an upward
adjustment in bus fares by fifteen percent
(15%) at a time when hundreds of thousands
of people in Central and Northern Luzon,
particularly in Central Pangasinan, La Union,
Baguio City, Nueva Ecija, and the Cagayan
Valley are suffering from the devastation and
havoc caused by the recent earthquake.
4. In lieu of the said proposal, the DOTC with
its agencies involved in public transportation
can consider measures and reforms in the
industry that will be socially uplifting, especially
for the people in the areas devastated by the
recent earthquake.
ISSUE:
WoN Memorandum Circular No. 90-395 is valid
HELD:
No. it is unconstitutional. The court held that
the LTFRB may not delegate the authority to
set a fare range above existing authorized fare
range to provincial buses. The doctrine of
Potestas delegate non delegari (what has been
delegated cannot be delegated). This doctrine
is based on the ethical principle that such a
delegated power constitutes not only a right but
a duty to be performed by the delegate through
the instrumentality of his own judgment and not
through the intervening mind of another.10 A
further delegation of such power would indeed
constitute a negation of the duty in violation of
the trust reposed in the delegate mandated to
discharge it directly. 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.
Petition granted.
G.R. No. 213088 June 28, 2017
LAND TRANSPORTATION FRANCHISING
AND REGULATORY BOARD (LTFRB),
Petitioner vs. G.V. FLORIDA TRANSPORT,
INC., Respondent
FACTS:
Around 7:20 in the morning of February 7,
2014, a vehicular accident occurred at Sitio
Paggang, Barangay Talubin, Bontoc, Mountain
Province involving a public utility bus coming
from Sampaloc, Manila, bound for Poblacion
Bontoc and bearing a "G.V. Florida" body mark
with License Plate No. TXT-872. 15 dead, 32
injured.
After an investigation, it was found out that
License Plate No. TXT-872 actually belongs to
a different bus owned by and registered under
the name of a certain Norberto Cue, Sr. that
the bus involved in the accident is not duly
authorized to operate as a public
transportation.
19
Thereafter, LTFRB, pursuant to its regulatory
powers, immediately issued an Order
preventively suspending, for a period not
exceeding thirty 30 days, the operations of 10
buses of Cue, and the entire fleet of
respondent. Both were ordered to show cause
why their Certificate of Public Convenience
(CPC) should not be suspended.
The incident report yielded that the bus was
registered as "private" and that the registered
owner is Dagupan Bus Co., Inc. (Dagupan
Bus) while the previous owner is herein
respondent bus company.
Dagupan answered it is not the owner of the
bus which was involved in the accident, that
the bus involved was the result of the
memorandum of agreement between Dagupan
and respondent. Cue filed his Position Paper
contending that the bus involved had been sold
to respondent.
Petitioner cancelled Cue’s CPC and
suspended the bus operations of respondent
for 6 mos.
ISSUE:
WoN the LTFRB has the power to suspend the
fleet of a public utility that violates the law, to
the damage of the public.
HELD:
Yes. Petition granted. Petitioner contends that
it is vested by law with jurisdiction to regulate
the operation of public utilities; that under
Section 5(b) of Executive Order No. 202 (E. 0.
202),9 it is authorized "[t]o issue, amend,
revise, suspend or cancel Certificates of Public
Convenience or permits authorizing the
operation of public land transportation services
provided by motorized vehicles, and to
prescribe the appropriate terms and conditions
therefor;" and that petitioner's authority to
impose the penalty of suspension of CPCs of
bus companies found to have committed
violations of the law is broad and is consistent
with its mandate and regulatory capability.
In the present case, respondent is guilty of
several violations of the law, to wit: lack of
petitioner's approval of the sale and transfer of
the CPC which respondent bought from Cue;
operating the ill-fated bus under its name when
the same is registered under the name of
Dagupan Bus Co., Inc.; attaching a vehicle
license plate to the ill-fated bus when such
plate belongs to a different bus owned by Cue;
and operating the subject bus under the
authority of a different CPC.
The Court agrees with petitioner that its power
to suspend the CPCs issued to public utility
vehicles depends on its assessment of the
gravity of the violation, the potential and actual
harm to the public, and the policy impact of its
own actions.
This serves as a reminder to all operators of
public utility vehicles that their franchises and
CPCs are mere privileges granted by the
government. As such, they are sternly warned
that they should always keep in mind that, as
common carriers, they bear the responsibility
of exercising extraordinary diligence in the
transportation of their passengers. Moreover,
they should conscientiously comply with the
requirements of the law in the conduct of their
operations, failing which they shall suffer the
consequences of their own actions or inaction.
G.R. No. L-15122 March 10, 1920
THE UNITED STATES, plaintiff-appellee, vs.
TAN PIACO, VENTURA ESTUYA, PEDRO
HOMERES, MAXIMINO GALSA and EMILIO
LEOPANDO, defendants. TAN PIACO,
appellant.
FACTS:
The appellant rented two automobile trucks
and was using them upon the highways of the
Province of Leyte for the purpose of carrying
some passengers and freight; that he carried
passengers and freight under a special
contract in each case; that he had not held
himself out to carry all passengers and all
20
freight for all persons who might offer authorizing the exercise of the jurisdiction of
passengers and freight. the public utility commission. There must be, in
general, a right which the law compels the
ISSUE:
power to give to the general public. It is not
WoN the appellant, under the above facts, was enough that the general prosperity of the public
a public utility. is promoted. Public use is not synonymous
with public interest. The true criterion by which
HELD: to judge of the character of the use is whether
No. It is not subject to the control and the public may enjoy it by right or only by
regulation of the Public Utility Commission. permission.

The Attorney-General supported his conclusion

by citing the case of Terminal Taxicab Co. vs.
Kutz: In that case the Terminal Taxicab Co.
furnished automobiles from its central garage G.R. No. L-25599 April 4, 1968
on special orders and did not hold itself out to
HOME INSURANCE COMPANY, plaintiff-
accommodate any and all persons. The plaintiff
appellee, vs. AMERICAN STEAMSHIP
reserve to itself the right to refuse service. The
AGENCIES, INC. and LUZON
Supreme Court of the United States, speaking
STEVEDORING CORPORATION,
through Mr. Justice Holmes, said: "The
defendants, AMERICAN STEAMSHIP
bargains made by the plaintiff are individual,
AGENCIES, INC., defendant-appellant.
and however much they may tend towards
uniformity in price, probably have not the FACTS:
mechanical fixity of charges that attend the use
"Consorcio Pesquero del Peru of South
of taxicabs from the stations to the hotels. The
America" shipped freight pre-paid at Chimbate,
court is of the opinion that that part of the
Peru, 21,740 jute bags of Peruvian fish meal
business is not to be regarded as a public
through SS Crowborough, covered by clean
utility. It is true that all business, and for the
bills of lading Numbers 1 and 2, both dated
matter of that, every life in all its details, has a
January 17, 1963. The cargo, consigned to
public aspect, some bearing upon the welfare
San Miguel Brewery, Inc., and insured by
of the country in which it is passed." The court
Home Insurance Company for $202,505,
held that by virtue of the fact that said company
arrived in Manila on March 7, 1963 and was
did not hold itself out to serve any and all
discharged into the lighters of Luzon
persons, it was not a public utility and was not
Stevedoring Company. When the cargo was
subject to the jurisdiction of the public utility
delivered to consignee San Miguel Brewery
commission.
Inc., there were shortages amounting to
"Public use" means the same as "use by the P12,033.85, causing the latter to lay claims
public." The essential feature of the public use against Luzon Stevedoring Corporation, Home
is that it is not confined to privilege individuals, Insurance Company and the American
but is open to the indefinite public. It is this Steamship Agencies, owner and operator of
indefinite or unrestricted quality that gives it its SS Crowborough.
public character. In determining whether a use
Home insurance paid the consignee.
is public, we must look not only the character
Respondents refused to reimburse petitioner.
of the business to be done, but also to the
The Petitioner then filed a complaint for
proposed mode of doing it. If the use is merely
recovery.
optional with the owners, or the public benefit
is merely incidental, it is not a public use,
21
Luzon Stevedoring Corporation alleged that it
delivered with due diligence the goods in the
same quantity and quality that it had received
the same from the carrier.
American Steamship Agencies denied liability
by alleging that under the provisions of the
Charter party referred to in the bills of lading,
the charterer, not the shipowner, was
responsible for any loss or damage of the
cargo.
CFI absolved Luzon having found the latter to
have merely delivered what it received from the
carrier in the same condition and quality.
American Steamship then appealed directly to
this court.
ISSUE:
WoN the stipulation in the charter party of the
owner's non-liability valid, so as to absolve the
American Steamship Agencies from liability for
loss.
HELD:
Yes. It is valid. Under American jurisprudence,
a common carrier undertaking to carry a
special cargo or chartered to a special person
only, becomes a private carrier. As a private
carrier, a stipulation exempting the owner from
liability for the negligence of its agent is not
against public policy, and is deemed valid.
The Civil Code provisions on common carriers
should not be applied where the carrier is not
acting as such but as a private carrier. The
stipulation in the charter party absolving the
owner from liability for loss due to the
negligence of its agent 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 in the case of
a ship totally chartered for the use of a single
party.
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner, vs. COURT
OF APPEALS and ERNESTO CENDANA,
respondents.
FACTS:
Respondent was utilized 2 6-wheeler trucks for
purposes of moving cargoes for merchants for
a rate lower than regular commercial rates.
Petitioner Pedro de Guzman a merchant and
authorized dealer of General Milk Company
(Philippines), Inc. in Urdaneta, Pangasinan,
contracted with respondent for the hauling of
750 cartons of Liberty filled milk from a
warehouse of General Milk in Makati, Rizal, to
petitioner's establishment in Urdaneta on or
before 4 December 1970. Accordingly, on 1
December 1970, respondent loaded in Makati
the merchandise on to his trucks: 150 cartons
were loaded on a truck driven by respondent
himself, while 600 cartons were placed on
board the other truck which was driven by
Manuel Estrada, respondent's driver and
employee.
Only 150 boxes of Liberty filled milk were
delivered to petitioner. The other 600 boxes
never reached petitioner, since the truck which
carried these boxes was hijacked somewhere
along the MacArthur Highway in Paniqui,
Tarlac, by armed men who took with them the
truck, its driver, his helper and the cargo.
Petitioner filed an action against respondent a
claim for the lost merchandise, argued that
private respondent, being a common carrier,
and having failed to exercise the extraordinary
diligence required of him by the law, should be
held liable for the value of the undelivered
goods.
Respondent raised the defense that the loss
was due to force majeure.
Trial court ruled in favor of the petitioner.
CA reversed saying: respondent had been
engaged in transporting return loads of freight
"as a casual occupation — a sideline to his
22
scrap iron business" and not as a common
carrier. Hence this petition.
ISSUE:
WoN Respondent is a common carrier.
HELD:
Yes. The Civil Code defines "common carriers"
in the following terms:
Article 1732. Common carriers are persons,
corporations, firms or associations engaged in
the business of carrying or transporting
passengers or goods or both, by land, water, or
air for compensation, offering their services to
the public.
The above article makes no distinction
between one whose principal business activity
is the carrying of persons or goods or both, and
one who does such carrying only as an
ancillary activity (in local Idiom as "a sideline").
Article 1732 also carefully avoids making any
distinction between a person or enterprise
offering transportation service on a regular or
scheduled basis and one offering such service
on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish
between a carrier offering its services to the
"general public," i.e., the general community or
population, and one who offers services or
solicits business only from a narrow segment
of the general population.
However the respondent is still absolved.
Common carriers, "by the nature of their
business and for reasons of public policy" 2 are
held to a very high degree of care and
diligence ("extraordinary diligence") in the
carriage of goods as well as of passengers.
The specific import of extraordinary diligence in
the care of goods transported by a common
carrier is, according to Article 1733, "further
expressed in Articles 1734,1735 and 1745,
numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that
common carriers are responsible for the loss,
destruction or deterioration of the goods which
they carry, "unless the same is due to any of
the following causes only:
1. Flood, storm, earthquake, lightning or
other natural disaster or calamity;
2. Act of the public enemy in war, whether
international or civil;
3. Act or omission of the shipper or owner
of the goods;
4. The character-of the goods or defects in
the packing or-in the containers; and
5. Order or act of competent public
authority.
It is important to point out that the above list of
causes of loss, destruction or deterioration
which exempt the common carrier for
responsibility therefor, is a closed list. Causes
falling outside the foregoing list, even if they
appear to constitute a species of force majeure
fall within the scope of Article 1735, which
provides as follows
In all cases other than those mentioned in
numbers 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.
Common Carriers; A. In General; I.
Definitions, Essential Elements; B.Liberal
Approach
G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners,  vs.
COURT OF APPEALS and RODOLFO A.
CIPRIANO, respondents.
FACTS:
 Rodolfo A. Cipriano representing
Cipriano Trading Enterprise, entered
into a hauling contract with Jibfair
Shipping Agency Corporation whereby
the former bound itself to haul the
latter's 2,000 m/tons of soya bean meal
from Magallanes Drive, Del Pan, Manila
to the warehouse of Purefoods
Corporation in Calamba, Laguna.
23
  To carry out its obligation, CIPTRADE,
through Rodolfo Cipriano,
subcontracted with Estrellita Bascos
to transport and to deliver 400 sacks of
soya bean meal worth P156,404.00
from the Manila Port Area to Calamba,
Laguna at the rate of P50.00 per metric
ton.
 HOWEVER, Petitioner failed to deliver
the said cargo. (NA-HIJACK yung
cargo truck)
  Cipriano paid Jibfair Shipping
Agency the amount of the lost goods in
accordance with the contract between
the two of them.
o Cipriano demanded
reimbursement from petitioner
but the latter refused to pay.
 Thereafter, Cipriano filed a complaint
for a sum of money and damages
with writ of preliminary attachment 4
for breach of a contract of carriage.
 Bascos alleged that:
o there was no contract of
carriage since CIPTRADE
leased her cargo truck to load
the cargo from Manila Port Area
to Laguna
o and hijacking, being a force
majeure, exculpated petitioner
from any liability to CIPTRADE.
 RTC rendered a decision in favor of
Cipriano, ordering Bascos to pay:
P156,404 as actual damages, 5K as
attorney’s fees and the costs of the suit.
 CA affirmed the decision of the RTC.
ISSUE:
 WON BASCOS is a common carrier.
RULING:
 YES.
 The Supreme Court held that Article
1732 of the Civil Code defines a
common carrier as "(a) person,
corporation or firm, or association
engaged in the business of carrying or
Common Carriers; A. In General; I.
transporting passengers or goods or
Definitions, Essential Elements; B.Liberal
both, by land, water or air, for
Approach
compensation, offering their services to
the public."
 The test to determine a common carrier
is "whether the given undertaking is a
part of the business engaged in by
the carrier which he has held out to
the general public as his occupation
rather than the quantity or extent of
the business transacted."
 Petitioner herself has made the
admission that she was in the
trucking business, offering her trucks
to those with cargo to move. Judicial
admissions are conclusive and no
evidence is required to prove the same. 
 Citing the case of De Guzman vs. Court
of Appeal, SC further held that:
o 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.
o Article 1732 also carefully avoids
making any distinction between a
person or enterprise offering
transportation service on a
regular or scheduled basis and
one offering such service on an
occasional, episodic or
unscheduled basis.
o Neither does Article 1732
distinguish between a carrier
offering its services to the
"general public," i.e., the general
community or population, and
one who offers services or solicits
business only from a narrow
segment of the general
population.
  It must be understood that a contract
is what the law defines it to be and
not what it is called by the
contracting parties
 Petition dismissed. CA decision
affirmed.
24
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner,  the ship.
vs. COURT OF APPEALS, SORIAMONT
STEAMSHIP AGENCIES AND KYOSEI
KISEN KABUSHIKI KAISHA, respondents.
FACTS:
 Planters Products, Inc. purchased
from Mitsubishi of New York, U.S.A.,
9,329.7069 metric tons (M/T) of Urea
46% fertilizer.
 Mitsubishi shipped the fertilizer in
bulk on 16 June 1974 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 the voyage, A TIME CHARTER-
PARTY on the vessel M/V "Sun
Plum" was entered into between
Mitsubishi as shipper/charterer and
KKKK as shipowner, in Tokyo, Japan.
o Before loading the fertilizer
aboard the vessel, four of her
holds were all presumably
inspected by the charterer's
representative and found fit to
take a load of urea in bulk
pursuant to par. 16 of the charter-
party.   PPI filed an action for damages with
o After the Urea fertilizer was
loaded in bulk by stevedores
hired by and under the
supervision of the shipper, the
steel hatches were closed with
heavy iron lids, covered with
three layers of tarpaulin, then tied
with steel bonds. The hatches
remained closed and tightly
sealed throughout the entire
voyage.
o Upon arrival of the vessel at her
port of call on 3 July 1974, the
steel pontoon hatches were
opened with the use of the
vessel's boom. Petitioner
unloaded the cargo from the
holds into its steelbodied
dump trucks which were
parked alongside the berth,
using metal scoops attached to
o Each time a dump truck was filled
up, its load of Urea was
covered with tarpaulin before it
was transported to the
consignee's warehouse located
some fifty (50) meters from the
wharf.
 Upon checking, a Certificate of
Shortage/Damaged Cargo dated 18 July
1974 prepared by PPI which showed
that the cargo delivered was short of
94.839 M/T and about 23 M/T were
rendered unfit for commerce, having
been polluted with sand, rust and
dirt.
 PPI sent a claim letter to Soriamont
Steamship Agencies (SSA), the
resident agent of the carrier, KKKK, for
P245,969.31 representing the cost of
the alleged shortage in the goods
shipped and the diminution in value of
that portion said to have been
contaminated with dirt.
 SSA explained that what it received was
just a request for shortlanded certificate
and not a formal claim thus it cannot
respond to the claim for payment.
the Court of First Instance of Manila
 The defendant carrier argued that the
strict public policy governing common
carriers does not apply to them because
they have become private carriers by
reason of the provisions of the
charter-party.
 CFI (RTC) sustained the plaintiff’s
claim.
 CA reversed and absolved the carrier
from liability. It ruled that the cargo
vessel was a private carrier and not a
common carrier by reason of the time
charterer-party.
ISSUE:
 WON  KKKK(the carrier) became a
private carrier by reason of a charter-
party.
25
RULING:
 YES.
 The Supreme Court first defined the
following:
o A "charter-party" is defined as a
contract by which an entire ship,
or some principal part thereof, is
let by the owner to another
person for a specified time or
use.
o “common carriers” are carriers
either by land, air or water which
hold themselves out as ready to
engage in carrying goods or
transporting passengers or both
for compensation as a public
employment and not as a casual
occupation
o The distinction between a MR. & MRS. ENGRACIO FABRE, JR. and
"common or public carrier" and a
"private or special carrier" lies in
the character of the business,
such that if the undertaking is a
single transaction, not a part of
the general business or
occupation, although involving
the carriage of goods for a fee,
the person or corporation offering
such service is a private carrier
 It is imperative that a public carrier shall
remain as such, notwithstanding the
charter of the whole or portion of a
vessel by one or more persons,
provided the charter is limited to the ship
only, as in the case of a time-charter or
voyage-charter.
o When petitioner chartered the
vessel M/V "Sun Plum", the ship
captain, its officers and
compliment were under the
employ of the shipowner and
therefore continued to be under
its direct supervision and control.
o Hardly then can the courts
charge the charterer, a stranger
to the crew and to the ship, with
the duty of caring for his cargo
when the charterer did not have
any control of the means in doing
so.  did not leave the Tropical Hut at the
 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.
 Petition Dismissed.
Common Carriers; A. In General; I.
Definitions, Essential Elements; B.Liberal
Approach
G.R. No. 111127 July 26, 1996
PORFIRIO CABIL, petitioners,  vs. COURT
OF APPEALS, THE WORD FOR THE
WORLD CHRISTIAN FELLOWSHIP, INC.,
et,al respondents.
FACTS:
 Petitioners Engracio Fabre, Jr. and his
wife were owners of a 1982 model
Mazda minibus.
o They used the bus principally in
connection with a bus service for
school children which they
operated in Manila. The couple
had a driver, Porfirio J. Cabil,
whom they hired in 1981, after
trying him out for two weeks,
 On November 2, 1984 private
respondent Word for the World Christian
Fellowship Inc. arranged with petitioners
for the transportation of 33 members
of its Young Adults Ministry from Manila
to La Union and back in consideration of
which private respondent paid
petitioners the amount of P3,000.00.
 The group was scheduled to leave on
November 2, 1984, at 5:00 o'clock in the
afternoon. However, as several
members of the party were late, the bus
26
 corner of Ortigas Avenue and EDSA
until 8:00 o'clock in the evening.
Petitioner Porfirio Cabil drove the
minibus.
 The usual route to Caba, La Union was
through Carmen, Pangasinan. However,
the bridge at Carmen was under repair,
and petitioner Cabil, who was
unfamiliar with the area (it being his
first trip to La Union), was forced to
take a detour through the town of
Baay in Lingayen, Pangasinan.
o At 11:30 that night, petitioner
Cabil came upon a sharp curve
on the highway, running on a
south to east direction, which he
described as "siete."
o The road was slippery because it
was raining, causing the bus,
which was running at the speed
of 50 kilometers per hour, to skid
to the left road shoulder.
o The bus hit the left traffic steel
brace and sign along the road
and rammed the fence of one
Jesus Escano, then turned over
and landed on its left side,
coming to a full stop only after a
series of impacts. The bus came
to rest off the road..
o Several passengers were injured.
 The driver, petitioner Cabil, claimed he
did not see the curve until it was too late
since he was unfamiliar with the area.
 Amyline Antonio, who was seriously
injured, brought this case in the RTC of
Makati, Metro Manila. As a result of the
accident, she is now suffering from
paraplegia and is permanently
paralyzed from the waist down.
 RTC decided in favor of WWCF and
Antonio, awarding: 1) P93,657.11 as
compensatory and actual damages; 2)
P500,000.00 as the reasonable amount
of loss of earning capacity of plaintiff
Amyline Antonio; 3) P20,000.00 as
moral damages; 4) P20,000.00 as
exemplary damages; and 5) 25% of the
recoverable amount as attorney's fees;
6) Costs of suit.
 CA affirmed the RTC decision.
ISSUE:
 WON the petitioners are liable as
common carriers.
RULING
 YES
 Art. 1732. Common carriers are
persons, corporations, firms or
associations engaged in the business of
carrying or transporting passengers or
goods or both, by land, water, or air for
compensation, offering their services to
the public.
o The above article makes no
distinction between one whose
principal business activity is the
carrying of persons or goods or
both, and one who does such
carrying only as an ancillary
activity (in local idiom, as "a
sideline"). Article 1732 also
carefully avoids making any
distinction between a person or
enterprise offering transportation
service on a regular or scheduled
basis and one offering such
service on an occasional,
episodic or unscheduled basis.
Neither does Article 1732
distinguish between a carrier
offering its services to the
"general public," i.e., the general
community or population, and
one who offers services or solicits
business only from a narrow
segment of the general
population. We think that Article
1732 deliberately refrained from
making such distinctions
 As common carriers, the Fabres were
found to exercise "extraordinary
diligence" for the safe transportation of
the passengers to their destination. This
duty of care is not excused by proof that
27
 they exercise the diligence of a good
father of the family in the selection and
supervision of their employee.
 As Art. 1759 of the Code provides:
o Common carriers are liable for
the death of or injuries to
passengers through the
negligence or willful acts of the
former's employees although
such employees may have acted
beyond the scope of their
authority or in violation of the
orders of the common carriers.
o This liability of the common
carriers does not cease upon
proof that they exercised all the
diligence of a good father of a
family in the selection and
supervision of their employees.
 CA decision affirmed.
Common Carriers; A. In General; I.
Definitions, Essential Elements; B.Liberal
Approach
G.R. No. 131621 September 28, 1999
LOADSTAR SHIPPING CO., INC., petitioner,  LOADSTAR is a common carrier.
vs. COURT OF APPEALS and THE MANILA
INSURANCE CO., INC., respondents
FACTS:
 LOADSTAR received on board its M/V
"Cherokee" (hereafter, the vessel) the
following goods for shipment: a) 705
bales of lawanit hardwood; b) 27 boxes
and crates of tilewood assemblies and
the others ;and c) 49 bundles of
mouldings R & W (3) Apitong
Bolidenized.
 The goods were insured with Manila
Insurance for 6.067M while the vessel
was insured by Prudential Guarantee
and Assurance for 4M.
 While on its way to Manila from the port
of Nasipit, Agusan del Norte, the
vessel, along with its cargo, sank off
Limasawa Island.
o As a result of the total loss of its
shipment, the consignee made a
claim with LOADSTAR which,
however, ignored the same.
 As the insurer, MIC paid P6,075,000 to
the insured in full settlement of its
claim, and the latter executed a
subrogation receipt therefor.
 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. (PGAI was dropped due to
payment of proceeds to LOADSTAR)
 LOADSTAR denied any liability for the
loss of the shipper's goods and claimed
that sinking of its vessel was due
to force majeure.
 RTC rendered a decision in favor of
MIC
 CA affirmed the RTC decision.
ISSUE:
 WON M/V "Cherokee" is a private
carrier.
RULING:
 NO.
 The Supreme Court held that
 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.
 A certificate of public convenience is not
a requisite for the incurring of liability
under the Civil Code provisions
governing common carriers. That
liability arises the moment a person
or firm acts as a common carrier,
without regard to whether or not such
carrier has also complied with the
requirements of the applicable
regulatory statute and implementing
regulations and has been granted a
certificate of public convenience or other
franchise.
o To exempt private respondent
from the liabilities of a common
carrier because he has not
28
 secured the necessary certificate
of public convenience, would be
offensive to sound public policy;
that would be to reward private
respondent precisely for failing to
comply with applicable statutory
requirements  local tax based on its gross receipts
 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.
 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.
 Petition denied. CA decision
affirmed.
Common Carriers; A. In General; I.
Definitions, Essential Elements; C.
Uncommon Carriers
G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL
CORPORATION, petitioner,  vs. COURT OF
APPEALS, HONORABLE PATERNO V. TAC-
AN, BATANGAS CITY and ADORACION C.
ARELLANO, in her official capacity as City
Treasurer of Batangas, respondents.
FACTS:
 Petitioner is a grantee of a pipeline
concession under Republic Act No.
387, as amended, to contract, install
and operate oil pipelines. The original
pipeline concession was granted in
1967and renewed by the Energy
Regulatory Board in 1992.
 Sometime in January 1995, petitioner
applied for a mayor's permit with the
Office of the Mayor of Batangas City.
However, before the mayor's permit
could be issued, the respondent City
Treasurer required petitioner to pay a
for the fiscal year 1993 pursuant to the
Local Government Code.
o The respondent City Treasurer
assessed a business tax on the
petitioner amounting to
P956,076.04 payable in four
installments based on the gross
receipts for products pumped at
GPS-1 for the fiscal year 1993
which amounted to
P181,681,151.00.
 In the protest filed by the petitioner, it
alleged that it was engaged in the
business of transporting petroleum
products from the Batangas
refineries, via pipeline, to Sucat and
JTF Pandacan Terminals. And as
such, it was exempt from paying the
tax on gross receipts under the LGC.
 The City Treasurer denied the protest
thus prompting the filing of a complaint
by the petitioner with RTC of Batangas
City.
 the city treasurer argued that petitioner
cannot be exempt from taxes under
Section 133 (j) of the Local
Government Code as said exemption
applies only to "transportation
contractors and persons engaged in
the transportation by hire and
common carriers by air, land and
water."
o Respondents assert that
pipelines are not included in
the term "common carrier"
which refers solely to ordinary
carriers such as trucks, trains,
ships and the like.
29
 Respondents further posit that
the term "common carrier"
under the said code pertains to
the mode or manner by which
a product is delivered to its
destination.
 RTC dismissed the complaint.
 CA affirmed the dismissal.
ISSUE:
 WON the petitioner is a common
carrier.
Ruling:
 YES.
 The Supreme Court held that a
"common carrier" may be defined,
broadly, as one who holds himself out to
the public as engaged in the business of
transporting persons or property from
place to place, for compensation,
offering his services to the public
generally.
 Art. 1732 of the Civil Code defines a
"common carrier" as "any person,
corporation, firm or association engaged
in the business of carrying or
transporting passengers or goods or
both, by land, water, or air, for
compensation, offering their services to
the public."
 The test for determining whether a party
is a common carrier of goods is:
o 1. He must be engaged in the
business of carrying goods for
others as a public employment,
and must hold himself out as
ready to engage in the
transportation of goods for
person generally as a business
and not as a casual
occupation;
o 2. He must undertake to carry
goods of the kind to which his
business is confined;
o 3. He must undertake to carry
by the method by which his
business is conducted and
over his established roads;
and
o 4. The transportation must be
for hire. 
 Based on the above definitions and
requirements, there is no doubt that
petitioner is a common carrier. It is
engaged in the business of transporting
or carrying goods, i.e. petroleum
products, for hire as a public
employment. It undertakes to carry for
all persons indifferently, that is, to all
persons who choose to employ its
services, and transports the goods by
land and for compensation. The fact that
petitioner has a limited clientele does
not exclude it from the definition of a
common carrier
 the definition of "common carriers" in the
Civil Code makes no distinction as to
the means of transporting, as long as
it is by land, water or air. It does not
provide that the transportation of the
passengers or goods should be by
motor vehicle.
o In fact, in the United States, oil
pipe line operators are
considered common carriers. 
 Under the Petroleum Act of the
Philippines (Republic Act 387),
petitioner is considered a "common
carrier." Thus, Article 86 thereof
provides that:
o Art. 86. Pipe line concessionaire
as common carrier. — A pipe line
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
30
 for the transportation of such
other petroleum as may be
offered by others for transport,
and to charge without
discrimination such rates as may
have been approved by the
Secretary of Agriculture and
Natural Resources.
 Republic Act 387 also regards
petroleum operation as a public
utility. Pertinent portion of Article 7
thereof provides:
o that everything relating to the
exploration for and exploitation of
petroleum . . . and everything
relating to the manufacture,
refining, storage,
or transportation by special
methods of petroleum, is hereby
declared to be a public utility.
(Emphasis Supplied)
 The Bureau of Internal Revenue
likewise considers the petitioner a
"common carrier." In BIR Ruling No.
069-83, it declared:
o . . . since [petitioner] is a pipeline
concessionaire that is engaged
only in transporting petroleum
products, it is considered a
common carrier under Republic
Act No. 387 . . . . Such being the
case, it is not subject to
withholding tax prescribed by
Revenue Regulations No. 13-78,
as amended.
 There is no doubt that petitioner is a
"common carrier" and, therefore, exempt
from the business tax as provided for in
Section 133 (j), of the Local Government
Code.
 Petition granted. CA decision
reversed and set aside.
ASIA LIGHTERAGE AND SHIPPING V. CA
August 19, 2003
FACTS:
 3,150 tons of white wheat was shipped
by Marubeni American Corporation of
Portland, Oregon on board the vessel
M/V NEO CYMBIDIUM V-26 for delivery
to the consignee General Milling Corp.
in Manila. The shipment was insured by
private respondent Prudential
Guarantee and Assurance Inc.
 The cargo arrived in Manila and was
transferred to the custody of Asia
Lighterage, which was contacted by the
consignee to deliver the cargo to their
warehouse in Pasig City.
 900 tons was first loaded for delivery,
but it did not reach its destination since
it was suspended due to a warning of an
incoming typhoon.
o The barge it was on sustained a
hole which was patched with clay
and cement. Upon its arrival to
the terminal before it reached the
consignee’s wharf, it again ran
aground. A portion of the goods
were transferred to three other
barges.
o The next day, the barge sank
completely, resulting in the total
loss of the remaining cargo.
 A bidding was conducted to dispose of
the damaged cargo. On the same date,
the consignee sent a claim letter to the
petitioner and Prudential for the value of
the lost cargo.
 Prudential indemnified the consignee,
and then sought recovery of the amount
from the petitioner.
 Prudential filed a complaint against the
petitioner recovery of the amount of
indemnity.
 RTC: ordered petitioner to pay
Prudential.
 CA: petitioner insisted that it is not a
common carrier. The CA affirmed the
RTC.
ISSUE: Is the petitioner a common carrier? If it
is, did it exercise extraordinary diligence?
HELD: Yes. No.
 The petitioner is a common carrier.
o Art. 1732 CC: Common carriers
are persons, corporations, firms
or associations engaged in the
31
 business of carrying or
transporting passengers or goods
or both, by land, water, or air, for
compensation, offering their
services to the public.
 Petitioner alleges that it is a private
carrier since it has no fixed and publicly
known route, maintains no terminals,
and issues no tickets.
o The definition of common carriers
in Article 1732 of the Civil Code
makes no distinction between
one whose principal business
activity is the carrying of persons
or goods or both, and one who
does such carrying only as an
ancillary activity.
o It does not distinguish between a
carrier offering its services to the
general public, and one who
offers services or solicits
business only from a narrow
segment of the general
population.
 Test to Determine a Common Carrier
o Whether the given undertaking is
a part of the business engaged in
by the carrier which he has held
out to the general public as his
occupation rather than the
quantity or extent of the business
transacted.
o Petitioner is engaged in the
business of shipping and
lighterage.
 Petitioner failed to exercise
extraordinary diligence.
o The barge completely sank after
its towing bits broke, resulting in
the total loss of its cargo.
Petitioner claims that this was
caused by a typhoon, hence, it
should not be held liable for the
loss of the cargo.
o However, petitioner failed to
prove that the typhoon is the
proximate and only cause of the
loss of the goods, and that it has
exercised due diligence before,
during and after the occurrence
of the typhoon to prevent or
minimize the loss.
o The partly-submerged vessel was
refloated but its hole was patched
with only clay and cement. The
patch work was merely a
provisional remedy, not enough
for the barge to sail safely.
SPS CRUZ V. SUN HOLIDAYS
June 29, 2010
FACTS:
 Sps. Dante and Leonora Cruz had a son
Ruelito whom, along with his new wife,
stayed onboard the M/B Coco Beach III
by virtue of a tour package-contract from
Sun Holidays.
 The boat capsized while it was en route
to Batangas from Puerto Galera,
causing the death of the couple.
 According to a scuba diving instructor
Matute, it rained shortly after the boat
sailed. As the rain and wind got
stronger, the boat tilted from side to side
and the waved got unwieldy. After
getting hit by two big waves, the boat
capsized.
o 8 passengers died, including
Ruelito and his wife.
 Sps. Cruz demanded indemnification
from Sun Holidays. Sun Holidays denied
any responsibility for the incident since it
was a fortuitous event.
 Sps. Cruz filed a complaint alleging that
Sun Holidays was a common carrier and
was guilty of negligence in allowing the
boat to sail notwithstanding a storm
warning.
 Sun Holidays denied being a common
carrier, alleging that its boats are not
available to the general public as they
only ferry Resort guests and crew
members.
 RTC: dismissed complaint.
 CA: denied appeal.
ISSUE: Is Sun Holidays a common carrier?
HELD: YES.
32
 Article 1732 (CC). Common carriers are before, during and after the
persons, corporations, firms or occurrence of the fortuitous
associations engaged in the business of event.
carrying or transporting passengers or o PAGASA issued a 24-hour
goods or both, by land, water, or air for weather forecast. A very cautious
compensation, offering their services to person exercising the utmost
the public. diligence would thus not brave
o The above article makes no such stormy weather and put
distinction between one whose other people’s lives at risk.
principal business activity is the
carrying of persons or goods or
both, and one who does such SCMITZ TRANSPORT & BROKERAGE
carrying only as an ancillary CORP. V. TRANSPORT VENTURE INC.
activity. April 22, 2005
o No distinction between regular
basis and occasional basis. FACTS:
o No distinction between general
 SYTCO Singapore shipped from the
public and narrow segment of
port of Ilyichevsk, Russia on board the
general public.
M/V Alexander Saveliev 545 hot rolled
 “Common carrier” may be seen to
steel sheets.
coincide neatly with the notion of "public
 The cargoes, which were to be
service," under the Public Service Act
discharged at the port of Manila in favor
(CA 1416).
of the consignee, Little Giant Steel Pipe
o Indeed, respondent is a common
Corporation, were insured against all
carrier. Its ferry services are so risks with Industrial Insurance.
intertwined with its main business
 The vessel arrived in Manila. Schmitz
as to be properly considered
Transport was engaged by the
ancillary thereto. The constancy
consignee to receive the cargoes and
of respondent’s ferry services in
deliver them to the warehouse engaged
its resort operations is
TVI to send a barge and a tugboat at
underscored by its having its own
shipside.
Coco Beach boats. And the tour
 TVI’s tugboat towed the barge. 37 out of
packages it offers, which include
the 545 coils were unloaded onto the
the ferry services, may be availed
barge, during which the weather
of by anyone who can afford to
became inclement due to an
pay the same. These services
approaching storm. The barge was not
are thus available to the public.
pulled back to the pier.
 That respondent does not charge a
 The barge capsized due to strong
separate fee or fare for its ferry services
waves, and the 37 coils fell into the sea.
is of no moment. It cannot be supposed
Earnest efforts on the part of both the
that it operates at a loss.
consignee Little Giant and Industrial
 Sun Holiday did not exercise due
Insurance to recover the lost cargoes
diligence.
proved futile.
o To fully free a common carrier
 Little Giant filed a claim against
from any liability, the fortuitous
Industrial Insurance. It then executed a
event must have been the
subrogation receipt.
proximate and only cause of the
 Industrial Insurance then filed a
loss. And it should have
complaint against Schmitz Transport
exercised due diligence to
and TVI for the recovery of the amount it
prevent or minimize the loss
paid to Little Giant.
33
  RTC: declared defendants negligent.
 CA: affirmed.
ISSUE: Was there negligence on the part of
the defendants? If yes, may liability for the loss
CRISOSTOMO V. CA & CARAVAN TRAVEL
attach?
August 25, 2003
HELD: YES. Yes, to petitioner and TVI.
FACTS:
 When a fortuitous event occurs, Article
1174 of the Civil Code absolves any
party from any and all liability arising
therefrom.
o In order, to be considered a
fortuitous event, however, (1) the
cause of the unforeseen and
unexpected occurrence, or the
failure of the debtor to comply
with his obligation, must be
independent of human will; (2) it
must be impossible to foresee the
event which constitute the caso
fortuito, or if it can be foreseen it
must be impossible to avoid; (3)
the occurrence must be such as
to render it impossible for the
debtor to fulfill his obligation in
any manner; and (4) the obligor
must be free from any
participation in the aggravation of
the injury resulting to the creditor.
 That no tugboat towed back the barge to
the pier after the cargoes were loaded is
the proximate cause of the loss of the
cargoes.
o Had the barge been towed back
promptly to the pier, the
deteriorating sea conditions
notwithstanding, the loss could
have been avoided. But the
barge was left floating in open
sea until big waves set in at 5:30
a.m., causing it to sink along with
the cargoes.
o Thus, the loss falls outside the
doctrine of fortuitous events.
 Petitioner and TVI are solidarily liable.
o TVI’s failure to tow back the
barge was the proximate cause
of the loss. Petitioner failed to
take all precautions to avoid the
loss since it knew that TVI failed
to tow back the barge but did not
do anything about it.
 Estela Crisostomo contracted the
services of Caravan Travel to arrange
her booking, ticketing, and
accommodation in a tour of Europe. The
booking fee was waived because her
niece Meriam Menor was the ticketing
manager.
 Menor went to Estela to deliver the
travel documents and tickets. She was
paid in full and told her aunt to go to
NAIA on Saturday, 2 hours before her
flight.
 Estela did not check her travel
documents. Upon arrival at NAIA, she
discovered that the flight had already
departed the previous day.
 Menor suggested that Estela take
another tour (the British Pageant) and
asked her to pay another $785. Estela
partially paid and went on the tour.
 Upon Estela’s return, she demanded
from respondent a reimbursement
representing the difference between the
sums she paid for the 2 tours.
Respondent refused to reimburse
Estela, and she filed a complaint for
breach of contract of carriage and
damages.
 Estela alleged that her failure to join
"Jewels of Europe" was due to
respondent’s fault since it did not clearly
indicate the departure date on the plane
ticket. Respondent was also negligent in
informing her of the wrong flight
schedule through its employee Menor.
 RTC: ordered respondent to refund
Estela, citing negligence. CA: held that
Estela is more negligent because she
should not have relied on what was told
to her.
34
ISSUE: Is the respondent a common carrier?
Did it not observe the standard of care required
of a common carrier?
HELD: NO. It is thus not bound under the law
to observe extraordinary diligence in the
performance of its obligation, as petitioner
claims.
 A contract of carriage or transportation
is one whereby a certain person or
association of persons obligate
themselves to transport persons, things,
or news from one place to another for a
fixed price.9 Such person or association
of persons are regarded as carriers and
are classified as private or special
carriers and common or public carriers.
o A common carrier is defined
under Article 1732 of the Civil
Code as persons, corporations,
firms or associations engaged in
the business of carrying or
transporting passengers or goods
or both, by land, water or air, for
compensation, offering their
services to the public.
 Respondent is not an entity engaged in
the business of transporting either
passengers or goods and is therefore,
neither a private nor a common carrier.
Respondent did not undertake to
transport petitioner from one place to
another since its covenant with its
customers is simply to make travel
arrangements in their behalf.
 Respondent acted merely as an agent
of the airline, with whom petitioner
ultimately contracted for her carriage to
Europe. Respondent’s obligation to
petitioner in this regard was simply to
see to it that petitioner was properly
booked with the airline for the appointed
date and time. Her transport to the place
of destination, meanwhile, pertained
directly to the airline.
TORRES-MADRID BROKERAGE V. FEB.
MITSUI INSURANCE & BENJAMIN
MANALASTAS
July 11, 2016
FACTS:
 A shipment of electronic goods from
Thailand and Malaysia arrived at the
Port of Manila for Sony PH. Sony had
engaged TMBI to facilitate, process,
withdraw, and deliver the shipment from
the port to its warehouse in Biñan,
Laguna.
 TMBI did not own any delivery trucks. It
then subcontracted Manalastas’ trucking
company BMT. TMBI notified Sony.
 4 BMT trucks picked up the shipment,
but could not immediately undertake the
delivery because of the truck ban and
that the following day was a Sunday.
 On the rescheduled date, 4 trucks left
but only 3 trucks arrived at the Sony
warehouse.
 The missing truck, driven by Lapesura,
was found abandoned in Muntinlupa
with the shipment missing.
 A complaint was filed with the NBI
against Lapesura for hijacking.
 TMBI notified Sony of the loss, and then
demanded from BMT payment for the
lost shipment. BMT refused to pay.
 Sony filed an insurance claim with
Mitsui, the insurer of the goods. After
paying Sony, Mitui was subrogated to its
rights and sent TMBI a demand letter for
the payment of the lost goods.
ISSUE: Is BMT liable for the cost of the lost
goods? Is it a common carrier?
HELD: YES.
 A brokerage may be considered a
common carrier if it also undertakes to
deliver the goods for its customers.
 The law does not distinguish between
one whose principal business activity is
the carrying of goods and one who
undertakes this task only as an ancillary
activity.
 That TMBI does not own trucks and has
to subcontract the delivery of its clients’
goods, is immaterial. As long as an
entity holds itself to the public for the
35
 transport of goods as a business, it is
considered a common carrier regardless
of whether it owns the vehicle used or
has to actually hire one.
 The only exceptions from liability for a
common carrier:
(1) Flood, storm, earthquake, lightning,
or other natural disaster or calamity;
(2) Act of the public enemy in war,
whether international or civil;
(3) Act of omission of the shipper or
owner of the goods;
(4) The character of the goods or
defects in the packing or in the
containers;
(5) Order or act of competent public
authority.
 For all other cases - such as theft or
robbery – a common carrier is
presumed to have been at fault or to
have acted negligently, unless it can
prove that it observed extraordinary
diligence. The theft or the robbery of the
goods is not considered a fortuitous
event or a force majeure
 Despite the subcontract, TMBI remained
responsible for the cargo. Under Article
1736, a common carrier’s extraordinary
responsibility over the shipper’s goods
lasts from the time these goods are
unconditionally placed in the possession
of, and received by, the carrier for
transportation, until they are delivered,
actually or constructively, by the carrier
to the consignee.
o That the cargo disappeared
during transit while under the
custody of BMT – TMBI’s
subcontractor – did not diminish
nor terminate TMBI’s
responsibility over the cargo.
Article 1735 of the Civil Code
presumes that it was at fault.
III. Common Carriers
a. In General
iv. Nature and basis of liability
Art. 1733, CC
JOSE CANGCO, plaintiff-appellant, vs.
MANILA RAILROAD CO., defendant-
appellee., G.R. No. L-12191, October
14, 1918.
FACTS:
Jose Cangco (Plaintiff), was in the
employment of Manila Railroad
Company (defendant) in the capacity
of clerk, with a monthly wage of P25.
Cangco, while alighting from the train (at
the San Mateo station) operated by the
defendant, stepped on a sack of
watermelons resulting to him falling
violently on the platform. His body was
drawn under the moving car, where his
right arm was badly crushed and
lacerated. It appears that after the
plaintiff alighted from the train the car
moved forward possibly six meters
before it came to a full stop.
The accident occurred between 7 and 8
o'clock on a dark night, and as the
railroad station was lighted dimly by a
single light located some distance away,
objects on the platform where the
accident occurred were difficult to
discern especially to a person emerging
from a lighted car.
The sacks of watermelon had been
brought to the station for the shipment to
the market. They were contained in
numerous sacks which has been piled
on the platform in a row one upon
another at the edge of platform.
The plaintiff sustained very serious
injuries. He was then operated on.
Evidence shows that the plaintiff
expended the sum of P790.25 in the
form of medical and surgical fees and
for other expenses in connection with
the process of his curation.
August 31, 1915, Cangco instituted this
proceeding in the CFI-Manila to recover
damages of the defendant company,
founding his action upon the negligence
of the servants and employees of the
36
defendant in placing the sacks of
melons upon the platform and leaving
them so placed as to be a menace to
the security of passenger alighting from
the company's trains. The CFI ruled in
favor of the defendant, stating that
although negligence was attributable to
the defendant by reason of the fact that
the sacks of melons were so placed as
to obstruct passengers passing to and
from the cars, nevertheless, the plaintiff
himself had failed to use due caution in
alighting from the coach and was
therefore precluded form recovering.
Hence this appeal.
ISSUE: Is Manila Railroad Company
liable to pay damages due to its
employees’ negligence?
RULING: No. Not necessarily because
of the employee’s negligence but
because of the breach of contract of
carriage.
The foundation of the legal liability of the
defendant is the contract of carriage,
and that the obligation to respond for the
damage which plaintiff has suffered
arises, if at all, from the breach of that
contract by reason of the failure of
defendant to exercise due care in its
performance. That is to say, its liability is
direct and immediate, differing
essentially, in legal viewpoint from that
presumptive responsibility for the
negligence of its servants, imposed by
article 1903 of the Civil Code, which can
be rebutted by proof of the exercise of
due care in their selection and
supervision.
The liability of masters and employers
for the negligent acts or omissions of
their servants or agents, when such acts
or omissions cause damages which
amount to the breach of a contact, is not
based upon a mere presumption of the
master's negligence in their selection or
control, and proof of exercise of the
utmost diligence and care in this regard
does not relieve the master of his
liability for the breach of his contract.
The contract of defendant to
transport plaintiff carried with it, by
implication, the duty to carry him in
safety and to provide safe means of
entering and leaving its trains (civil
code, article 1258). That duty, being
contractual, was direct and
immediate, and its non-performance
could not be excused by proof that
the fault was morally imputable to
defendant's servants.
The defendant’s contention that the
direct and proximate cause of the injury
suffered by plaintiff was his own
contributory negligence in failing to wait
until the train had come to a complete
stop before alighting, hence no or
apportioned liability shall be imposed, is
of no moment.
In determining the question of
contributory negligence in performing
such act — that is to say, whether the
passenger acted prudently or recklessly
— the age, sex, and physical condition
of the passenger and all other
circumstances necessarily affecting the
safety of the passenger and should be
considered. In this particular instance,
the nature of the platform, constructed
as it was of cement material, also
assured to the passenger a stable and
even surface on which to alight. The
plaintiff was possessed of the vigor and
agility of young manhood, and it was by
no means so risky for him to get off
while the train was yet moving as the
same act would have been in an aged
or feeble person. The train was barely
moving when plaintiff alighted is shown
conclusively by the fact that it came to
stop within six meters from the place
where he stepped from it. Thousands of
person alight from trains under these
conditions every day of the year, and
sustain no injury where the company
37
has kept its platform free from
dangerous obstructions. There is no
reason to believe that plaintiff would
have suffered any injury whatever in
alighting as he did had it not been for
defendant's negligent failure to perform
its duty to provide a safe alighting place.
The only fact from which a conclusion
can be drawn to the effect that plaintiff
was guilty of contributory negligence is
that he stepped off the car without being
able to discern clearly the condition of
the platform and while the train was yet
slowly moving. In considering the
situation thus presented, it should not be
overlooked that the plaintiff was, as we
find, ignorant of the fact that the
obstruction which was caused by the
sacks of melons piled on the platform
existed; and as the defendant was
bound by reason of its duty as a
public carrier to afford to its
passengers facilities for safe egress
from its trains, the plaintiff had a
right to assume, in the absence of
some circumstance to warn him to
the contrary, that the platform was
clear. The place, as we have already
stated, was dark, or dimly lighted, and
this also is proof of a failure upon the
part of the defendant in the performance
of a duty owing by it to the plaintiff; for if
it were by any possibility concede that it
had right to pile these sacks in the path
of alighting passengers, the placing of
them adequately so that their presence
would be revealed.
The conduct of the plaintiff in
undertaking to alight while the train was
yet slightly under way was not
characterized by imprudence and that
therefore he was not guilty of
contributory negligence.
The Court awarded compensation for
the damage suffered by him for his
permanent disability is the sum of
P2,500, and the additional sum of
P790.25 for medical attention, hospital
services, and other incidental
expenditures connected with the
treatment of his injuries.
____________
CESAR L. ISAAC, Plaintiff-Appellant,
v. A. L. AMMEN TRANSPORTATION
CO., INC., Defendant-Appellee., G.R.
No. L-9671. August 23, 1957.
FACTS:
A. L. Ammen Transportation Co., Inc.,
(defendant), is a corporation engaged in
the business of transporting passengers
by land for compensation in the Bicol
provinces
On May 31, 1951, plaintiff boarded the
defendant’s Bus No. 31 as a paying
passenger from Ligao, Albay bound for
Pili, Camarines Sur, but before reaching
his destination, the bus collided with a
motor vehicle of the pick-up type coming
from the opposite direction, as a result
of which plaintiff’s left arm was
completely severed and the severed
portion fell inside the bus. Plaintiff was
rushed to several hospitals for blood
transfusion, treatment, operation, and
monitoring for several months.
Plaintiff brought this action against
defendant for damages alleging that the
collision which resulted in the loss of his
left arm was mainly due to the gross
incompetence and recklessness of the
driver of the bus operated by defendant
and that defendant incurred in culpa
contractual arising from its non-
compliance with its obligation to
transport plaintiff safely to his
destination. Plaintiff prays for judgment
against defendant for his medical
treatment, cost of an artificial arm, for
his loss of earning, for diminution of his
earning capacity, moral damages, and
attorneys’ fees and costs of suit.
38
The trial court found that the collision
occurred due to the negligence of the
driver of the pick-up car and not to that
of the driver of the bus it appearing that
the latter did everything he could to
avoid the same but that notwithstanding
his efforts, he was not able to avoid it.
As a consequence, the court dismissed
the complaint, with costs against
plaintiff. This is an appeal from said
decision.
ISSUE: Is the defendant liable due to
breach of obligation under the contract
of carriage?
RULING: No. Trial court’s decision is
affirmed.
The Code Commission, in justifying this
extraordinary diligence required of a
common carrier (Art. 1733, 1734,
1735, and 1745 (Nos. 5, 6, and 7),
1755, and 1756), says the following:
"A common carrier is bound to carry the
passengers safely as far as human care
and foresight can provide, using the
utmost diligence of very cautious
persons, with due regard for all
circumstances. This extraordinary
diligence required of common carriers is
calculated to protect the passengers
from the tragic mishaps that frequently
occur in connection with rapid modern
transportation. This high standard of
care is imperatively demanded by the
preciousness of human life and by the
consideration that every person must in
every way be safeguarded against all
injury. (Report of the Code Commission,
pr. 35-36)" (Padilla, Civil Code of the
Philippines, Vol. IV, 1956 ed., p. 197).
The following are the principles
governing the liability of a common
carrier: (1) the liability of a carrier is
contractual and arises upon breach of
its obligation. There is breach if it fails
to exert extraordinary diligence
according to all the circumstances of
each case; (2) a carrier is obliged to
carry its passenger with the utmost
diligence of a very cautious person,
having due regard for all the
circumstances; (3) a carrier is presumed
to be at fault or to have acted
negligently in case of death of, or injury
to, passengers, it being its duty to prove
that it exercised extraordinary diligence;
and (4) the carrier is not an insurer
against all risks of travel.
Evidence shows that Bus No. 31,
immediately prior to the collision, was
running at a moderate speed because it
had just stopped at the school zone.
The pick-up car was at full speed and
was running outside of its proper lane.
The driver of the bus, upon seeing the
manner in which the pick-up was then
running, swerved the bus to the very
extreme right of the road until its front
and rear wheels have gone over the pile
of stones or gravel situated on the
rampart of the road. Said driver could
not move the bus farther right and run
over a greater portion of the pile, the
peak of which was about 3 feet high,
without endangering the safety of his
passengers. And notwithstanding all
these efforts, the rear left side of the bus
was hit by the pick-up car.
Authorities abound where failure to
observe the same degree of care that
as ordinary prudent man would
exercise under ordinary circumstances
when confronted with a sudden
emergency was held to be warranted
and a justification to exempt the
carrier from liability. The failure to
exercise the best judgment in such
cases does not establish lack of care
39
and skill on the part of the driver which
renders the company liable. Considering
all the circumstances, we are persuaded
to conclude that the driver of the bus
has done what a prudent man could
have done to avoid the collision and in
our opinion this relieves appellee from
liability under our law.
In addition, "It is the prevailing rule that it
is negligence per se for a passenger on
a railroad voluntarily or inadvertently to
protrude his arm, hand, elbow, or any
other part of his body through the
window of a moving car beyond the
outer edge of the window or outer
surface of the car, so as to come in
contact with objects or obstacles near
the track, and that no recovery can be
had for an injury which but for such
negligence would not have been
sustained." In this case, the appellant
seated himself on the left side thereof
resting his left arm on the window sill but
with his left elbow outside the window,
this being his position in the bus when
the collision took place. It is for this
reason that the collision resulted in the
severance of said left arm from the body
of appellant thus doing him a great
damage. It is therefore apparent that
appellant is guilty of contributory
negligence. Had he not placed his left
arm on the window sill with a portion
thereof protruding outside, perhaps the
injury would have been avoided as is
the case with the other passengers. It is
to be noted that appellant was the only
victim of the collision.
It is true that such contributory
negligence cannot relieve appellee of its
liability but will only entitle it to a
reduction of the amount of damage
caused (Article 1762, new Civil Code).
_________________
PAZ FORES, petitioner, vs. IRENEO
MIRANDA, respondent., G.R. No. L-
12163             March 4, 1959.
FACTS:
Respondent Miranda was one of the
passengers on a jeepney (allegedly
owned by the petitioner Fores) driven
by Eugenio Luga. While the vehicle was
descending the Sta. Mesa bridge at an
excessive rate of speed, the driver lost
control thereof, causing it to swerve and
to his the bridge wall. The accident
occurred on the morning of March 22,
1953. Five of the passengers were
injured, including the respondent who
suffered a fracture of the upper right
humerus. He was taken to the National
Orthopedic Hospital for treatment, and
later was subjected to a series of
operations.
The driver was charged with serious
physical injuries through reckless
imprudence, and upon interposing a
plea of guilty was sentenced
accordingly. On the other hand,
defendant-petitioner Paz Fores brings
this petition for review of the decision of
the Court of Appeals (C.A. Case No.
1437-R) awarding to the respondent
Miranda actual damages, counsel fees,
and moral damages, with costs. It is the
petitioner's contention that on March 21,
1953, or one day before the accident
happened, she allegedly sold the
passenger jeep that was involved
therein to a certain Carmen Sackerman.
ISSUE: Is the petitioner liable for the
damages awarded?
RULING: Yes, except for the moral
damages which was eliminated.
In the assumption that the sale of the
subject passenger jeep is a fact, the
40
Public Service Commission’s approval is
necessary for the sale of a public
service vehicle even without conveying
therewith the authority to operate the
same. Interpreting the effects of Section
20 of the Public Service Act
(Commonwealth Act No. 146), the Court
has held in the recent cases that a
transfer contemplated by the law, if
made without the requisite approval
of the Public Service Commission, is
not effective and binding in so far as
the responsibility of the grantee
under the franchise in relation to the
public is concerned. The provisions of
the statute are clear and prohibit the
sale, alienation, lease, or encumbrance
of the property, franchise, certificate,
privileges or rights, or any part thereof of
the owner or operator of the public
service Commission. The law was
designed primarily for the protection of
the public interest; and until the
approval of the public Service
Commission is obtained the vehicle
is, in contemplation of law, still under
the service of the owner or operator
standing in the records of the
Commission which the public has a right
to rely upon. It appears that no such
approval was given by the Commission
before the accident occurred, hence, the
petitioner is liable.
Actual damages are awarded based on
the respondent’s expenses and loss of
income.
As for moral damages, it must be
discarded because, based on Art. 2220
of NCC, in case of breach of contract
(including one of transportation) proof of
bad faith or fraud (dolus), i.e., wanton or
deliberately injurious conduct, is
essential to justify an award of moral
damages (with the exception of Art.
1764 where a death of a passenger
entitles the deceased passenger to
"demand moral damages for mental
anguish by reason of the death of the
deceased" (Necesito vs. Paras). In the
case at bar there is no other evidence of
such malice to support the award of
moral damages.
It is also suggested that a carrier's
violation of its engagement to safety
transport the passenger involves a
breach of the passenger's confidence,
and therefore should be regarded as a
breach of contract in bad faith, justifying
recovery of moral damages under Art.
2220. This theory is untenable, for under
it the carrier would always be deemed in
bad faith, in every case its obligation to
the passenger is infringed, and it would
be never accountable for simple
negligence; while under the law (Art.
1756). the presumption is that
common carriers
acted negligently (and not
maliciously), and Art. 1762 (on
contributory negligence) speaks
of negligence of the common carrier.
It is true that negligence may be
occasionally so gross as to amount to
malice; but that fact must be shown in
evidence, and a carrier's bad faith is not
to be lightly inferred from a mere finding
that the contract was breached through
negligence of the carrier's employees.
Upon the other hand, the advantageous
position of a party suing a carrier for
breach of the contract of transportations
explains, to some extent, the limitations
imposed by the new Code on the
amount of the recovery. The action for
breach of contract imposes on the
defendant carrier a presumption of
liability upon mere proof of injury to
the passenger; that latter is relieved
from the duty to established the fault
of the carrier, or of his employees,
and the burden is placed on the
carrier to prove that it was due to an
unforseen event or to force
majeure (Cangco vs. Manila Railroad
41
Co., 38 Phil., 768, 777). Moreover, the
carrier, unlike in suits for quasi-
delict, may not escape liability by
proving that it has exercised due
diligence in the selection and
supervision of its employees (Art.
1759, new civil code; Cangco vs. Manila
Railroad Co., supra; Prado vs. Manila
Electric Co., 51 Phil., 900).
______________
PHILIPPINE RABBIT BUS LINES,
INC., petitioner, vs. THE HONORABLE
INTERMEDIATE APPELLATE COURT
AND CASIANO PASCUA, ET
AL., respondents., G.R. Nos. 66102-04,
August 30, 1990.
FACTS:
About 11:00AM on December 24, 1966,
Catalina Pascua and six other boarded
the jeepney owned by spouses Isidro
Mangune and Guillerma Carreon and
driven by Tranquilino Manalo at Dau,
Mabalacat, Pampanga bound for
Carmen, Rosales, Pangasinan. Their
contract with Manalo was for them to
pay P24.00 for the trip. The private
respondents' testimonial evidence on
this contractual relationship was not
controverted by Mangune, Carreon and
Manalo, nor by Filriters Guaranty
Assurance Corporation, Inc., the insurer
of the jeepney, with contrary evidence.
Upon reaching barrio Sinayoan, San
Manuel, Tarlac, the right rear wheel of
the jeepney was detached, so it was
running in an unbalanced position.
Manalo stepped on the brake, as a
result of which, the jeepney which was
then running on the eastern lane (its
right of way) made a U-turn, invading
and eventually stopping on the western
lane of the road which is the right of way
of vehicles coming from the north,
among which was Bus No. 753 of
petitioner Philippine Rabbit Bus Lines,
Inc. (Rabbit) driven by Tomas delos
Reyes. Almost at the time when the
jeepney made a sudden U-turn and
encroached on the western lane of the
highway as claimed by Rabbit and delos
Reyes, or after stopping for a couple of
minutes as claimed by Mangune,
Carreon and Manalo, the bus bumped
from behind the right rear portion of the
jeepney. As a result of the collision,
three passengers of the jeepney died
while the other jeepney passengers
sustained physical injuries.
Complaints for recovery of damages
were then filed before the CFI by the
heirs of the deceased passengers. In all
three cases, spouses Mangune and
Carreon, Manalo, Rabbit and delos
Reyes were all impleaded as
defendants. Plaintiffs anchored their
suits against spouses Mangune and
Carreon and Manalo on their contractual
liability. As against Rabbit and delos
Reyes, plaintiffs based their suits on
their culpability for a quasi-delict.
Filriters Guaranty Assurance
Corporation, Inc. was also impleaded as
additional defendant in one civil case.
Among others, the plaintiffs sought to
collect amounts for medical expenses,
burial expenses, civil indemnity, loss of
wages, exemplary damages, moral
damages, attorney's fees, and expenses
of litigation.
The trial court found Manalo negligent
and ordered that defendants Isidro
Mangune, Guillerma Carreon and
Tranquilino Manalo thru their
negligence, breached contract of
carriage with their passengers be jointly
and severally pay the plaintiffs the
damages awarded, including the cross
claim of Phil. Rabbit Bus Lines, Inc.
On appeal, the IAC reversed the CFI’s
decision by finding delos Reyes
negligent and ordered him and the
Philippine Rabbit Bus Lines, Inc. to pay
the plaintiffs jointly and severally the
awarded damages. It applied primarily
42
(1) the doctrine of last clear chance, (2)
the presumption that drivers who bump
the rear of another vehicle guilty and the
cause of the accident unless
contradicted by other evidence, and (3)
the substantial factor test. The MR was
denied. Hence, the present petition.
ISSUE: Is the petitioner liable for the
death and physical injuries suffered by
the passengers of the jeepney?
RULING: No. The decision of the CFI is
REINSTATED with MODIFICATION that
only Isidro Mangune, Guillerma Carreon
and Filriters Guaranty Assurance
Corporation, Inc. are liable to the victims
or their heirs and that the amount of
indemnity for loss of life is increased to
thirty thousand pesos (P30,000.00 from
P3,000.00).
The principle about "the last clear"
chance, would call for application in a
suit between the owners and drivers of
the two colliding vehicles. It does not
arise where a passenger demands
responsibility from the carrier to enforce
its contractual obligations. For it would
be inequitable to exempt the negligent
driver of the jeepney and its owners on
the ground that the other driver was
likewise guilty of negligence."
On the presumption that drivers who
bump the rear of another vehicle guilty
and the cause of the accident, it is an
undisputed fact that the U-turn made by
the jeepney was abrupt. Delos Reyes
could not have anticipated the sudden
U-turn executed by Manalo. The
respondent court did not realize that the
presumption was rebutted by this piece
of evidence.
With regard to the substantial factor test,
it cannot be said that the bus was
travelling at a fast speed when the
accident occurred because the speed of
80 to 90 kilometers per hour, assuming
the IAC’s calculation to be correct, is yet
within the speed limit allowed in
highways. Delos Reyes cannot be
faulted for not having avoided the
collision as he had little time to react to
the situation (roughly 2.025 seconds).
To require delos Reyes to avoid the
collision is to ask too much from him.
Aside from the time element involved,
there were no options available to him:
he cannot swerve to its right (western
shoulder) because the road was narrow
and had tall grasses which would
indicate that it was not passable, and he
cannot swerve to its left (eastern lane)
because considering the time element
involved, he would run the greater risk
of running smack in the Mangune
jeepney either head on or broadside.
The Court find that the proximate cause
of the accident was the negligence of
Manalo and spouses Mangune and
Carreon. They all failed to exercise the
precautions that are needed
precisely pro hac vice.
In culpa contractual, the moment a
passenger dies or is injured, the
carrier is presumed to have been at
fault or to have acted negligently, and
this disputable presumption may
only be overcome by evidence that
he had observed extra-ordinary
diligence as prescribed in Articles
1733, 1755 and 1756 of the New Civil
Code  or that the death or injury of the
passenger was due to a fortuitous
event  (Lasam v. Smith, Jr., 45 Phil.
657).
The negligence of Manalo was proven
during the trial by the unrebutted
testimonies of Caridad Pascua, Police
Investigator Tacpal, Police Corporal
Cacalda, his (Manalo's) conviction for
the crime of Multiple Homicide and
Multiple Serious Injuries with Damage to
Property thru Reckless Imprudence, and
the application of the doctrine of res
43
ipsa loquitur supra. The negligence of
spouses Mangune and Carreon was
likewise proven during the trial.
In any event, "[i]n an action for
damages against the carrier for his
failure to safely carry his passenger
to his destination, an accident
caused either by defects in the
automobile or through the negligence
of its driver, is not a caso
fortuito which would avoid the
carriers liability for damages (Son v.
Cebu Autobus Company, 94 Phil. 892
citing Lasam, et al. v. Smith, Jr., 45 Phil.
657; Necesito, etc. v. Paras, et al., 104
Phil. 75).
The trial court was therefore right in
finding that Manalo and spouses
Mangune and Carreon were negligent.
However, its ruling that spouses
Mangune and Carreon are jointly and
severally liable with Manalo is
erroneous. The driver cannot be held
jointly and severally liable with the
carrier in case of breach of the
contract of carriage. The rationale
behind this is readily discernible. Firstly,
the contract of carriage is between
the carrier and the passenger, and in
the event of contractual liability, the
carrier is exclusively responsible
therefore to the passenger, even if such
breach be due to the negligence of his
driver (Viluan v. The Court of Appeals,
et al.,). In other words, the carrier can
neither shift his liability on the contract
to his driver nor share it with him, for his
driver's negligence is his.  Secondly, if
We make the driver jointly and severally
liable with the carrier, that would make
the carrier's liability personal instead of
merely vicarious and consequently,
entitled to recover only the share which
corresponds to the driver,  contradictory
to the explicit provision of Article 2181 of
the New Civil Code.  the death of Nicanor Navidad and,
LIGHT RAIL TRANSIT AUTHORITY &
RODOLFO ROMAN, petitioners, vs.
MARJORIE NAVIDAD, Heirs of the
Late NICANOR NAVIDAD & PRUDENT
SECURITY AGENCY, respondents.,
G.R. No. 145804, February 6, 2003.
FACTS:
On 14 October 1993, Nicanor Navidad,
then drunk, entered the EDSA LRT
station. While Navidad was standing on
the platform near the LRT tracks,
Junelito Escartin, the security guard
assigned to the area approached
Navidad. A misunderstanding or an
altercation between the two ensued that
led to a fist fight. Later on, Navidad fell
on the LRT tracks and at the exact
moment, an LRT train, operated by
petitioner Rodolfo Roman, was coming
in. Navidad was struck by the moving
train, and he was killed instantaneously.
The widow of Nicanor, herein
respondent Marjorie Navidad, along with
her children, filed a complaint for
damages against Junelito Escartin,
Rodolfo Roman, the LRTA, the Metro
Transit Organization, Inc. (Metro
Transit), and Prudent (agency of
Escartin) for the death of her husband.
Prudent denied liability and averred that
it had exercised due diligence in the
selection and supervision of its security
guards.
The trial court rendered its decision in
favor of the plaintiffs and against the
defendants Prudent Security and
Junelito Escartin ordering the latter to
pay jointly and severally the plaintiffs
damages. The complaint against
defendants LRTA and Rodolfo Roman
are dismissed for lack of merit.
Prudent appealed to the CA. the CA
promulgated its now assailed decision
exonerating Prudent from any liability for
instead, holding the LRTA and Roman
44
jointly and severally liable. It ratiocinated
that while the deceased might not have
then as yet boarded the train, a contract
of carriage theretofore had already
existed when the victim entered the
place where passengers were supposed
to be after paying the fare and getting
the corresponding token therefor. In
exempting Prudent from liability, the
court stressed that there was nothing to
link the security agency to the death of
Navidad. It said that Navidad failed to
show that Escartin inflicted fist blows
upon the victim and the evidence merely
established the fact of death of Navidad
by reason of his having been hit by the
train owned and managed by the LRTA
and operated at the time by Roman. The
appellate court faulted petitioners for
their failure to present expert evidence
to establish the fact that the application
of emergency brakes could not have
stopped the train. MR was denied.
ISSUE: Are the petitioners liable?
RULING: Yes for LRTA. No for Roman.
The assailed decision of the appellate
court is AFFIRMED with
MODIFICATION in that (a) the award of
nominal damages is DELETED and (b)
petitioner Rodolfo Roman is absolved
from liability.
Law and jurisprudence dictate that a
common carrier, both from the nature
of its business and for reasons of public
policy, is burdened with the duty of
exercising utmost diligence in
ensuring the safety of passengers.
The law requires common carriers to
carry passengers safely using the
utmost diligence of very cautious
persons with due regard for all
circumstances (Art. 1755, NCC). Such
duty of a common carrier to provide
safety to its passengers so obligates
it not only during the course of the
trip but for so long as the passengers
are within its premises and where
they ought to be in pursuance to the
contract of carriage. The statutory
provisions render a common carrier
liable for death of or injury to
passengers (a) through the negligence
or willful acts of its employees or b) on
account of wilful acts or negligence of
other passengers or of strangers if the
common carrier’s employees through
the exercise of due diligence could have
prevented or stopped the act or
omission (Art. 1759, 1763, NCC). In
case of such death or injury, a carrier is
presumed to have been at fault or been
negligent (Art. 1756, NCC), and by
simple proof of injury, the passenger is
relieved of the duty to still establish the
fault or negligence of the carrier or of its
employees and the burden shifts upon
the carrier to prove that the injury is due
to an unforeseen event or to force
majeure. In the absence of satisfactory
explanation by the carrier on how the
accident occurred, which petitioners,
according to the appellate court, have
failed to show, the presumption would
be that it has been at fault, an exception
from the general rule that negligence
must be proved.
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 high diligence required
of the common carrier. In the
discharge of its commitment to
ensure the safety of passengers, a
carrier may choose to hire its own
employees or avail itself of the
services of an outsider or an
independent firm to undertake the
task. In either case, the common
carrier is not relieved of its
45
 responsibilities under the contract of
carriage.
The CA’s finding that there is nothing to
link Prudent to the death of Nicanor, for
the reason that the negligence of its
employee, Escartin, has not been duly
proven is justified by the records of the
case.
There being, similarly, no showing that
petitioner Rodolfo Roman himself is
guilty of any culpable act or omission,
he must also be absolved from liability.
Needless to say, the contractual tie
between the LRT and Navidad is not
itself a juridical relation between the
latter and Roman; thus, Roman can be
made liable only for his own fault or
negligence.
The award of nominal damages in
addition to actual damages is untenable.
Nominal damages are adjudicated in
order that a right of the plaintiff, which
has been violated or invaded by the
defendant, may be vindicated or
recognized, and not for the purpose of
indemnifying the plaintiff for any loss
suffered by him. It is an established rule
that nominal damages cannot co-exist
with compensatory damages.
Classes of Common Carriers
Article 1732. Common carriers are persons,
corporations, firms or associations
engaged in the business of carrying or
transporting passengers or goods or both,
by land, water, or air, for compensation,
offering their services to the public.
Article 1733. Common carriers, from the
nature of their business and for reasons of
public policy, are bound to observe
extraordinary diligence in the vigilance over
the goods and for the safety of the
passengers transported by them, according
to all the circumstances of each case.
Such extraordinary diligence in the
vigilance over the goods is further
expressed in articles 1734, 1735, and 1745,
Nos. 5, 6, and 7, while the extraordinary
diligence for the safety of the passengers is
further set forth in articles 1755 and 1756.
Article 1735. In all cases other than those
mentioned in Nos. 1, 2, 3, 4, and 5 of the
preceding article, if the goods are lost,
destroyed or deteriorated, common carriers
are presumed to have been at fault or to
have acted negligently, unless they prove
that they observed extraordinary diligence
as required in article 1733.
G.R. No. 112350 December 12, 1997
VLASONS SHIPPING, INC., petitioner, 
vs.
COURT OF APPEALS AND NATIONAL
STEEL CORPORATION, respondents.
Facts:
The MV Vlasons I is a vessel which renders
tramping service and, as such, does not
transport cargo or shipment for the general
public.
Its services are available only to specific
persons who enter into a special contract of
charter party with its owner. It is undisputed
that the ship is a private carrier. And it is in the
capacity that its owner, Vlasons Shipping, Inc.,
entered into a contract of affreightment or
contract of voyage charter hire with National
Steel Corporation.
On July 17, 1974, plaintiff National Steel
Corporation (NSC) as Charterer and
defendant Vlasons Shipping, Inc. (VSI) as
Owner, entered into a Contract of Voyage
Charter Hire whereby NSC hired VSI's vessel,
the MV "VLASONS I" to make one (1)
voyage to load steel products at Iligan City
and discharge them at North Harbor,
Manila.
46
The vessel arrived with the cargo at Manila, on
August 12, 1974. The following day, when the
vessel's three (3) hatches containing the
shipment were opened by plaintiff's agents,
nearly all the skids of tinplates and hot rolled
sheets were allegedly found to be wet and
rusty. The cargo was discharged and
unloaded by stevedores hired by the Charterer.
On September 6, 1974, plaintiff filed with the
defendant its claim for damages suffered
due to the downgrading of the damaged
tinplates in the amount of P941,145.18. Then
plaintiff formally demanded payment of said
claim but defendant VSI refused and failed to
pay.
In its answer, defendant denied liability for the
alleged damage claiming that the MV
"VLASONS I" was seaworthy in all respects for
the carriage of plaintiff's cargo; that said
vessel was not a "common carrier"
inasmuch as she was under voyage charter
contract with the plaintiff as charterer under
the charter party; that in the course of the
voyage from Iligan City to Manila, the MV
"VLASONS I" encountered very rough seas,
strong winds and adverse weather
condition, causing strong winds and big
waves to continuously pound against the
vessel and seawater to overflow on its deck
and hatch covers, that under the Contract of
Voyage Charter Hire, defendant shall not be
responsible for losses/damages except on
proven willful negligence of the officers of the
vessel, that the officers of said MV "VLASONS
I" exercised due diligence and proper
seamanship and were not willfully negligent;
that furthermore the Voyage Charter Party
provides that loading and discharging of the
cargo was on FIOST terms which means that
the vessel was free of risk and expense in
connection with the loading and discharging of
the cargo; that the damage, if any, was due to
the inherent defect, quality or vice of the cargo
or to the insufficient packing thereof or to latent
defect of the cargo not discoverable by due
diligence or to any other cause arising without
the actual fault or privity of defendant and
without the fault of the agents or servants of
defendant; consequently, defendant is not
liable.
ISSUE:
Whether VSI contracted with NSC as a
common carrier or as a private carrier.
HELD: PRIVATE CARRIER
At the outset, it is essential to establish
whether VSI contracted with NSC as a
common carrier or as a private carrier. The
resolution of this preliminary question
determines the law, standard of diligence and
burden of proof applicable to the present case.
Article 1732 of the Civil Code defines a
common carrier as "persons, corporations,
firms or associations engaged in the business
of carrying or transporting passengers or
goods or both, by land, water, or air, for
compensation, offering their services to the
public."
It has been held that the true test of a
common carrier is the carriage of
passengers or goods, provided it has
space, for all who opt to avail themselves of
its transportation service for a fee.
A carrier which does not qualify under the
above test is deemed a private carrier.
Generally, private carriage is undertaken by
special agreement and the carrier does not
hold himself out to carry goods for the general
public.
In the instant case, it is undisputed that VSI
did not offer its services to the general
public. As found by the Regional Trial
Court, it carried passengers or goods only
for those it chose under a "special contract
of charter party." 
As correctly concluded by the Court of
Appeals, the MV Vlasons I "was not a common
but a private carrier." Consequently, the rights
and obligations of VSI and NSC, including their
47
respective liability for damage to the cargo, are
determined primarily by stipulations in their
contract of private carriage or charter party.
Extent of VSI's Responsibility and
Liability Over NSC's Cargo
It is clear from the parties' Contract of Voyage
Charter Hire, dated July 17, 1974, that VSI
"shall not be responsible for losses except on
proven willful negligence of the officers of the
vessel."
Burden of Proof
Code of Commerce provides:
Art. 361. Merchandise shall be transported at
the risk and venture of the shipper, if the
contrary has not been expressly stipulated.
Therefore, the damage and impairment
suffered by the goods during the
transportation, due to fortuitous event, force
majeure, or the nature and inherent defect of
the things, shall be for the account and risk of
the shipper.
The burden of proof of these accidents is
on the carrier.
Because the MV Vlasons I was a private
carrier, the shipowner's obligations are
governed by the foregoing provisions of the
Code of Commerce and not by the Civil
Code which, as a general rule, places
the prima facie presumption of negligence
on a common carrier.
In an action against a private carrier for loss of,
or injury to, cargo, the burden is on the plaintiff
to prove that the carrier was negligent or
unseaworthy, and the fact that the goods were
lost or damaged while in the carrier's custody
does not put the burden of proof on the carrier.
Since . . . a private carrier is not an insurer
but undertakes only to exercise due care in
the protection of the goods committed to its
care, the burden of proving negligence or a
breach of that duty rests on plaintiff and
proof of loss of, or damage to, cargo while
in the carrier's possession does not cast on
it the burden of proving proper care and
diligence on its part or that the loss
occurred from an excepted cause in the
contract or bill of lading.
However, in discharging the burden of proof,
plaintiff is entitled to the benefit of the
presumptions and inferences by which the
law aids the bailor in an action against a
bailee, and since the carrier is in a better
position to know the cause of the loss and
that it was not one involving its liability, the
law requires that it come forward with the
information available to it, and its failure to
do so warrants an inference or presumption
of its liability. However, such inferences and
presumptions, while they may affect the burden
of coming forward with evidence, do not alter
the burden of proof which remains on plaintiff,
and, where the carrier comes forward with
evidence explaining the loss or damage, the
burden of going forward with the evidence is
again on plaintiff.
Where the action is based on the
shipowner's warranty of seaworthiness, the
burden of proving a breach thereof and that
such breach was the proximate cause of
the damage rests on plaintiff, and proof that
the goods were lost or damaged while in the
carrier's possession does not cast on it the
burden of proving seaworthiness. . . . Where
the contract of carriage exempts the carrier
from liability for unseaworthiness not
discoverable by due diligence, the carrier has
the preliminary burden of proving the exercise
of due diligence to make the vessel seaworthy.
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI
exercised due diligence to make the ship
seaworthy and fit for the carriage of NSC's
cargo of steel and tinplates. This is shown by
the fact that it was drylocked and inspected by
the Philippine Coast Guard before it proceeded
to Iligan City for its voyage to Manila under the
contract of voyage charter hire. 24 The vessel's
48
voyage from Iligan to Manila was the
vessel'sfirst voyage after drydocking. The
Philippine Coast Guard Station in Cebu cleared
it as seaworthy, fitted and equipped; it met all
requirements for trading as cargo vessel.
WHEREFORE, premises considered, the
instant consolidated petitions are hereby
DENIED.
Start ng online recit
VALENZUELA HARDWOOD AND
INDUSTRIAL SUPPLY INC., petitioner,  liability under the policy.
vs.
COURT OF APPEALS AND SEVEN
BROTHERS SHIPPING
CORPORATION, respondents.
Facts:
On 16 January 1984, plaintiff (Valenzuela
Hardwood and Industrial Supply, Inc.) entered
into an agreement with the defendant Seven
Brothers (Shipping Corporation) whereby
the latter undertook to load on board its
vessel M/V Seven Ambassador the former's
lauan round logs numbering 940 at the port
of Maconacon, Isabela for shipment to
Manila.
plaintiff insured the logs against loss
and/or damage with defendant South Sea
Surety and Insurance Co., Inc. for
P2,000,000.00 and the latter issued its Marine
Cargo Insurance Policy
the said vessel M/V Seven Ambassador sank
on 25 January 1984 resulting in the loss of
the plaintiff's insured logs. The proximate
cause of the sinking of M/V Seven
Ambassadorsresulting in the loss of its cargo
was the "snapping of the iron chains and
the subsequent rolling of the logs to the
portside due to the negligence of the
captain in stowing and securing the logs on
board the vessel and not due to fortuitous
event." 
On 30 January 1984, a check for P5,625.00
(Exh. "E") to cover payment of the premium
and documentary stamps due on the policy
was tendered due to the insurer but was not
accepted. Instead, the South Sea Surety and
Insurance Co., Inc. cancelled the insurance
policy it issued as of the date of the
inception for non-payment of the premium
due in accordance with Section 77 of the
Insurance Code.
plaintiff demanded from defendant South Sea
Surety and Insurance Co., Inc. the payment of
the proceeds of the policy but the latter denied
the court a quorendered judgment in favor of
plaintiff and against defendants. Both
defendants shipping corporation and the surety
company appealed.
The lower court declared that the non-liability
clause of the Seven Brothers Shipping
Corporation from logs (sic) of the cargo
stipulated in the charter party is void for being
contrary to public policy invoking article 1745 of
the New Civil Code.
The Court of Appeals affirmed in part the RTC
judgment by sustaining the liability of South
Sea Surety and Insurance Company ("South
Sea"), but modified it by holding that Seven
Brothers Shipping Corporation ("Seven
Brothers") was not liable for the lost cargo.
ISSUE: whether defendants shipping
corporation and the surety company are
liable to the plaintiff for the latter's lost
logs.
HELD: NO
It is undisputed that private respondent had
acted as a private carrier in transporting
petitioner's lauan logs. Thus, Article 1745
and other Civil Code provisions on
common carriers which were cited by
petitioner may not be applied unless
expressly stipulated by the parties in their
charter party. 
49
In a contract of private carriage, the parties
may validly stipulate that responsibility for
the cargo rests solely on the charterer,
exempting the shipowner from liability for
loss of or damage to the cargo caused even
by the negligence of the ship captain.
Pursuant to Article 1306 17 of the Civil Code,
such 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. Indeed, their contract of
private carriage is not even a contract of
adhesion.
We stress that in a contract of private carriage,
the parties may freely stipulate their duties and
obligations which perforce would be binding on
them. Unlike in a contract involving a common
carrier, private carriage does not involve the
general public.
Hence, the stringent provisions of the Civil
Code on common carriers protecting the
general public cannot justifiably be applied to a
ship transporting commercial goods as a
private carrier. Consequently, the public policy
embodied therein is not contravened by
stipulations in a charter party that lessen or
remove the protection given by law in contracts
involving common carriers.
A common carrier undertaking to carry a
special cargo or chartered to a special person
only, becomes a private carrier. As a private
carrier, a stipulation exempting the owner from
liability for the negligence of its agent is not
against public policy, and is deemed valid.
The Civil Code provisions on common carriers
should not be applied where the carrier is not
acting as such but as a private carrier. The
stipulation in the charter party absolving the
owner from liability for loss due to the
negligence of its agent would be void if the
strict public policy governing common carriers
is applied. Such policy has no force where the
public at large is not involved, as in this case of
a ship totally chartered for the used of a single
party.
REASON: The general public enters into a
contract of transportation with common carriers
without a hand or a voice in the preparation
thereof. The riding public merely adheres to the
contract; even if the public wants to, it cannot
submit its own stipulations for the approval of
the common carrier. Thus, the law on common
carriers extends its protective mantle against
one-sided stipulations inserted in tickets,
invoices or other documents over which the
riding public has no understanding or, worse,
no choice.
Articles 586 and 587, Code of Commerce
WON the charter party stipulation is contrary to
Articles 586 and 587 of the Code of Commerce
which confer on petitioner the right to recover
damages from the shipowner and ship agent
for the acts or conduct of the captain.
NO. Whatever rights petitioner may have under
the aforementioned statutory provisions were
waived when it entered into the charter party.
Article 6 of the Civil Code provides that "(r)ights
may be waived, unless the waiver is contrary to
law, public order, public policy, morals, or good
customs, or prejudicial to a person with a right
recognized by law." As a general rule,
patrimonial rights may be waived as opposed
to rights to personality and family rights which
may not be made the subject of waiver. 
This, the petitioner did by acceding to the
contractual stipulation that it is solely
responsible or any damage to the cargo,
thereby exempting the private carrier from any
responsibility for loss or damage thereto.
WHEREFORE, premises considered, the
petition is hereby DENIED for its utter failure to
show any reversible error on the part of
Respondent Court.
50

LAW APPLICABLE
Article 1766. In all matters not regulated by
this Code, the rights and obligations of
common carriers shall be governed by the
Code of Commerce and by special laws.
Article 1753. The law of the country to
which the goods are to be transported shall
govern the liability of the common carrier
for their loss, destruction or deterioration.
G.R. No. L-49407 August 19, 1988
NATIONAL DEVELOPMENT
COMPANY, petitioner-appellant,  P344,977.86 which amount, the plaintiff as
vs.
THE COURT OF APPEALS and
DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents-appellees.
FACTS:
in accordance with a memorandum agreement
entered into between defendants NDC
NATIONAL DEVELOPMENT COMPANY and
MCP MARITIME COMPANY OF THE
PHILIPPINES on September 13, 1962,
defendant NDC as the first preferred
mortgagee of three ocean going vessels
including one with the name 'Dona Nati'
appointed defendant MCP as its agent to
manage and operate said vessel for and in its
behalf.
Thus, on February 28, 1964 the E. Philipp
Corporation of New York loaded on board the
vessel "Dona Nati" at San Francisco,
California, a total of 1,200 bales of
American raw cotton consigned to the
order of Manila Banking Corporation,
Manila and the People's Bank and Trust
Company acting for and in behalf of the Pan
Asiatic Commercial Company, Inc., who
represents Riverside Mills.
Also loaded on the same vessel at Tokyo,
Japan, were the cargo of Kyokuto Boekui,
Kaisa, Ltd., consigned to the order of
Manila Banking Corporation consisting of
200 cartons of sodium lauryl sulfate and 10
cases of aluminum foil.
En route to Manila the vessel Dofia Nati figured
in a collision at 6:04 a.m. on April 15, 1964
at Ise Bay, Japan with a Japanese vessel
'SS Yasushima Maru' as a result of which
550 bales of aforesaid cargo of American
raw cotton were lost and/or destroyed, of
which 535 bales as damaged were landed and
sold on the authority of the General Average
Surveyor for Yen 6,045,-500 and 15 bales
were not landed and deemed lost.
The damaged and lost cargoes was worth
insurer, paid to the Riverside Mills Corporation
as holder of the negotiable bills of lading duly
endorsed.
Also considered totally lost were the
aforesaid shipment of Kyokuto, Boekui
Kaisa Ltd., consigned to the order of Manila
Banking Corporation, Manila, acting for
Guilcon, Manila, The total loss was
P19,938.00 which the plaintiff as insurer paid
to Guilcon as holder of the duly endorsed bill of
lading
Thus, the plaintiff had paid as insurer the total
amount of P364,915.86 to the consignees or
their successors-in-interest, for the said lost or
damaged cargoes. Hence, plaintiff filed this
complaint to recover said amount from the
defendants-NDC and MCP as owner and ship
agent respectively, of the said 'Dofia Nati'
vessel.
On April 22, 1965, the Development Insurance
and Surety Corporation filed before the then
Court of First Instance of Manila an action
for the recovery of the sum of P364,915.86
plus attorney's fees of P10,000.00 against
NDC and MCP.
the trial court rendered a decision ordering the
defendants MCP and NDC to pay jointly and
solidarity to DISC the sum of P364,915.86 plus
51
the legal rate of interest to be computed from
the filing of the complaint on April 22, 1965,
until fully paid/
On November 17,1978, the Court of Appeals
promulgated its decision affirming in toto the
decision of the trial court.
Hence these appeals by certiorari.
The main thrust of NDC's argument is to the
effect that the Carriage of Goods by Sea Act
should apply to the case at bar and not the
Civil Code or the Code of Commerce.
Under Section 4 (2) of said Act, the carrier is
not responsible for the loss or damage
resulting from the "act, neglect or default of the
master, mariner, pilot or the servants of the
carrier in the navigation or in the management
of the ship."
Thus, NDC insists that based on the findings of
the trial court which were adopted by the Court
of Appeals, both pilots of the colliding vessels
were at fault and negligent, NDC would have
been relieved of liability under the Carriage of
Goods by Sea Act. Instead, Article 287 of the
Code of Commerce was applied and both NDC
and MCP were ordered to reimburse the
insurance company for the amount the latter
paid to the consignee as earlier stated.
Issue: WON it is the COSGA that should be
applied?
HELD: NO
This issue has already been laid to rest by this
Court of Eastern Shipping Lines Inc. v. IAC
where it was held under similar circumstance
"that the law of the country to which the
goods are to be transported governs the
liability of the common carrier in case of
their loss, destruction or deterioration"
(Article 1753, Civil Code).
Thus, the rule was specifically laid down that
for cargoes transported from Japan to the
Philippines, the liability of the carrier is
governed primarily by the Civil Code and in
all matters not regulated by said Code, the
rights and obligations of common carrier
shall be governed by the Code of
commerce and by laws (Article 1766, Civil
Code).
Hence, the Carriage of Goods by Sea Act, a
special law, is merely suppletory to the
provision of the Civil Code.
In the case at bar, it has been established that
the goods in question are transported from San
Francisco, California and Tokyo, Japan to the
Philippines and that they were lost or due to a
collision which was found to have been caused
by the negligence or fault of both captains of
the colliding vessels. Under the above ruling,
it is evident that the laws of the Philippines
will apply, and it is immaterial that the
collision actually occurred in foreign
waters, such as Ise Bay, Japan.
PRESUMED NEGLIGENT
Under Article 1733 of 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 and for the safety of the
passengers transported by them according to
all circumstances of each case. Accordingly,
under Article 1735 of the same Code, in all
other than those mentioned is Article 1734
thereof, the common carrier shall be
presumed to have been at fault or to have
acted negigently, unless it proves that it
has observed the extraordinary diligence
required by law.
WON MCP is SOLIDARILY LIABLE:
MCP next contends that it can not be liable
solidarity with NDC because it is merely the
manager and operator of the vessel Dona Nati
not a ship agent.
As the general managing agent, according to
MCP, it can only be liable if it acted in excess
of its authority.
It is well settled that both the owner and
agent of the offending vessel are liable for
52
the damage done where both are impleaded
that in case of collision, both the owner and
the agent are civilly responsible for the acts
of the captain.
While it is true that the liability of the naviero in
the sense of charterer or agent, is not
expressly provided in Article 826 of the Code of
Commerce, it is clearly deducible from the
general doctrine of jurisprudence under the
Civil Code but more specially as regards
contractual obligations in Article 586 of the
Code of Commerce.
Moreover, the Court held that both the owner
and agent (Naviero) should be declared jointly
and severally liable, since the obligation which
is the subject of the action had its origin in a
tortious act and did not arise from contract.
Consequently, the agent, even though he may
not be the owner of the vessel, is liable to the
shippers and owners of the cargo transported
by it, for losses and damages occasioned to
such cargo, without prejudice, however, to his
rights against the owner of the ship, to the
extent of the value of the vessel, its equipment,
and the freight.
PREMISES CONSIDERED, the subject
petitions are DENIED for lack of merit
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC.,
petitioner,
vs.
INTERMEDIATE APPELLATE COURT and
DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents.
Facts:
In G.R. No. 69044, sometime in or prior to
June, 1977, the M/S ASIATICA, a vessel
operated by petitioner Eastern Shipping
Lines, Inc., (referred to hereinafter as
Petitioner Carrier) loaded at Kobe, Japan
for transportation to Manila, 5,000 pieces of
calorized lance pipes in 28 packages
consigned to Philippine Blooming Mills Co.,
Inc., and cases of spare parts, consigned to
Central Textile Mills, Inc. Both sets of goods
were insured against marine risk for their
stated value with respondent Development
Insurance and Surety Corporation.
During the same period, the same vessel
took on board 128 cartons of garment
fabrics and accessories, in two (2)
containers, consigned to Mariveles Apparel
Corporation, and two cases of surveying
instruments consigned to Aman Enterprises
and General Merchandise. The 128 cartons
were insured for their stated value by
respondent Nisshin Fire & Marine Insurance
Co.
Enroute for Kobe, Japan, to Manila, the
vessel caught fire and sank, resulting in the
total loss of ship and cargo.
The cargoes in question were, according to the
witnesses defendant placed in hatches No, 2
and 3 cf the vessel, Boatswain Ernesto
Pastrana noticed that smoke was coming out
from hatch No. 2 and hatch No. 3; that where
the smoke was noticed, the fire was already
big; that the fire must have started twenty-four
24) our the same was noticed; that carbon
dioxide was ordered released and the crew
was ordered to open the hatch covers of No, 2
tor commencement of fire fighting by sea
water: that all of these effort were not enough
to control the fire.
The respective respondent Insurers paid
the corresponding marine insurance values
to the consignees concerned and were thus
subrogated unto the rights of the latter as
the insured.
On May 11, 1978, respondent Development
Insurance & Surety Corporation (Development
Insurance, for short), having been subrogated
unto the rights of the two insured companies,
filed suit against petitioner Carrier for the
recovery of the amounts it had paid to the
insured before the then Court of First
instance of Manila.
53
Petitioner-Carrier denied liability mainly on
the ground that the loss was due to an
extraordinary fortuitous event, hence, it is
not liable under the law.
On August 31, 1979, the Trial Court rendered
judgment in favor of Development Insurance
Petitioner Carrier took an appeal to the then
Court of Appeals which, on August 14, 1984,
affirmed.
Petitioner Carrier is now before us on a Petition
for Review on Certiorari.
Petitioner Carrier denied liability on the
principal 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:
which law should govern — the Civil Code
provisions on Common carriers or the
Carriage of Goods by Sea Act?
The law of the country to which the goods
are to be transported governs the liability of
the common carrier in case of their loss,
destruction or deterioration.
As the cargoes in question were transported
from Japan to the Philippines, the liability of
Petitioner Carrier is governed primarily by the
Civil Code. 5 However, in all matters not
regulated by said Code, the rights and
obligations of common carrier shall be
governed by the Code of Commerce and by
special laws. 6 Thus, the Carriage of Goods by
Sea Act, a special law, is suppletory to the
provisions of the Civil Code.
Who has the burden of proof to show
negligence of the carrier?
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. 8Common carriers are responsible
for the loss, destruction, or deterioration of the
goods unless the same is due to any of the
following causes only:
(1) Flood, storm, earthquake, lightning or other
natural disaster or calamity;
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. This must be so as it arises almost
invariably from some act of man or by human
means.  It does not fall within the category of
an act of God unless caused by lightning or by
other natural disaster or calamity.  It may even
be caused by the actual fault or privity of the
carrier. 
Article 1680 of the Civil Code, which considers
fire as an extraordinary fortuitous event refers
to leases of rural lands where a reduction of
the rent is allowed when more than one-half of
the fruits have been lost due to such event,
considering that the law adopts a protection
policy towards agriculture. 
As the peril of the fire is not comprehended
within the exception in Article
1734, supra, Article 1735 of the Civil Code
provides that all cases than those mention in
Article 1734, the common carrier shall be
presumed to have been at fault or to have
acted negligently, unless it proves that it has
observed the extraordinary deligence required
by law.
In this case, the respective Insurers. as
subrogees of the cargo shippers, have
proven that the transported goods have
been lost. Petitioner Carrier has also
proved that the loss was caused by fire.
The burden then is upon Petitioner Carrier
to proved that it has exercised the
extraordinary diligence required by law.
54
Pursuant to Article 1733, common carriers are
bound to extraordinary diligence in the
vigilance over the goods. The evidence of the
defendant did not show that extraordinary
vigilance was observed by the vessel to
prevent the occurrence of fire What appears is
that after the cargoes were stored in the
hatches, no regular inspection was made as to
their condition during the voyage.
Consequently, the crew could not have
even explain what could have caused the
fire. The defendant, in the Court's mind,
failed to satisfactorily show that
extraordinary vigilance and care had been
made by the crew to prevent the occurrence
of the fire.
Having failed to discharge the burden of
proving that it had exercised the extraordinary
diligence required by law, Petitioner Carrier
cannot escape liability for the loss of the cargo.
G.R. No. 156330               November 19, 2014
NEDLLOYD LIJNEN B.V. ROTTERDAM and
THE EAST ASIATIC CO., LTD., Petitioners,  unauthorized persons managed to forge the
vs.
GLOW LAKS ENTERPRISES,
LTD., Respondent.
Facts:
Petitioner Nedlloyd Lijnen B.V. Rotterdam
(Nedlloyd) is a foreign corporation engaged in
the business of carrying goods by sea, whose
vessels regularly call at the port of Manila. It is
doing business in the Philippines thru its local
ship agent, co-petitioner East Asiatic Co., Ltd.
Respondent Glow Laks Enterprises,Ltd., is
likewise a foreign corporation organized and
existing under the laws of Hong Kong. It is not
licensed to do, and it is not doing business in,
the Philippines.
On or about 14 September 1987,
respondent loaded on board M/S Scandutch
at the Port of Manila a total 343 cartoons of
garments, complete and in good order for
pre-carriage tothe Port of Hong Kong.
The goods covered by Bills of Lading arrived in
good condition in Hong Kong and were
transferred to M/S Amethyst for final
carriage to Colon, Free Zone, Panama.
Both vessels, M/S Scandutch and M/S
Amethyst, are owned by Nedlloyd
represented in the Phlippines by its agent,
East Asiatic.
The goods which were valued at
US$53,640.00 was agreed to be released to
the consignee, Pierre Kasem, International,
S.A., upon presentation of the original copies
of the covering bills of lading.5
Upon arrival of the vessel at the Port of Colon
on 23 October 1987, petitioners notified the
consignee of the arrival of the shipments, and
its custody was turned over to the National
Ports Authority in accordance with the laws,
customs regulations and practice of trade in
Panama.
By an unfortunate turn of events, however,
covering bills of lading and on the basis of
the falsified documents, the ports authority
released the goods.
Respondent filed a formal claim with Nedlloyd
for the recovery of the amount of
US$53,640.00 representing the invoice value
of the shipment but to no avail.6 
Claiming that petitioners are liable for the
misdelivery of the goods, respondent initiated
Civil Case No. 88-45595 before the Regional
Trial Court (RTC) of Manila, Branch 52,
seeking for the recovery of the amount of
US$53,640.00, including the legal interest from
the date of the first demand.7
In disclaiming liability for the misdelivery of the
shipments, petitioners asserted in their Answer
that they were never remiss in their obligation
as a common carrier and the goods were
discharged in good order and condition into the
55
custody of the National Ports Authority of
Panama in accordance with the Panamanian
law.
They averred that they cannot be faulted for
the release of the goods to unauthorized
persons, their extraordinary responsibility as a
common carrier having ceased at the time the
possession of the goods were turned over to
the possession of the port authorities.
In releasing the common carrier from liability
for the misdelivery of the goods, the RTC ruled
that Panama law was duly proven during the
trial and pursuant to the said statute, carriers of
goods destined to any Panama port of entry
have to discharge their loads into the custody
of Panama Ports Authority to make effective
government collection of port dues, customs
duties and taxes. The subsequent withdrawal
effected by unauthorized persons on the
strength of falsified bills of lading does not
constitute misdelivery arising from the fault of
the common carrier.
On appeal, the Court of Appeals reversed the
findings of the RTC.
TOPIC ISSUE:
WON THE PANAMA LAW CAN BE APPLIED
IN THIS CASE?
HELD: NO
It is well settled that foreign laws do not prove
themselves in our jurisdiction and our courts
are not authorized to take judicial notice of
them.
Like any other fact, they must be alleged and
proved.
Contrary to the contention of the
petitioners, the Panamanian laws,
particularly Law 42 and its Implementing
Order No. 7, were not duly proven in
accordance with Rules of Evidence and as
such, it cannot govern the rights and
obligations of the parties in the case at bar.
While a photocopy of the Gaceta Official of
the Republica de Panama No. 17.596, the
Spanish text of Law 42 which is theforeign
statute relied upon by the court a quoto
relieve the common carrier from liability,
was presented as evidence during the trial
of the case below, the same however was
not accompanied by the required
attestation and certification.
To prove a foreign law, the party invoking it
must present a copy thereof and comply with
Sections 24 and 25 of Rule 132 of the Revised
Rules of Court14 which read: SEC. 24. Proof of
official record. — The record of public
documents referred to in paragraph (a) of
Section 19, when admissible for any purpose,
may be evidenced by an official publication
thereof or by a copy attested by the officer
having the legal custody of the record, or by his
deputy, and accompanied, if the record is not
kept in the Philippines, with a certificate that
such officer has the custody . If the office in
which the record is kept is in a foreign country,
the certificate may be made by a secretary of
the embassy or legation, consul general,
consul, vice- consul, or consular agent or by
any officer in the foreign service of the
Philippines stationed in the foreign country in
which the record is kept, and authenticated by
the seal of his office.
For a copy of a foreign public document to
be admissible, the following requisites are
mandatory: (1) it must be attested by the
officer having legal custody of the records
or by his deputy; and (2) it must be
accompanied by a certificate by a secretary
of the embassy or legation, consul general,
consul, vice-consular or consular agent or
foreign service officer, and with the seal of
his office.15 Such official publication or copy
must be accompanied, if the record is not kept
in the Philippines, with a certificate that the
attesting officer has the legal custody thereof.
PROCESSUAL PRESUMPTION
It is worth reiterating at this point that
under the rules of private international law,
a foreign law must be properly pleaded and
56
proved as a fact. In the absence of pleading
and proof, the laws of the foreign country
or state will be presumed to be the same as
our local or domestic law. This is known as
processual presumption.22 While the foreign
law was properly pleaded in the case at bar, it
was,however, proven not in the manner
provided by Section 24, Rule 132 of the
Revised Rules of Court. The decision of the
RTC, which proceeds from a disregard of
specific rules cannot be recognized.
It is explicitly required by Section 24, Rule 132
of the Revised Rules of Court that a copy of
the statute must be accompanied by a
certificate of the officer who has legal custody
of the records and a certificate made by the
secretary of the embassy or legation, consul
general, consul, vice-consular or by any officer
in the foreign service of the Philippines
stationed in the foreign country, and
authenticated by the seal of his office.
WHETHER OR NOT PETITIONERS ARE
LIABLE FOR THE MISDELIVERY OF GOODS
UNDER PHILIPPINE LAWS. YES
Petitioners concede that, as a common carrier,
they are bound to observe extraordinary
diligence in the care and custody of the goods
in their possession, they insist that they cannot
be held liable for the loss of the shipments,
their extraordinary responsibility having ceased
at the time the goods were discharged into the
custody of the customs arrastreoperator, who
in turn took complete responsibility over the
care, storage and delivery of the cargoes.
The fact that the shipments were not delivered
to the consignee as stated in the bill of lading
or to the party designated or named by the
consignee, constitutes misdelivery thereof, and
under the law it is presumed that the common
carrier is at fault or negligent if the goods they
transported, as in this case, fell into the hands
of persons who have no right to receive them.
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.
Responsibility remains in full force and
effect even when they are temporarily
unloaded or stored in transit, unless the
shipper or owner exercises the right of stop
page in transitu, and terminates only after
the lapse of a reasonable time for the
acceptance, of the goods by the consignee
or such other person entitled to receive
them.
In this case, there is no dispute that the
custody of the goods was never turned over to
the consignee or his agents but was lost into
the hands of unauthorized persons who
secured possession thereof on the strength of
falsified documents. The loss or the
misdelivery of the goods in the instant case
gave rise to the presumption that the common
carrier is at fault or negligent.
When the goods shipped are either lost or
arrived in damaged condition, a presumption
arises against the carrier of its failure to
observe that diligence, and there need not be
an express finding of negligence to hold it
liable.
In the present case, petitioners failed to prove
that they did exercise the degree of diligence
required by law over the goods they
transported.
DELIVERY TO CUSTOMS AUTHORITY
57
Nothing in the New Civil Code, however,
suggests, even remotely, that the common
carriers’ responsibility over the goods
ceased upon delivery thereof to the custom
authorities. To the mind of this Court, the
contract of carriage remains in full force and
effect even after the delivery of the goods to
the port authorities; the only delivery that
releases it from their obligation to observe
extraordinary care is the delivery to the
consignee or his agents.
WHEREFORE, premises considered, the
petition is hereby DENIED.
B. Common Carriage of Goods
i) Liability and Presumption of
Negligence - Arts. 1733, 1734, 1735
G.R. No. L-15652 December 14, 1920
THE YNCHAUSTI STEAMSHIP
COMPANY, petitioner,
vs.
I. B. DEXTER, as Auditor of the Philippine
Islands, and C. E. UNSON, as Acting
Purchasing Agent of the Philippine
Islands, respondents
Petitioner was engaged in transporting for the
Government two distinct consignments of a
merchandise, consisting of thirty (30) cases
of "White Rose" mineral oil and of ninety-
six cases of "Cock" Brand mineral oil from
the port of Manila to the port of Aparri,
Cagayan on board the steamship Venus.
The goods were delivered by the shipper to the
carrier evidenced by a Government bill of
lading. However, upon the delivery of the
said shipment of "Cock" brand oil and of
"White Rose," brand oil, one case each was
delivered empty.
Petitioner denied any liability but Insular
Auditor found and decided that the
leakages of the two whole cases were due
to its negligence and that the deduction of
the sum of P22.53, the invoice value of the
goods lost, has been authorized. Petitioner
thereupon protested against the threatened
deduction, and demanded that it be paid the
full amount due but to no avail.
A petition for a writ of mandamus was filed in
this court to compel the Purchasing Agent of
the Philippine Islands and the Insular Auditor to
sign, countersign, and deliver to the petitioner
a warrant upon the Treasurer of the Philippine
Islands for the sum of P82.79 for freight earned
as a common carrier.
ISSUE:
W/N the petitioner may compel payment from
the Government in the instant case
HELD:
NO.
The Administrative Code provides that
when Government property is transmitted
from one place to another by carrier, it shall
be upon proper bill of lading, or receipt,
from such carrier, and it shall be the duty of
the consignee, or his representative, to
make full notation of any evidence of loss,
shortage, or damage before accomplishing
it. The notation of these losses by the
consignee is competent evidence to show that
the shortage in fact existed. As the petitioner
admits that the oil was received by it for
carriage and inasmuch as the fact of loss is
proved in the manner just stated, it results
that there is a presumption that the
petitioner was to blame for the loss; and it
was incumbent upon the petitioner in order
to entitle it to relief in the case to rebut that
presumption by proving, as is alleged in the
58
petition, that the loss was not due to any
fault or negligence of the petitioner.
The mere proof of delivery of goods in good
order to a carrier, and of their arrival at the
place of destination in bad order, makes out
a  prima facie case against the carrier, so
that if no explanation is given as to how the
injury occurred, the carrier must be held
responsible.
From this it is apparent that
the mandamus prayed for cannot be granted.
The SC is of the opinion that, in the absence of
proof showing that the carrier was not at fault
in respect to the matter under discussion, the
Insular Auditor was entitled to withhold, from
the amount admittedly due to the petitioner for
the freight charges, a sum sufficient to cover
the value of the oil lost in transit.
G.R. No. L-29721             March 27, 1929
AMANDO MIRASOL, plaintiff-appellant,
vs.
THE ROBERT DOLLAR CO., defendant-
appellant.
Plaintiff alleges that he is the owner and
consignee of two cases of books, shipped
in good order and condition at New York,
U.S.A., on board the defendant's
steamship President Garfield, for transport
and delivery to the plaintiff in the City of
Manila. The two cases arrived in Manila in bad
order and damaged condition, resulting in the
total loss of one case and a partial loss of the
other..
The plaintiff filed a claim with legal interest
but the defendant refused to pay giving as
its reason that the damage in question "was
caused by sea water” and not by the
unseaworthiness of its vessel nor the
negligence of its master, agent, officers, or
crew; that it was agreed in writing that
defendant should not be "held liable for any
loss of, or damage to, any of said merchandise
resulting from Acts of God, perils of the sea or
other waters," and that plaintiff's damage, if
any, was caused by "Acts of God" or "perils of
the sea.". The lower court rendered judgment
for the plaintiff for P2,080, with legal interest
from which both parties appealed.
ISSUE:
W/N the defendant must be held liable
HELD:
YES.
The defendant having received the two boxes
in good condition, its legal duty was to deliver
them to the plaintiff in the same condition in
which it received them. The defendant having
admitted that the boxes were damaged while in
transit and in its possession, the burden of
proof then shifted, and it devolved upon the
defendant to both allege and prove that the
damage was caused by reason of some fact
which exempted it from liability. The
defendant has not even attempted to prove
that the two cases were wet with sea water
by fictitious event, force majeure or nature
and defect of the things themselves.
Consequently, it must be presumed that it was
by causes entirely distinct and in no manner
imputable to the plaintiff, and of which the
steamer President Garfield or any of its crew
could not have been entirely unaware.
The evidence for the defendant shows that
the damage was largely caused by "sea
water.” The fact that the cases were
damaged by "sea water," standing alone
and within itself, is not evidence that they
59
were damaged by force majeure or for a
cause beyond the defendant's control. The
words "perils of the sea," as stated in
defendant's brief apply to "all kinds of marine
casualties, such as shipwreck, foundering,
stranding," and among other things, it is said:
"Tempest, rocks, shoals, icebergs and other
obstacles are within the expression," and
"where the peril is the proximate cause of the
loss, the shipowner is excused." "Something
fortuitous and out of the ordinary course is
involved in both words 'peril' or 'accident'."
Moreover, article 361 of the Code of
Commerce provides that:
Merchandise shall be transported at the
risk and venture of the shipper, if the
contrary was not expressly stipulated.
Therefore, all damages and impairment
suffered by the goods during the
transportation, by reason of accident, force
majeure, or by virtue of the nature or defect of
the articles, shall be for the account and risk of
the shipper.
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO
CENDANA, respondents.
Respondent Ernesto Cendana, a junk dealer,
was engaged in buying up used bottles and
scrap metal in Pangasinan. He owned 2 trucks.
Sometime in November 1970, petitioner Pedro
de Guzman a merchant and authorized dealer
of General Milk Company (Philippines), Inc. in
Urdaneta, Pangasinan, contracted with
respondent for the hauling of 750 cartons of
Liberty filled milk from a warehouse of General
Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta. Respondent loaded
in Makati the merchandise on to his trucks: 150
cartons - (truck driven by Pedro) & 600 cartons
- (truck driven by employee of Pedro).
Only 150 boxes of Liberty filled milk were
delivered to petitioner. The other 600 boxes
never reached petitioner, since the truck which
carried these boxes was hijacked somewhere
along the MacArthur Highway in Paniqui,
Tarlac, by armed men.
Petitioner filed an action against private
respondent in the Court of First Instance of
Pangasinan, demanding payment of P
22,150.00, the claimed value of the lost
merchandise, plus damages and attorney's
fees - that private respondent, being a common
carrier, and having failed to exercise the
extraordinary diligence required of him by the
law, should be held liable for the value of the
undelivered goods. Private respondent denied
that he was a common carrier and argued that
he could not be held responsible for the value
of the lost goods, such loss having been due
to force majeure.
The trial court rendered a Decision 1 finding
private respondent to be a common carrier and
holding him liable. The Court of Appeals
reversed the judgment of the trial court and
held that respondent had been engaged in
transporting return loads of freight "as a casual
occupation — a sideline to his scrap iron
business" and not as a common carrier.
ISSUE:
1. W/N private respondent is a common carrier
2. Corollarily, W/N above-mentioned is liable
HELD:
1. YES.
The Civil Code defines "common carriers" in
the following terms:
60
 Article 1732. Common carriers are
persons, corporations, firms or
associations engaged in the business of
carrying or transporting passengers or
goods or both, by land, water, or air for
compensation, offering their services to the
public.
The above article makes no distinction
between one whose principal business
activity is the carrying of persons or goods
or both, and one who does such carrying
only as an ancillary activity. Article 1732 also
carefully avoids making any distinction
between a person or enterprise offering
transportation service on a regular or
scheduled basis and one offering such service
on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish
between a carrier offering its services to the
"general public," and one who offers services
or solicits business only from a narrow
segment of the general population.
The concept of "common carrier" under Article
1732 may be seen to coincide neatly with the
notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as
amended).Under Section 13, paragraph (b) of
the Public Service Act, "public service"
includes:
... every person that now or hereafter may
own, operate, manage, or control in the
Philippines, for hire or compensation, with
general or limited clientele, whether
permanent, occasional or accidental,
and done for general business
purposes, any common carrier, railroad,
street railway, traction railway, subway
motor vehicle, either for freight or
passenger, or both…
It appears to the Court that private
respondent is properly characterized as a
common carrier even though he merely
"back-hauled" goods for other merchants from
Manila to Pangasinan, although such back-
hauling was done on a periodic or occasional
rather than regular or scheduled manner, and
even though private
respondent's principal occupation was not the
carriage of goods for others. There is no
dispute that private respondent charged his
customers a fee for hauling their goods; that
fee frequently fell below commercial freight
rates is not relevant here.
A certificate of public convenience is not a
requisite for the incurring of liability under
the Civil Code provisions governing
common carriers. That liability arises the
moment a person or firm acts as a common
carrier, without regard to whether or not such
carrier has also complied with the requirements
of the applicable regulatory statute and
implementing regulations and has been
granted a certificate of public convenience or
other franchise. Ruling otherwise would be
offensive to public policy - the business of a
common carrier impinges directly and
intimately upon the safety and well being and
property of those members of the general
community who happen to deal with such
carrier.
2. NO.
Common carriers, "by the nature of their
business and for reasons of public
policy" 2 are held to a very high degree of
care and diligence ("extraordinary
diligence") in the carriage of goods as well as
of passengers.
Article 1734 establishes the general rule that
common carriers are responsible for the loss,
destruction or deterioration of the goods which
they carry, "unless the same is due to any of
the following causes only:
(1) Flood, storm, earthquake, lightning or
other natural disaster or calamity;
61
 (2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner
of the goods;
(4) The character-of the goods or defects in
the packing or-in the containers; and
(5) Order or act of competent public
authority.
It is important to point out that the above list of
causes of loss, destruction or deterioration
which exempt the common carrier for
responsibility therefor, is a closed list. Causes
falling outside the foregoing list, even if they
appear to constitute a species of force majeure
fall within the scope of Article 1735, which
provides as follows:
In all cases other than those mentioned in
numbers 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.
Applying the above-quoted Articles 1734 and
1735, we note firstly that the specific cause
alleged in the instant case — the hijacking of
the carrier's truck — does not fall within
any of the five (5) categories of exempting
causes listed in Article 1734. It would
follow, therefore, that the hijacking of the
carrier's vehicle must be dealt with under
the provisions of Article 1735, in other
words, that the private respondent as
common carrier is presumed to have been
at fault or to have acted negligently. This
presumption, however, may be overthrown
by proof of extraordinary diligence on the
part of private respondent.
Under Article 1745 (6) above, a common
carrier is held responsible — and will not be
allowed to divest or to diminish such
responsibility — even for acts of strangers like
thieves or robbers, except where such
thieves or robbers in fact acted "with grave
or irresistible threat, violence or force." We
believe and so hold that the limits of the duty of
extraordinary diligence in the vigilance over the
goods carried are reached where the goods
are lost as a result of a robbery which is
attended by "grave or irresistible threat,
violence or force."
In these circumstances, we hold that the
occurrence of the loss must reasonably be
regarded as quite beyond the control of the
common carrier and properly regarded as a
fortuitous event. It is necessary to recall that
even common carriers are not made absolute
insurers against all risks of travel and of
transport of goods, and are not held liable for
acts or events which cannot be foreseen or are
inevitable, provided that they shall have
complied with the rigorous standard of
extraordinary diligence.
[G. R. No. 108897. October 2, 1997.]
SARKIES TOURS PHILIPPINES,
INC., Petitioner, v. HONORABLE COURT OF
APPEALS (TENTH DIVISION), DR. ELINO G.
FORTADES, MARISOL A. FORTADES and
FATIMA MINERVA A.
FORTADES, Respondents.
On 1984, Fatima boarded petitioner’s De Luxe
Bus No. 5 in Manila on her way to Legazpi
City. Her 3 luggages contain 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. Her belongings were kept in
the baggage compartment of the bus, but
during a stopover at Daet, it was discovered
that only one bag remained in the open
compartment. The others, including
62
Fatima’s things, were missing and might
have dropped along the way.
Fatima, thru her mother, immediately reported
the loss to the petitioner but the latter merely
offered P1,000.00 for each piece of luggage
lost, which she turned down. They sought the
assistance of the radio stations, from
Philtranco bus drivers who plied the same
route, and even the NBI and they recovered
one of the bags.Then, Respondents formally
demanded satisfaction of their complaint from
petitioner.
After more than nine months of fruitless
waiting, respondents decided to file the case
below to recover the value of the remaining lost
items - 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.
The court a quo adjudged the case in favor of
respondents, awarding P30,000.00 equivalent
to the value of the personal belongings of
plaintiff Fatima Minerva Fortades, etc. less the
value of one luggage recovered; transportation
expense; moral damages; exemplary
damages; and attys fees. The appellate court
affirmed the trial court’s judgment but deleted
the award of moral and exemplary damages,
so petitioner elevated its case to this Court for
a review.
ISSUE:
W/N petitioner, as a common carrier, is
responsible for their loss
HELD:
YES.
Under the Civil Code," (c)ommon 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," 6 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 to . . .
the person who has a right to receive them," 7
unless the loss is due to any of the excepted
causes under Article 1734 thereof.
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. It is
responsible for the consequent loss of the
baggage.
The Court agrees with the Court of Appeals in
awarding P30,000.00 for the lost items and
P30,000.00 for the transportation expenses,
but disagrees with the deletion of the award of
moral and exemplary damages which, in view
of the foregoing proven facts, with negligence
and bad faith on the fault of petitioner having
been duly established, should be granted to
respondents in the amount of P20,000.00 and
P5,000.00, respectively.
G.R. No. 114167 July 12, 1995
COASTWISE LIGHTERAGE
CORPORATION, petitioner,
vs.
COURT OF APPEALS and the PHILIPPINE
GENERAL INSURANCE
COMPANY, respondents.
Pag-asa Sales, Inc. entered into a contract to
transport molasses from the province of
Negros to Manila with Coastwise using the
63
latter's dumb barges. Upon reaching Manila
Bay, one of the barges, "Coastwise 9",
struck an unknown sunken object. The
compartment was damaged, and water gushed
in through a hole. As a consequence, the
molasses at the cargo tanks were
contaminated and rendered unfit for the use
it was intended. This prompted the consignee,
Pag-asa Sales, Inc. to reject the shipment of
molasses as a total loss. Thereafter, Pag-asa
Sales, Inc. filed a formal claim with the insurer
of its lost cargo, herein private respondent,
PhilGen and against the carrier, herein
petitioner, Coastwise which denied the
claim and it was PhilGen which paid the
consignee the value of the damaged cargo
of molasses (700k php).
In turn, PhilGen then filed an action against
Coastwise Lighterage before the Regional Trial
Court of Manila - claims to be subrogated to all
the contractual rights and claims which the
consignee may have against the carrier, which
is presumed to have violated the contract of
carriage.
The RTC awarded the amount prayed for by
PhilGen. CA affirmed. Hence, this petition.
ISSUE:
1. W/N petitioner Coastwise Lighterage was
transformed into a private carrier, by virtue
of the contract of affreightment which it
entered into with the consignee, Pag-asa
Sales, Inc.
2. Corollarily, did it exercise the required
diligence?
HELD:
1. NO.
The charter party contract is one of
affreightment over the whole vessel, rather
than a demise. As such, the liability of the
shipowner for acts or negligence of its captain
and crew, would remain in the absence of
stipulation.
Under the demise or bareboat charter of the
vessel, the charterer will generally be regarded
as the owner for the voyage or service
stipulated. The charterer mans the vessel with
his own people and becomes the owner pro
hac vice, subject to liability to others for
damages caused by negligence. To create a
demise, the owner of a vessel must completely
and exclusively relinquish possession,
command and navigation thereof to the
charterer, anything short of such a complete
transfer is a contract of affreightment (time or
voyage charter party) or not a charter party at
all.
On the other hand a contract of
affreightment is one in which the owner of the
vessel leases part or all of its space to haul
goods for others. It is a contract for special
service to be rendered by the owner of the
vessel and under such contract the general
owner retains the possession, command and
navigation of the ship, the charterer or freighter
merely having use of the space in the vessel in
return for his payment of the charter hire
An owner who retains possession of the
ship though the hold is the property of the
charterer, remains liable as carrier and
must answer for any breach of duty as to
the care, loading and unloading of the
cargo. Although a charter party may
transform a common carrier into a private
one, the same however is not true in a
contract of affreightment on account of the
aforementioned distinctions between the
two.
64
Pag-asa Sales, Inc. only leased three of that a person without license to navigate,
petitioner's vessels, in order to carry cargo lacks not just the skill to do so, but also the
from one point to another, but the possession, utmost familiarity with the usual and safe
command and navigation of the vessels routes taken by seasoned and legally
remained with petitioner Coastwise, the authorized ones.
contract therefore is one of affreightment.
Coastwise Lighterage, by the contract of As a common carrier, petitioner is liable for
breach of the contract of carriage, having
affreightment, was not converted into a
failed to overcome the presumption of
private carrier, but remained a common
negligence with the loss and destruction of
carrier and was still liable as such. The law goods it transported, by proof of its
and jurisprudence on common carriers both exercise of extraordinary diligence.
hold that the mere proof of delivery of goods in
good order to a carrier and the subsequent G.R. No. 177116               February 27, 2013
arrival of the same goods at the place of
destination in bad order makes for a prima ASIAN TERMINALS, INC., Petitioner,
facie case against the carrier. It follows then vs.
that the presumption of negligence that SIMON ENTERPRISES, INC., Respondent.
attaches to common carriers, once the
goods it transports are lost, destroyed or VILLARAMA, JR., J.:
deteriorated, applies to the petitioner. This
presumption, which is overcome only by FACTS:
proof of the exercise of extraordinary
diligence, remained unrebutted in this case. Simon Enterprises Inc (Simon) has entered
into a contract with Contiquincybunge Export
Company as its consignee of the shipped
2. NO.
Soybean meal.
The carrier was culpably remiss in the
On October 25, 1995 and November 25, 1995,
observance of its duties. Jesus R.
Contiquincybunge have made shipment
Constantino, the patron of the vessel
through vessels MN "Sea Dream and M/V
"Coastwise 9" admitted that he was not
"Tern" respectively at the Port of Darrow,
licensed. The Code of Commerce provides
Louisiana, U.S.A.
that:
For the first shipment, Contiquincybunge
Art. 609. — Captains, masters, or patrons
loaded 6, 843.700 metric tons of U.S. soybean
of vessels must be Filipinos, have legal
Meal which was received by Asian Terminal
capacity to contract in accordance with this
Inc (ATI) for shipment to Simon. However,
code, and prove the skill capacity and
when it reached Simon, it was already
qualifications necessary to command and
6,825.144 metric tons or short by 18.556 metric
direct the vessel, as established by marine
tons, estimated to be worth US$7,100.16 or
and navigation laws, ordinances or
₱186,743.20.
regulations, and must not be disqualified
according to the same for the discharge of
For the second shipment, 3,300.000 metric
the duties of the position. . . .
tons of Soybean Meal were loaded and was
again received by Asian Terminals, however,
It cannot safely claim to have exercised
reported receiving only 3,100.137 tons and
extraordinary diligence, by placing a person
short of 199.863 metric tons and estimated
whose navigational skills are questionable,
to be worth US$79,848.86 or ₱2,100,025.00.
at the helm of the vessel which eventually met
the fateful accident. It may also logically, follow
65
Simon filed with the RTC of Manila an action
for damages against the unknown owner of the
vessels M/V "Sea Dream" and M/V "Tern", its
local agent Inter-Asia Marine Transport and
ATI alleging that it suffered the losses through
the fault or negligence of the said defendants.
The unknown owner of the vessel of MV
Dream has been settled leaving only MV Tern,
local agent Inter-Asia and ATI.
In their Answer, the unknown owner of the
vessel M/V "Tern" and its local agent Inter-Asia
Marine Transport, Inc., prayed for the dismissal
of the complaint essentially alleging lack of
cause of action and prescription.
While ATI alleged in its Answer that it
exercised the required diligence in handling the
subject shipment.
RTC ruled that defendants be held solidarily
liable for the damages incurred by Simon. CA
affirmed.
ISSUE:
Whether the appellate court erred in
affirming the decision of the trial court
holding petitioner ATI solidarily liable with
its co-defendants for the shortage incurred
in the shipment of the goods to respondent.
RULING
YES.
First, petitioner ATI is correct in arguing that
the respondent failed to prove that the subject
shipment suffered actual shortage, as there
was no competent evidence to prove that it
actually weighed 3,300 metric tons at the port
of origin.
Though it is true that common carriers are
presumed to have been at fault or to have
acted negligently if the goods transported
by them are lost, destroyed, or deteriorated,
and that the common carrier must prove
that it exercised extraordinary diligence in
order to overcome the presumption, the
plaintiff must still, before the burden is
shifted to the defendant, prove that the
subject shipment suffered actual shortage.
This can only be done if the weight of the
shipment at the port of origin and its
subsequent weight at the port of arrival have
been proven by a preponderance of evidence,
and it can be seen that the former weight is
considerably greater than the latter weight,
taking into consideration the exceptions
provided in Article 1734 of the Civil Code.
In this case, respondent failed to prove that
the subject shipment suffered shortage, for
it was not able to establish that the subject
shipment was weighed at the port of origin
at Darrow, Louisiana, U.S.A. and that the
actual weight of the said shipment was 3,300
metric tons.
The weight of the shipment as indicated in the
bill of lading is not conclusive as to the actual
weight of the goods. Consequently, the
respondent must still prove the actual weight of
the subject shipment at the time it was loaded
at the port of origin so that a conclusion may
be made as to whether there was indeed a
shortage for which petitioner must be liable.
This, the respondent failed to do.
Second, as correctly asserted by petitioner
ATI, the shortage, if any, may have been due
to the inherent nature of the subject shipment
or its packaging since the subject cargo was
shipped in bulk and had a moisture content of
12.5%.
Third, the SC agree with the petitioner ATI that
respondent has not proven any negligence on
the part of the former.
Considering that respondent was not able to
establish conclusively that the subject
shipment weighed 3,300 metric tons at the port
of loading, and that it cannot therefore be
concluded that there was a shortage for which
petitioner should be responsible; bearing in
mind that the subject shipment most likely lost
weight in transit due to the inherent nature of
Soya Bean Meal; assuming that the shipment
lost weight in transit due to desorption, the
shortage of 199.863 metric tons that
66
respondent alleges is a minimal 6.05% of the
weight of the entire shipment, which is within
the allowable 10% allowance for loss; and
noting that the respondent was not able to
show negligence on the part of the petitioner
and that the weighing methods which
respondent relied upon to establish the
shortage it alleges is inaccurate, respondent
cannot fairly claim damages against petitioner
for the subject shipment's alleged shortage.
G.R. No. 6092. March 8, 1912.
TAN CHIONG SIAN, Plaintiff-Appellee, v.
INCHAUSTI & Co., Defendant-Appellant.
FACTS:
On November 25, 1908, Inchausti and Co,
received in Manila from the Chinaman, Ong
Bieng Sip, 205 bundles or cases of goods to
be conveyed by the steamer Sorsogon to
the port of Gubat, Sorsogon where they
were to be transhipped to another vessel
belonging to the defendant company and
by the latter transported to the pueblo of
Catarman, Island of Samar, there to be
delivered to the Chinese shipper with whom
the defendant party made shipping contract.
Three (3) bills of lading were executed. The
Steamer Sorsogon, which carried the goods,
arrived at the Port of Gubat on November 28
and as the lorcha Pilar, to which the
merchandise was to be transhipped for its
transportation to Catarman, was not yet there,
the cargo was unloaded and stored in the
defendant company’s warehouses at the port.
After several days, the lorcha Pilar arrived at
Gubat and after the cargo it carried was
unloaded, the merchandise belonging to
Chinaman, Ong Bieng Sip, and other goods
belonging to Inchausti and Co was taken
aboard to be transported to Catarman.
On December 5, 1908, before lorcha Pilar
could leave its destination, there arose a
storm, which coming from Pacific, passed
over Gubat and, as a result of the strong
wind and heavy sea, the lorcha was driven
upon the shore and wrecked, and its cargo,
including the Chinese shipper’s 205
packages of goods, scattered on the beach.
Laborers and workmen of the defendant
company, by its order, then proceeded to
gather up the plaintiff’s merchandise and,
as it is impossible to preserve if after it was
salved from the wreck of the lorcha, it was
sold at public auction before a notary for
the sum of P1,693.67.
The Chinaman, Tan Chiong Sian or Tan
CHinto filed a written complaint alleging that
Inchausti neither carried nor delivered the
aforementioned merchandise to the said Ong
Bieng Sip, in Catarman, but unjustly and
negligently failed to do so, with the result that
the said merchandise was almost totally lost;
and thus claim the value of merchandise which
was P20,000, together with legal interest
thereon from November 25, 1908, and the
costs of the suit.
After the hearing of the case and the
introduction of testimony by the parties,
judgment was rendered, in favor of the plaintiff,
Tan Chiong Sian or Tan Chinto, against the
defendant Inchausti & Co., for the sum of
P14,642.63, with interest at the rate of 6 per
cent per annum.
ISSUE:
Whether the defendant is liable for the loss
of the merchandise and for failure to deliver
the same at the place of destination, or
whether he is relieved from responsibility
on the ground of force majeure.
RULING:
NO.
The defendant is not liable for the loss and
damage of the goods shipped on the lorcha
Pilar by the Chinaman, Ong Bieng Sip,
inasmuch as such loss and damage were
the result of a fortuitous event or force
67
majeure, and there was no negligence or
lack of care and diligence on the part of the
defendant company or its agents.
It is held that the loss of the said lorcha was
due to force majeure, a fortuitous event, with
no conclusive proof of negligence or of the
failure to take the precautions such as
diligent and careful persons usually adopt
to avoid the loss of the boat and its cargo, it
is neither just nor proper to attribute the loss or
damage of the goods in question to any fault,
carelessness, or negligence on the part of the
defendant company and its agents and,
especially, the patron of the lorcha Pilar.
Under article the Code of Commerce
transportation of merchandise is for account,
risk and hazard of the shipper, unless the
contrary has been expressly stipulated. The
carrier is exempt from liability if he prove, as it
is incumbent upon him to do, that the loss or
destruction of the merchandise was due to
accident and force majeure and not to fraud,
fault, or negligence on the part of the captain or
owners of the ship.
EN BANC
[G.R. No. 13972.  July 28, 1919.]
G. MARTINI, LTD., Plaintiff-Appellee, vs.
MACONDRAY & CO. (INC.), Defendant-
Appellant.
 
STREET, J.:
FACTS:
In September 1916, G. Martini, Ltd., arranged
with the Macondray, as agents of the Eastern
and Australian Steamship Company, for the
shipment of 219 cases or packages of
chemical products from Manila, Philippine
Islands, to Kobe, Japan.
It was Friday morning when Martini applied to
Macondray for a space on the steamship called
Eastern. But beforehand, Martini expressed
desire to the Macondray company if he could
obtain the Bill of Lading on Saturday morning
in order that he might negotiate them at the
bank. So a request was made by Martini to
Macondray for the delivery of the Bill of Lading
on that day. But to effectuate this, Martini was
required to enter into a written obligation,
called a Letter of Guarantee.
In conformity with the purpose of this document
the Bills of Lading were issued, and the
negotiable copies were on the same day
negotiated at the bank by plaintiff Martini for
the 90% of the invoice value of the goods.
As already stated these bills of lading
contained on their face, conspicuously
stenciled, the words “on deck at shipper’s
risks.”
So the goods were embarked at Manila on the
steamship Eastern and were carried to Kobe
on the deck of the ship.
Upon arrival at the port of destination it was
found that the chemicals comprised in the
shipment had suffered damage from the effects
of both fresh and salt water.
An action was instituted by the Martini to
recover the amount of the damage thereby
occasioned.
CFI ordered in favor of the Martini for the sum
of P34,997.56, with interest.
ISSUE:
Whether or not Macondray should be held
liable.
RULING:
NO.
That the damage was caused by water,
either falling in the form of rain or splashing
aboard by the action of wind and waves.
It is contended that the goods, in this case,
having been lost by the dangers of the
seas, both the master and the vessel are
exempted from responsibility within the
common exemption in bills of lading; and
the goods having been thrown overboard
from necessity, and for the safety of the
68
vessel and cargo, as well as the lives of the
crew, that it presents a case for a general
average or contribution, upon the common
principle that when a sacrifice is made for the
benefit of all, that the loss shall be shared by
all.
In every contract of affreightment, losses by
the dangers of the seas are excepted from the
risks which the master takes upon himself,
whether the exception is expressed in the
contract or not. The exception is made by the
law, and falls within the general principle that
no one is responsible for fortuitous events and
accidents of major force.
Although Martini & Company would have
greatly preferred for the cargo to be carried
under the hatches, they nevertheless
consented for it to go on deck.
[G.R. No. 94151. April 30, 1991.]
EASTERN SHIPPING LINES,
INC., Petitioner, v. THE COURT OF
APPEALS and THE FIRST NATIONWIDE
ASSURANCE
CORPORATION, Respondents.
FACTS:
On September 4, 1978, thirteen coils of
uncoated 7-wire stress relieved wire strand
for prestressed concrete were shipped on
board the vessel ‘Japri Venture,’ owned and
operated by the defendant Eastern Shipping
Lines, Inc., at Kobe, Japan, for delivery to
Stresstek Post-Tensioning Phils., Inc. in
Manila, as evidenced by the bill of lading,
commercial invoice, packing list and
commercial invoice.
The cargo was insured by First Nationwide
Assurance Corporation (FNAC).
The vessel arrived in Manila and discharged
the cargo to the custody of E.Razon Inc., from
whom the consignee’s customs broker
received it for delivery to the consignee’s
warehouse.
It appears that while en route to Manila, the
vessel encountered very rough seas and
stormy weather and the cargo stored in the
lower hatch of the vessel was flooded with
water about one foot deep. That upon
survey, it was found that several 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
weather.
FNAC paid Stresstek about Php 172K for
damage and loss to the insured cargo.
Being subrogated to the rights of Stresstek,
FNAC now seeks to recover from Eastern what
it has indemnified Stresstek less the salvage
value of the goods, or the total of about Php
124K.
RTC ordered for the dismissal of the case.
Upon appeal, the CA held that Eastern is liable
to FNAC.
ISSUE:
Whether Eastern Shipping should be held
liable even if it claims that the shipment was
discharged and delivered complete into the
custody of the arrastre operator under
clean tally sheets.
RULING:
Yes.
The Court stated that, the heavy seas and
rains referred to in the master’s report were
not caso fortuito, but normal occurrences
that an ocean-going vessel, particularly in
the month of September which, in our area,
is a month of rains and heavy seas would
encounter as a matter of routine. They are
not unforeseen nor unforeseeable. These
are conditions that ocean-going vessels would
encounter and provide for, in the ordinary
course of a voyage. 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
69
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." The Court agrees with and is bound
by the foregoing findings of fact made by the
appellate court. The presumption, therefore,
that the cargo was in apparent good condition
when it was delivered by the vessel to the
arrastre operator by the clean tally sheets has
been overturned and traversed. The evidence
is clear to the effect that the damage to the
cargo was suffered while aboard petitioner’s
vessel.
EASTERN SHIPPING LINES,
INC., petitioner,  The Trial Court rendered judgment in favor of
vs.
THE NISSHIN FIRE AND MARINE
INSURANCE CO., and DOWA FIRE &
MARINE INSURANCE CO., LTD.,
GR No. 71478 May 29, 1987
FACTS:
Sometime in or prior to June, 1977, the M/S
ASIATICA, a vessel operated by Eastern
Shipping Lines, Inc. (petitioner carrier), took on
board 128 cartons of garment fabrics and
accessories, in two (2) containers,
consigned to Mariveles Apparel
Corporation, and two cases of surveying
instruments consigned to Aman
Enterprises and General Merchandise.
The 128 cartons were insured for their stated
value by respondent Nisshin Fire & Marine
Insurance Co.
Enroute for Kobe, Japan, to Manila, the
vessel caught fire and sank, resulting in the
total loss of ship and cargo. The respective
respondent Insurers paid the corresponding
marine insurance values to the consignees
concerned and were thus subrogated unto the
rights of the latter as the insured.
On June 16, 1978, respondents Nisshin Fire
& Marine Insurance Co. and Dowa Fire &
Marine Insurance Co., Ltd., as subrogees of
the insured, filed suit against Petitioner
Carrier for the recovery of the insured value
of the cargo lost with the then Court of First
Instance of Manila, imputing
unseaworthiness of the ship and non-
observance of extraordinary diligence by
petitioner Carrier.
Petitioner Carrier denied liability on the
principal 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.
NISSHIN and DOWA in the amounts of US
$46,583.00 and US $11,385.00, respectively,
with legal interest, plus attorney's fees and
costs.
On appeal by petitioner, the then Court of
Appeals affirmed with modification the Trial
Court's judgment by decreasing the amount
recoverable by DOWA to US $1,000.00
because of $500 per package limitation of
liability under the COGSA.
ISSUES:
1. Which law should govern — the Civil
Code provisions on Common carriers or the
Carriage of Goods by Sea Act? ; and
2. Who has the burden of proof to show
negligence of the carrier?
RULING:
1. The law of the country to which the
goods are to be transported governs the
liability of the common carrier in case of
their loss, destruction or deterioration. As
the cargoes in question were transported
from Japan to the Philippines, the liability
of Petitioner Carrier is governed primarily
by the Civil Code. 5However, in all matters not
regulated by said Code, the rights and
70
obligations of common carrier shall be
governed by the Code of Commerce and by
special laws. 6 Thus, the Carriage of Goods by
Sea Act, a special law, is suppletory to the
provisions of the Civil Code.
2. 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.  Common carriers are responsible
for the loss, destruction, or deterioration of the
goods unless the same is due to any of the
following causes only:
(1) Flood, storm, earthquake,
lightning or other natural disaster
or calamity;
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. This must be so as it arises
almost invariably from some act of man or
by human means.  It does not fall within the
category of an act of God unless caused by
lightning or by other natural disaster or
calamity.  It may even be caused by the
actual fault or privity of the carrier.  actual fault or privity of the
Article 1680 of the Civil Code, which considers
fire as an extraordinary fortuitous event refers
to leases of rural lands where a reduction of
the rent is allowed when more than one-half of
the fruits have been lost due to such event,
considering that the law adopts a protection
policy towards agriculture.  must have started twenty-four (24) hours
As the peril of the fire is not comprehended
within the exception in Article 1734, the
common carrier shall be presumed to have
been at fault or to have acted negligently,
unless it proves that it has observed the
extraordinary diligence required by law.
In this case, the respective Insurers, as
subrogees of the cargo shippers, have proven
that the transported goods have been lost.
Petitioner Carrier has also proved that the loss
was caused by fire. The burden then is upon
Petitioner Carrier to prove that it has exercised
the extraordinary diligence required by law.
Having failed to discharge the burden of
proving that it had exercised the extraordinary
diligence required by law, Petitioner Carrier
cannot escape liability for the loss of the cargo.
And even if fire were to be considered a
"natural disaster" within the meaning of Article
1734 of the Civil Code, it is required under
Article 1739 of the same Code that the "natural
disaster" must have been the "proximate and
only cause of the loss," and that the carrier has
"exercised due diligence to prevent or minimize
the loss before, during or after the occurrence
of the disaster." This Petitioner Carrier has also
failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from
liability under the Carriage of Goods by Sea
Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor
the ship shall be responsible for
loss or damage arising or
resulting from
(b) Fire, unless caused by the
carrier.
In this case, both the Trial Court and the
Appellate Court, in effect, found, as a fact, that
there was "actual fault" of the carrier shown by
"lack of diligence" in that "when the smoke was
noticed, the fire was already big; that the fire
before the same was noticed; " and that "after
the cargoes were stored in the hatches, no
regular inspection was made as to their
condition during the voyage." The foregoing
suffices to show that the circumstances under
which the fire originated and spread are such
as to show that Petitioner Carrier or its
servants were negligent in connection
therewith. Consequently, the complete defense
afforded by the COGSA when loss results from
fire is unavailing to Petitioner Carrier.
71
EXEMPTION FROM LIABILITY
1. NATURAL DISASTERS
G.R. No. 147246            August 19, 2003
ASIA LIGHTERAGE AND SHIPPING, INC.,
petitioner,
vs.
COURT OF APPEALS and PRUDENTIAL
GUARANTEE AND ASSURANCE, INC.,
respondents.
PUNO, J.:
FACTS:
In 1990, Marubeni American Corporation of
Portland, Oregon shipped 3,150 metric tons
of wheat on board a vessel for delivery to
consignee, General Milling Corporation
(GMC), evidence by Bill of Lading.
The shipment was insured by PR Prudential.
The vessel arrived in Manila and the cargo was
transferred to the custody of PETITIONER Asia
Lighterage and Shipping, Inc. The latter was
contracted by the consignee (GMC) to deliver
the cargo to its warehouse at Pasig City.
The shipment was loaded on a barge (boat lol)
for delivery to consignee (GMC) HOWEVER
the cargo did not reach its destination. The
transport was suspended due to a warning
of an incoming typhoon.
Petitioner pulled the barge to Engineering
Island off Baseco to seek shelter and was
tied down together with other barges. few
days after, the barge developed a list
because of a hole it sustained after hitting
an unseen protuberance underneath the
water (check ruling for clearer description sa
nangyari thnx). The petitioner filed a Marine
Protest.
The barge was then towed to ISLOFF terminal
before it finally headed towards the
consignee's wharf on September 5, 1990.
Upon reaching the Sta. Mesa spillways, the
barge again ran aground due to strong current.
To avoid the complete sinking of the barge,
a portion of the goods was transferred to
three other barges.10
The next day, September 6, 1990, the towing
bits of the barge broke. It sank completely,
resulting in the total loss of the remaining
cargo.11 A second Marine Protest was filed
Private respondent indemnified the
15
consignee. Thereafter, as subrogee, it sought
recovery of said amount from the petitioner, but
to no avail.
The PR Prudential filed a complaint against the
petitioner for recovery of the amount of
indemnity, attorney's fees and cost of suit.
RTC: ruled in favor of the private respondent.
Petitioner appealed to the Court of Appeals
insisting that it is not a common carrier.
Petitioner contends that it is not a common
carrier but a private carrier. Allegedly, it has
no fixed and publicly known route,
maintains no terminals, and issues no
tickets. It points out that it is not obliged to
carry indiscriminately for any person. It is not
bound to carry goods unless it consents. In
short, it does not hold out its services to the
general public.
ISSUES:
1. W/N Petitioner is a common carrier
2. Assuming the petitioner is a common
carrier, whether it exercised
extraordinary diligence in its care and
custody of the consignee's cargo.
RULING:
1. YES. Petitioner is a common carrier.
In the case at bar, the principal business of the
petitioner is that of lighterage and drayage and
it offers its barges to the public for carrying or
transporting goods by water for compensation.
Petitioner is clearly a common carrier. In De
72
 Guzman, supra,23 we considered private
respondent Ernesto Cendaña to be a common
carrier even if his principal occupation was not
the carriage of goods for others, but that of
buying used bottles and scrap metal in
Pangasinan and selling these items in Manila.
We therefore hold that petitioner is a common
carrier whether its carrying of goods is done on
an irregular rather than scheduled manner, and
with an only limited clientele. A common
carrier need not have fixed and publicly
known routes. Neither does it have to
maintain terminals or issue tickets.
2. 2. NO. petitioner failed to exercise
extraordinary diligence in its care and
custody of the consignee's goods.
Article 1734 of the Civil Code enumerates the
instances when the presumption of negligence
does not attach (XPN to GR):
“Art. 1734. Common carriers are responsible
for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the
following causes only:
(1) Flood, storm, earthquake, lightning, or other
natural disaster or calamity;
(2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner of
the goods;
(4) The character of the goods or defects in the
packing or in the containers;
(5) Order or act of competent public authority.”
In the case at bar, the barge completely
sank after its towing bits broke, resulting in
the total loss of its cargo.
Petitioner claims that this was caused by a
typhoon, hence, it should not be held liable for
the loss of the cargo. However, petitioner
failed to prove that the typhoon is the
proximate and only cause of the loss of the
goods, and that it has exercised due
diligence before, during and after the
occurrence of the typhoon to prevent or
minimize the loss. The evidence show that,
even before the towing bits of the barge broke,
it had already previously sustained damage
when it hit a sunken object while docked at the
Engineering Island. It even suffered a hole.
Clearly, this could not be solely attributed to
the typhoon. The partly-submerged vessel was
refloated but its hole was patched with only
clay and cement. The patch work was merely
a provisional remedy, not enough for the
barge to sail safely. Thus, when petitioner
persisted to proceed with the voyage, it
recklessly exposed the cargo to further
damage. 
G.R. No. 190271, September 14, 2016
TRANSIMEX CO., Petitioner, v. MAFRE
ASIAN INSURANCE CORP., Respondent.
DECISION
SERENO, C.J.:
FACTS:
M/V Meryem Ana shipped 21,857 metric
tons of Fertilizer from Odessa, Ukrain for
delivery to two ports – Poro Point, San
Fernando, La Union and Tabaco, Albay. The
shipment was consigned to Fertiphil. Fertiphil
insured the cargo with PR Mafre Asian
Insurance Corp (MAIC).
M/V discharged the first cargo in La union. The
ship sailed on to Albay to unload the remainder
73
which appeared to have a gross weight of denied that there was loss. It submitted survey
7,700 metric tons. The present controversy certificates and presented the testimony of a
involves only this second delivery to Albay. marine surveyor to prove that there was, in
fact, an excess of 3.340 metric tons of
As soon as the vessel docked at the Tabaco, fertilizer delivered to the
the fertilizer was bagged and stored inside a consignee. Petitioner also alleged that
warehouse by employees of the defendants had exercised extraordinary
consignee. When the cargo was subsequently diligence in the transport and handling of the
weighed, it was discovered that only 7,350.35 cargo.
metric tons of fertilizer had been
delivered. Because of the alleged shortage of
349.65 metric tons, Fertiphil filed a claim
with respondent MAIC for
P1,617,527.37, which was found compensable. RTC: Favored Respondent Insurance
Company finding that there indeed a shortage
and that Petitioner must be held liable as
PR paid Fertiphil and demanded common carrier under Art. 1734.
reimbursement from petitioner (subrogation).
The claim was denied prompting PR MAIC to
file a complaint with RTC for recovery of sum CA: Affirmed RTC’s ruling and denied
of money. petitioner’s appeal.

RESPONDENT: RELEVANT ISSUE:

1. respondent presented a Report of

Survey18 and a Certification19 from David
W/N PETITIONER IS LIABLE FOR THE LOSS
Cargo Survey Services to prove the shortage.
OR DAMAGE SUSTAINED BY THE CARGO
BECAUSE OF BAD WEATHER.

2. In addition, respondent submitted an

Adjustment Report20 prepared by Adjustment
Standards Corporation (ASC) to establish the
outturn quantity and condition of the fertilizer
discharged from the vessel at the Tabaco
port. In the report, the adjuster also stated
that the shortage was attributable to the
melting of the fertilizer while inside the
hatches, when the vessel took on water
because of the bad weather experienced at
sea.22 Two witnesses were then presented by
respondent to buttress its documentary
evidence.
PETITIONER:
RULING:
YES. Petitioner is liable
petitioner failed to prove the existence of a
storm or a peril of the sea within the context of
Article 1734(1) of the Civil Code or Section 4(2)
(c) of COGSA (Carriage of Goods by Sea Act)
In this petition, Petitioner Transimex
summarizes the testimony of one witness for
respondent supposedly proving that the
shortage in the shipment was caused by
inclement weather encountered by the vessel
at sea. Petitioner claims that this testimony
74
proves that damage to the cargo was the result
of the melting of the fertilizer after seawater
entered Hatch No. 1 of the vessel as a result of
the bad weather conditions at sea
The question before this Court therefore comes
down to whether there is sufficient proof that
the loss or damage incurred by the cargo was
caused by a "storm" or a "peril of the sea."
We rule in the negative. As will be discussed,
petitioner failed to prove the existence of a
storm or a peril of the sea within the context
of Article 1734(1) of the Civil Code or Section
4(2)(c) of COGSA. Furthermore, there was no
sufficient proof that the damage to the
shipment was solely and proximately caused
by bad weather.
The presence of a "storm" or a "peril of the
sea" was not established.
It must be emphasized that not all instances of
bad weather may be categorized as "storms"
or "perils of the sea" within the meaning of the
provisions of the Civil Code and COGSA on
common carriers. To be considered absolutory
causes under either statute conditions must
reach a certain threshold of severity.
With respect to storms, this Court has
explained the difference between a storm and
ordinary weather conditions in Central
Shipping Co. Inc. v. Insurance Company of
North America:
“According to PAGASA, a storm has a wind
force of 48 to 55 knots, equivalent to 55 to
63 miles per hour or 10 to 11 in the Beaufort
Scale. The second mate of the vessel stated
that the wind was blowing around force 7 to 8
on the Beaufort Scale. Consequently, the
strong winds accompanying the
southwestern monsoon could not be
classified as a "storm." Such winds are the
ordinary vicissitudes of a sea
57
voyage.  (Emphases supplied; citations
omitted)”
In this case, the documentary and testimonial
evidence cited by petitioner indicate that M/V
Meryem Ana faced winds of only up to 40
knots while at sea. This wind force clearly
fell short of the 48 to 55 knots required for
"storms" under Article 1734(1) of the Civil
Code based on the threshold established by
PAGASA.63 Petitioner also failed to prove that
the inclement weather encountered by the
vessel was unusual, unexpected, or
catastrophic. In particular, the strong winds and
waves, which allegedly assaulted the ship,
were not shown to be worse than what should
have been expected in that particular location
during that time of the year. Consequently, this
Court cannot consider these weather
conditions as "perils of the sea" that would
absolve the carrier from liability.
Moreover, there is absolutely no evidence that
petitioner satisfied the two requisites.
First, there is no proof that the bad weather
encountered by M/V Meryem Ana was the
proximate and only cause of damage to the
shipment. Second, petitioner failed to establish
that it had exercised the diligence required
from common carriers to prevent loss or
damage to the cargo.
Before the trial court, petitioner limited itself to
the defense of denial. The latter refused to
admit that the shipment sustained any loss or
damage and even alleged overage of the cargo
delivered.
75
Under these circumstances, the Court cannot
absolve petitioner from liability for the shortage
incurred by the shipment.
WHEREFORE, the Petition is DENIED.  engulfed and destroyed the entire vessel
G.R. No. 146018               June 25, 2003
EDGAR COKALIONG SHIPPING LINES,
INC., Petitioner,
vs.
UCPB GENERAL INSURANCE COMPANY,
INC., Respondent.
FACTS:
December 11, 1991: Nestor Angelia (shipper
and consignee) delivered to the petitioner
Edgar Cokaliong Shipping Lines, Inc. (now
Cokaliong Shipping Lines), a cargo
consisting of one (1) carton of Christmas
decor and two (2) sacks of plastic toys, to
be transported on board the M/V Tandag
from Cebu City for Tandag, Surigao del Sur.
This cargo is under Bill of Lading No. 58, in the
amount of P6,500.00.
Zosimo Mercado (another shipper and
consignee) likewise delivered cargo to
petitioner consisting of two (2) cartons of
plastic toys and Christmas decor, one (1) roll of
floor mat and one (1) bundle of various or
assorted goods. This is under Bill of Lading No.
59, valued in the amount of P14,000.00
Feliciana Legaspi (owner of the goods) insured
the cargo, covered by BOL Nos. 59 and No.
58, with the UCPB General Insurance Co., Inc.,
[respondent]. No. 59 was insured for P100,000
while No. 58 for P50,000. [*Note that both
amounts are far from the actual and declared
value in the BOLs issued by Cokaliong]
After the vessel had passed by the
MandaueMactan Bridge, fire ensued in the
engine room, and, despite earnest efforts of
the officers and crew of the vessel, the fire
resulting in the loss of the vessel and the
cargoes therein.
Feliciana Legaspi filed a claim, with
[respondent], for the value of the cargos
insured. The latter approved the claim. For Bill
of Lading No. 59, Legaspi received from UCPB
P99,000.00 while for No. 58, P60,338.00.
UCPB as subrogee of Legaspi, filed a
complaint anchored on torts against petitioner,
with the RTC of Makati City, for the collection
of the total principal amount of P148,500.00.
Respondent alleged that the loss of the cargo
was due to the negligence of the petitioner
Petitioner alleged that: (a) It was cleared by the
Board of Marine Inquiry of any negligence in
the burning of the vessel; and (b) it cannot be
held liable for the loss of the cargo beyond the
value thereof declared in the Bill of Lading.
ISSUE:
W/N petitioner is liable for the loss of the
goods?
HELD:
Petitioner’s argument: the cause of the loss of
the goods, subject of this case, was force
majeure. It adds that its exercise of due
diligence was adequately proven by the
findings of the Philippine Coast Guard.
76
SC: We are not convinced. The
uncontroverted findings of the Philippine Coast
Guard show that the M/V Tandag sank due
to a fire, which resulted from a crack in the
auxiliary engine fuel oil service tank.
The crack was located on the side of the
fuel oil tank, which had a mere two-inch gap
from the engine room walling, thus
precluding constant inspection and care by
the crew Having originated from an unchecked
crack in the fuel oil service tank, the fire could
not have been caused by force majeure.
Broadly speaking, force majeure generally
applies to a natural accident, such as that
caused by a lightning, an earthquake, a
tempest or a public enemy.
Hence, fire is not considered a natural
disaster or calamity. It does not fall within
the category of an act of God unless
caused by lighting or by other natural
disaster or calamity. It may even be caused
by the actual fault or privity of the carrier.
Peril of fire is not comprehended within the
exceptions in Article 1734; Article 1735 applies
(please see provision)
Where loss of cargo results from the failure of
the officers of a vessel to inspect their ship
frequently so as to discover the existence of
cracked parts, that loss cannot be attributed to
force majeure, but to the negligence of those
officials.
Ensuring the seaworthiness of the vessel is the
first step in exercising the required vigilance.
Petitioner did not present sufficient evidence
showing what measures or acts it had
undertaken to ensure the seaworthiness of the
vessel.
It failed to show when the last inspection and
care of the auxiliary engine fuel oil service tank
was made, or some other evidence to establish
that it had exercised extraordinary diligence.
It merely stated that constant inspection and
care were not possible, and that the last time
the vessel was dry-docked was in November
1990. Necessarily, in accordance with Article
173517 of the Civil Code, we hold petitioner
responsible for the loss of the goods covered
by Bills of Lading Nos. 58 and 59.
G.R. No. 116940 June 11, 1997
THE PHILIPPINE AMERICAN GENERAL
INSURANCE COMPANY, INC., petitioner,
vs.
COURT OF APPEALS and FELMAN
SHIPPING LINES, respondents.
FACTS:
On 6 July 1983 Coca-Cola Bottlers
Philippines, Inc. (Coca-Cola Bottlers),
loaded on board "MV Asilda," a vessel
owned and operated by respondent Felman
Shipping Lines (FELMAN), 7,500 cases of 1-
liter Coca-Cola softdrink bottles to be
transported from Zamboanga City to Cebu
City for consignee Coca-Cola Bottlers
Philippines, Inc., Cebu. The shipment was
insured with petitioner Philippine American
General Insurance Co., Inc. (PHILAMGEN)
In a joint statement, the Captain as well as the
chief mate of the vessel confirmed that the
weather was fine when "MV Asilda" left the port
of Zamboanga at 8 p.m. on 6 July. The ship
captain stated that around 4 a.m. of 7 July
1983 he was awakened by the officer on duty
to inform him that the vessel had hit a floating
log.
77

At that time he noticed that the weather had
deteriorated with strong southeast winds
inducing big waves. After 30 minutes, he
observed that the vessel was listing slightly to
starboard and would not correct itself despite
the heavy rolling and pitching. He then ordered
his crew to shift the cargo from starboard to
portside until the vessel was balanced. At
about 7 a.m., the master of the vessel
stopped the engine because the vessel was
listing dangerously to portside. He ordered
his crew to shift the cargo back to
starboard (right). The shifting of cargo took
about an hour after which he rang the
engine room to resume full speed.
At around 8:45 a.m., the vessel suddenly listed
to portside and before the captain could decide
on his next move, some of the cargo on deck
were thrown overboard and seawater entered
the engine room and cargo holds of the vessel.
At that instance, the master of the vessel
ordered his crew to abandon ship.
Shortly thereafter, "MV Asilda" capsized
and sank in the waters of Zamboanga del
Norte bringing down her entire cargo with
her including the subject 7,500 cases of 1-
liter Coca-Cola softdrink bottles.
The Ship Captain ascribed the sinking to the
entry of seawater through a hole in the hull
caused by the vessel's collision with a partially
submerged log.
On 15 July 1983 the consignee Coca-Cola
Bottlers Philippines, Inc., Cebu plant, filed a
claim with respondent FELMAN for recovery of
damages. FELMAN denied the claim thus
prompting the consignee to file an insurance
claim with PHILAMGEN which paid its claim of
P755,250.00.
Claiming its right of subrogation PHILAMGEN
sought recourse against respondent FELMAN
which disclaimed any liability for the loss.
Consequently, on 29 November 1983
PHILAMGEN sued the shipowner for sum of
money and damages, alleging that the total
loss of cargo was due to the vessel’s
unseaworthiness as she was put to sea in an
unstable condition. FELMAN, on the other
hand, filed a motion to dismiss contending that
there was no right of subrogation in favor of
PHILAMGEN since it had abandoned all its
rights, interests and ownership over the vessel
together with her freight and appurtenances for
the purpose of limiting and extinguishing its
liability under Art. 587 of the Code of
Commerce.
The RTC dismissed PHILAMGEN’s complaint
and appealed to the CA which remanded the
case and denied its motion for reconsideration.
The RTC then ruled that the vessel was
seaworthy and even if assumed unseaworthy,
PHILAMGEN still could not recover from
FELMAN since Coca-Cola Bottlers had
breached its implied warranty on the vessel’s
seaworthiness.
On appeal, the CA ruled that the vessel was
unseaworthy for being topheavy ( FYI lang,
according to aling Merriam webstersxsz, If
something is top-heavy, it has more weight in
the higher part than in the lower part and will
not balance correctly) as 2,500 cases of Coca-
Cola softdrinks bottles were improperly stowed
on deck. Even though the vessel possessed
the necessary Coast Guard certification
indicating its seaworthiness with respect to the
structure of the ship itself, it was not seaworthy
with respect to the cargo. However, it denied
the money claim of PHILAMGEN because of
the implied breach of warranty of
seaworthiness by Coca-Cola Bottlers.
Furthermore, the filing of notice of
78
abandonment had absolved FELMAN from
liability under the limited liability rule.
ISSUES:
W/N MV Asilda was seaworthy when it left port
of Zamboanga
HELD:
NO. The Supreme Court subscribe to the
findings of the Elite Adjusters and the Court of
Appeals that the proximate cause of the
sinking of the MV Asilda was its being top-
heavy. As according to the report submitted
by the Elite Adjusters, while the vessel may
not have been overloaded, the distribution
or stowage of the cargo on board was done
in such a manner that the vessel was in top-
heavy condition at the time of its departure
which rendered it unstable and
unseaworthy for that particular voyage.
Furthermore, MV Asilda was designed as a
fishing vessel and was not designed to carry a
substantial amount or quantity of cargo in deck
and from the moment it was utilized to load
heavy cargo, the vessel was rendered
unseaworthy for the purpose of carrying the
type of cargo and that the capsizing and
sinking of the vessel was bound to happen and
an inevitable occurrence.
Under Art 1733 of the Civil Code, "(c)ommon
carriers, from the nature of their business and
for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance
over the goods and for the safety of the
passengers transported by them, according to
all the circumstances of each case . . ." In the
event of loss of goods, common carriers are
presumed to have acted negligently. FELMAN,
the shipowner, was not able to rebut this
presumption.
WHEREFORE, the petition is GRANTED.
Respondent FELMAN SHIPPING LINES is
ordered to pay petitioner PHILIPPINE
AMERICAN GENERAL INSURANCE CO.,
INC.
3. ACT OR OMISSION OF SHIPPER
G.R. No. 119197 May 16, 1997
TABACALERA INSURANCE CO.,
PRUDENTIAL GUARANTEE & ASSURANCE,
INC., and NEW ZEALAND INSURANCE CO.,
LTD., petitioners,
vs.
NORTH FRONT SHIPPING SERVICES, INC.,
and COURT OF APPEALS, respondents.
FACTS:
Sacks of corn grains, consigned to Republic
Flour Mills Corporation and insured with the
petitioners, were shipped on board North Front
777, a vessel owned by private respondent.
The vessel was inspected prior to actual
loading and was found fit to carry the
merchandise. The cargo was covered with
tarpaulins and wooden boards. The hatches
79
were sealed and could only be opened by
representatives of Republic Flour Mills.
When the vessel arrived Manila, Republic Flour
Mills did not immediately commence the
unloading operations, and was subsequently
completed (20) days after its arrival. Upon
unloading of the cargo, there was a shortage of
26.333 metric tons and the remaining
merchandise was already moldy, rancid and
deteriorating. The corn grains were
examined and revealed to be contaminated
with salt water. Hence, Republic Flour Mills
rejected the entire cargo and formally
demanded from private respondent payment
for the damages. Upon refusal, petitioners
were obliged to pay. Petitioners filed a
complaint against herein private respondent
alleging that there was negligence on the part
of the latter.
RTC: Dismissed the complaint and ruled that
the contract entered into between private
respondent and Republic Flour Mills was a
charter-party agreement. As such, only
ordinary diligence in the care of goods was
required ofrespondent. The inspection of the
barge before actual loading, coupled with the
Permit to Sail issued by the Coast Guard,
sufficed to meet the degree of diligence
required of the carrier.
CA: Ruled that as a common carrier required
to observe a higher degree of diligence, North
Front 777 satisfactorily complied with all the
requirements, hence, was issued a Permit to
Sail after proper inspection. Consequently, the
complaint was dismissed and the motion for
reconsideration rejected.
ISSUES:
1. Whether or not North Front Shipping
Services is a common carrier despite the
charter-party agreement; and
2. Whether or not North Front Shipping
Services observed the required diligence in the
vigilance over the goods placed in its care.
HELD:
1. YES, North Front Shipping Services is a
common carrier.
The charter-party agreement between North
Front Shipping Services, Inc., and Republic
Flour Mills Corporation did not in any way
convert the common carrier into a private
carrier. We have already resolved this issue
with finality in Planters Products, Inc. v. Court
of Appeals :
“A "charter-party" is defined as a contract by
which an entire ship, or some principal part
thereof, is let by the owner to another person
for a specified time or use; a contract of
affreightment by which the owner of a ship or
other vessel lets the whole or a part of her to a
merchant or other person for the conveyance
of goods, on a particular voyage, in
consideration of the payment of freight x x x
Upon the other hand, the term "common or
public carrier" under Art. 1732 of the Civil
Code, extends to carriers either by land, air or
water which hold themselves out as ready to
engage in carrying goods or transporting
passengers or both for compensation as a
public employment and not as a casual
occupation . . .
80
 vessel had rusty bulkheads and the wooden
boards and tarpaulins bore heavy
It is therefore imperative that a public
concentration of molds. The tarpaulins used
carrier shall remain as such,
were not new, as there were already several
notwithstanding the charter of the whole or
patches on them, hence, making it highly
portion of a vessel by one or more persons,
probable for water to enter.
provided the charter is limited to the shin
only, as in the case of a time-charter or
voyage-charter. “
Private respondent did not even endeavor to
establish that the loss, destruction or
deterioration of the goods was due to the
North Front Shipping Services, Inc., is a
following: (a) flood, storm, earthquake,
corporation engaged in the business of
lightning, or other natural disaster or calamity;
transporting cargo and offers its services
(b) act of the public enemy in war, whether
indiscriminately to the public. It is without doubt
international or civil; (c) act or omission of the
a common carrier.
shipper or owner of the goods; (d) the
character of the goods or defects in the
packing or in the containers; (e) order or act of
2. NO. Private respondent is required to competent public authority. This is a closed list.
observe extraordinary diligence in its If the cause of destruction, loss or deterioration
vigilance over the goods it transports. is other than the enumerated circumstances,
When goods placed in its care are lost or then the carrier is rightly liable therefor.
damaged, the carrier is presumed to have
been at fault or to have acted negligently. It
has the burden of proving that it observed
However, the destruction, loss or deterioration
extraordinary diligence in order to avoid
of the cargo cannot be attributed solely to the
responsibility for the lost cargo.
carrier. Republic Flour Mills is guilty of
contributory negligence as it was
seasonably notified of the arrival of the
The master of the vessel testified that the barge but did not immediately start the
corn grains were farm wet when loaded but unloading operations. Had the unloading
was disproved by the clean bill of lading been commenced immediately the loss could
issued by respondent, which did not have been completely avoided or at least
contain a notation that the corn grains were minimized. For its contributory negligence,
wet and improperly dried. Having been in Republic Flour Mills should share at least 40%
the service since 1968, the master of the of the loss.
vessel would have known at the outset that
corn grains that were farm wet and not properly
dried would eventually deteriorate when stored
The Decision of the Court of Appeals is
in sealed and hot compartments as in hatches
REVERSED and SET ASIDE.
of a ship. Equipped with this knowledge, the
master of the vessel and his crew should
have undertaken precautionary measures
to avoid or lessen the cargo's possible
deterioration as they were presumed
knowledgeable about the nature of such
cargo. But none of such measures was
taken. It was shown during the trial that the
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