Mercantile Law
When amount paid by the insurance company
does not fully cover the injury or loss
The aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury
(NCC, Art. 2207).
Instances where the right of subrogation does
not apply (RRL-No LoCo)
1. Where the insured by his own act releases the
wrongdoer or third party liable for loss or
damage from liability
2. The insurer loses his rights against the
wrongdoer since the insurer can only be
subrogated to only such rights as the insured
may have
3. Where the insurer pays the insured the value of
the loss without notifying the carrier who has
in good faith settled the insured claim for loss
4. Where the insurer pays the insured for a loss or
risk not covered by the policy
5. Life insurance
6. For recovery of loss in excess of insurance
coverage
NOTE: Since the insurer can be subrogated to only
such rights as the insured may have, should the
insured, after receiving payment from the insurer,
release the wrongdoer who caused the loss, the
insurer loses his rights against the latter. But in such
a case, the insurer will be entitled to recover from
the insured whatever it has paid to the latter, unless
the release was made with the consent of the
insurer (Manila Mahogany Manufacturing Corp. v.
CA, G.R. No. L-52756, October 12, 1987).
TRANSPORTATION LAW
Laws that govern contracts of transportation
Contracts of transportation, whether by land, sea, or
air, [i] if within the Philippines; or [ii] if the
transportation of goods be from a foreign country to
the Philippines, shall be governed by the following
laws, arranged by order of application:
1. Provisions of the New Civil Code on Common
Carriers;
2. Code of Commerce; and
3. Special laws such as Carriage of Goods by the
Sea (COGSA); Salvage Law; Public Service Act;
Land Transportation and Traffic Code; Tariff
and Customs Code; and Civil Aeronautics Act
(Art. 1735 and 1766, NCC; American President
Lines, Ltd. v. Klepper, G.R. No. L-15671, November
29, 1960).
121
(Ci-Co-Spec)
NOTE: In case of international carriage in air
transportation, (i) the Montreal Convention as
ratified by the Philippines in 2015; (ii) the Warsaw
Convention (iii) Civil Aviation Authority Act, may be
applicable.
If the goods are to be transported from the
Philippines to a foreign country, the law of the latter
country shall govern the transportation contract
(CC, Art. 1753; NDC. v. CA, G.R. No. L-49407, August
19, 1988).
COMMON CARRIER
Requisites for an entity to be classified as a
common carrier (1996, 1997, 2000, 2002 Bar)
(PecofaB-LAW-FP)
1. Must be a Person, corporation, firm or
association;
2. Engaged in the Business of carrying or
transporting passengers or goods or both;
3. The carriage or transport must either be by
Land, water or air;
4. The service is for a Fee; and
5. The service is offered to the Public (Art. 1732,
NCC)
NOTE: A pipeline operator who carries oil and other
petroleum products through pipes/pipelines is a
common carrier. The law does not distinguish as to
the means by which transportation is carried out, as
long as it is by land, water, or air. Neither does the
law require that transportation be through a motor
vehicle (First Phil. Industrial Corp. v. CA, G.R. No.
125948, December 29, 1998).
Q: The Pereñas were engaged in the business of
transporting students from their respective
residences in Parañaque City to Don Bosco in
Pasong Tamo, Makati City and back. They
employed Alfaro as driver of the van. The
Zarates contracted the Pereñas to transport
their son, Aaron, to and from Don Bosco.
However, a train hit the rear end of the van
driven by Alfaro, and the impact threw nine (9)
students in the rear, including Aaron, out of the
van. Aaron landed on the path of the train, which
dragged his body and severed his head,
instantaneously killing him.
The Zarates commenced an action for damages
against Alfaro, the Pereñas, PNR, and Alano. The
Zarates’ claim against the Pereñas was based on
breach of the contract of carriage and based on
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
quasi-delict under Article 2176, Civil Code
against PNR.
The Pereñas argued that they exercised the
diligence of a good father of the family in the
selection and supervision of Alfaro by making
sure that Alfaro had been issued a driver’s
license and had not been involved in any
vehicular accident prior to the collision.
Is the operation of a school bus service
considered as a private carrier?
A: NO. The Pereñas, as the operators of a school bus
service, were:
a) engaged in transporting passengers
generally as a business, not just as a
casual occupation;
b) undertaking to carry passengers over
established roads by the method by
which the business was conducted; and
c) transporting students for a fee.
Despite catering to a limited clientèle, the Pereñas
operated as a common carrier because they held
themselves out as a ready transportation
indiscriminately to the students of a particular
school living within or near where they operated
the service and for a fee (Sps. Pereña v. Sps. Zarate,
G.R. No. 157917, August 29, 2012).
Test for determining whether one is a common
carrier (1996 Bar)
The true test for a common carrier is not the
quantity or extent of the business actually
transacted, or the number and character of the
conveyances used in the activity, but whether the
undertaking is a part of the activity engaged in by
the carrier that he has held out to the general public
as his business or occupation. The question must be
determined by the character of the business actually
carried on by the carrier, not by any secret intention
or mental reservation it may entertain or assert
when charged with the duties and obligations that
the law imposes (Sps. Pereña v. Sps. Zarate, supra).
The concept of common carriers contemplated
under Article 1732 of the Civil Code and the fact that
the said concept corresponds to the concept of
“public service” under the Public Service Act results
in the application of the following rules or
principles:
a. Art. 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
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
ancillary activity (De Guzman v. CA, G.R. No.
L-4782, December 22, 1988).
b. Art. 1732 also carefully avoids making any
distinction between a person or enterprise
offering transportation service on a regular
or scheduled basis and one offering suhc
service on an occasional, episodic or
unscheduled basis (Ibid.).
c. Art. 1732 does not distinguish between a
carrier offering its services to the “general
public,” and one who offers services or
solicits its business only from a narrow
segment of the general population (Ibid.).
d. A person or entity is a common carrier and
has the obligations of the common carrier
under the Civil Code even if he did not
secure a Certificate of Public Convenience
(Ibid.).
e. The Civil Code makes no distinction as to
the means of transporting, as long as it is by
land, water or air (First Philippine Industrial
Corporation v. CA, G.R. no. 125948,
December 29, 1998).
f. The Civil Code does not provide that the
transportation should be by motor vehicle
(Ibid.).
g. A person or entity may be a common
carrier even if he has no fixed and publicly
known route, maintains no terminals, and
issues no tickets (Asia Lighterage and
Shipping, Inc. v. CA, G.R. No. 147246, August
19, 2003).
h. A person or entity need not be engaged in
the business of public transportation for
the provisions of the Civil Code on common
carriers to apply to them (Fabre, Jr. v. CA,
G.R. No. 111127, July 26, 1996).
i. The carrier can also be a common carrier
even if the operator does not own the
vehicle or vessel that he or she operates
(Cebu Salvage Corporation v. Philippine
Home Assurance Corp., G.R. No. 150403,
January 25, 2007).
(Aquino and Hernando, 2016)
Q: Alejandro Camaling is engaged in buying
copra, charcoal, firewood, and used bottles and
in reselling them in Cebu City. He uses two (2)
big Isuzu trucks for the purpose; however, he
has no certificate of public convenience or
franchise to do business as a common carrier.
On the return trips to Alegria, he loads his trucks
with various merchandise of other merchants in
Alegria and in the two neighboring
municipalities. He charges them freight rates
much lower than the regular rates. In one of the
return trips, one cargo truck was loaded with
several boxes of sardines, owned by Pedro
Rabor. While passing the zigzag road between
122
 Mercantile Law
Carcar and Barili, the truck was hijacked by
three (3) armed men who took all the boxes of
sardines and kidnapped the driver and his
helper, releasing them only two (2) days later.
Rabor sought to recover from Alejandro the
value of the sardines. The latter argued that he
is not a common carrier. If you were the judge,
would you sustain the contention of Alejandro?
(1991 Bar)
A: NO. If I were the judge, I would rule that
Alejandro is a common carrier. A person who offers
his services to carry passengers or goods for a fee is
a common carrier, regardless of whether he has a
certificate of public convenience or not, whether it
is his main business or is incidental to such
business, whether it is scheduled or unscheduled
service, and whether he offers his services to the
Common carrier v.Private carrier (2002 Bar)
COMMON CARRIER
To whom the Undertakes to carry passengers or goods
carrier caters its for the public
services
Civil Code Provisions on Common Carriers,
Public Service Act, and other special laws
Governing laws relating to transportation
(CICOCA-PSA-SPEC)
Degree of
Diligence Extraordinary diligence
required
1. If the goods are lost, destroyed or
Presumption of deteriorated.
Negligence 2. In case of death of or injuries to
passengers
Whether subject
Subject to regulation by a regulatory
to regulation or
agency
not
A common carrier cannot stipulate that it
Exemption from is exempt from liability for negligence of its
liability agents or employees. Such stipulation is
void as it is against public policy
DILIGENCE REQUIRED OF COMMON CARRIERS
The diligence required of common carriers is
extraordinary diligence (NCC, Art. 1733).
It is that extreme measure of care and caution which
persons of unusual prudence and circumspection
use for securing and preserving their own property
or rights. The law requires common carriers to
render service with the greatest skill and utmost
foresight (Loadmasters Services v. Glodel Brokerage,
G.R. 179446, January 10, 2011).
123
general public or to a limited few (De Guzman v. CA,
G.R. No. 47822, December 27, 1988).
Private carrier
A private carrier is one who, without making the
activity a vocation, or without holding himself or
itself out to the public as ready to act for all who may
desire his or its services, undertakes, by special
agreement in a particular instance only, to transport
goods or persons from one place to another either
gratuitously or for hire (Sps Pereña v. Sps Zarate,
supra).
A carrier which does not qualify under the
requisites of a common carrier is deemed a private
carrier (National Steel Corporation v. CA, G.R. No.
112287, December 12, 1997).
PRIVATE CARRIER
Carriage is generally undertaken by special
agreement and it does not hold itself out to
carry goods for the general public
Civil Code provisions on ordinary
contracts
Ordinary diligence or diligence of a good
father of the family
No presumption as to negligence
NOT subject to regulation by a regulatory
agency
A private carrier may validly enter into a
stipulation exempting it from liability.
Reasons for the requirement of extraordinary
diligence:
1. Because of the nature of the business of
common carrier which is public service; and
2. For public policy consideration - the common
carriers are supposed to serve the public
interest and therefore, they have to exercise
extraordinary diligence (Martin, 1989).
Q: Why is the defense of due diligence in the
selection and supervision of an employee not
available to a common carrier? (2002 Bar)
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
A: The defense of due diligence in the selection and carrier at the place of
supervision of an employee is not available to a destination until the
common carrier because the degree of diligence consignee has been
required of a common carrier is not the diligence advised of the arrival of
of a good father of a family but extraordinary the goods and has been
diligence, i.e., diligence of the greatest skill and given a reasonable
utmost foresight. opportunity thereafter
to remove them or
Q: Are common carriers liable for injuries to otherwise dispose of
passengers even if they have observed ordinary them.
diligence and care? Explain. (2015 Bar)
The requirement to observe extraordinary diligence
A: YES, common carriers are liable to injuries to begins with the actual delivery of the goods for
passengers even if the carriers observed ordinary transportation, and not merely with the formal
diligence and care because the obligation imposed execution of a receipt or bill of lading; the issuance
upon them by law is to exercise extraordinary of a bill of lading is not necessary to complete
diligence. Common carriers are bound to carry the delivery and acceptance by the carrier (Compania
passengers safely as far as human care and foresight Maritima v. Insurance Co. of North America, G.R. No.
can provide, using the utmost diligence of very L-18965, October 30, 1964).
cautious persons with a due regard for all the
circumstances. Q: In cases where the cargoes are damaged when
it is being unloaded from the vessel, is the vessel
Exercise of extraordinary diligence in the owner relieved of its responsibility to observe
carriage of goods and transport of passengers extraordinary diligence from the moment the
cargoes were delivered to the arrastre
EXTRAORDINARY DILIGENCE operator?
Carriage of Goods Transport of
Passengers A: NO. Under the Civil Code, other pertinent laws
Commencement and jurisprudence, the extraordinary responsibility
Commences from the of common carriers lasts until the time the goods
Commences from the moment the person are actually or constructively delivered by the
time the goods are who purchases the carrier to the consignee or the person who has the
unconditionally placed ticket from the carrier right to receive. There is actual delivery in contracts
in the possession of and presents himself at the for the transport of goods when possession has
received by the carrier proper place and in a been turned over to the consignee or to his duly
for transportation proper manner to be authorized agent and a reasonable time is given him
transported to remove the goods. In this case, since the
Duration discharging of the containers had not yet been
1. GR: Continues until completed at the time the damage occurred, there
the goods are delivered, was still no delivery, actual or constructive, of the
actually or cargoes (Westwind Shipping Corp v. UCPB General
constructively, by the Insurance Co., G.R. No. 200289 November 25, 2013).
carrier to the consignee
or to the person who Q: X, while driving his Toyota Altis, tried to cross
has a right to receive the railway tract of PNR along Blumentritt
them, and even when Avenida Ext., Manila. The train, as it approached
Continues until the Blumentritt Avenida Ext., applied its horn as a
they are temporarily
passenger has been warning to all the vehicles that might be
unloaded or stored in
landed at the port of crossing the railway tract, but there was really
transit
destination and has nobody manning the crossing. X was listening to
left the vessel owner’s his lpod Touch, hence, he did not hear the sound
XPN:The shipper or
dock or premises of the horn of the train and so his car was hit by
owner had made use of
the right or stoppage in the train. As a result of the accident, X suffered
transit. some injuries and his car was totally destroyed
as a result of the impact. Is PNR liable? (2012
2. Continues even Bar)
during the time the
goods are stored in a A: NO. PNR is not liable because X should have
warehouse of the known that he was crossing a place designated as

UNIVERSITY OF SANTO TOMAS 124

2019 GOLDEN NOTES
 Mercantile Law
crossing for train, and therefore should have been Q: Fil-Asia Air Flight 9I6 was on a scheduled
more careful. passenger flight from Manila when it crashed as
it landed at the Cagayan de Oro airport. The pilot
Causes of action for failure to observe diligence miscalculated the plane's approach and
required undershot the runway. Ten passengers died at
the crash scene.
PERSON WHO HAS BASIS OF CAUSE OF
CAUSE OF ACTION ACTION AGAINST THE One of them managed to leave the plane but was
COMMON CARRIER run over by an ambulance coming to the rescue.
Third person who Tort (extra-contractual Another was an airline employee who hitched a
suffered damages negligence) free ride to Cagayan de Oro and who was not in
Breach of the contract of the passenger manifest.
Shipper of the
carriage (Culpa
goods damaged The Civil Aeronautics Authority investigation
Contractual)
Heir/s of the showed that the co-pilot who had control of the
deceased plane's landing had less than the required flying
Breach of the contract of and landing time experience, and should not
passengers or the
carriage (Culpa have been in control of the plane at the time. He
passenger himself
Contractual) was allowed to fly as a co-pilot because of the
for the injuries
sustained by him scarcity of pilots - Philippine pilots have been
recruited by foreign airlines under vastly
CAUSE OF ACTION improved flying terms and wages so that newer
OF THE INJURED BASIS OF CAUSE OF and less trained pilots are being locally
PASSENGER OR HIS ACTION deployed. The main pilot, on the other hand, had
HEIRS, IF THE a very high level of blood alcohol at the time of
PASSENGER DIES: the crash.
Culpa criminal
You are part of the team that the victims hired to
If the driver is convicted handle the case for them as a group. In your case
and it turns out that he conference, the following questions came up:
is insolvent, the heirs/
passengers may run a. Explain the causes of action legally possible
Against the under the given facts against the airline and
after the employer of
negligent driver the pilots; whom will you specifically
the driver, pursuant to
the employer’s implead in these causes of action?
subsidiary liability b. How will you handle the cases of the
under Article 103, in passenger run over by the ambulance and
relation to Arts. 100 and the airline employee allowed to hitch a free
102, RPC. ride to Cagayan de Oro? (2013 Bar)
Tort
Against the carrier A:
and driver operating a. A complaint for breach of contract of carriage
the other vehicle at can be filed against Fil-Asia Air for failure to
fault exercise extraordinary diligence in
Culpa Contractual; transporting the passengers safely from their
Direct and primary point of embarkation to their destination (Art.
1755, NCC).
The liability of the
common carrier and his A complaint based on a quasi-delict can be filed
driver as well as the against the pilots because of their fault and
Against the common negligence (Art. 2176, NCC). Fil-Asia Air can be
operator of the other
carrier at fault included for negligence in the selection and
vehicle and his driver is
joint and several (J. supervision of the pilots (Art. 2180, NCC).
Dimaampao, citing Tiu v.
Arriesgado, G.R. No. A third cause of action may be a criminal
138060, September 1, prosecution for the reckless imprudence
2004). resulting in homicide against two pilots. The
airline will be subsidiary liable for the civil

UNIVERSITY OF SANTO TOMAS

125 FACULTY OF CIVIL LAW
 Transportation Laws
liability, only after the pilots are convicted and
found to be insolvent.
b. It is the driver of the ambulance and his
employer who should be held liable for
damages because a passenger was run over.
This is in accordance with Articles 2176 and
2180 of the Civil Code. There could also be a
criminal prosecution for reckless imprudence
resulting in homicide against the ambulance
driver and his consequent civil liability.
Since the airline employee was being
transported gratuitously, Fil-Asia Air was not
required to exercise extraordinary diligence for
his safety and only ordinary care (Lara v.
Valencia, G.R. No. L-9907, June 30, 1958).
LIABILITIES OF COMMON CARRIER
Presumption of negligence in the carriage of
goods (1997, 2001, 2008 Bar)
GR: There is a presumption of negligence if the
goods are lost, destroyed, or deteriorated.
XPNs: (Dica-WA-COa-Ed)
1. Natural disaster or calamity which is the
proximate cause of the loss (flood, storm,
earthquake, lightning);
2. Acts of public enemy in war, whether
international or civil;
3. Act of omission of the shipper or passenger;
4. Character of the goods or defects in the packing
or container;
5. Order or act of competent public authority (Art.
1734, NCC); or
6. Exercise of extraordinary diligence (Art. 1735,
NCC).
Presumption of negligence in the transportation
of passengers (1990, 1994 Bar)
In case of death of or injuries to passengers,
common carriers are presumed to have been at fault
or to have acted negligently (NCC, Art. 1756).
However, such presumption may be refuted by
proving observance of extraordinary diligence as
prescribed by Article 1733 of the NCC.
Q: Is it important that the plaintiff still prove
that the subject shipment suffered actual
shortage before the burden is shifted to the
defendant common carrier to prove that it
exercised extraordinary diligence?
A: YES. 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
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
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 (Asian Terminals, Inc.
v. Simon Enterprises, Inc., G.R. No. 177116, February
27, 2013).
Q: Peter hailed a taxicab owned and operated by
Jimmy Cheng and driven by Hermie Cortez. On
the way to Malate, the taxicab collided with a
passenger jeepney, as a result of which Peter’s
left leg was fractured. Peter sued Jimmy for
damages, based on contract of carriage, and
Peter won. Jimmy wanted to challenge the
decision before the SC on the ground that the
trial court erred in not making an express
finding as to whether or not Jimmy was
responsible for the collision and, hence, civilly
liable to Peter. He went to see you for advice.
What will you tell him? Explain (1990 Bar).
A: I will advise Jimmy to desist from challenging the
decision. The action of Peter being based on culpa
contractual, the carrier’s negligence is presumed
upon the breach of contract. The burden of proof
instead would lie on Jimmy to establish that despite
an exercise of utmost diligence, the collision could
not have been avoided.
Q: In a court case involving claims for damages
arising from death and injury of bus
passengers, counsel for the bus operator filed a
demurrer to evidence arguing that the
complaint should be dismissed because the
plaintiffs did not submit any evidence that the
operator or its employees were negligent. If
you were the judge, would you dismiss the
complaint? (1997 Bar)
A: NO. In the carriage of passengers, the failure of
the common carrier to bring the passengers safely
to their destination immediately raises the
presumption that such failure is attributable to the
carrier‘s fault or negligence, the plaintiff need not
adduce proof of specific acts of negligence committed
by the carrier. It is for the carrier to rebut such
presumption.
Presumption of negligence
126
 Mercantile Law
The court need not make an express finding of fault
or negligence of common carriers, the law imposes
liability upon common carriers, as long as it shown
that: (Con-LoDID)
1. There exist a contract between the passenger
or the shipper and the common carrier; and
2. That the loss, deterioration, injury or death
took place during the existence of the contract
(Air France v. Gillego, G.R. No. 165266, December
15, 2010).
Effect of Acquittal
The acquittal of the employee of the common carrier
in the criminal case is immaterial to the case for
breach of contract (Heirs of Marcial K. Ochoa v. G&S
Transport Corp., G.R. Nos. 170071 and 170125, March
9, 2011).
Q: Vivian Martin was booked by PAL, which
acted as ticketing agent of Far East Airlines, for
a round trip flight on the latter’s aircraft, from
Manila–Hong Kong- Manila. The ticket was cut
by an employee of PAL. The ticket showed that
Vivian was scheduled to leave Manila at
5:30p.m. Vivian arrived at NAIA an hour before
the time scheduled in her ticket, but was told her
flight had left at 12:10p.m. It turned out that the
ticket was inadvertently cut and wrongly
worded. PAL employees nevertheless scheduled
her to fly two hours later aboard their plane. She
agreed and arrived in Hong Kong safely. The
aircraft used by Far East Airlines had an engine
trouble, and did not make it to HK but returned
to Manila. Vivian sued both PAL and Far East.
Could either or both airlines be held liable to
Vivian? Why? (2003 Bar)
A: Only Far East Airline is liable. The instant
petition was based on breach of contract of carriage;
therefore, Vivian can only sue Far East Airlines
alone, and not PAL, since the latter was not a party
to the contract. However, this is not to say that PAL
is relieved from any liability due to any of its
negligent acts. In China Air Lines, Ltd. v. CA, while
not exactly in point, however, illustrates the
principle which governs this particular situation. In
that case, the carrier (PAL), acting as an agent of
another carrier, was also liable for its own negligent
acts or omission in the performance of its duties. Far
East Airlines may also file a third-party complaint
against PAL for the purpose of determining who was
primarily at fault between them. It is but logical, fair,
and equitable to allow Far East Airlines to sue PAL
for indemnification, if it is proven that the latter’s
negligence was the proximate cause of Vivian’s
unfortunate experience, instead of totally absolving
127
PAL from any liability (British Airways v. CA, G.R. No.
121824, January 29, 1998).
VIGILANCE OVER GOODS
EXEMPTING CAUSES
Presumption on the loss, destruction, or
deterioration of goods
GR: The common carrier is presumed to have been
at fault or to have acted negligently when the goods
transported are lost, destroyed, or deteriorated
(Art. 1735, NCC).
XPNs: When the same is due to any of the following
causes only: (FA2 – C O)
1. Fortuitous events (flood, storm, earthquake,
lightning, or other natural disaster or calamity).
Provided, the following conditions are present:
a. Natural disaster was the proximate and
only cause;
b. Carrier exercised due diligence to prevent
or minimize loss before, during, and after
the occurrence of the natural disaster; and
c. The common carrier has not negligently
incurred delay in transporting the goods
(Art. 1739-1740, NCC).
2. Act of the public enemy in war, whether
international or civil, provided:
a. Act was the proximate and only cause; and
b. Carrier exercised due diligence to prevent
or minimize loss before, during, and after
the act (Art. 1739-1740, NCC).
3. Act or omission of the shipper or owner of the
goods, provided:
a. If proximate and only cause – exempting
b. If contributory negligence – mitigating
4. The Character of the goods or defects in the
packing or in the containers; provided, carrier
exercised due diligence to forestall or prevent
loss (Art 1742, NCC).
NOTE: If the fact of improper packing is known
to the carrier or its servants, or apparent upon
ordinary observation, but it accepts the goods
notwithstanding such condition, it is not
relieved from responsibility for loss or injury
resulting therefrom (Southern Lines Inc., v. CA,
GR No. L-16629, January 31, 1962).
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
5. Order or act of competent authority; provided,
the authority is with power to issue the order
(Art. 1743, NCC).
NOTE: There must be an order or act of
competent public authority through which the
goods are seized or destroyed (Art. 1734, NCC).
If the officer acts without legal process, the
common carrier will be held liable (Ganzon v.
CA, GR No. L-48757, May 30, 1988).
In all cases other than those enumerated above,
there is presumption of negligence even if there is
an agreement limiting the liability of the common
carrier in the vigilance over the goods.
FORTUITOUS EVENT
REQUIREMENT OF ABSENCE OF NEGLIGENCE
Requisites of a fortuitous event (FEU-I)
1. The common carrier must be Free from any
participation in or aggravation of the injury to
the creditor.
2. The Event must be such as to render it
impossible for the common carrier to fulfill his
obligation in a normal manner.
3. The event must be Unforeseen or unavoidable.
4. The cause of the breach of obligation must be
Independent of the will of the common carrier
(Real v. Belo, G.R. No. 146224, January 26, 2007).
A mechanical defect is not fortuitous event
Mechanical defects in the carrier are NOT
considered a caso fortuito that exempts the carrier
from responsibility (Sweet Lines, Inc. v. CA, G.R. No.
L-46340, April 29, 1983).
Tire blowout of a jeep is not a fortuitous event
where there exists a specific act of negligence by the
carrier consisting of the fact that the jeepney was
overloaded and speeding at the time of the incident
(Juntilla v. Fontanar, GR No. L-45637, May 31, 1985).
Defective brakes cannot be considered fortuitous in
character (Vergara v. CA, G.R. No. 77679, September
30, 1987).
Fire is not considered a natural disaster
GR: Fire arises almost invariably from some act of
man or by human means. It does not fall within the
category of an act of God.
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
XPN: If the fire is caused by lightning or by other
natural disaster or calamity. (Eastern Shipping Lines
v. IAC, G.R. No. L-69044, May 29, 1987)
NOTE: In case that the goods have already been
deposited in the warehouse of the Bureau of
Customs and the goods were then destroyed by fire,
the carrier is not anymore liable. (Servando v.
Philippine Steam Navigation, G.R. No. L-36481-2,
October 23, 1982)
Typhoon as a fortuitous event
GR: If all the elements of a natural disaster or
calamity concur and there was no contributory
negligence or delay, the occurrence of a typhoon is
a fortuitous event. This holds true especially if the
vessel was seaworthy at the time it undertook that
fateful voyage and that it was confirmed with the
Coast Guard that the weather condition would
permit safe travel of the vessel to its destination
(PhilAm Gen. v. MGG Marine Services, Inc., G.R. No.
135645, March 8, 2002).
The loss of cargoes due to the sinking of a seaworthy
tugboat which was suddenly tossed by waves of
extraordinary height is due to a force majeure
(PhilAm Gen. v. PKS Shipping Company, G.R. 149038,
April 9, 2003).
XPN: If a vessel sank due to a typhoon, and there
was failure to ascertain the direction of the storm
and the weather condition of the path they would be
traversing, it constitutes lack of foresight and
minimum vigilance over its cargoes taking into
account the surrounding circumstances of the case.
Thus, the common carrier will still be liable (Arada
v. CA, G.R. No. 98243, July 1, 1992).
Where a vessel encountered stormy weather and
the coils of wire it was transporting became rusty
because rain entered the hatch of the vessel, the
damage was not due to a fortuitous event, because
heavy rains are foreseeable and rain would not have
entered the hatch if it was closed properly (Eastern
Shipping Lines v. CA, G.R. No. 97412, July 12, 1994).
Q: On a clear weather, M/V Sundo, carrying
insured cargo, left the port of Manila bound for
Cebu. While at sea, the vessel encountered a
strong typhoon forcing the captain to steer the
vessel to the nearest island where it stayed for
seven days. The vessel ran out of provisions for
its passengers. Consequently, the vessel
proceeded to Leyte to replenish its supplies.
Assuming that the cargo was damaged because
of such deviation, who between the insurance
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 Mercantile Law
company and the owner of the cargo bears the
loss? Explain. (2005 Bar)
A: The insurance company is liable. It is an instance
of a valid deviation because the strong typhoon is a
fortuitous event over which neither the master nor
the owner has any control. Deviation is likewise
proper in order to avoid a peril. Common carriers
are responsible for the loss, destruction,
deterioration of the goods unless the same is due to
any of the causes provided by law – which includes,
among others, is when there is flood, storm,
earthquake, lightning, or other natural disaster or
calamities. Moreover, even in cases where a natural
disaster is the proximate and only cause of the loss,
a common carrier is still required to exercise due
diligence to prevent or minimize loss before, during
and after the occurrence of the natural disaster, for
it to be exempt from liability under the law for the
loss of the goods. Such deviation is just proper in its
exercise of extraordinary diligence (The Philippine
American General Insurance Co., Inc. v. MCG Marine
Services, Inc. and Gaerland, G.R. No. 135645, March
28, 2005).
Q: Philip Mauricio shipped a box of cigarettes to
a dealer in Naga City through Bicol Bus Company
(BBC). When the bus reached Lucena City, the
bus developed engine trouble. The driver
brought the bus to a repair shop in Lucena
where he was informed by the mechanic that an
extensive repair was necessary, which would
take at least 2 days. While the bus was in the
repair shop, Typhoon Coring lashed Quezon
Province. The cargoes inside the bus, including
Mauricio’s cigarettes, got wet and were totally
spoiled. Mauricio sued BBC for damage to his
cargoes. Decide. (1987 Bar)
A: BBC is liable for damages to the cargoes lost by
Mauricio. A natural disaster would relieve liability if
it is the proximate and only cause of the damage.
The carrier itself, in this case, had been negligent.
The presumption of negligence in culpa contractual
is not overcome by invoking the defense that there
has been engine trouble, for such defense does not
preclude its having been due to the fault of the
common carrier. The fact that an extensive repair
work was necessary which, in fact, took 2 days to
complete, somehow justifies an impression that the
engine trouble could have been detected, if not
already known, well before the actual breakdown.
Common carrier’s liability for the acts of
strangers or criminals
GR: A common carrier is liable even for acts of
strangers like thieves or robbers.
129
XPN: Where such thieves or robbers acted "with
grave or irresistible threat, violence or force." The
common carrier is not liable for the value of the
undelivered merchandise which was lost because of
an event that is beyond his control (De Guzman v. CA,
supra).
Q: M. Dizon Trucking entered into hauling
contract with Fairgoods Co. whereby the former
bound itself to haul the latter’s 2000 sacks of
soya bean meal from Manila Port Area to
Calamba, Laguna. To carry out faithfully its
obligation, Dizon subcontracted with Enrico
Reyes the delivery of 400 sacks of the soya bean
meal. Aside from the driver, three male
employees of Reyes rode on the truck with the
cargo. While the truck was on its way to Laguna,
two strangers suddenly stopped the truck and
hijacked the cargo. Investigation by the police
disclosed that one of the hijackers was armed
with a bladed weapon while the other was
unarmed. For failure to deliver the 400 sacks,
Fairgoods sued Dizon for damages. Dizon in turn
set up a third party complaint against Reyes
which the latter registered on the ground that
the loss was due to force majeure. Did the
hijacking constitute force majeure to exculpate
Reyes from any liability? (1995 Bar)
A: NO. The hijacking in this case cannot be
considered as force majeure. Only one of the two
hijackers was armed with a bladed weapon. As
against four male employees of Reyes, two (2)
hijackers, with only one of them being armed with a
bladed weapon, cannot be considered force
majeure. In De Guzman vs. Court of Appeals, the
Supreme Court held that hijacking, not being
included in the provisions of Article 1734, must be
dealt with under the provisions of Article 1735 and
thus, the common carrier is presumed to have been
at fault or negligent. To exculpate the carrier from
liability arising from hijacking, he must prove that
the robbers or the hijackers acted with grave or
irresistible threat, violence, or force (Bascos v. CA,
G.R. No. 101089, April 7, 1993)
When an airline company was not authorized to
search passengers for firearms, the loss of the
jewelry and cash of a passenger because of an
armed robbery committed by other passengers is a
force majeure, for which the airline company is not
liable (Quisumbing v. CA, G.R. No L-50076, September
14, 1990).
NOTE: With increased concern over airplane
hijacking and terrorism has come increased security
at the nation’s airports. Passengers attempting to
board an aircraft routinely pass through metal
detectors; their carry-on baggages as well as
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
checked luggage are routinely subjected to x-ray
scans. Should these procedures suggest the
presence of suspicious objects, physical searches
are conducted to determine what the objects
are. There is little question that such searches are
reasonable, given their minimal intrusiveness, the
gravity of the safety interests involved, and the
reduced privacy expectations associated with
airline travel. Indeed, travelers are often notified
through airport public address systems, signs and
notices in their airline tickets that they are subject
to search and, if any prohibited materials or
substances are found, such would be subject to
seizure. These announcements place passengers on
notice that ordinary constitutional protections
against warrantless searches and seizures do not
apply to routine airport procedures (People
v. Suzuki, G.R. No. 120670, October 23, 2003).
Other invalid defenses
Explosion. Damage to cargo from explosion of
another cargo is not ordinarily attributable to peril
of the sea or accidents of navigation particularly
where it occurs after the vessel has ended its voyage
and is finally moored to unload.
Worms and Rats. Whenever the ship is damaged by
worms resulting in damage to the cargo, the carrier
cannot cite the same as an excuse. The same is true
with respect to damage of the cargo by rats whether
the cargo was directly damaged by the rats or by the
water let in through holes gnawed by rats in the ship
or her fixtures.
Water Damage. Damage by seawater is not a valid
excuse where the water gains entrance through a
port that had been left open or insufficiently
fastened on sailing.
Barratry. The ship owner cannot escape liability to
third persons if the cause of damage is barratry. It is
an act committed by the master or crew of the ship
for some unlawful or fraudulent purpose, contrary
to their duty to the owner. (Aquino and Hernando,
2016)
ABSENCE OF DELAY
Rules regarding the time of delivery of goods
and delay
1. If there is an agreement as to time of delivery –
delivery must be within the time stipulated in
the contract or bill of lading.
2. If there is no agreement – delivery must be
within a reasonable time (Saludo, Jr. v. CA, G.R.
No. 95536, March 23, 1992).
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
Delay in the delivery of goods
The carrier shall be liable for damages immediately
and proximately resulting from such neglect of duty
(Ibid; Art. 1170, NCC).
In the absence of a special contract, a carrier is not
an insurer against delay in the transportation of
goods. The effects of delay are as follows:
a. If the common carrier, without just cause,
delays the transportation of the goods or
changes the stipulated or usual route, the
contract limiting the common carrier’s liability
cannot be availed of in case of the loss,
destruction, or deterioration of the goods (Art.
1747, NCC).
NOTE: An agreement limiting the common
carrier’s liability for delay on account of strikes
or riots is valid (Art. 1748, NCC).
b. Excusable delay in carriage merely suspends
and generally does not terminate the contract of
carriage;
c. The carrier shall be made liable when vessel or
vehicle is unreasonably delayed;
d. Carrier remains duty bound to exercise
extraordinary diligence; and
e. Natural disaster shall not free the carrier from
responsibility (Dimaampao & Dumlao-
Escalante, 2014).
However, where the delay in the transportation of
the remains of a deceased person was due to the
fault of the mortuary service, who erroneously
switched the casket with that of another deceased
person, the airline company cannot be held liable
for damages because of the delay (Saludo v. CA,
supra).
Although the delivery of the suitcase of a passenger
was delayed by eleven days, an airline company
cannot be held liable for moral damages, exemplary
damages, and attorney’s fees, where the airline
company was not guilty of bad faith and exerted
efforts in tracing the suitcase (Philippine Air Lines v.
Miano, G.R. No. 106664, March 8, 1995).
DUE DILIGENCE TO PREVENT OR LESSEN LOSS
To free the common carrier from liability in case
of flood, storm or other natural disaster or an act
of a public enemy
1. The common carrier must exercise due
diligence to prevent or minimize loss
before, during, and after the occurrence
(NCC Art., 1739).
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 Mercantile Law
2. The natural disaster or the act of the public
enemy is the proximate and only cause of
the loss (NCC, Art. 1740).
NOTE: If the common carrier negligently incurs
delay in transporting the goods, a natural disaster
shall not free such carrier from responsibility.
Loss due to character of the goods or the faulty
nature of its containers
If the loss, destruction, or deterioration of the goods
was caused by the character of the goods, or the
faulty nature of the packing or the containers, the
common carrier must exercise due diligence to
forestall or lessen the loss.
Q: Because of spillage of the rice during the trip
from Davao to Manila due to the bad condition of
the sacks, there was a shortage in the rice
delivered by the Provident Lines Inc. to the
consignee XYZ Import and Export Corporation.
The carrier accepted the shipment, knowing
that the sacks had holes and some had broken
strings. When sued, Provident Lines, Inc. alleged
that the loss was caused by the spillage of the
rice on account of the defective condition of the
sacks, at the time it received the shipment, and
therefore, it cannot be held liable. Decide. Give
reasons. (1978 Bar)
A: The maritime carrier is liable. Where the fact of
improper packing is known to the carrier or its
servants, or apparent upon ordinary observations,
but the carrier accepts the goods notwithstanding
such conditions, it is not relieved of liability for loss
or injury resulting therefrom (Southern Lines, Inc. v.
CA, 4 SCRA 259).
CONTRIBUTORY NEGLIGENCE
Contributory negligence is the failure of a person
who has been exposed to injury by the fault or
negligence of another, to use such degree of care for
his safety and protection an ordinarily prudent man
would use under the circumstances (Martin, 1989,
citing Rakes v. Atlantic Gulf Co., G.R. No. 1719,
January 23, 1907).
NOTE: Contributory negligence on the part of the
passenger does not justify the common carrier’s
exemption from liability (Martin, 1989).
Q: Nelson owned and controlled the Sonnel
Construction Company. Acting for the company,
Nelson contracted the construction of a building.
Without first installing a protective net atop the
sidewalks adjoining the construction site, the
company proceeded with the construction
work. One day, a heavy piece of lumber fell from
131
the building. It smashed a taxicab which at that
time had gone off-road and onto the sidewalk in
order to avoid the traffic. The taxicab
passengers died as a result.
a. If you were the counsel for Sonnel
Construction, how would you defend your
client? What would be your theory?
b. Could the heirs hold the taxicab owner and
driver liable? Explain. (2008 Bar)
A:
a. I shall raise the affirmative defense of
contributory negligence. The proximate cause
of death is the violation of the taxi driver of
traffic rules and regulations when it drove off-
road to avoid heavy traffic. The lumber that fell
from the building was only the immediatecause
ofdeath of the victims. Further, Sonnel
Construction, exercised due diligence in the
selection and supervision of its employees.
b. YES. Both taxicab owner and driver may be held
liable based on breach of contract of carriage
and negligence in the selection and supervision
of employees for quasi-delict. The driver can be
held criminally liable for reckless imprudence
resulting to homicide and for damages under
quasi-delict as provided in Article 2180— an
employer may be held solidarily liable for the
negligent act of his employee. Hence, in this
case, the taxicab owner is exempted from
liability while the taxi cab driver is liable solely
and personally for criminal prosecution.
Q: A and his classmates took a bus from UP to
Quiapo. On the way, another Quiapo-bound bus
tries to overtake them. A and his classmates
dared the bus driver to run faster and race with
the other bus. The driver takes their dare, to the
delight of A and his friends who cheered him. On
rounding the curve, the bus driver fails to slow
down and the bus turns turtle, resulting in the
death of A and injuries to the other passengers.
The bus carried the following sign: “Do not talk
to driver while bus is on motion, otherwise the
company will not assume liability for any
accident.”
Explain briefly the extent of the liability, if any,
of the bus company, giving the legal provisions
and principles involved. (1983 Bar)
A: The bus company is liable for damages to A’s
heirs and to all the injured passengers. Under the
Civil Code, a common carrier is duty bound to
exercise extraordinary diligence in carrying its
passengers through the negligence or willful acts of
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
its employees even if the latter have acted beyond
the scope of their authority or in violation of their
orders. This liability cannot be eliminated or limited
by stipulation or by posting notices. Although it may
be argued that A was guilty of contributory
negligence, such an argument loses its force in the
face of the driver’s recklessness in taking the dare.
And even if such argument would be accepted, at
most it can only mitigate the amount of damages,
since the proximate cause of the accident was the
driver’s willful and reckless act in running a race
with the other bus.
Rule if there is contributory negligence on the
part of the shipper
If the shipper or owner merely contributed to the
loss, destruction, or deterioration of the goods, the
proximate cause thereof being the negligence of the
common carrier, the latter shall be liable for
damages, which however, shall be equitably
reduced (Art. 1741, NCC).
DURATION OF LIABILITY
The New Civil Code is explicit when it comes to the
duration of extraordinary responsibility with
respect to goods. Such responsibility 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 was a right to
receive them (Art. 1736, NCC).
The carrier’s responsibility terminates in any of the
following cases:
1. When the goods are delivered actually or
constructively by the carrier to the consignee or to
the person who was a right to receive them (Art.
1736, NCC);
2. When the goods are temporarily unloaded or
stored in transit by reason of the exercise of the
shipper or owner of his right of stoppage in transit;
3. When the consignee has been advised of the
arrival of the goods at the plce of destination and
has had reasonable opportunity to remove them or
dispose of them from the warehouse of the carrier
at the place of destination (Art. 1738, NCC).
DELIVERY OF GOODS TO COMMON CARRIER
The goods are deemed delivered to the carrier when
the goods are ready for and have been placed in the
exclusive possession, custody and control of the
carrier for the purpose of their immediate
transportation and the carrier has accepted them.
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
When the carrier has thus accepted such delivery,
the liability of the carrier commences eo instant
(Saludo, Jr. v. CA, G.R. No. 95536, March 23, 1992,
citing 13 Am. Jur. 2d, Carriers, 763-764).
ACTUAL OR CONSTRUCTIVE DELIVERY
Party to whom delivery should be made
It must be delivered, actually or constructively, to
the consignee or to the person who has a right to
receive them (Art.1736, NCC).
Delivery of the cargo to the customs authorities is
not delivery to the consignee, or to the person who
has a right to receive them (Lu Do & Lu Ym Corp. vs.
Binamira, G.R. No. L-9840, April 22, 1957).
Constructive delivery
There is constructive delivery when delivery is
effected not by actually transferring the possession
of thing to the vendee (in this case, the other party,
either the carrier or the consignee) but by legal
formalities or by symbolic tradition (Pineda, 2010).
NOTE: Delivery of the cargo to the customs
authorities is not delivery of the cargo to the
consignee, or to the person who has a right to
receive them", contemplated in Article 1736,
because in such case the goods are still in the hands
of the Government and the owner cannot exercise
dominion over them. However, the parties may
agree to limit the liability of the carrier considering
that the goods have still to through the inspection of
the customs authorities before they are actually
turned over to the consignee. It is a situation where
the carrier losses control of the goods because of a
custom regulation and it is unfair that it be made
responsible for what may happen during the
interregnum. This stipulation is not contrary to
morals or public policy (Lu Do v. Binamira, G.R. No.
L-9840, April 22, 1957).
Misdelivery by a carrier who was chosen by the
buyer
Misdelivery of the goods is attributable to the
carrier and not to the seller. And, since the carrier
was chosen and authorized to make the delivery by
the buyer itself, the seller cannot be held
responsible for such misdelivery (Smith, Bell & Co.
[Phils.] vs. Gimenez, G.R. No. L-17617, June 29, 1963).
TEMPORARY UNLOADING OR STORAGE
Right of stoppage in transitu
132
 Mercantile Law
It is the right exercised by the seller by stopping the
delivery of the goods, in case of insolvency of the
buyer or consignee, when such goods are already in
transit (NCC, Art. 1530).
The seller may exercise this right either:
1. By obtaining actual possession of the goods; or
2. By giving notice of his claim to the carrier or
other bailee in whose possession the goods are.
NOTE: Notice may be given either to the person
in actual possession of the goods or to his
principal. In the latter case, the notice, to be
effectual, must be given at such time and under
such circumstances that the principal, by the
exercise of reasonable diligence, may prevent a
delivery to the buyer (NCC, Art. 1532).
GR: The common carrier’s duty to observe
extraordinary diligence in the vigilance over the
goods remains in full force and effect even when they
are temporarily unloaded or stored in transit.
XPN: When the shipper or owner has made use of
the right of stoppage in transit (Art. 1737, NCC).
The diligence required is merely ordinary diligence
because of the following:
1. It is holding the goods in the capacity of an
ordinary bailee or warehouseman and not as a
carrier.
2. There is a change of contract from a contract of
carriage to a contract of deposit (Art. 1737,
NCC).
Obligation required of the common carrier in
case of stoppage in transitu
When notice of stoppage in transitu is given by the
seller to the carrier, he must redeliver the goods to,
or according to the directions of, the seller. The
expenses of such delivery must be borne by the
seller (Art. 1532, NCC).
NOTE: If the seller instructs to deliver it somewhere
else, a new contract of carriage is formed and the
carrier must be paid accordingly.
STIPULATIONS LIMITING LIABILITY
Valid stipulations that a common carrier of
goods may indicate in a contract in order to
escape liability
1. A stipulation limiting the liability of the
common carrier for the loss, destruction, or
deterioration of the goods to a degree less
than extraordinary diligence, provided it be:
a. In writing, signed by the shipper or owner;
133
b. Supported by a valuable consideration
other than the service rendered by the
common carrier, and
c. Reasonable, just and not contrary to public
policy.
2. An agreement limiting the common
carrier's liability for delay on account of
strikes or riots (Art. 1748, NCC).
3. A stipulation that the common carrier's
liability is limited to the value of the goods
appearing in the bill of lading, unless the
shipper or owner declares a greater value
(Art. 1749, NCC; 1998, 2002 Bar).
4. A contract fixing the sum that may be
recovered by the owner or shipper for the
loss, destruction, or deterioration of the
goods (Art. 1750, NCC).
NOTE: The contract limiting the common carrier's
liability cannot be availed of in case of loss,
destruction, or deterioration of the goods, if the
common carrier, without just cause:
1. delays the transportation of the goods; or
2. changes the stipulated or usual route (Art.
1747, NCC).
Even if there is an agreement limiting the liability of
the common carrier in the vigilance over the goods,
the common carrier is still disputably presumed to
have been negligent in case of its loss, destruction or
deterioration (Art. 1752, NCC).
Annulment of a stipulation limiting the common
carrier’s liability by the shipper or owner
A stipulation limiting the common carrier’s liability
may be annulled by the shipper or owner if the
common carrier refused to carry the goods unless
the shipper or owner agreed to such stipulation
(Art. 1746, NCC).
VOID STIPULATIONS
Void stipulations in a contract of carriage of
goods (CR2UELED)
1. That the common carrier need not observe any
diligence in the Custody of the goods
2. That the goods are transported at the Risk of
the owner or shipper
3. That the common carrier’s liability for acts
committed by thieves, or of Robbers who do not
act with grave or irresistible threat, violence or
force, is dispensed with or diminished
4. Any similar stipulation that is Unreasonable,
unjust and contrary to public policy
5. That the common carrier shall Exercise a
degree of diligence less than that of a good
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
father of a family, or a man of ordinary
prudence in the vigilance over the movables
transported
6. That the common carrier will not be liable for
any Loss, destruction, or deterioration of the
goods
7. That the common carrier shall not be
responsible for the acts or omissions of his or
its Employees
8. That the common carrier is not responsible for
the loss, destruction or deterioration of goods
on account of the Defective condition of the car,
vehicle, ship, airplane or other equipment used
in the contract of carriage (Art. 1745, NCC).
Q: Discuss whether the following stipulations in
a contract of carriage of a common carrier are
valid:
1. A stipulation limiting the sum that may be
recovered by the shipper or owner to 90%
of the value of the goods in case of loss due
to theft.
2. A stipulation that in the event of loss,
destruction, or deterioration of goods on
account of the defective condition of the
vehicle used in the contract of carriage, the
carrier’s liability is limited to the value of
the goods appearing in the bill of lading
unless the shipper or owner declares a
higher value (2002 Bar).
A:
1. Invalid. Article 1745 provides that a
stipulation which dispenses or diminishes
the common carrier’s liability for acts
committed by thieves or robbers who do
not act with grave and irresistible force,
threat or violence is unreasonable, unjust,
and contrary to public policy.
2. Valid. Article 1749 provides that a
stipulation limiting the carrier’s liability to
the value of the goods appearing in the bill
of lading unless the shipper or owner
declares a higher value, is binding.
LIMITATION OF LIABILITY TO FIXED AMOUNT
A contract fixing the sum that may be recovered for
the loss, destruction, and deterioration of goods is
binding provided that it is:
1. Just and reasonable under the circumstances;
and
2. Has been fairly and freely agreed upon (Art.
1750, NCC).
The liability of a common carrier may, by contract,
be limited to a fixed amount, but the agreement
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
must be in writing and signed by the shipper or
owner of the goods, besides the other requirements
of the law (Shewaran v. PAL, G.R. No. L-20099, July 7,
1966).
Q: Martin Nove shipped an expensive video
equipment to a friend in Cebu. Martin had
bought the equipment from Hong Kong for U.S.
$5,000. The equipment was shipped through
M/S Lapu-Lapu under a bill of lading which
contained the following provision in big bold
letters: “The limit of the carrier’s liability for any
loss or damage to cargo shall be P200 regardless
of the actual value of such cargo, whether
declared by shipper or otherwise.”
The cargo was totally damaged before reaching
Cebu. Martin Nove claimed for the value of his
cargo ($5,000 or about P100,000) instead of just
P200 as per the limitation on the bill of lading.
Is there any legal basis for Nove’s claim?(1987
Bar)
A: YES, there is legal basis for the claim of Martin
Nove. The stipulation limiting the carrier’s liability
up to a certain amount “regardless of the actual
value of such cargo, whether declared by its shipper
or otherwise,” is violative of the requirement of Art.
1750 of Civil Code, which provides that stipulations
limiting liability should be fairly and freely agreed
upon. A stipulation that denies to the shipper the
right to declare the actual value of his cargoes and
to recover, in case of loss or damage, on the basis of
such stipulation would be invalid.
LIMITATION OF LIABILITY IN THE ABSENCE OF
DECLARATION OF GREATER VALUE
GR: The liability of the common carrier shall not
exceed the stipulation in a contract of carriage, even
if the loss or damage results from the carrier's
negligence (Eastern and Australian Shipping Co. v.
Great American Insurance Co., GR No. L-37604,
October 23, 1981).
XPN: Common carrier’s liability may be extended
beyond the specified amount mentioned if the
shipper or owner of the goods:
1. Declares a greater value and;
2. Pays corresponding freight (Art. 1749, NCC)
The liability of an airline company for lost baggage
is limited to the amount stated in the ticket unless
the passenger declared a higher valuation and paid
additional fare (Pan American World Airways, Inc. v.
IAC, G.R. No. 70462, August 11, 1988).
Q: X took a plane from Manila bound for Davao
via Cebu where there was a change of planes. X
arrived in Davao safely but to his dismay, his two
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 Mercantile Law
suitcases were left behind in Cebu. The airline
company assured X that the suitcases would
come in the next flight but they never did. X
claimed P2,000.00 for the loss of both suitcases,
but the airline was willing to pay only P500.00
because the airline ticket stipulated that unless
a higher value was declared, any claim for loss
cannot exceed P250 for each piece of luggage. X
reasoned out that he did not sign the stipulation
and in fact had not even read it. X did not declare
a greater value despite the fact that the clerk had
called the attention to the stipulation in the
ticket. (1998 Bar)
A: X is bound by the stipulation written in the ticket
because he consented to the terms and conditions
thereof from the moment he availed the services of
the carrier. The fact that he did not sign the ticket
and he was not able to declare the true value of his
luggage is not a valid claim in order for the carrier
to pay for the value of the lost luggage. As a general
rule, the liability of the common carrier shall not
exceed the stipulation in a contract of carriage even
if the loss or damage results from the carrier’s
negligence However, it is subject to an exception
provided under Art. 1749 of NCC, as when the
shipper or owner of the goods declares a greater
value and pays corresponding freight. X, therefore is
only entitled to P500 for the two pieces of luggage
lost (Eastern and Australian Shipping Co., v. Great
American Insurance Co., G.R. No. L-37604, October 23,
1981).
But when the goods being shipped are packed in
cartons placed in containers supplied by the carrier
and the number of cartons is disclosed in the
shipping documents, it is the number of cartons and
not of the containers that should be used in
computing the liability of the carrier for the loss of
the goods, as it is the cartons that constitute the
packages (Eastern Shipping Lines, Inc. s. IAC, G.R. No.
L-71478, May 29, 1987).
LIABILITY FOR BAGGAGE OF PASSENGERS
Baggage is any personal property carried by the
passenger, either check-in or hand-carry (Sec. 2.1,
Air Passenger Bill of Rights).
CHECKED-IN BAGGAGE
The provisions of Articles 1733 to 1753, NCC shall
apply (Art. 1754, NCC).
An airline company is liable for moral damages
where it left behind the luggage of a passenger, and
its employees did not assist the passenger in
locating his luggage but instead treated him
135
boorishly (Pan American World Airways v. IAC, G.R.
No. 68988, June 21, 1990).
In one case, the Court held that the cause of the loss
was the negligence of the carrier in not ensuring
that the doors of the baggage compartment of the
bus were securely fastened (Sarkies Tours
Philippines, Inc. v. CA, G.R. No. 108897, October 2,
1997).
BAGGAGE IN POSSESSION OF PASSENGERS
The rules in Articles 1998 and 2000 to 2003, NCC
concerning the responsibility of hotel-keepers for
necessary deposit shall be applicable.
1. The common carrier shall be responsible for
shipper’s baggage as depositaries, provided
that:
a. notice was given to them, or to their
employees, of the effects brought by
the guests; and
b. on the part of the shipper, they take the
precautions which said common
carriers or their substitutes advised
relative to the care and vigilance of
their effects (Art. 1998, NCC).
2. The responsibility shall include the loss of, or
injury to the personal property of the shipper
caused by the employees of the common carrier
as well as strangers; but not that which may
proceed from any force majeure (Art. 2000,
NCC).
3. The act of a thief or robber, who has entered the
carrier, is not deemed force majeure, unless it is
done with the use of arms or through an
irresistible force (Art. 2001, NCC).
4. The common carrier is not liable for
compensation if the loss is due to the acts of the
shipper, his family, or servants, or if the loss
arises from the character of the things brought
into the carrier (Art. 2002, NCC).
5. The common carrier cannot free himself from
responsibility by posting notices to the effect
that he is not liable for the articles brought by
the passenger. Any stipulation between the
common carrier and the shipper whereby the
responsibility of the former as set forth in
Articles 1998 to 2001 is suppressed or
diminished shall be void (Art. 2003, NCC).
Q: Pasahero, a paying passenger, boarded a
Victory Liner bus bound for Olongapo. He chose
a seat at the front near the bus driver. Pasahero
told the bus driver that he had valuable items in
his bag which was placed near his feet. Since he
had not slept for 24 hours, he requested the
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
driver to keep an eye on the bag should he doze
off during the trip.
While Pasahero was asleep, another passenger
took the bag away and alighted at Guagua,
Pampanga. Is Victory Liner liable to Pasahero?
Explain. (1987 Bar)
A: YES. The responsibility of common carriers in the
case of loss or damage to hand-carried baggage is
governed by the rule on necessary deposits. The
common carrier is thus liable for the loss of the
personal property caused by its employees or by
strangers. In this case, the passenger told the driver
that he had valuable item placed beside the driver’s
seat. If the driver exercised due diligence, he could
have prevented the loss of the bag.
SAFETY OF PASSENGERS
A common carrier is bound to carry the passengers
safely as far as human care and foresight can
provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances
(Art. 1755, NCC).
Who are not considered passengers (WAMU)
1. One who has boarded a Wrong vehicle, has been
properly informed of such fact, and on alighting,
is injured by the carrier.
2. Invited guests and Accommodation passengers.
3. One who attempts to board a Moving vehicle,
although he has a ticket, unless the attempt be
with the knowledge and consent of the carrier.
4. One who remains on a carrier for an
Unreasonable length of time after he has been
afforded every safe opportunity to alight.
The carrier is thus NOT obliged to exercise
extraordinary diligence but only ordinary diligence
in these instances.
Assumption of risk on the part of passengers
Passengers must take such risks incident to the
mode of travel. The passenger must observe the
diligence of a good father of a family to avoid injury
to himself (Art. 1761, NCC).
Carriers are not insurers of any and all risks to
passengers and goods. It merely undertakes to
perform certain duties to the public as the law
imposes, and holds itself liable for any breach
thereof (Pilapil v. CA, G.R. No. 52159, Dec. 22, 1989).
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
Q: Wisconsin Transportation Co., Inc. (WTC)
owned and operated an inter-island de luxe bus
service plying the Manila-Batangas-Mindoro
route. Three friends, namely: Aurelio, Jerome
and Florencio rode on the same WTC bus from
Manila bound for Mindoro. Aurelio purchased a
ticket for himself. Jerome, being a boyhood
friend of the bus driver, was allowed a free ride
by agreeing to sit during the trip on a stool
placed in the aisle. Florencio, already penniless
after spending all of his money on beer the night
before, just stole a ride in the bus by hiding in
the on-board toilet of the bus.
During the trip, the bus collided with another
bus coming from the opposite direction. The
three friends all suffered serious physical
injuries.
What are WTC's liabilities, if any, in favor of
Aurelio, Jerome and Florencio? Explain your
answer. (2017 Bar)
A: As a common carrier, WTC is liable to Aurelio for
breach of contract of carriage, the latter being a
passenger who purchased a ticket for himself. WTC
is also liable to Jerome for breach of contract of
carriage because he was a passenger although he
was being transported gratuitously. However, WTC
has no liability in favor of Florencio for breach of
contract of carriage. A stowaway like Florencio, who
secures passage by fraud, is not a passenger.
NOTE: 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. 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 (Articles 1755 and
1756, NCC, Lara v. Valencia, G.R. No. L-9907, June 30,
1958).
VOID STIPULATIONS
Stipulations limiting the liability of common
carrier in case of injury or death
GR: The responsibility of a common carrier for the
safety of passengers cannot be dispensed with or
lessened by stipulation, by posting of notices, by
statements on tickets, or otherwise (Art. 1757, NCC).
XPN: When a passenger is carried gratuitously, a
stipulation limiting the common carrier’s liability
for negligence is valid (Art. 1758, NCC).
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 Mercantile Law
NOTE: The passenger must be carried gratuitously.
If it is only a reduction of fare, then any limitation
of the common carrier’s liability is not justified
(2001, 2009 Bar).
XPN to the XPN: Notwithstanding the exception,
common carriers will be liable nevertheless for
willful acts or gross negligence.
DURATION OF LIABILITY
Observance of extraordinary diligence in
transportation of goods commences from the
moment the person who purchases the ticket from
the carrier presents himself at the proper place and
in a proper manner to be transported, and continues
until the passenger has been landed at the port of
destination and has left the vessel owner’s dock or
premises.
WAITING FOR CARRIER OR
BOARDING OF CARRIER
A proper person whom the carrier would be bound
to accept who enters upon the carrier’s premises
such as a station, ticket office, or waiting room, with
the intention of becoming a passenger, will
ordinarily be viewed as assuming the status of a
passenger (LRTA v. Navidad, G.R. No. 145804,
February 6, 2003, citing 10 Am. Jur. 30).
Trains
The carrier is supposed to exercise extraordinary
diligence although the passenger is still waiting for
a coach on the platform of the train station (LRTA v.
Navidad, G.R. No. 145804, February 6, 2003).
However, there is no obligation on the part of a
street railway company to stop its cars to let on
intending passengers at other points than those
appointed for stoppage (De Prado v. Manila Electric
Co., G.R. No. 29462, March 7, 1929).
Q: City Railways, Inc. (CRI) provides train
service, for a fee, to commuters from Manila to
Calamba, Laguna. Commuters are required to
purchase tickets and then proceed to designated
loading and unloading facilities to board the
train. Ricardo Santos purchased the ticket for
Calamba and entered the station. While waiting,
he had an altercation with the security guard of
CRI leading to a fistfight. Ricardo Santos fell on
the railway just as a train was entering the
station. Ricardo Santos was run over by the
train. He died. CRI contented that the mishap
occurred before Ricardo Santos boarded the
train and that it was not guilty of negligence.
Decide. (2008 Bar)
137
A: The contention of CRI must fail. The duty of a
common carrier to provide safety to its passengers
is 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. Furthermore, the common carrier will
still be liable even though its employees acted
beyond the scope of their work (LRTA vs. Navidad,
G.R. No. 145804 February 6, 2003).
Q: P, a sales girl in a flower shop at the Ayala
Station of the MRT bought two (2) tokens or
tickets, one for her ride to work and another for
her ride home. She got to her flower shop where
she usually worked. While P was attending to
her duties at the flower shop, two (2) crews of
the MRT got into a fight near the flower shop,
causing injuries to P in the process. Can P sue the
MRT for contractual breach as she was within
the MRT premises where she would shortly take
her ride home? (2011 Bar)
A: NO, P had no intention to board an MRT train
coach when the incident occurred.
Carriage by sea
The duty of the carrier commences as soon as a
person with bona fide intention of taking passage
places himself in the care of the carrier or its
employees and is accepted as passenger (Aquino
and Hernando, 2016, citing 80 C.J.S. 1085).
Land transportation
The act of the driver in stopping their conveyances
is a continuous offer to riders (continuing offer
rule). The passenger is deemed to be accepting the
offer if he is already attempting to board the
conveyances and the contract of carriage is
perfected from that point.
It is the duty of common carriers of passengers,
including common carriers by railroad train,
streetcar, or motorbus, to stop their conveyances a
reasonable length of time in order to afford
passengers an opportunity to board and enter, and
they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up or
jerking of their conveyances while they are doing so
(Dangwa vs. CA, G.R. No. 95582, October 7, 1991).
Q: A bus of GL Transit on its way to Davao
stopped to enable a passenger to alight. At that
moment, Santiago who had been waiting for a
ride, boarded the bus. However, the bus driver
failed to notice Santiago who was still standing
on the bus platform, and stepped on the
accelerator. Because of the sudden motion,
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
Santiago slipped and fell down suffering serious
injuries. Is GL Transit liable? (1996 Bar)
A: YES. Santiago may hold GL Transit liable for
breach of contract of carriage. It was the duty of the
driver, when he stopped the bus, to do no act that
would have the effect of increasing the peril to a
passenger such as Santiago while he was attempting
to board the same. When a bus is not in motion there
is no necessity for a person who wants to ride the
same to signal his intention to board. A public utility
bus, once it stops, is in effect making continuous
offer to bus riders. It is the duty of common carriers
of passengers to stop heir conveyances while they
are doing so. Santiago, by stepping and standing on
the platform of the bus is already considered as a
passenger and is entitled to all the rights and
protection pertaining to a contract of carriage
(Dangwa Trans. Co. v. CA, G.R. No. 95582, October 7,
1991).
When a Public Utility Vehicle is not in motion, it
is not necessary for a person who wants to ride
the same to signal his intention to board
When the bus is not in motion, there is no necessity
for a person who wants to ride the same to signal his
intention to board. A public utility bus, once it stops,
is in effect making a continuous offer to bus riders.
Hence, it becomes the duty of the driver and the
conductor, every time the bus stops, to do no act
that would have the effect of increasing the peril to
a passenger while he was attempting to board the
same. The premature acceleration of the bus in this
case was a breach of such duty.
A person, by stepping and standing on the platform
of the bus, is already considered a passenger and is
entitled all the rights and protection pertaining to
such a contractual relation. Hence, it has been held
that the duty which the carrier owes to its patrons
extends to persons boarding cars as well as to those
alighting therefrom (Dangwa Trans. Co. v. CA, supra).
ARRIVAL AT DESTINATION
Liability for death or injury to passengers upon
arrival at destination
Once created, the relationship will not ordinarily
terminate until the passenger has, after reaching his
destination, safely alighted from the carrier's
conveyance or had a reasonable opportunity to
leave the carrier's premises. All persons who
remain on the premises a reasonable time after
leaving the conveyance are to be deemed
passengers, and what is a reasonable time or a
reasonable delay within this rule is to be
determined from all the circumstances, and
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
includes a reasonable time to see after his baggage
and prepare for his departure (La Mallorca v. CA,
G.R. No. L-21486, May 14, 1966).
Carrier-passenger relationship continues until the
passenger has been landed at the port of destination
and has left the vessel-owner’s premises. The
victim’s presence in a vessel after one (1) hour from
his disembarkation is not enough in order to
absolve the carrier from liability in his death
(Aboitiz Shipping Corporation v. CA, G.R. No. 84458,
November 6, 1989).
Q: Robert De Alban and his family rode a bus
owned by Joeben Bus Company. Upon reaching
their desired destination, they alighted from the
bus but Robert returned to get their baggage.
However, his youngest daughter followed him
without his knowledge. When he stepped into
the bus again, the bus accelerated that resulting
to Robert’s daughter death. The bus ran over
her. Is the bus company liable?
A: YES. The relation of carrier and passenger does
not cease at the moment the passenger alights from
the carrier’s vehicle at a place selected by the carrier
at the point of destination, but continues until the
passenger has had a reasonable time or reasonable
opportunity to leave the current premises (La
Mallorca v. CA, GR L-20761, July 27 1966).
LIABILITY FOR ACTS OF OTHERS
EMPLOYEES
Common carriers are liable for the acts of their
employees
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. The 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 (NCC, Art. 1759).
NOTE: By express provision of Article 1759, it is no
defense that the employee acted beyond the scope
of his authority because the riding public is not
expected to inquire from time to time before they
board the carrier whether or not the driver or any
other employee is authorized to drive the vehicle or
that said driver is acting within the scope of his
authority and observing the existing rules and
regulations required of him by management
(Aquino and Hernando, 2016).
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 Mercantile Law
Q:At around 8:45 in the morning, A, after having
alighted from a passenger bus in front of
Robinsons Galleria along the north-bound lane
of EDSA, was hit and run over by a bus driven by
B, who was then employed by C Transport
Company. A was immediately rushed to the
hospital where she was pronounced dead on
arrival. By reason of the quasi-delict, who
should be held liable for the death of A? B, the
bus driver, C Transport Company, or both?
A: Both B and C Transport Company should be held
solidarily liable as joint tortfeasors. Under Article
2180 of the New Civil Code, employers are liable for
the damages caused by their employees acting
within the scope of their assigned tasks. Once
negligence on the part of the employee is
established, a presumption instantly arises that the
employer was remiss in the selection and/or
supervision of the negligent employee. It is
incumbent upon the employer to rebut this
presumption by presenting adequate and
convincing proof that it exercised the care and
diligence of a good father of a family in the selection
and supervision of its employees. Failing to do this,
a common carrier cannot avoid liability for the
quasi-delict committed by its negligent employee.
The responsibility of two or more persons who are
liable for a quasi-delict is solidary (R Transport
Corporation vs. Luisito G. Yu, G.R. No. 174161,
February 18, 2015).
NOTE: 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, NCC; see
Cangco vs. Manila Railroad Co., supra; Prado vs.
Manila Electric Co., 51 Phil., 900)
Liability of the common carrier as regard the
acts of employees may not be limited by
stipulation
The common carrier’s responsibility cannot be
eliminated or limited by stipulation, by the posting
of notices, by statements on the tickets or otherwise
(Art. 1760, NCC).
Rationale: The basis of the carrier's liability for
assaults on passengers committed by its drivers
rests on the principle that it is the carrier's implied
duty to transport the passengers safely. As between
the carrier and the passenger, the former must bear
the risk of wrongful acts or negligence of the
carrier's employees against passengers, since it, and
not the passengers, has power to select and remove
them(Maranan vs. Perez, GR No. L-22272, June 26,
1967).
139
Q: The AAA Bus Company picks up passengers
along EDSA. X, the conductor, while on board the
bus, drew his gun and randomly shot the
passengers inside. As a result, Y, a passenger,
was shot and died instantly. Is AAA Bus
Company liable? (2012 Bar)
A: YES. The bus company is liable because common
carriers are liable for the negligence or willful act of
its employees even though they acted beyond the
scope of their responsibility.
NOTE: Willful acts of the employees include theft. It
should be pointed out that the Code of Commerce
expressly provides that the captain shall be civilly
liable to the naviero and the latter to third persons
for all thefts committed by the crew, reserving the
right of action against the guilty party (Aquino and
Hernando, 2016).
OTHER PASSESNGERS AND STRANGERS
The registered owner of the vehicle may be held
liable for damages suffered by a third person in
the course of the operation of the vehicle
The registered owner of a public service vehicle is
responsible for damages that may arise from
consequences incident to its operation or that may
be caused to any of the passengers therein (Gelisan
vs. Alday, G.R. No. L-30212, September 30, 1987).
Extent of liability of common carriers for acts of
co-passengers or strangers (1997, 2005 Bar)
A common carrier is responsible for injuries
suffered by a passenger on account of the willful
acts or negligence of other passengers or of
strangers, if the carrier’s employees through the
exercise of the diligence of a good father of a family
would have prevented or stopped the act or
omission (Art. 1763, NCC).
Q: P rode a Sentinel Liner bus going to Baguio
from Manila. At a stop-over in Tarlac, the bus
driver, the conductor, and the passengers
disembarked for lunch. P decided, however, to
remain in the bus, the door of which was not
locked. At this point, V, a vendor, sneaked into
the bus and offered P some refreshments. When
P rudely declined, V attacked him, resulting in P
suffering from bruises and contusions. Does he
have cause to sue Sentinel Liner? (2011 Bar)
A: YES, since the carrier's crew did nothing to
protect a passenger who remained in the bus during
the stop-over.
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
Q: In a jeepney, Angela, a passenger, was injured
because of the flammable material brought by
Antonette, another passenger. Antonette denied
her baggage to be inspected invoking her right
to privacy.
a. Should the jeepney operator be held
liable for damages?
b. If it were an airline company involved,
would your answer be the same? (1992
Bar)
A:
a. NO. The operator is not liable for damages.
In overland transportation, the common
carrier is not bound nor empowered to
make an examination on the contents of
packages or bags, particularly those hand
carried by passengers (Nocum vs. Laguna
Tayabas Bus Company, G.R. No. L-23733,
October 31, 1969).
b. NO. The common carrier should be made
liable. In case of air carriers, it is unlawful
to carry flammable materials in passenger
aircrafts, and airline companies may open
and investigate suspicious packages and
cargoes pursuant to Republic Act No. 6235.
Q: Marites, a paying bus passenger, was hit
above her left eye by a stone hurled at the bus by
an unidentified bystander as the bus was
speeding through the National Highway. The bus
owner’s personnel lost no time in bringing
Marites to the provincial hospital where she was
confined and treated. Marites wants to sue the
bus company for damages and seeks your advice
whether she can legally hold the bus company
liable. What will you advise her? (1994 Bar)
A: I will advise Marites that she cannot legally hold
the bus company liable if the stone throwing was
entirely unforeseeable and the carrier exercised
utmost diligence. However, I will also inform her
that the burden is on the carrier to prove such
exercise of due diligence. If she decides to file a case
in court, all that she will prove is that she was a
passenger and she was inhured while on board the
bus.
Q: A was seated at the first row behind the driver
and slept during the ride. When the bus reached
the Philippine Carabao Center in Muñoz, Nueva
Ecija, the bus driver, B, stopped the bus and
alighted to check the tires. At this point, a man
who was seated at the fourth row of the bus
stood up, shot A at his head and then left with a
companion. The bus conductor, C, notified B of
the incident and thereafter, brought A to the
hospital but the latter was pronounced dead on
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
arrival. Can the common carrier, B, and C be
held liable for the death of A?
A: NO. It is imperative for a party claiming against a
common carrier to show that the injury or death of
the passenger/s arose from the negligence of the
common carrier and/or its employees in providing
safe transport to its passengers.In this case, A’s
death was neither caused by any defect in the means
of transport or in the method of transporting, or the
negligent or willful acts of the bus driver or
conductor.Instead, the case involves the death of A
wholly caused by the surreptitious act of a co-
passenger, who after committing such crime,
hurriedly alighted from the vehicle (G.V. Florida
Transport, Inc. vs. Heirs of Romeo Battung, Jr.,
represented by Romeo Battung, Sr.; G.R. No. 208802;
October 14, 2015).
EXTENT OF LIABILITY FOR DAMAGES
Kinds of damages that may be recovered in case
of death of a passenger (DeLo-MEAtIH)
1. An indemnity for the death of the victim
2. An indemnity for loss of earning capacity of
the deceased
3. Moral damages
4. Exemplary damages
NOTE: Carrier is not liable for exemplary
damages where there is no proof that it acted in
a wanton, fraudulent, reckless, oppressive or
malevolent manner.
5. Attorney's fees and expenses of litigation
6. Interest in proper cases (Briñas v. People,
G.R. No. L-30309, Nov. 25, 1983)
7. Hospital and funeral expenses
NOTE: In case of death, the plaintiff is entitled
to the amount he spent during the wake and
funeral of the deceased. However, it has been
ruled that expenses after the burial are not
compensable (Victory Liner, Inc. v. Heirs of
Andres Malecdan, G.R. No. 154278).
Damages in Personal Injury Cases
Personal injury and even death entitles claimant to
all medical expenses as well as other reasonable
expenses that he incurred to treat his or his
relative’s injuries. Medical expenses may even
include the amount spent for plastic surgery of the
plaintiff or any procedure to restore the part of the
body that was affected (Sps. Ong v. CA, G.R. No.
117103, January 21, 1999).
Loss of earning capacity
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 Mercantile Law
The formula for the computation of unearned
income is:
1. Net Earning Capacity = Life Expectancy x
(Gross annual income - Reasonable and
necessary living expenses).
2. Life expectancy is determined in accordance
with the formula: 2/3 x (80 – age of
deceased at the time of death). (Heirs of
Ochoa vs. VS.G & S Transport Corporation,
G.R. No. 170071, March 09, 2011)
When there is no showing that the living expenses
constituted the smaller percentage of the gross
income, the Court fixes the living expenses at half of
the gross income.
Moral damages
GR: Moral damages are not recoverable for breach
of contract of carriage, because such contract cannot
be considered included in the “analogous cases”
used in Article 2219 of the NCC. Also, Art. 2176 of
the NCC, which is the provision on quasi-delict,
expressly excludes the cases where there is a “pre-
existing contractual relation between the parties”
from recovering damages (Versoza v. Baytan, et al.,
G.R. L-14092, April 29, 1960).
XPNs: (DeFraG)
1. Where the mishap results in the Death of the
passenger (Art. 1764, NCC); or
2. Where it is proved that the common carrier
was guilty of Fraud or bad faith, even if
death does not result (Art. 2220, NCC).
3. Where the negligence of the carrier is so
Gross and reckless as to virtually amount to
bad faith (PAL vs. CA et al., GR NO. 123238,
Sept. 22, 2008)
Although the relation of passenger and carrier is
"contractual both in origin and nature"
nevertheless, “the act that breaks the contract may
be also a tort" when said act is done with gross
negligence or with bad faith (Air France v.
Carrascoso, G.R. No. L-21438, September 28, 1966).
NOTE: The current jurisprudential award for the
loss of life of a passenger is P100,0000 pesos by way
of moral damages (Victory Liner vs. Gammad; supra;
Heirs of Ochoa vs. VS.G & S Transport Corp., supra).
Q: Judith and Joyce were on board a passenger
bus operated by Eduardo. The bus was driven at
a fast speed by the driver, Rolando, when it
crashed into a truck parked on the shoulder of
the Kennon Road. As a result, Judith and Joyce
suffered injuries. Eduardo and Rolando paid for
141
their medical and hospitalization expenses.
Nonetheless, Judith and Joyce filed a complaint
against Eduardo and Rolando for breach of
contract of carriage caused by Rolando’s
reckless and negligent driving. As relief, they
prayed for moral and exemplary damages.
Eduardo and Rolando refused to pay moral
damages on the ground that there was neither
proof nor allegation that they acted fraudulently
or in bad faith. Are Eduardo and Rolando liable
for moral damages?
A: NO. In an action for breach of contract, moral
damages may be recovered only when a) death of a
passenger results; or b) the carrier was guilty of
fraud and bad faith even if death does not result. In
the case, Judith and Joyce impute negligence when
the bus collided with another vehicle. While they
propounded on negligence, they did not discuss or
impute fraud or bad faith, or such gross negligence
which would amount to bad faith. There being
neither allegation nor proof that respondents acted
in fraud or in bad faith in performing their duties
arising from their contract of carriage, they are not
liable for moral damages. Since moral damages
cannot be awarded, it follows that the award of
exemplary damages is also not available, since this
kind of damages may only be awarded in addition to
moral, temperate, liquidated, or compensatory
damages (Darnes v. Quiñones, G.R. No. 206468,
August 2, 2017, Del Castillo, J.).
Defenses available to a Common Carrer
(FECoLD)
1. Exercise of extraordinary due diligence
2. Fortuitous event
3. Contributory negligence of passengers – it does
not bar recovery of damages for death or injury
if the proximate cause is the negligence of the
common carrier but the amount of damages
shall be equitably reduced (NCC, Art. 1762).
4. Doctrine of Last Clear Chance
5. Due Diligence in the selection and supervision
of employees.
The diligence of the passenger may be
considered in determining liability in case of
injury
The passenger must observe the diligence of a good
father of a family or ordinary diligence to avoid
injury to himself (NCC, Art. 1761). This means that if
the proximate cause of the passenger’s injury is his
negligence, the common carrier is not liable.
DOCTRINE OF LAST CLEAR CHANCE
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
The doctrine of last clear chance provides that
where both parties are negligent but the negligent
act of one is appreciably later in point of time than
that of the other, or where it is impossible to
determine whose fault or negligence brought about
the occurrence of the incident, the one who had the
last clear opportunity to avoid the impending harm
but failed to do so, is chargeable with the
consequences arising therefrom. Stated differently,
the rule is that the antecedent negligence of a
person does not preclude recovery of damages
caused by the supervening negligence of the latter,
who had the last fair chance to prevent the
impending harm by the exercise of due diligence.
Q: B Traversing EDSA swerved then collision
took place with B barely encroaching on C’s lane.
Prior to and at the time of collision, C did not
take any defensive maneuver to prevent the
accident and minimize the impending damage to
life and property, which resulted in the collision
in the middle of the highway, where a vehicle
would normally be traversing. Is C liable for his
lack of care in driving?
A: Yes. The collision was certainly foreseen and
avoidable but C took no measures to avoid it. Rather
than exhibit concern for the welfare of his
passengers and the driver of the oncoming vehicle,
who might have fallen asleep or suddenly fallen ill
at the wheel, C coldly and uncaringly stood his
ground closed his eyes, and left everything to fate,
without due regard for the consequences. Such a
suicidal mindset cannot be tolerated, for the grave
danger it poses to the public and passengers
availing of petitioners' services. Where both parties
are negligent but the negligent act of one is
appreciably later in point of time than that of the
other, or where it is impossible to determine whose
fault or negligence brought about the occurrence of
the incident, the one who had the last clear
opportunity to avoid the impending harm but failed
to do so, is chargeable with the consequences
arising therefrom. In this case C, clearly had the Last
Clear Chance, thus he is should be the one liable for
having failed to avert the clearly imminent danger.
(Greenstar v Universal Robina G.R. No. 205090,
October 17, 2016)
The doctrine of “last clear chance” cannot apply
if the: (iCOIN)
Options available to recover damages in case of death or injuries to persons, which resulted from a
collision
BASIS OF
CIVIL PLAINTIFF DEFENDANT
LIABILITY
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
a. Negligence of the plaintiff is concurrent with that
of the defendant (in pari delicto);
b. Party charged is required to act instantaneously;
c. Injury cannot be avoided despite the application
at all times of all the means to avoid the injury (after
the peril is or should have been discovered), at least
in all instances where the previous negligence of the
party charged cannot be said to have contributed to
the injury at all. (O'Mally vs. Eagan, 77 ALR 582)
It goes without saying that the plaintiff himself was
not free from fault, for he was guilty of antecedent
negligence in planting himself in the wrong side of
the road. But as we have already stated, the
defendant was also negligent; and in such case the
problem always is to discover which agent is
immediately and directly responsible. It will be
noted that the negligent acts of the two parties were
not contemporaneous, since the negligence of the
defendant succeeded the negligence of the plaintiff
by an appreciable interval. Under these
circumstances, the law is that a person who has the
last clear chance to avoid the impending harm and
fails to do so is chargeable with the consequences,
without reference to the prior negligence of the
other party. (Picart vs. Smith, 37 Phil., 809)
The last clear chance doctrine of the common law
was imported into our jurisdiction by Picart vs.
Smith but it is a matter for debate whether, or to
what extent, it has found its way into the Civil Code
of the Philippines. The historical function of that
doctrine in the common law was to mitigate the
harshness of another common law doctrine or
rule—that of contributory negligence. The
common law rule of contributory negligence
prevented any recovery at all by a plaintiff who was
also negligent, even if the plaintiff’s negligence was
relatively minor as compared with the wrongful act
or omission of the defendant. The common law
notion of last clear chance permitted courts to grant
recovery to a plaintiff who had also been negligent
provided that the defendant had the last clear
chance to avoid the casualty and failed to do so.
Accordingly, it is difficult to see what role, if any, the
common law last clear chance doctrine has to play
in a jurisdiction where the common law concept of
contributory negligence as an absolute bar to
recovery by the plaintiff, has itself been rejected, as
it has been in Article 2179 of the Civil Code of the
Philippines. (PHOENIX CONSTRUCTION, INC.
and CARBONEL Mar 10, 1987)
DEFENSE OF DUE
LIABILITY OF THE
DILIGENCE IN THE
EMPLOYER
SELECTION AND
142
 Mercantile Law
(Damages) SUPERVISION OF
EMPLOYEE
Culpa contractual
Contract of Passenger Common Direct and Primary Not an available defense. (Art.
Carriage carrier 1759, NCC)
Culpa aquiliana
Direct and primary under This is a complete and proper
1. Driver; Art. 2180, NCC. defense. (Art. 2180, last par.,
1. Passenger; or 2. Owner or NCC)
Quasi-delict
2. Third person employer; NOTE: Action may
3. Both proceed independently of
the criminal action.
Culpa criminal
Subsidiary liability under The defense is not available.
Art. 103, RPC. The judgment in the criminal
action pronouncing the
NOTE: There must be a employee to be also civilly
judgment of conviction liable is conclusive on the
1. Passenger; or
Crime Driver against the negligent employer not only as to the
2. Third person
driver and a finding of actuality of that liability but
insolvency. aslo as to the amount. (Ozoa v.
Madula, 156 SCRA 779;
Philippine Rabbit Bus Lines,
Inc. v. People, 427 SCRA 456)

Distinctions between culpa contractual and culpa aquiliana

CULPA CONTRACTUAL CULPA -AQUILIANA

Source of Obligation
Liability of Employee
Availability of Defense
In What Capacity Liable
Contract
No liability there being no privity
of contract
Due diligence in the selection and
supervision of the employee is not
a defense
Liable as a contracting party
Quasi - Delict
Solidarily liable with the employer
Due diligence in the selection and
supervision of the employee is a
defense
Liable as an employer

UNIVERSITY OF SANTO TOMAS

143 FACULTY OF CIVIL LAW
 Transportation Laws
BILL OF LADING
It is a written acknowledgment of receipt of goods
and agreement to transport them to a specific place
and to a named person or to his order (Unsworth
Transport International [Phils] vs. CA, G.R. No.
166520, 26 July 2010; 1992, 1998 Bar).
THREE-FOLD CHARACTER
1. As a receipt, it recites the date and place of
shipment, describes the goods as to quantity,
weight, dimensions, identification marks and
condition, quality, and value.
2. As a contract, it names the contracting parties,
which include the consignee, fixes the route,
destination, and freight rate or charges, and
stipulates the rights and obligations assumed
by the parties (Phoenix Assurance Co., Ltd. vs.
United States Lines, G.R. No. L-24033, Feb. 22,
1968).
3. As a document of title, it regulates the relations
between a carrier and a holder of the same.
(2015 Bar)
In the absence of a bill of lading, their respective
claims may be determined by legal proofs that each
of the contracting parties may present in conformity
with law.
Parties to a bill of lading
1. Shipper
2. Carrier
NOTE: A consignee, although not a signatory to the
contract of carriage between the shipper and the
carrier, becomes a party to the contract by reason of
either:
a) The relationship of agency between the
consignee and the shipper/ consignor;
b) The unequivocal acceptance of the bill of lading
delivered to the consignee, with full knowledge
of its contents; or
c) Availment of the stipulation pour autrui, i.e.,
when the consignee, a third person, demands
before the carrier the fulfillment of the
stipulation made by the consignor/shipper in
the consignee’s favor, specifically the delivery
of the goods/cargoes shipped.
(MOF Company, Inc., v. Shin Yang Brokerage Corporation,
G.R. No. 172822, December 18, 2009, Del Castillo, J.)
Two types of bill of lading
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
1. Negotiable – If issued to the bearer or to the
order of any person named in such bill.
2. Non-negotiable – If issued to a specific person
named in such bill.
Q: X is a trader of school supplies in Calapan,
Oriental Mindoro. To bring the school supplies
to Calapan, it has to be transported by a vessel.
Because there were so many passengers, the two
(2) boxes of school supplies were loaded but the
shipping company was not able to issue the Bill
of Lading. So, on board, the Ship Captain issued
instead a "shipping receipt" to X indicating the 2
boxes of school supplies being part of the cargo
of the vessel. Is there a contract of carriage?
A: It is possible to have a contract of carriage bill of
lading even without a bill of lading. The shipping
receipt would be sufficient. A bill of lading is not
indispensable. For as long as there is a meeting of
the minds of the parties, a contract of carriage exists
even in the absence of a bill of lading (Compania
Maritima vs. Insurance Co. of NA, G.R. No. L-18965,
October 30, 1964).
Technical jargons
1. On Board –states that the goods have been
received on board the vessel which is to carry
the goods and is issued when goods have been
placed aboard a ship with every reasonable
expectation that the shipment is as good as on
its way.
2. Received for Shipment Bill– states that the
goods have been received for shipment with or
without specifying the vessel by which the
goods are to be shipped and are issued
whenever conditions are not normal and that
there is insufficiency of shipping space.
3. Clean – does not contain any notation
indicating defect in the goods.
4. Foul – contains a notation indicating a defect in
the goods.
5. Spent – if the goods were already delivered but
the bill of lading was not returned.
6. Through- issued by a carrier who is obliged to
use the facilities of other carriers as well as his
own facilities for the purpose of transporting
the goods from the city of the seller to the city
of the buyer, which bill of lading is honored by
the second and other interested carriers who do
not issue their own lading.
7. Custody – the goods are already received by the
carrier but the vessel indicated has not yet
arrived in the port.
8. Port- the vessel indicated in the bill of lading
that will transport the goods is already in the
port.
144
 Mercantile Law
Q: A bill of lading indicated that the contract of
carriage was under a "said to weigh" clause.
What are the responsibilities of the shipper and
the carrier?
A: This means that the shipper was solely
responsible for the loading of the container while
the carrier was oblivious to the contents of the
shipment. The arrastre operator was, like any
ordinary depositary, duty-bound to take good care
of the goods received from the vessel and to turn the
same over to the party entitled to their
possession, subject to such qualifications as may
have validly been imposed in the contract between
the parties. The arrastre operator was not required
to verify the contents of the container received and
to compare them with those declared by the shipper
because, as earlier stated, the cargo was at the
shipper’s load and count (Asian Terminals Inc. vs.
Simon Enterprises, Inc., G.R. No. 177116, February 27,
2013).
DELIVERY OF GOODS
PERIOD OF DELIVERY
1. If period has been fixed – It must be made within
such time, failure to do so, the carrier shall pay
the indemnity stipulated in the bill of lading,
neither the shipper nor the consignee being
entitled to anything else (Code of Commerce
[CC], Art. 370).
2. If no period of time fixed- thecarrier shall be
under the obligation to forward them with the
first shipment of the same or similar
merchandise he may make to the point where
he must deliver them, and should he not do so,
the damages occasioned by the delay shall be
suffered by him (CC, Art. 358).
Determination of indemnity if the same is not
stipulated
If no indemnity has been stipulated and the delay
exceeds the time fixed in the bill of lading, the
carrier shall be liable for the damages which the
delay may have caused (CC, Art. 370).
DELIVERY WITHOUT SURRENDER OF
BILL OF LADING
GR: The surrender of the bill of lading is necessary
upon delivery of the goods.If the carrier fails to
require such surrender:
1. If non-negotiable – Action against the
carrier does not lie
145
2. If negotiable – Action by the shipper may lie
against the carrier
XPN: Surrender of the bill of lading is not necessary:
1. If the seller instructed the shipping
company to deliver the cargoes to the
buyer without requiring the
presentation of the bill of lading;
The shipping company is shall not be liable
for releasing the cargoes to the buyer
(Macam vs. CA, G.R. No. 125524, August 25,
1999)
2. If surrender of the original bill of lading is
not possible.
Acknowledgment of the delivery by signing
the delivery receipt suffices to discharge
the common carrier of its contractual
obligation (National Trucking and
Forwarding Corporation vs. Lorenzo
Shipping Corporation, G.R. No. 153563,
February 27, 2005).
REFUSAL OF CONSIGNEE TO TAKE DELIVERY
Grounds for the refusal of a consignee to take
delivery of the goods (PLD2)
1. When a Part of the goods transported are
delivered and the consignee is able to prove
that he cannot make use of the part without the
others (CC, Art. 365);
2. If the cargo consists of Liquids and they have
leaked out, nothing remaining in the containers
but one-fourth (¼) of their contents, on account
of inherent defect of cargo (CC, Art. 687);
3. If the goods are Damaged and such damage
renders the goods useless for the particular
purpose for which there are to be used (CC, Art.
365);
4. When there is Delay on account of the fault of
the carrier (CC, Art. 371).
In all cases, the shipper may exercise the right of
abandonment by notifying the carrier. Ownership
over damaged goods passes to the carrier and
carrier must pay shipper the market value of the
goods at point of destination.
PERIOD FOR FILING CLAIMS
1. If the damage is apparent – Immediately after
delivery; or
2. If the damage is not apparent – within 24 hours
from delivery (CC, Art. 366)
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
Claim for damages under Art. 366 of Code of
Commerce
It applies in case of domestic transportation (inter-
island) where there is damage to the goods
transported.
The filing of claim is a condition precedent for
recovery of damages.
Requisites:
1. Consignment of goods through a common
carrier, by a consignor in one place to a
consignee in another place; and
2. The delivery of the merchandise by the carrier
to the consignee at the place of destination
(New Zealand Ins. Co., Ltd. vs. Choa Joy, G.R. No.
L-7311, Sept. 30, 1955).
Effect of paying the transportation charges in
the filing of an action on account of damages to
goods
1. If paid before checking the goods – The right to
file a claim is not waived.
2. If paid after the goods were checked – The
right to file a claim is already waived (Southern
Lines, Inc. v. CA, G.R. No. L-16629, Jan. 31, 1962).
Doctrine of combined or connecting services
The carrier which delivered the goods to the
consignee shall assume the obligations, rights and
actions of those who preceded him in the
conveyance of the goods.
The shipper or consignee should proceed against
the one who executed the contract or against the
others who received the goods without reservation.
But even if there is reservation, they are not
exempted from liabilities that they may have
incurred by reason of their own acts (CC, Art. 373).
The carrier may then file a third-party complaint
against the one who is really responsible. The
carrier is an indispensable party. But the shipper or
consignee may sue all of them as alternative
defendants.
PERIOD FOR FILING ACTIONS
1. For coastwise or carriage within the Philippines,
within 6 years if no bill of lading has been
issued or within 10 years if a bill of has been
issued.
2. For international carriage from foreign port to
the Philippines, within 1 year from delivery of
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
goods or the date when the goods have been
delivered.
NOTE: The 1 year period of prescription is not
applicable to misdelivery or conversion of goods.
The compliance with a requirement in the bill of
lading that the consignee must file a claim for loss or
damage to the goods shipped within thirty days
from delivery is a condition precedent to the accrual
of a right of action against the carrier (Philippine
American General Insurance Co. v. Sweet Lines, Inc.,
G.R. No. 87434, August 5, 1992).
Q: Akiro of Tokyo, Japan sent various goods to
his friend Juan in Cebu City, Philippines, through
one of the vessels of Worth Well Shippers, Inc.,
an American corporation. En route to Cebu City,
the vessel had two stops, first in Hong Kong, and
second, in Manila. While travelling from Tokyo
to Hong Kong, the goods were damaged. What
law will govern? (2013 Bar)
A: D. Philippine Law
Q: Assuming Philippine law to be applicable and
Juan fails to file a claim with the carrier, may he
still commence an action to recover damages
with the court? (2013 Bar)
A: B. Yes, provided he files the complaint within 10
years from delivery.
Commencement of action if delivery was made
to arrastre operator
Commencement of action should be computed from
the time of delivery to the arrastre operator. To use
as basis for computing the one year period, the
delivery to the consignee would be unrealistic and
might generate confusion between the loss or
damage sustained by the goods while in the carrier’s
custody and those occurring while in the arrastre
operator’s possession (Martin, 1989).
A claim against the arrastre operator must be filed
within fifteen days from the delivery of goods
(International Container Terminal Services, Inc. vs.
Prudential Guarantee and Assurance Company, Inc.
G.R. No. L-134514, December 8, 1999).
The filing of a provisional claim is substantial
compliance with the provision in the management
contract of the arrastre operator that a formal claim
for the loss of goods must be filed within thirty days
from the filing of the entry (Metro Port Service Inc.
vs. IAC, G.R. No. 66253, August 31, 1992).
146
 Mercantile Law
MARITIME COMMERCE
Agents of maritime commerce
1. Ship-owners and ship agents
2. Captains and masters of the vessel
3. Officers and Crews of the vessel
4. Supercargoes (Sundiang, Sr. & Aquino, 2011)
Ship owner of a vessel
The person in possession, management, control
over the vessel, and the right to direct her
navigation. While in their possession, the ship
owners also receive freight earned and paid.
Ship agent
The person entrusted with provisioning or
representing the vessel in the port in which it may
be found. Hence, whether acting as agent of the
owner of the vessel or as agent of the charterer, he
will be considered as the ship agent and may be held
liable as such, as long as he is the one that provisions
or represents the vessel (Macondray & Co., Inc. v.
Provident Insurance Corp, G.R. No. 154305, Dec. 9,
2004).
Supercargoes
Persons especially employed by the owner of a
cargo to take charge of and sell to the best advantage
merchandise which has been shipped, and to
purchase returning cargoes and to receive freight,
as he may be authorized.
CHARTER PARTIES
Charter party contract
A charter party is 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 in
consideration of the payment of freight (Caltex vs.
Sulpicio Lines, G.R. No. 131166, September. 30, 1999).
Classes of charter party
1. Bareboat or demise
2. Contract of affreightment
a. Time charter
b. Voyage charter
BAREBOAT / DEMISE CHARTER
The ship owner gives possession of the entire vessel
to the charterer. In turn, the charterer supplies,
147
equips, and mans the vessel. The charterer is the
owner pro hac vice (2004 Bar).
As owner pro hac vice of the vessel, the charterer
assumes the rights and liabilities of the owner to
third parties who deal with the vessel, it is the
charterer and its agent who are liable for the wages
of seamen hired by the master of the vessel, as the
master of the vessel is acting in behalf of the
charterer (Litonjua Shipping Co., Inc. vs. National
Seamen Board, G.R. No. L-51910, August 10, 1989,
1991 Bar).
The charterer is considered the owner of the vessel
for the voyage or service stipulated. The charterer,
not the owner of the vessel, is liable for vessel’s
expenses, including seaman’s wages.
CONTRACT OF AFFREIGHTMENT
The owner of the vessel leases a part or all of its
space to haul goods for others. It can either be:
1. Time charter; or
2. Voyage/ trip charter.
NOTE: A written contract of affreightmentmay be
amended by oral agreement and since in such a case
the terms of the contract shall be those embodied in
the bill of lading, no demurrage charges can be
collected where this was not stipulated in the bill of
lading (Market Developers, Inc. vs. IAC, G.R. No. L-
47978, September 8, 1989).
Time charter
A vessel is chartered for a particular time or
duration. While the ship owner still retains
possession and control of the vessel, the charterer
has the right to use all vessel’s facilities. The
charterer may likewise designate vessel’s
destination.
Voyage/ trip charter
Vessel is chartered for a carriage of goods from one
or more ports of loading to one or more ports of
unloading.
A voyage charter is a contract wherein the ship was
leased for a single voyage for the conveyance of
goods, in consideration of the payment of freight. An
owner who retains possession of the ship remains
liable as carrier and must answer for loss or non-
delivery of the goods received for transportation
(Cebu Salvage Corp. vs. Philippine Home Assurance
Corp., G.R. No. 150403, Jan. 25, 2007).
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
Bareboat or demise charter party vs. Contract of b. SAle by the owner of the vessel before
affreightment loading by the charterer.

BAREBOAT/DEMISE CONTRACT OF 3. Due to fortuitous event: (WEB-Pro-N)

CHARTER CONTRACT AFFREIGHTMENT a. War – there is a governmental prohibition
Ship owner remains of commercial intercourse, intended to
Negligence of the bring about an entire cessation for the time
liable and carrier must
charterer gives rise to being of all trade whatever.
answer for any breach
its liability to others. b. Embargo – A proclamation or order of
of duty.
Charterer is not State, usually issued in times of war or
Charterer is regarded threatened hostilities, prohibiting the
regarded as owner.
as owner pro hac vice. departure of ships or goods from some or
Ship owner retains
Ship owner all the ports of such State until further
ownership over the
temporarily order; or
vessel (Coastwise
relinquishes c. Blockade – A sort of circumvallation
Lighterage vs. CA, G.R.
possession and around a place by which all foreign
No. 114167, July 12,
ownership of the connection and correspondence is, as far as
1995).
vessel. human power can effect it, to be cut off.
d. PROhibition to receive cargo at port of
Q: For the transportation of its cargo from the destination.
Port of Manila to the Port of Kobe, Japan, Osawa e. Inability of the vessel to Navigate (CC, Art.
&Co., c hartered bareboat M/V Ilog of Karagatan 640)
Corporation. M/V Ilog met a sea accident
resulting in the loss of the cargo and the death Q: What is a “Jason clause” in a charter party?
of some of the seamen manning the vessel. Who (2015 Bar)
should bear the loss of the cargo and the death
of the seamen? Why? A: The Jason clause derives its name from The Jason
225 US 32 (1912) decided by the US Supreme Court
A: Osawa & Co. should bear the loss because it under the Harter Act. By the Jason clause, a
chartered bareboat M/V Ilog which, in effect, gave shipowner (provided he had exercised due
it exclusive control over the vessel. In a demise, in diligence to make the ship seaworthy and properly
contrast to other charters, the charterer is manned, equipped and supplied) could claim a
considered the owner pro hac vice. The charterer is general average contribution from cargo, even
accordingly liable in personam for all liabilities where the damage was caused by faulty navigation
arising out of the operation of the vessel; he is of the vessel, provided that the bill of lading
responsible for the actions of the master and crew excluded liability for such faults.
(Litonjua Shipping Company, Inc. v. National
Seamen Board and Gregorio P. Candongo, G.R. No. LIABILITY OF SHIPOWNERS AND SHIPPING
51910, August 10, 1989). AGENTS

Instances when a charter party may be
rescinded
1. At the request of the charterer by: (FARER)
a. Failure to place vessel at charterer’s
disposal
b. Abandoning the charter and paying half the
price
c. Return the vessel due to pirates, enemies,
and bad weather
d. Error in tonnage or flag
e. Arrival at port for Repairs - if repairs take
less than 30 days, pay full freightage; if
more than, freightage in proportion to the
distance covered.
2. At the request of the ship owner: (Sa-Te)
a. If extra lay days TErminate without the
cargo being placed alongside vessel; and
Three-fold character of the Captain (GVG)
1. General agent of the ship owner
2. Vessel’s technical director
3. Government representative of the flag he
navigates under
Inherent powers of the Ship Captain (A2-C3-D)
1. To Appoint or make contracts with the crew in
the ship agent’s absence, and to propose said
crew, should said agent be present; but the ship
agent may not employ any member against the
captain's express refusal
2. To Command the crew and direct the vessel to
the port of its destination, in accordance with
the instructions he may have received from the
ship agent
3. To impose Correctional punishment:

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 Mercantile Law
a. Upon those who fail to comply with orders; 1. Damages suffered by the vessel and its cargo by
or reason of want of skill or negligence on his part;
b. Those wanting in discipline 2. Thefts committed by the crew, reserving his
right of action against the guilty parties;
4. To make Contracts for the charter of the vessel 3. Losses, fines, and confiscations imposed on
in the absence of the ship agent or of its account of violation of customs, police, health,
consignee and navigation laws and regulations;
5. To Adopt all proper measures to keep the vessel 4. Losses and damages caused by mutinies on
well supplied and equipped, purchasing all that board the vessel or by reason of faults
may be necessary for the purpose, provided committed by the crew in the service and
there is no time to request instruction from the defense of the same, if he does not prove that he
ship agent made timely use of all his authority to prevent
6. To make Disposition, in similar urgent cases or avoid them;
while on a voyage, the repairs on the hull and 5. Those caused by the misuse of the powers;
engines of the vessel and in its rigging and 6. For those arising by reason of his going out of
equipment, which are absolutely necessary to his course or taking a course which he should
enable it to continue and finish its voyage (Code not have taken without sufficient cause, in the
of Commerce, Art. 610). opinion of the officers of the vessel, at a meeting
with the shippers or supercargoes who may be
Obligations of the Captain on board. No exceptions whatsoever shall
exempt him from this obligation;
1. Inventory of equipment 7. For those arising by reason of his voluntarily
2. Keep a copy of Code of Commerce on board entering a port other than that of his
3. Have a log book, freight book, accounting book destination, outside of the cases or without the
4. Conduct a marine survey of vessel before formalities referred to in Article 612; and
loading 8. For those arising by reason of non-observance
5. Remain on board while loading of the provisions contained in the regulations
6. Demand pilot on departure and on arrival at on situation of lights and maneuvers for the
each port purpose of preventing collisions (CC, Art. 618).
7. Be on deck when sighting land
8. Arrivals under stress: to file marine protest in Ship owner/agent is not liable for the obligations
24 hours contracted by the captain if the latter exceeds his
9. Record bottomry loan with Bureau of Customs powers and privileges inherent in his position of
10. Keep papers and properties of crew members those which may have been conferred upon him by
who might die the former. However, if the amount claimed were
11. Conduct himself according to the instructions of used for the benefit of the vessel, the ship owner or
the ship agent ship agent is liable.
12. Report to ship agent on arrival
13. Observe rules on the situation of lights and Q: X chartered the ship of Y to transport his logs
maneuvers to prevent collisions from Zamboanga to Manila. In the course of their
14. Remain on board until the last hope to save the voyage, the ship met a storm and had to dock in
vessel is lost and to abide by the decision of the Cebu for 3 days. Z, the captain of the ship,
majority whether to abandon or not borrowed P20,000 from X on the pretext that he
15. In case of shipwreck: file marine protest, within would need the money for the repair of the ship.
24 hours Z misappropriated the money and converted it
16. Comply with rules and regulation on navigation to his own benefit. What is the liability of Y, if
(CC, Art. 612). any? (1989 Bar)

Failure of the Ship Captain to ascertain beforehand
direction of reported storm and weather conditions
along his route constitutes negligent lack of
foresight (Alejandro Arada vs. CA and SMC, G.R. No.
98243, July 1, 1992).
LIABILITY FOR THE ACTS OF THE CAPTAIN
Cases where the ship owner/agent shall be
liable to the damages caused by the captain
A: A ship-owner would only be liable for contracts
made by the captain (a) when duly authorized or (b)
even when unauthorized, for ship repairs, or for
equipping or provisioning the vessel when the
proceeds are invested therein. Since the loan by the
captain from X does not fall under any of the
foregoing cases, the amount borrowed shall be
considered a personal liability of Z, the captain, and
Y, the ship-owner, cannot thus be held liable.

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149 FACULTY OF CIVIL LAW
 Transportation Laws
Q: Under a charter party, XXO Trading Company
shipped sugar to Coca-Cola Company through
SS Negros Shipping Corp., insured by Capitol
Insurance Company. The cargo arrived but with
shortages. Coca-Cola demanded from Capitol
Insurance Co. P500.000 in settlement for XXO
Trading. The MM Regional Trial Court, where
the civil suit was filed, "absolved the insurance
company, declaring that under the Code of
Commerce, the shipping agent is civilly liable
for damages in favor of third persons due to the
conduct of the carrier's captain, and the
stipulation in the charter party exempting the
owner from liability is not against public policy.
Coca-Cola appealed. Will its appeal prosper?
Reason briefly. (2004 Bar)
A: NO. The appeal of Coca-Cola will not prosper.
Under Article 587 of the Code of Commerce, the
shipping agent is civilly liable for damages in favor
of third persons due to the conduct of the carrier's
captain, and the shipping agent can exempt himself
therefrom only by abandoning the vessel with all his
equipment and the freight he may have earned
during the voyage. On the other hand, assuming
there is bareboat charter, the stipulation in the
charter party exempting the owner from liability is
not against public policy because the public at large
is not involved (Home Insurance Co. vs. American
Steamship Agencies, Inc., G.R. No. L-25599, April 4,
1968).
Q: While docking his vessel, “Taurus”, the
master, thru negligence, damaged the wharf and
the merchandise loaded on the deck. The owner
of the wharf and the damaged merchandise sued
the owner of the vessel and the master of the
vessel for the damage.
A. What is the basis of the liability of the owner
of the vessel with respect to the damage to the
wharf?
B. With respect to the damage to the
merchandise?
C. Does the defense of exercise of diligence of a
good father of a family lie?
Reason.
A:
A. The basis of the liability of the shipowner with
respect to the damaged wharf is tort. There was
damage due to negligence without any preexisting
contractual relations between the parties.
B. The basis of the liability with respect to the
merchandise on deck is the contract of carriage.
There was a breach of contract because the goods
were not carried safely to their destination due to
the negligence of the master.
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
C. The defense of exercise of the diligence of a good
father of a family will lie in case of tort but not in
case of contract. In the latter, such defense is not
available because the contract was to carry the
goods safely and unless loss is due to caso fortuito
or force majeure, there is a breach of contract. The
due diligence of the shipowner is against his
employee, the master.
Civil liabilities of ship owners and agents
1. Damages suffered by a 3rd person for tort
committed by the captain;
2. Contracts entered for provisioning and repair of
vessel;
3. Indemnities in favor of 3rd persons arising from
the conduct of the captain from the care of
goods;
4. Damages in case of collision due to fault or
negligence or want of skill of the captain; and
5. Damages for the acts of the captain.
Instances when the captain and crew members
may rescind their contractual employment
1. War
2. Outbreak of disease
3. New owner of vessel
4. Change of Destination (CC, Art. 647)
Powers, functions, and liabilities of ship agents
(ID)
1. Indemnity for expenses incurred for ship’s
benefit.
2. Discharge of captain and/or crew members
The following are the rules observed by the ship
agent:
a. Captain and/or crew member’s contract
not for a definite period or voyage:
i. Before vessel sets out to sea: Ship agent
at his discretion may discharge the
captain and members of the crew.
Ship agent must pay captain and/or
crew members salaries earned
according to their contracts, and
without any indemnity whatsoever,
unless there is an expressed
agreement;
ii. During voyage: Captain and/or crew
member shall receive salary until
return to the port where contract was
made. Article 637 of the Code of
Commerce enumerates the just
causes for discharge.
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 Mercantile Law
b. Where captain and members of the crew’s
contracts with ship agent be for a definite
period or voyage:
i. Captain and/or crew members may
not be discharged until after the
fulfillment of their contracts, except by
reason of insubordination in serious
matters, robbery, theft, habitual
drunkenness, or damage caused to the
vessel or to its cargo through malice
or manifest or proven negligence (CC,
Art. 605).
ii. If the captain should be the vessel’s
co-owner, he may not be discharged
unless ship agent returns his amount
of interest therein. In the absence of
agreement between the parties,
interest shall be appraised by experts
appointed in the manner established
by civil procedure.
Exception to the rule
The captain shall not be liable for the loss or injury
to persons or cargo if the loss or the injury is based
on the following causes:
1. Force majeure
2. Obligations contracted for the vessel’s benefit,
except when the captain expressly agrees to be
liable.
A captain may not have himself substituted in the
absence of consent from the ship agent, and should
he do so he shall be liable for all the acts of the
substitute (CC, Art. 615).
Q: T, the captain of MV Don Alan, while asleep in
his cabin, dreamt of an Intensity 8.0 earthquake
along the path of his ship. On waking up, he
immediately ordered the ship to return to port.
True enough, the earthquake and tsunami
struck three days later and his ship was saved.
Was the deviation proper? (2011 Bar)
A: No, because no reasonable ground for avoiding a
peril existed at the time of the deviation.
LIMITED LIABILITY RULE
Doctrine of limited liability (1991, 1994, 1997,
2000, 2008 Bar)
Also called the “no vessel, no liability doctrine”, it
provides that liability of ship owner is limited to
ship owner’s interest over the vessel. Consequently,
in case of loss, the ship owner’s liability is also
extinguished. Limited liability likewise extends to
ship’s appurtenances, equipment, freightage, and
151
insurance proceeds. The ship owner’s or agent’s
liability is merely co-extensive with his interest in
the vessel, such that a total loss of the vessel results
in the liability’s extinction. The vessel’s total
destruction extinguishes maritime liens because
there is no longer any res to which they can attach
(Monarch Insurance vs. CA, G.R. No. 92735, June 8,
2000).
By necessary implication, the ship agent’s or ship
owner’s liability is confined to that which he is
entitled as of right to abandon—the vessel with all
her equipment and the freight it may have earned
during the voyage and to the insurance thereof, if
any (Yango vs. Laserna, 73 Phil. 330, 1941).
Rationale of the doctrine: The Real and
Hypothecary nature of Maritime Law
To offset against innumerable hazards and perils in
sea voyage and to encourage ship building and
maritime commerce. By abandonment, the ship
owner and ship agent exempt themselves from
liability, thus, avoiding the possibility of risking his
whole fortune in the business.
Person/s who can invoke the limited liability
rule
1. Ship owner; and
2. Shipping agent.
He is (they are) the very person(s) whom the
Limited Liability Rule has been conceived to protect
(Philippine Trigon Shipyard Corp., et al. v.
Concepcion, et al., G.R. No. 160088, July 13, 2011).
Cases in which the Doctrine of Limited Liability
is allowed (1994, 2004 Bar) (SOLE)
1. Civil liability of the Ship agent or ship owner for
the indemnities in favor of third persons (CC,
Art. 587);
2. Civil liability of the co-Owners of the vessel for
the results of the acts of the captain (CC, Art.
590);
3. If the vessel and her cargo be totally Lost, by
reason of capture or shipwreck, all the rights
shall be extinguished, both as regards the right
of the crew to demand wages and the right of
the ship agent to recover the advances made
(CC, Art. 643);
4. Extinction of civil liability incurred by the ship
owner or agent in cases of maritime collisions
(CC, Art. 837)
Stipulations which may be inserted in the bill of
lading to limit liability and their effects:
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
1. No liability - The carrier will not be liable at all
for the negligent acts of its crew and employees.
This is void for being contrary to public policy.
2. Limited liability - regardless of the value of
the cargo, the maximum liability of the carrier
will be, for example, P500. This is also void for
being public policy.
3. Qualified Liability - this is the only stipulation
in a bill of lading which can validly limit liability.
NOTE: Under Qualified Liability, carrier fixes a
maximum kiability in the event the shipper
does not declare any value or a value up to a
certain amount. Should a shipper declare a
higher value, and wiulling to pay higher
freightage, the carrier shall accordingly be
liable for greater damage. In effect, carrier
becomes an insurer for higher insurance.
EXCEPTIONS TO THE LIMITED LIABILITY RULE
Instances where Doctrine of Limited Liability
shall not apply
1. Repairs and provisioning of the vessel before
the loss of the vessel (CC, Art. 586)
2. Insurance proceeds. If the vessel is insured, the
proceeds will go to the persons entitled to claim
from the ship owner (Vasquez v. CA, G.R. No. L-
42926, Sept. 13, 1985)
3. Claims of the crew under the Workmen’s
Compensation Act
4. When the ship owner is guilty of fault or
negligence
5. When the vessel is not abandoned
6. When vessel is not seaworthy
Q: On October 30, 2007, M/V Pacific, a Philippine
registered vessel owned by Cebu Shipping
Company (CSC), sank on her voyage from Hong
Kong to Manila. Empire Assurance Company
(Empire) is the insurer of the lost cargoes
loaded on board the vessel which were
consigned to Debenhams’ company. After it
indemnified Debenhams, Empire as subrogee
filed an action for damages against CSC.
a. Assume that the vessel was seaworthy.
Before departing, the vessel was advised by
the Japanese Meteorological Center that it
was safe to travel to its destination. But
while at sea, the vessel received a report of a
typhoon moving within its general path. To
avoid the typhoon, the vessel changed its
course. However, it was still at the fringe of
the typhoon when it was repeatedly hit by
huge waves, foundered and eventually sank.
The captain and the crew were saved except
three (3) who perished. Is CSC liable to
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
empire? What principle of maritime law is
applicable? Explain.
b. Assume the vessel was not seaworthy as in
fact its hull had leaked, causing flooding in
the vessel, will your answer be the same?
Explain.
c. Assume the facts in question (b). Can the
heirs of the three (3) crew members who
perished recover from CSC? Explain fully.
(2008 Bar)
A:
a. NO. The principle of limited liability will apply
because the exclusively real and hypothecary
nature of maritime law operates to limit the
liability of the ship owner to the value of the
vessel, earned freightage and proceeds of the
insurance, if any “No vessel, No liability,”
expresses in a nutshell the limited liability rule
(Monarch Insurance v. CA, G.R No. 92735, June 8,
2000). The total destruction of the vessel
extinguishes maritime lien as there is no longer
any res to which it can attach. In this case, the
ship was seaworthy. It exercised extraordinary
diligence when it changed its course to avoid
the typhoon but unfortunately, it was hit by
huge waves and sank. Since the vessel sank at
no fault by CSC, it cannot be held liable by virtue
of “No vessel, no liability rule.”
b. NO. While as a rule, a ship owner’s liability is
limited to the value of the vessel, the same rule
has no application when the carrier failed to
overcome the presumption of negligence. Such
presumption is only rebutted when the carrier
establishes that the vessel is seaworthy. The
vessel is this case is not seaworthy, thus,
doctrine of limited liability is inapplicable.
c. YES. The heirs of the 3 crew members who
perished can recover. This is because the heirs
may file a claim under the Workmen’s
Compensation Claims. The Limited Liability
Rule does not apply.
Q: A cargo ship of X Shipping, Co. ran aground off
the coast of Cebu during a storm and lost all its
cargo amounting to Php50 Million. The ship
itself suffered damages estimated at Php80
Million.
The cargo owners filed a suit against X Shipping
but it invoked the doctrine of limited liability
since its vessel suffered an Php80 Million
damage, more than the collective value of all lost
cargo. Is X Shipping correct? (2011 Bar)
A: NO, since X Shipping neither incurred a total loss
nor abandoned its ship.
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 Mercantile Law
Q: CARDIAC shipped 165,200 bags of cement GENERAL AND PARTICULAR AVERAGES
from China Port to Manila Port to HEINDRICH,
the consignee. The shipment was insured by the Averages
insurers FGU AND PIONEER. When the shipment
arrived, it was inspected by the consignee and All extraordinary or accidental expenses which may
ACENAV, the agent of CARDIAc and it was found be incurred during the voyage for the preservation
that 43,905 bags were on a bad condition. The of the vessel or cargo or both. Average may either be
shipper was not able to collect from the shipper general or particular
and charterer so it proceeded to the insurers
who paid the claim. FGU AND PIONEER General average vs. Particular average
INSURANCE CO., who subrogated the consignee
HIENDRICH, filed a claim against the charterer GENERAL AVERAGE PARTICULAR
and ACENAV who is a mere agent of CARDIAC AVERAGE
The trial court dismissed the complaint but on Damages or expenses Damages or expenses
appeal, the appellate court reversed the deliberately caused in caused to the vessel or
decision and held ACENAV liable for 30% of the order to save the vessel, cargo that did not inure
claim of the respondents. its cargo, or both from to the common benefit
real and known risk and borne by
Is the appellate court correct? respective owners
Both the ship and cargo No common danger to
A: NO, Article 586 of the Code of Commerce are subject to the same both the vessel and the
provides: danger cargo
There is a deliberate Expenses and damages
x x x sacrifice of part of the are not deliberately
By ship agent is understood the person entrusted with vessel, cargo, or both made
the provisioning of a vessel, or who represents her in Damage or expenses Did not inure to
the port in which she may be found. incurred to the vessel, common benefit and
its cargo, or both, profit of all persons
Records show that the obligation of ACENAV was redounded to the interested in the vessel
limited to informing the consignee HEINDRICH of benefit of the respective and her cargo
the arrival of the vessel in order for the latter to owners
immediately take possession of the goods. No All those who have Only the owner of the
evidence was offered to establish that ACENAV had benefited shall satisfy goods benefiting from
a hand in the provisioning of the vessel or that it the average the damage shall bear
represented the carrier, its charterers, or the vessel the expense of average
at any time during the unloading of the goods.
Clearly, ACENAV's participation was simply to Persons liable for the amount of loss
assume responsibility over the cargo when they
were unloaded from the vessel. Hence, no reversible In general average: All persons having an interest in
error was committed by the courts a quo in holding the vessel and cargo therein at the time of the
that ACENAV was not a ship agent within the occurrence of the average shall contribute (Art. 812,
meaning and context of Article 586 of the Code of CC).
Commerce, but a mere agent of CARDIA, the shipper.
(ACE NAVIGATION CO., INC. v FGU INSURANCE In particular average: The owner of the things which
CORPORATION and PIONEER INSURANCE AND gave rise to the expenses or suffered the damage
SURETY CORPORATION G.R. No. 171591, June 25, shall bear the simple or particular averages (Art.
2012) 810, CC).
ACCIDENTS AND DAMAGES IN MARITIME Requisites of general average (CD-PS)
COMMERCE
1. Common danger present;
Accidents in maritime commerce (CASA) 2. Deliberate sacrifice of part of the vessel or
cargo;
1. Collision 3. Successful saving of vessel and/or cargo; and
2. Averages 4. Proper procedure and legal steps.
3. Shipwreck a. Assembly to be called by captain of all the
4. Arrival under stress cargo owners and other officers of the
vessel
b. Deliberation

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153 FACULTY OF CIVIL LAW
 Transportation Laws
c. Resolution of the captain
d. Entry of resolution in the logbook
e. Delivery of the minutes of the meeting to
the maritime judicial authority of the first
port of arrival within 24 hours from arrival;
f. Ratification by captain under oath
(Dimaampao & Dumlao-Escalante, 2014)
Goods not covered by general average even if
not sacrificed
1. Goods not recorded in the books or records of
the vessel (Art. 855[2], CC)
2. Fuel for the vessel if there is more than
sufficient fuel for the voyage (Rule IX, York-
Antwerp Rule)
Q. Global Transport Services, Inc (GTSI)
operates a fleet of cargo vessels plying
interisland routes. One of its vessels, MV Donna
Juana, left the port of Manila for Cebu laden with,
among other goods, 10,000 television sets
consigned to Romualdo, a TV retailer in Cebu.
When the vessel was about 10 nautical miles
away from Manila, the ship captain heard on the
radio that a typhoon which, as announced by
PAG-ASA, was on its way out of the country, had
suddenly veered back into Philippine territory.
The captain realized that MV Dona Juana would
traverse the storm’s path, but decided to
proceed with the voyage. True enough, the
vessel sailed into the storm. The captain
ordered the jettison of the 10,000 television
sets, along with some other cargo, in order to
lighten the vessel and make it easier to steer the
vessel out of the path of the typhoon. Eventually,
the vessel, with its crew intact, arrived safely in
Cebu. (2009 bar)
a) Will you characterize the jettison of
Romualdo’s TV sets as an average? If so, what
kind of an average, and why? If not, why not?
b) Against whom does Romualdo have a
cause of action for indemnity of his lost TV sets?
Explain.
A:
a. The jettison of Romualdo’s TV sets resulted in a
general average loss, which entitles him
compensation or indemnification from the ship
owner and the owners of the cargoes saved by the
jettison.
b. Romualdo has a cause of action for his lost TV sets
against the ship owner and the owners of the
cargoes saved by the jettison. The jettison of the TV
sets resulted in a general average loss, entitling
Romualdo to indemnity for the lost TV sets.
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
Jettison (2000, 2009 Bar)
Act of throwing overboard part of a vessel’s cargo or
hull in hopes of saving a ship from sinking.
Goods jettisoned for the common safety, shall not
pay freight; but its latter amount (freight lost) shall
be considered as general average, computing the
same in proportion to the distance covered when
they were jettisoned (Art. 660, Code of Commerce).
Q: Distinguish between overseas and inter-
island trade regarding reimbursement and
payment of general averages on jettisoned deck
cargo.
A:
1. In case of overseas trade, the York-Antwerp
Rules prohibit the loading of cargo on deck. In
case such cargo is jettisoned, the owner will not
be entitled to reimbursement in view of the
violation. If the cargo were saved, the owner
must contribute to general average.
2. In case of interisland trade, the York-Antwerp
Rules allow deck cargo. If the cargo loaded on
deck is jettisoned as a result of which the vessel
was saved, the cargo owner is entitled to
reimbursement. If the cargo is saved, the cargo
owner must contribute to the general average.
Reason: In interisland trade, voyages are usually
short and there are intervening islands and the seas
are generally not rough. In overseas trade, the
vessel is exposed for many days to the peril of the
sea, making deck cargo is dangerous to navigation.
COLLISION
Collision is impact of two moving vessels. It is an
impact or sudden contact of a vessel with another
whether both are in motion or one stationary
(Aquino and Hernando, 2016).
Allision is impact between a moving vessel and a
stationary one.
Error in extremis isthe sudden movement made by
a faultless vessel during the third zone of collision
with another vessel which is at fault under the
second zone. Even if sudden movement is wrong, no
responsibility will fall on the faultless vessel.
Rules governing liabilities of parties in case of
collision
1. One vessel at fault – The ship owner of such
vessel shall be liable for all resulting damages.
2. Both vessels at fault – Each vessel shall suffer
their respective losses but as regards the
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 Mercantile Law
owners of the cargoes, both vessels shall be
jointly and severally liable (1991, 1995, 1998
Bar).
3. Vessel at fault not known – Each vessel shall
suffer its own losses and both shall be solidarily
liable for loses or damages on the cargo
(Doctrine of Inscrutable Fault).
Doctrine of inscrutable fault (1995, 1997
Bar)
Under this doctrine, where fault is established
but it cannot be determined which of the two
vessels were at fault, both shall be deemed to
have been at fault.
4. Fortuitous event – Each shall bear its own
damage (1995 Bar).
5. Third vessel at fault – The third vessel shall be
liable for losses and damages sustained.
Zones of time in the collision of vessel
1. First zone – all time up to the moment when risk
of collision begins.
One vessel is a privileged vessel and the other is
a vessel required to take action to avoid
collision.
2. Second zone – time between moment when risk
of collision begins and moment it becomes
practically a certainty.
In this zone, the conduct of the vessels is
primordial. It is in this zone that vessels must
observe nautical rules, unless a departure
therefrom becomes necessary to avoid
imminent danger. The vessel which does not
make such strict observance is liable.
3. Third Zone – time when collision is certain and
up to the time of impact.
An error at this point no longer bears any
consequence. Even if a collision which resulted
in the damage to the cargoes of a vessel was due
to the fault of the other vessel, the ship owner is
still liable where the vessel did not exercise due
diligence to avoid collision (Maritime Company
of the Philippines vs. CA, G.R. No 47004, March 8,
1989).
A vessel is guilty of negligence even if it correctly
navigated to the right to avoid the collision where it
did not make such maneuver at an early stage and
allowed the two vessels to come to close quarters
(Mecenas vs. CA, G.R. No. 88052, December 14, 1989).
155
If the collision is imputable to both vessels, each one
shall suffer her own damage, and both shall be
solidarily liable for the damages occasioned to their
cargoes (CC, Art. 827).
Protest in collision (2007 Bar)
The action for recovery of damages arising from
collisions cannot be admitted if a protest or
declaration is not presented within twenty-four
hours before the competent authority of the point
where the collision took place, or that of the first
port of arrival of the vessel, if in Philippine territory,
and to the Filipino consul if it occurred in a foreign
country (Art. 835, CC).
Failure to make a protest is not an impediment to
the maintenance of a civil action based on quasi-
delict.
Instances when a protest is required (AS-HM)
1. Arrival under stress (CC, Art. 612 [8]);
2. Shipwreck (CC, Arts. 601 [15], 843);
3. If the vessel has gone through a Hurricane or
where the captain believes that the cargo has
suffered damages or averages (CC, Art. 642);
and
4. Maritime collision (CC, Art. 835)
Persons who can file a maritime protest
1. In case of maritime collision, the passenger or
other persons interested who may be on board
the vessel or who were in a condition who can
make known their wishes (CC, Arts. 835-836) or
the captain himself (Verzosa and Ruiz vs. Lim,
G.R. No. 20145, Nov. 15, 1923).
2. The captain in cases of:
a. Arrival under stress
b. Shipwreck; or
c. If the vessel has gone through a hurricane
or where the captain believes that the cargo
has suffered damages or averages.
Q: Two vessels figured in a collision resulting in
considerable loss of cargo. The damaged vessels
were safely conducted to a port. Kim, a
passenger and Ruby, a shipper who suffered
damage to his cargo, did not file maritime
protest. Can Kim and Ruby successfully
maintain an action to recover losses and
damages arising from the collision? (2007 Bar)
A: Ruby, the shipper can successfully maintain an
action to recover losses and damages arising from
the collision notwithstanding his failure to file a
maritime protest since the filing thereof is required
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
only on the part of Kim, who, being a passenger of
the vessel at the time of the collision, was expected
to know the circumstances of the collision. Kim’s
failure to file a maritime protest will therefore
prevent him from successfully maintaining an
action to recover his losses and damages (CC, Art
836).
Shipwreck
The loss of the vessel at sea as a consequence of its
grounding, or running against an object in sea or on
the coast. If the wreck was due to malice, negligence,
or lack of skill of the captain, the owner of the vessel
may demand indemnity from said captain.
Person who shall bear the losses in shipwreck
GR: The loss of a ship and her cargo shall fall upon
their respective owners (CC, Art. 840).
XPN: The ship agent or the shippers may demand
indemnity from the captain for the damage caused
to the vessel or to the cargo by the accident.
1. The wreck was due to malice, negligence, or
lack of skill of the captain; or
2. The vessel put to sea was insufficiently repaired
and equipped (Art. 841, CC).
Arrival under stress
It is the arrival of a vessel at the nearest and most
convenient port, if during the voyage the vessel
cannot continue the trip to the port of destination
on account of:
1. Lack of provisions;
2. Well-founded fear of seizure, privateers or
pirates; or
3. Any accident of the sea disabling it to navigate
(art. 819, cc).
NOTE: In arrival under stress, the captain must file
a protest which is merely a disclaimer for the ship
owner not to be liable.
Instances when arrival under stress is unlawful
(LR-DM)
1. Lack of provisions is due to negligence to carry
according to usage and customs
2. Risk of enemy not well known of manifest
3. Defect of vessel is due to improper repair; or
4. Malice, negligence, lack of foresight or skill of
captain (Art. 820, CC).
CARRAIGE OF GOODS BY SEA ACTS (COGSA)
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
APPLICATION
It will only be applied in terms of loss or damage of
goods transported to and from Philippine ports in
foreign trade.
It may also apply to domestic trade when there is a
paramount clause in the contract. Paramount
Clause is a stipulation or clause either on the bill of
lading or charter party stipulating the laws that the
parties agreed to be used of that particular
transport. In the event that there will be a breach,
the parties shall follow the law stipulated in the
paramount clause (Martin, 1989).
The Carriage of Goods by Sea Act applies up to the
final port of destination even if the transshipment
was made on an inter-island vessel (Sea Land
Service Inc. vs. IAC, G.R. No. 75118, August 31, 1987).
Cases covered under the COGSA
It applies only in case of non-delivery or damage,
and not to misdelivery or conversion of goods (Ang
vs. American Steamship Agencies, Inc., G.R. No. L-
22491, Jan. 27, 1967).
Also, the deterioration of goods due to delay in their
transportation is not covered by Sec. 6 of COGSA
(Mitsui O.S.K. Lines Ltd. vs. CA, G.R. No. 119571, March
11, 1998).
Q: The goods imported from the United States
were unloaded by the carrier in Manila. While in
the custody of the arrastre operator, part of the
shipment worth P1,000 was lost. Does the case
involve admiralty and maritime commerce so
that the action for short delivery has to be files
in the Court of First Instance regardless of the
amount? Reasons. (2013 Bar)
A: NO. The matter does not involve admiralty or
maritime commerce which relate only to incidents
occurring during the sea voyage.
NOTICE OF LOSS AND DAMAGES
Notice of claim
1. If the damage is not apparent – within three (3)
days from delivery; or
2. If the damage is apparent – immediately.
NOTE: The period is not mandatory. However, the
prescriptive period of one year from delivery for
the filing of the case is a condition precedent or
mandatory.
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 Mercantile Law
Failure to file notice of loss does not bar an action
against the carrier if the action was filed within one
year (Belgian Overseas Chartering & Shipping N.V. vs.
Philippine First Insurance Company, Inc, G.R. No.
143133, June 5, 2002). There is no consequence on
the right to bring suit if no notice is filed unlike
under the Code of Commerce. It only gives rise to a
presumption that the goods are delivered in the
same condition as they are shipped.
There is also no consequence if the transportation
charges and expenses are paid unlike under the
Code of Commerce.
Q. RC imported computer motherboards from
the USA and had them shipped to Manila aboard
an oceangoing cargo ship owned by BC Shipping
Company. When the cargo arrived at the Manila
seaport and delivered to RC, the crate appeared
intact; but upon inspection of the contents, RC
discovered that the items inside had all been
badly damaged. He did not file any notice of
damage or anything with anyone, least of all
with BC Shipping Company. What he did was to
proceed directly to your office to consult you
about whether he should have given a notice of
damage and how long a time he had to initiate a
suit under the provisions of the COGSA. What
would your advise be? (2000 Bar)
A. My advice would be that RC should give notice of
the damage sustained by the cargo within 3 days
and that he has to file the suit to recover the damage
sustained by the cargo within 1 year from the date
of the delivery of the cargo to him.
PERIOD OF PRESCRIPTION
The suit for loss or damage should be brought within
one year from:
1. Delivery of the goods, in case of damage; or
2. The date when the goods should have been
delivered, in case of loss.
The one-year period is computed from the delivery
of goods to the operator and not to the consignee.
The parties may agree to extend the one-year period
to file a case under the Carriage of Goods by Sea
(Universal Shipping Lines, Inc. vs. Intermediate
Appellate Court, G.R. No. 74125, July 31, 1990).
The term carriage of goods in the COGSA covers the
period from the time the goods are loaded to the
vessel to the time they are discharged therefrom.
NOTE: Delivery to another vessel is not the delivery
contemplated if it constitures transschipment.
157
Transshipment – is the act of taking out cargo out
of one ship and laoding it in another, or the transfer
of goods from the vessel stipulated in the contract of
affreightment to another vessel before the place of
destination named in the contract has been reached.
Instances when the one-year period applies
(AFLS)
1. Amendment of pleadings for suing the wrong
party
2. Filing of third party complaint
3. Loss or damage to cargo, excluding delay or
misdelivery
4. Subrogation (Art 2207, NCC)
NOTE: Art. 1155 of the Civil Code, providing that the
prescription of actions is interrupted by the making
of an extrajudicial written demand by the creditor,
is not applicable to actions brought under the
COGSA.Written claims do not toll the running of the
one-year prescriptive period under the COGSA since
matters affecting the transportation of goods by sea
must be decided as soon as possible (Dole
Philippines, Inc. vs. Maritime Company of the
Philippines, G.R. No. L-61352, February 27, 1987).
The one-year prescriptive period within which to
file a case against the carrier also applies to a claim
filed by an insurer who stands as a subrogee to the
insured. Also, whether the insurer files a third party
complaint or maintains an independent action is of
no moment (Filipino Merchants Insurance Co., Inc. vs.
Alejandro, G.R. No. L-54140, Oct. 14, 1986).
NOTE: The ruling in the above-cited case should
apply only to suits against the carrier filed either by
the shipper, the consignee or the insurer, not to
suits by the insured against the insurer. The basis of
the insurer’s liability is the insurance contract and
such claim prescribes in 10 years, in accordance
with Art. 1144 of the Civil Code (Mayer Steel Pipe
Corporation vs. CA, G.R. No. 124050, June 19, 1997).
The prescriptive period for an action against a
broker is ten years and not one year under the
COGSA, since the broker is not a carrier, charterer or
holder of the bill of lading (Reyma Brokerage Inc. vs.
Philippine Home Assurance Corporation, G.R. No.
93464, October 7, 1991).
The one year period in COGSA is interrupted:
1. When an action is filed in court; or
2. When there is an agreement between the parties
to extend it.
Persons who can give notice to, and bring suit
against the carrier (SCA)
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
1. The Shipper
2. The Consignee; or
3. Any legal holder of the bill of lading like the
indorsee, subrogee, or the insurer of the goods
(Kuy vs. Everett Steamship Corporation, G.R. No.
L-5554, May 27, 1953).
Q: On December 1, 2010, Kore A Corporation
shipped from South Korea to LT Corporation in
Manila some 300,000 sheets of high-grade
special steel. The shipment was insured against
all risk by NA Insurance (NA). The carrying
vessel arrived at the Port of Manila on January
10, 2011. When the shipment was discharged, it
was noted that 25,000 sheets were damaged and
in bad order. The entire shipment was turned
over to the custody of ATI, the arrastre operator,
on January 21, 2011 for storage and
safekeeping, pending its withdrawal by the
consignee’s authorized customs broker, RVM.
On January 26 and 29, 2011, the subject
shipment was withdrawn by RVM from the
custody of ATI.
On January 29, 2011, prior to the withdrawal of
the last batch of the shipment, a joint inspection
of the cargo was conducted per the Request for
bad Order Survey (RBO) dated January 28, 2011.
The examination report showed that 30,000
sheets of steel were damaged and in bad order.
NA Insurance paid LT Corporation the amount of
P30 M for the 30,000 sheets that were damaged,
as shown in the Subrogation Receipt dated
January 13, 2013. Thereafter, NA Insurance
demanded reparation against ATI for the goods
damaged in its custody, in the amount of P5 M.
ATI alleged that the COGSA applies in this case
since the goods were shipped from a foreign
port to the Philippines.
NA Insurance claims that the COGSA does not
apply, since ATI is not a shipper or carrier. Who
is correct? (2014 Bar)
A: NA Insurance is correct. ATI should be ordered
to pay NA Insurance notwithstanding the lapse of
the one year prescriptive period for filing a suit
under the COGSA. The term “carriage of goods”
under Section 1 in COGSA, covers the period from
the time when the goods are loaded to the time
when they are discharged from the ship infer that
the period of time when the goods have been
discharged from the ship and given to the custody of
the arrastre operator is not covered by the COGSA.
The COGSA does not mention that an arrastre
operator may invoke the prescriptive period of one
year; hence, it does not cover the arrastre operator.
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
Prescriptive period in case of misdelivery and
conversion of goods
1. If there is a written contract – 10 years (NCC,
Art. 1144)
2. Oral contract – 6 years (NCC, Art. 1145)
3. For quasi-delict – 4 years (NCC, Art. 1146)
LIMITATION OF LIABILITY
Amount of the carrier’s liability under the
COGSA
1. The liability limit is set at $500 per package or
customary freight unless the nature and value
of such goods is declared by the shipper.
2. Shipper and carrier may agree on another
maximum amount, but not more than amount of
damage actually sustained.
NOTE: When the packages are shipped in a
container supplied by carrier and the number of
such units is stated in the bill of lading, each unit,
and not the container, constitute the “package.”
Instances where there is no liability under
COGSA (FDUD)
1. If the nature or value of goods knowingly and
fraudulently misstated by shipper
2. If damage resulted from Dangerous nature of
shipment loaded without consent of carrier
3. If Unseaworthiness not due to negligence
4. If Deviation was to save life or property at sea.
Q: Clause 18 of the bill of lading provides that the
owner should not be liable for loss or damage of
cargo unless written notice thereof was given to
the carrier within 30 days after receipt of the
goods. However, Section 3 of the COGSA
provides that even if a notice of loss or damage
is not given, "that fact shall not affect or
prejudice the right of the shipper to bring suit
within one year after the delivery of the goods."
Which of these two provisions should prevail?
A: Section 3 will prevail. Sec. 3 of the COGSA
provides that any clause, covenant, or agreement in
a contract of carriage relieving the carrier or the
ship from liability for loss or damage to or in
connection with the goods or lessening such liability
otherwise than as provided, shall be null and void
and of no effect (E. E. Elser, Inc. vs. CA, G.R. No. L-6517,
November 29, 1954).
THE WARSAW CONVENTION
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 Mercantile Law
The Warsaw Convention for Unification of Certain
Rules Relating to International Carriage by Air (WC)
provides for rules applicable to international
transportation by air. The Philippines is one of the
signatories to the Warsaw Convention (Santos III vs.
Northwest Orient Airlines, G.R. No. 101538, June 23,
1992). Hence, this has the force and effect of law in
the Philippines (Cathay Pacific Airways, Ltd. vs. CA,
G.R. No. 60501, March 5, 1993).
Montreal Convention
On 10 August 2015, the Philippine Senate ratified the
Convention for the Unification of Certain Rules for
International Carriage by Air, Montreal, 28 May
1999.
With the Montreal Convention, airline liability
caps have been increased substantially such that a
passenger is entitled to claim damages up
to $170,000.00 even without proof of negligence or
fault by the airline. Furthermore, in excess of this
amount, the burden of proof is on the shoulders of
the carrier to show that it was not negligent.
1. Passenger death or bodily injury – no financial
limits, however, the carrier shall not be liable
for damages exceeding 100,000 Special
Drawing Rights (Approximately EUR 123,000)
if it proves that it was not negligent or at fault
or such damages is solely attributable to the
negligence or fault of third parties. The air
carrier may make an advance payment to meet
the immediate economic needs of the person
entitled to claim compensation.
2. Destruction, loss of, or damage or delay to
baggage – 1,000 Special Drawing Rights
(approximately EUR 1,230) per passenger.
3. Damage caused by delay in the carriage by air of
passengers– 4,150 Special Drawing Rights.
(approximately EUR 5,100)
APPLICABILITY
The Warsaw Convention applies to all international
carriage of persons, luggage or goods performed by
aircraft for reward. It applies equally to gratuitous
carriage by aircraft performed by an air transport
undertaking (WC, Art. 1[1]).
International carriage
Any carriage in which, according to the contract
made by the parties, the place of departure and the
place of destination, whether or not there be a break
in the carriage or a transshipment, are situated
either:
159
1. Within the territories of two High Contracting
Parties; or
2. Within the territory of a single High Contracting
Party, if there is an agreed stopping place within
a territory subject to the sovereignty,
suzerainty, mandate or authority of another
Power, even though that Power is not a party to
the Convention (WC, Art. 1[2]).
High Contracting Parties are the signatories to the
Warsaw Convention and those which subsequently
adhered to it (Mapa vs. CA, G.R. No. 122308, July 8,
1997).
Q: How should carriage performed by several
successive air carriers be treated under Warsaw
Convention?
A: A carriage to be performed by several successive
air carriers is deemed, for the purposes of Warsaw
Convention to be one undivided carriage, if it has
been regarded by the parties as a single operation,
whether it had been agreed upon under the form of
a single contract or of a series of contracts (WC, Art.
1 [3]).
Such carriage does not lose its international
character merely because one contract or a series of
contracts is to be performed entirely within a
territory subject to the sovereignty, suzerainty,
mandate or authority of same High Contracting
Party (Ibid).
Documents of carriage issued under the Warsaw
Convention
The following are the documents of carriage:
1. Passenger Ticket
2. Luggage Ticket
3. Air Consignment note
Function of the air consignment note
It is prima facie evidence of:
1. The conclusion of the contract
2. Receipt of the goods
3. Conditions of carriage (WC, Art. 11 [1])
Right to dispose by consignor
The consignor may exercise its right to dispose of
the goods by:
1. Withdrawing them at the aerodrome of
departure or destination, or
2. Stopping them in the course of the journey on
any landing, or
3. Calling for them to be delivered at the place of
destination or in the course of the journey to a
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 Transportation Laws
person other than the consignee named in the
air consignment note, or
4. Requiring them to be returned to the
aerodrome of departure (WC, Art. 12).
In the exercise of this right, the carrier or other
consignors must not be prejudiced. For the carrier
to obey the orders for disposition, the carrier must
require the production of the part of the air
consignment note delivered to the consignor (Ibid).
Right to dispose ceases as soon as the consignee, on
arrival of the goods at the place of destination,
require the carrier to hand over to him the air
consignment note and to deliver the goods to him,
on payment of charge due and on complying with
the conditions of carriage set out in the air
consignment note (WC, Art. 13).
Where the supervisor of the consignee signed the
delivery receipt for the goods shipped, the
consignee cannot sue the shipping company for
non-delivery of the goods (Republic vs. Lorenzo
Shipping Corporation, G.R. No. 153563, Februry 7,
2005).
Liabilities under the Warsaw Convention
The carrier is liable under the following instances:
1. Damage sustained in the event of the death
or wounding of a passenger taking place on
board the aircraft or in the course of any of
the operations of embarking or
disembarking;
2. Loss or damage to any check baggage or
goods sustained during the transport by
air;
3. Delay in the transport by air of passengers,
baggage or goods.
Thelist is not exclusive.
Venue in the filing of an action for violation of a
contract of international carriage
An action for damage must be brought at the option
of the plaintiff, in the territory of one of the High
Contracting Parties, either before the court:
1. Of the domicile of the carrier or
2. Of his principal place of business, or
3. Where the ticket was purchased, or
4. At the place of destination (WC, Art. 28 [1]).
LIMITATION OF LIABILITY (1993 Bar)
LIABILITY TO PASSENGERS
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
GR: The carrier shall be liable for 250,000 francs for
each passenger.
XPN: By special contract, the carrier and the
passenger may agree to a higher limit of liability
(Art. 22, WC).
A passenger of an airline is bound by the terms of a
passenger ticket declaring that the limitations of
liability zet forth in the Warsaw Convention in case
of loss, damage or destruction to a registered
luggage of the passenger. The Warsaw Convention
governs the availment of the liabitlity limitations
where the baggebe checked is combined with or
incorporated in the passesnger ticket. (Pan-am v
Rapadas. 209 scra 67)
LIABILITY FOR CHECKED BAGGAGE
GR: Two hundred and fifty (250) francs per
kilogram,
XPN: The passenger or consignor has made, at the
time when the package was handed over to the
carrier, a special declaration of interest in delivery
at destination and has paid a supplementary sum if
the case so requires (Ibid.).
LIABILITY FOR HANDCARRIED BAGGAGE
Five thousand (5,000) francs per passenger (Ibid.).
NOTE: The above figures have been amended by the
Guatemala Protocol, viz:
1. Carriage of persons – One hundred thousand
dollars ($100, 000)
2. Checked-in articles – One thousand dollars
($1,000)
3. Hand-carried baggage - One thousand dollars
($1,000)
According to Dean Eduardo Abella, the Guatemala
Protocol has not yet been ratified, so either of the
two currencies is still correct.
Defenses against limit of liability
The limit of liability is not applicable in case of:
1. Willful misconduct;
2. Gross negligence;
3. Absence of baggage check;
4. If there was waiver on the part of the carrier;
and
5. If the carrier is estopped from invoking the
provision on limit of liability (Aquino and
Hernando, 2016)
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 Mercantile Law
Carrier is not entitled to the foregoing limit if the
damage is caused by willful misconduct or default
on its part (WC, Art. 25). Where the loss of the
baggage of a passenger was due to the fault or
recklessness of an airline company, the limitation
on the liability of airline companies under the
Warsaw Convention is not applicable (Alitalia v. IAC,
G.R. No. 71929, December 4, 1990).
Stipulation relieving the carrier from or limiting
its liability is not valid
Any provision tending to relieve the carrier of
liability or to fix a lower limit than that which is laid
down in this Convention shall be null and void but
the nullity of such provision does not involve the
nullity of the whole contract (WC, Art. 23).
Notice of Claim
Under the Warsaw Convention, complaint must be
filed within the following period:
1. Three days from receipt of baggage;
2. Seven days from receipt of goods; or
3. Fourteen days, in case of delay, counted from the
time the baggage was placed at the disposal of the
passenger (Aquino and Hernando, 2016).
Prescriptive period
Claim for damages must be brought within two
years reckoned [a] from the date of arrival at the
destination; or [b] from the date on which the
aircraft ought to have arrived; or [c] from the date
on which the carriage stopped, otherwise, right to
damages shall be extinguished.
Despite the express mandate that an action for
damages should be filed within 2 years from the
arrival at the place of destination, such rule shall
not be applied where delaying tactics were
employed by airline itself in a case where a
passenger wishes to settle his complaint out-of-
court but the airline gave him the runaround,
answering the passenger’s letters but not giving in
to his demands, hence, giving the passenger no time
to institute the complaint within the reglementary
period (United Airlines vs. Uy, G.R. No. 127768, Nov.
19, 1999).
A claim covered by the Warsaw Convention can no
longer be recovered under local law, if the statute of
limitations of two years has already lapsed (PAL. v.
Savillo, G.R. No. 149547, July 4, 2008).
However, the action filed by a passenger of an
airline company for loss of his luggage is not barred
by the two-year prescriptive period under the
161
Warsaw Convention, where the passenger
immediately made a demand upon the airline
company and the action was delayed because of the
evasion of the airline company (United Air Lines, Inc.
v. CA, G.R. No. 124110, April 20, 2001).
Where an airline company failed to deliver the
baggage of a passenger on time, a passenger may
maintain an action for damages under the Civil Code
even if he did not file a claim with the airline
company within fourteen days as required by the
Warsaw Convention, for he may still sue under the
Civil Code (Luna v. CA, G.R. No. 100374-75, November
27, 1992).
WILLFUL MISCONDUCT
Carrier is not entitled to the limitation of liability if
the damage is caused by willful misconduct or
default on its part (WC, Art. 25). The definition of
"willful misconduct" depends in some measure on
which court is deciding the issue. Some common
factors that courts will consider are:
1. Knowledge that an action will probably result in
injury or damage
2. Reckless disregard of the consequences of an
action, or
3. Deliberately failing to discharge a duty related
to safety.
NOTE: Courts may also consider other factors.
The failure of the carrier to deliver the passenger’s
luggage at the designated time and place does not
ipso facto constitute willful misconduct.There must
be a showing that the acts complained of were
impelled by an intention to violate the law, or were
in persistent disregard of one's rights. It must be
evidenced by a flagrantly or shamefully wrong or
improper conduct. (Luna vs. CA, GR No. 100374-75,
November 27, 1992.
The act of the carrier in guessing which luggage
contained the firearm constitutes willful
misconduct.The guessing of which luggage
contained the firearms amounted to willful
misconduct under Section 25(1) of the Warsaw
Convention. (Northwest Airlines vs. CA, GR No.
120334, January 20, 1998)
The allegation of willful misconduct resulting in a
tort is insufficient to exclude the case from the realm
of Warsaw Convention.A cause of action based on
tort did not bring the case outside the sphere of the
Warsaw Convention. (Lhuiller vs. British Airways, GR
No. 171092, March 15, 2010)
UNIVERSITY OF SANTO TOMAS
FACULTY OF CIVIL LAW
 The Corporation Code
NOTE: There is no willful misconduct if the airplane
was lost without a trace. In such case, no willful
misconduct can be proved because if the airplane is
lost without a trace, there is no proof of the act or
omission or the proximate cause of the accident.
(Wyman and Barlett v. Pan American Airways, Inc.,
CCH 1 AVI 1093 (1943)
THE CORPORATION CODE (CC)
CORPORATION
(Note: Those which are affected by the Revised
Corporation Code is not included in the 2019 Bar
Syllabus. The reader must be guided accordingly.)
DEFINITION
A corporation is an artificial being created by
operation of law, having the right of succession and
the powers, attributes and properties expressly
authorized by law or incident to its existence (CC,
Sec. 2).
ATTRIBUTES OF A CORPORATION
[ALS– PAPI]
1. It is an Artificial being
2. It is created by operation of Law
3. It enjoys the right of Succession
4. It has the Powers, Attributes and Properties
expressly authorized by law or Incident to its
existence.
1. Artificial Personality
A corporation is a legal or juridical person with a
personality separate and apart from individual
stockholders or members and from any other legal
entity into which it may be connected or related.
2. Corporation as a Creation of Law or By
Operation of Law
No corporation can exist without the consent or
grant of the sovereign, and that the power to create
corporations is one of the attributes of sovereignty.
Corporations cannot come into existence by mere
agreement of the parties (De Leon, 2010).
GR: A legislative grant or authority is required for
the creation of a corporation, either by a special
UNIVERSITY OF SANTO TOMAS
2019 GOLDEN NOTES
incorporation law or charter or by means of general
corporation law.
XPN: For corporations by prescription, such
authority is not necessary (De Leon, 2010).
NOTE: A corporation by prescription is one which
has exercised powers for an indefinite period
without interference on the part of the sovereign
power and which by fiction of law, is given the status
of a corporation (De Leon, 2010).
The creation of a corporation is by operation of
law
NOTE: The Philippine jurisprudence adopted the
Concession or fiat theory, which states that a
corporation is conceived as an artificial person
owing existence through creation by a foreign
power. Further, a corporation has without any
existence until it has received the imprimatur of the
State acting according to law, through the SEC
(Tayag v. Benguet Consolidated, Inc., GR No. L-23145,
November 29, 1968).
Q: Since February 8, 1935, the legislature has
not passed even a single law creating a private
corporation. What provision of the constitution
precludes the passage of such law? (2008 Bar)
A: Article XII, Section 16 of the 1987 Constitution
provides that Congress shall not, except by general
law, provide for the formation, organization, or
regulation of private corporations. Government-
owned and controlled corporations may be created
or established by special charters in the interest of
the common good and subject to the test of
economic viability.
Private corporations owned or controlled by the
government can only be created by special law often
referred to as “Charters”.
Q: A corporation was created by a special law.
Later, the law creating it was declared invalid.
May such corporation claim to be a de facto
corporation?
A: NO. A private corporation may be created only
under the Corporation Code. Only public
corporations may be created under a special law.
Where a private corporation is created under a
special law, there is no attempt at a valid
incorporation and it cannot claim a de facto status.
Q: A Special Audit Team from COA audited the
accounts of Leyte Metropolitan Water District
(LMWD). Subsequently, LMWD and received a
requested for payment of auditing fees from
162