Transportation Law - Case Digest

TRANSPORTATION LAW CASE DIGEST
1.
PEDRO DE GUZMAN vs. COURT OF APPEALS
G.R. No. L-47822, December 22, 1988
DOCTRINE:
 Article 1732 of the Civil Code makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local Idiom as "a sideline")
 Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis.
 Neither does Article 1732 distinguish between a carrier offering its services to the
"general public,"
ISSUES:
(1) Whether or not private respondent is a common carrier
(2) Whether or not private respondent is liable for the loss of the goods
(3) Whether or not force majeure is included as an exemption under the provisions of
either Article 1733, 1734, 1735 or 1745, numbers 4, 5 and 6
(4) Whether or not Certificate of Public Convenience is necessary for the incurring liability
under the Civil Code
(5) What are the specific requirements of the duty of extraordinary diligence in the
vigilance over the goods?
FACTS:
Respondent, Ernesto Cendana, was a junk dealer who buys scrap materials and
brings those he gathered to Manila for resale using 2 six-wheeler trucks. On the
return trip to Pangasinan, respondent would load his vehicle with cargo which various
merchants wanted delivered, charging fee lower than the commercial rates. Sometime
in November 1970, Petitioner, Pedro de Guzman, contracted with respondent for the
delivery of 750 cartons of Liberty Milk. On December 1, 1970, respondent loaded the
cargo and only 150 boxes of liberty milk were delivered to petitioner because the truck
carrying the boxes was hijacked along the way.
Petitioner commenced an action claiming the value of the lost merchandise. He
argues that respondent, being a common carrier, is bound to exercise extraordinary
diligence, which it failed to do. Private respondent denied that he was a common
carrier, and so he could not be held liable for force majeure.
RULINGS:
(1) YES.
Article 1732 of the Civil Code defines Common Carrier as persons, corporations,
firms or associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air, for compensation, offering their services to the
public.
It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other merchants from
Manila to Pangasinan, although such back-hauling was done on a periodic or
occasional rather than regular or scheduled manner, and even though private
respondent's principal occupation was not the carriage of goods for others. There is no
dispute that private respondent charged his customers a fee for hauling their goods;
that fee frequently fell below commercial freight rates is not relevant here.
(2) NO.
The hijacking of the carrier's truck - does not fall within any of the five (5)
categories of exempting causes listed in Article 1734. Private respondent as common
carrier is presumed to have been at fault or to have acted negligently. This
presumption, however, may be overthrown by proof of extraordinary diligence on the
part of private respondent.
The court believed that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a result of a
robbery which is attended by "grave or irresistible threat, violence or force." It held
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that the occurrence of the loss must be reasonably regarded as quite beyond the
control of the common carrier and properly regarded as a fortuitous event. It is
necessary to recall that even common carriers are not made absolute insurers against
all risks of travel and of transport of goods, and are not held liable for acts or events
which cannot be foreseen or are inevitable, provided that they shall have complied
with the rigorous standard of extraordinary diligence.
In this case, private respondent is not liable for the value of the undelivered
merchandise which was lost due to an event entirely beyond private respondent’s
control.
(3) YES, Article 1745 provides that any of the following or similar stipulations shall
be considered unreasonable, unjust and contrary to public policy:
5. That the common carrier shall not be responsible for the acts or omissions of his or its
employees;
6. 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; and
7. That the common carrier shall 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. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible - and will
not be allowed to divest or to diminish such responsibility - even for acts of strangers
like thieves or robbers, except where such thieves or robbers in fact acted "with grave
or irresistible threat, violence or force." We believe and so hold that the limits of the
duty of extraordinary diligence in the vigilance over the goods carried are reached
where the goods are lost as a result of a robbery which is attended by "grave or
irresistible threat, violence or force."
(4) NO.
A certificate of public convenience is not a requisite for the incurring of liability
under the Civil Code provisions governing common carriers. That liability arises the
moment a person or firm acts as a common carrier, without regard to whether or not
such carrier has also complied with the requirements of the applicable regulatory
statute and implementing regulations and has been granted a certificate of public
convenience or other franchise.
To exempt private respondent from the liabilities of a common carrier because
he has not secured the necessary certificate of public convenience, would be offensive
to sound public policy; that would be to reward private respondent precisely for failing
to comply with applicable statutory requirements. The business of a common
carrier impinges directly and intimately upon the safety and well-being and property of
those members of the general community who happen to deal with such carrier.
The law imposes duties and liabilities upon common carriers for the safety and
protection of those who utilize their services and the law cannot allow a common
carrier to render such duties and liabilities merely facultative by simply failing to
obtain the necessary permits and authorizations.
(5) ARTICLE 1733 provides that Common carriers, from the nature of their
business and for reasons of public policy, are bound to observe extraordinary diligence
in the vigilance over the goods and for the safety of the passengers transported by
them, according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed
in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence
for the safety of the passengers is further set forth in Articles 1755 and 1756.
Given additional specifications not only by Articles 1734 and 1735 but also by
Article 1745 numbers 4, 5, and 6 of the laws governing Common Carriers s under
the Civil Code
2.
CEBU SALVAGE CORPORATION vs. PHILIPPINE HOME ASSURANCE
CORPORATION
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G.R. No. 150403, January 25, 2007
ISSUES:
(1) Whether or not petitioner is a Common Carrier
(2) Whether or not a carrier may be held liable for the loss of cargo resulting from the
sinking of a ship it does not own
(3) Whether or not the voyage charter it entered into with MCII was a contract of carriage
or a mere contract of hire
(4) Whether or not the contract of carriage was between MCII and ALS as evidenced by
the Bill of Lading ALS issued
(5) Whether or not petitioner observed extraordinary diligence over the goods they
transport
FACTS:
Cebu Salvage Corporation (CSC), as carrier, and Maria Cristina Chemicals
Industries, Inc. (MCCII), as charterer, entered into a voyage charter wherein CSC was
to load 800 to 1,100 metric tons of silica quartz on board the M/T Espiritu Santo at
Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis
Oriental to consignee Ferrochrome Phils., Inc
CSC received and loaded 1,100 metric tons of silica quartz on board the M/T
Espiritu Santo which left for Misamis the next day. M/T Espiritu Santo sank off the
beach of Opol, Misamis Oriental, resulting in the total loss of the cargo.
MCCII filed a claim for the loss of the shipment with its insurer Philippine Home
Assurance Corporation paid the claim of P211,500 and was subrogated to the rights of
MCCII. Philippine Home Assurance Corporation (PHAC) filed a case against CSC for
reimbursement of the amount it paid MCCII.
RULINGS:
(1) YES, There is no dispute that petitioner was a common carrier.
Article 1732 of the civil code defines that Common carriers are persons,
corporations, firms or associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation, offering their
services to the public.
At the time of the loss of the cargo, it was engaged in the business of carrying
and transporting goods by water, for compensation, and offered its services to the
public which makes him a common carrier.
(2) YES.
Petitioner was the one which contracted with MCCII for the transport of the
cargo. It had control over what vessel it would use. All throughout its dealings with
MCCII, it represented itself as a common carrier. The fact that it did not own the
vessel it decided to use to consummate the contract of carriage did not negate its
character and duties as a common carrier. In fact, in this case, the voyage charter
itself denominated petitioner as the "owner/operator" of the vessel.
(3) It is clear that it was a contract of carriage that petitioner signed with MCCII.
A "voyage charter," also known as a contract of affreightment, is defined
wherein the ship was leased for a single voyage for the conveyance of goods, in
consideration of the payment of freight. Under a voyage charter, the shipowner
retains the possession, command and navigation of the ship, the charterer or freighter
merely having use of the space in the vessel in return for his payment of 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
(4) NO.
The bill of lading was merely a receipt issued by ALS to evidence the fact that
the goods had been received for transportation. It was not signed by MCCII, as in fact
it was simply signed by the supercargo of ALS. This is consistent with the fact that
MCCII did not contract directly with ALS. While it is true that a bill of lading may serve
as the contract of carriage between the parties, it cannot prevail over the express
provision of the voyage charter that MCCII and petitioner executed:
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“[I]n cases where a Bill of Lading has been issued by a carrier covering goods
shipped aboard a vessel under a charter party, and the charterer is also the holder of
the bill of lading, "the bill of lading operates as the receipt for the goods, and as
document of title passing the property of the goods, but not as varying the
contract between the charterer and the shipowner." The Bill of Lading becomes,
therefore, only a receipt and not the contract of carriage in a charter of the
entire vessel, for the contract is the Charter Party, and is the law between the parties
who are bound by its terms and condition provided that these are not contrary to law,
morals, good customs, public order and public policy.”
(5) NO.
Article 1733 of the Civil Code provides that Common Carriers, from the nature
of their business and for reasons of public policy, are bound to observe extraordinary
diligence over the goods they transport according to the circumstances of each case.
In the event of loss of the goods, common carriers are responsible, unless they
can prove that this was brought about by the causes specified in Article 1734 of the
Civil Code. In all other cases, common carriers are presumed to be at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence.
In this case, the court ruled that petitioner failed to prove that it exercised
extraordinary diligence to prevent such loss or that it was due to some casualty or
force majeure.
3.
FIRST PHILIPPINE INDUSTRIAL CORPORATION vs. COURT OF APPEALS
G.R. No. 125948, December 29, 1998
DOCTRINE:
 The definition of "common carriers" in the Civil Code makes no distinction as to the
means of transporting, as long as it is by land, water or air. It does not provide that the
transportation of the passengers or goods should be by motor vehicle.
ISSUES:
(1) Whether or not the petitioner is a common carrier
(2) What are the tests to determine whether a party is a common carrier of goods
(3) Whether or not Petitioner is exempted to pay the carriers tax under the Local
Government Code of 1991?
(4) Whether or not petitioner is a common carrier under the Petroleum Act of the
Philippines (R.A. 387)
(5) Whether or not the legislatives intent to exclude from the taxing power of the local
government unit the imposition of business tax against common carriers is valid
FACTS:
Petitioner is a grantee of a pipeline concession under R.A. No. 387, as amended,
a contract, install and operate oil pipelines. The original pipeline concession was
granted in 1967 and renewed by the Energy Regulatory Board in 1992.
Petitioner applied for a mayor’s permit with the Office of the Mayor of Batangas
City. However, before the mayor’s permit could be issued, the respondent City
Treasurer required petitioner to pay a local tax based on its gross receipts pursuant to
the Local Government Code. The respondent City Treasure assessed a business tax on
the petitioner amounting to P956,076.04 payable in four installments based on the
gross receipts for products pumped at GPS-1 which amounted to P181,681,151.00. In
order not to hamper its operations, petitioner paid the tax under protest in the
amount of P239, 019.01 for the first quarter.
Petitioner filed with the RTC of Batangas City a complaint for tax refund with
prayer for writ of preliminary injunction against respondents City of Batangas and
Adoracion Arellano in her capacity as City Treasurer. Petitioner alleged in its
complaint that:
(1) the imposition and collection of the business tax on its gross receipts violates Sec. 133 of
the Local Government Code;
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(2) the authority of cities to impose and collect a tax on the gross receipts of “contractors
and independent contractors” under Sec. 141(e) and 151 does not include the authority
to collect such taxes on transportation contractors for, as defined under Sec. 131(h), the
term “contractors” excludes transportation contactors; and
(3) the City Treasurer illegally and erroneously imposed and collected the said tax, thus
meriting the immediate refund of the tax paid.
Traversing the complaint, the respondents argued that petitioner cannot be
exempt from taxes under Sec. 133 (J) of the Local Government Code as said exemption
applied only to “transportation contractors and persons engaged in the transportation
by hire and common carriers by air land and water.”
Respondents assert that pipelines are not included in the term “common
carrier” which refers solely to ordinary carriers as trucks, trains, ships and the like.
Respondents further posit that the term “common carrier” under the said Code
pertains to the mode or manner by which a product is delivered to its destination.
RULINGS:
(1) YES.
Article 1732 of the Civil Code defines a “common carrier” as “any person,
corporation, firm or association engaged in the business of carrying or transporting
Based on the above definitions and requirements, there is no doubt that
petitioner is a common carrier. It is engaged in the business of transporting or
carrying goods, i.e. petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to all persons who choose to
employ its services, and transports the goods by land and for compensation. The fact
that petitioner has a limited clientele does not exclude it from the definition of a
common carrier.
(2) The test for determining whether a party is a common carrier of goods is:
a. He must be engaged in the carrying of goods for others as a public employment, and
must hold himself out as ready to engage in the transportation of goods or persons
generally as a business and not as a casual occupation.
b. He must undertake to carry goods of the kind to which his business is confined;
c. He must undertake to carry by the method by which his business is conducted and over
his established roads; and
d. The transportation must be for hire.
(3) YES.
There is no doubt that petitioner is a "common carrier" and, therefore, exempt
from the business tax as provided for in Section 133 (j), of the Local Government Code,
to wit:
“Sec. 133. Common Limitations on the Taxing Powers of Local Government
Units. - Unless otherwise provided herein, the exercise of the taxing powers of
provinces, cities, municipalities, and barangays shall not extend to the levy of the
following:
“(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or
water, except as provided in this Code.”
The Bureau of Internal Revenue likewise considers the petitioner a "common
carrier." In BIR Ruling No. 069-83, it declared:
“. . . since [petitioner] is a pipeline concessionaire that is engaged only in transporting
petroleum products, it is considered a common carrier under Republic Act No. 387 . . .
. Such being the case, it is not subject to withholding tax prescribed by Revenue
Regulations No. 13-78, as amended.”
(4) YES.
Article 86 thereof provides that Pipe line concessionaires are considered a
common carrier. And thus shall have the preferential right to utilize installations for
the transportation of petroleum owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of such other petroleum as may
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be offered by others for transport, and to charge without discrimination such rates as
may have been approved by the Secretary of Agriculture and Natural Resources.
Republic Act 387 also regards petroleum operation as a public utility. Pertinent
portion of Article 7 thereof provides that everything relating to the exploration for and
exploitation of petroleum . . . and everything relating to the manufacture, refining,
storage, or transportation by special methods of petroleum, is hereby declared to be a
public utility.
(5) YES.
It is clear that the legislative intent in excluding from the taxing power of the
local government unit the imposition of business tax against common carriers is to
prevent a duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross
sales/earnings under the National Internal Revenue Code. To tax petitioner again on
its gross receipts in its transportation of petroleum business would defeat the purpose
of the Local Government Code
4.
A.F. SANCHEZ BROKERAGE INCORPORATED vs. COURT OF APPEALS
G.R. NO. 147079, December 21, 2004
DOCTRINE:
 A common carrier is liable to the resulting damage to the goods if the improper
packaging is known to the carrier or his employees or is apparent upon ordinary
observation, but he nevertheless accepts the same without protest or exception.
ISSUES:
(1) Whether or not A.F. Sanchez Brokerage Inc. is a common carrier
(2) Whether AF Sanchez Brokerage as customs broker is liable for the damage of the
cargo as a common carrier.
(3) Whether or not A.F Sanchez Brokerage exercised extraordinary diligence over the
goods
(4) Whether or not the appellate court committed grave and reversible error tantamount
to abuse of discretion when it found petitioner a "common carrier" within the context
of Article 1732 of the New Civil Code
(5) What is the rule or doctrine laid down in the case?
FACTS:
Respondent, FGU Insurance Corporation (FGU), brought an action for
reimbursement against petitioner A.F. Sanchez Brokerage Inc. (Sanchez Brokerage) to
collect the amount paid by the former to Wyeth-Suaco Laboratories Inc. (Wyeth-Suaco)
as insurance payment for the goods delivered in bad condition.
A.F. Brokerage refused to admit liability for the damaged goods which it
delivered from Philippines Skylanders, Inc. (PSI) to Wyeth-Suaco as it maintained that
the damage was due to improper and insufficient export packaging, discovered when
the sealed containers were opened outside the PSI warehouse.
The decision in the Regional Trial Court was subsequently reversed and set
aside by the Court of Appeals, finding that Sanchez Brokerage is liable for the carriage
of cargo as a ―common carrier‖ by definition of the New Civil Code.
RULINGS:
1. YES.
As defined under Article 1732 of the Civil Code, common carriers are persons,
passengers or goods or both by land, water or air for compensation, offering their
services to the public. It does not distinguish between one whose principal business
activity is the carrying of goods and one who does such carrying only as an ancillary
activity. The contention therefore of Sanchez Brokerage that it is not a common carrier
but a customs broker whose principal function is to prepare the correct customs
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declaration and proper shipping documents as required by law is bereft of merit. It

suffices that petitioner undertakes to deliver the goods for pecuniary consideration.
In this light, Sanchez Brokerage as a common carrier, is mandated to observe,
under Article 1733 of the Civil Code, extraordinary diligence in the vigilance over the
goods it transports according to all the circumstances of each case. In the event that
the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to
have acted negligently, unless it proves that it observed extraordinary diligence.
2. YES. AF Sanchez Broker is liable for the damage of the cargo as a common
carrier.
Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage,
himself testified that the services the firm offers include the delivery of goods to the
warehouse of the consignee or importer.
Article 1732 does not distinguish between one whose principal business activity
is the carrying of goods and one who does such carrying only as an ancillary activity.
The contention, therefore, of petitioner that it is not a common carrier but a customs
broker whose principal function is to prepare the correct customs declaration and
proper shipping documents as required by law is bereft of merit. It suffices that
petitioner undertakes to deliver the goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under
Article 1733 of the Civil Code, extraordinary diligence in the vigilance over the goods it
transports according to all the circumstances of each case. In the event that the goods
are lost, destroyed or deteriorated, it is presumed to have been at fault or to have
acted negligently, unless it proves that it observed extraordinary diligence
3. NO.
Rule 45 is clear that decisions, final orders or resolutions of the Court of
Appeals in any case, i.e., regardless of the nature of the action or proceedings
involved, may be appealed to this Court by filing a Petition for Review , which would be
but a continuation of the appellate process over the original case.
The Resolution of the Court of Appeals dated December 8, 2000 denying the
motion for reconsideration of its Decision of August 10, 2000 was received by
petitioner on January 5, 2001. Since petitioner failed to appeal within 15 days or on or
before January 20, 2001, the appellate court's decision had become final and
executory. The filing by petitioner of a petition for certiorari on March 6, 2001 cannot
serve as a substitute for the lost remedy of appeal.
In another vein, the rule is well settled that in a petition for certiorari , the
petitioner must prove not merely reversible error but also grave abuse of discretion
amounting to lack or excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting aside
the decision of the trial court based on its finding that petitioner is liable for the
damage to the cargo as a common carrier. What petitioner is ascribing is an error of
judgment, not of jurisdiction, which is properly the subject of an ordinary appeal.
Where the issue or question involves or affects the wisdom or legal soundness of
the decision - not the jurisdiction of the court to render said decision - the same is
beyond the province of a Petition for Certiorari. The supervisory jurisdiction of this
Court to issue a cert writ cannot be exercised in order to review the judgment of lower
courts as to its intrinsic correctness, either upon the law or the facts of the case.
Procedural technicalities aside, the petition still fails.
4. It is a well settled rule that a common carrier is liable to the resulting damage
to the goods if the improper packaging is known to the carrier or his employees or is
apparent upon ordinary observation, but he nevertheless accepts the same without
protest or exception.
5. NO.
it was established that petitioner received the cargoes from the PSI warehouse
in NAIA in good order and condition; and that upon delivery by petitioner to Hizon
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Laboratories Inc., some of the cargoes were found to be in bad order, as noted in the
Delivery Receipt issued by petitioner, and as indicated in the Survey Report of Elite
Surveyors and the Destruction Report of Hizon Laboratories, Inc.
In an attempt to free itself from responsibility for the damage to the goods,
petitioner posits that they were damaged due to the fault or negligence of the shipper
for failing to properly pack them and to the inherent characteristics of the goods; and
that it should not be faulted for following the instructions of Calicdan of Wyeth-Suaco
to proceed with the delivery despite information conveyed to the latter that some of the
cartons, on examination outside the PSI warehouse, were found to be wet.
While paragraph No. 4 of Article 1734 of the Civil Code exempts a common
carrier from liability if the loss or damage is due to the character of the goods or
defects in the packing or in the containers, the rule is that if the improper packing
is known to the carrier or his employees or is apparent upon ordinary
observation, but he nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for the resulting
damage.
If the claim of petitioner that some of the cartons were already damaged upon
delivery to it were true, then it should naturally have received the cargo under protest
or with reservations duly noted on the receipt issued by PSI. But it made no such
protest or reservation.
Moreover, as observed by the appellate court, if indeed petitioner's employees
only examined the cargoes outside the PSI warehouse and found some to be wet, they
would certainly have gone back to PSI, showed to the warehouseman the damage, and
demanded then and there for Bad Order documents or a certification confirming the
damage. Or, petitioner would have presented, as witness, the employees of the PSI
from whom Morales and Domingo took delivery of the cargo to prove that, indeed, part
of the cargoes was already damaged when the container was allegedly opened outside
the warehouse
5.
LOADMASTER CUSTOMS SERVICES, INC. vs. GLODEL BROKERAGE CORP.
G.R. NO. 179446, January 10, 2011
ISSUES:
(1) Whether or not Loadmasters and Glodel are common carriers
(2) How is Extraordinary Diligence define in the case at bar?
(3) Whether or not Glodel and Loadmaster are liable to pay R&B Insurance for the
amount of the indemnity it paid Columbia
(4) Whether or not Glodel can collect from Loadmasters, if it having failed to file a cross-
claim against the latter.
(5) Whether or not Loadmasters may be legally considered as an Agent of respondent
Glodel?
FACTS:
R&B Insurance issued a Marine Policy in favor of Columbia to insure the
shipment of 132 bundles of electric copper cathodes against All Risks.
Columbia engaged the services of Glodel for the release and withdrawal of the
cargoes from the pier and the subsequent delivery to its warehouses/plants.
Glodel, in turn, engaged the services of Loadmasters for the use of its delivery
trucks to transport the cargoes to Columbia’s warehouses/plants in Bulacan and
Valenzuela City.
The goods were loaded on board twelve trucks owned by Loadmasters, driven by
its employed drivers and accompanied by its employed truck helpers.
The cargoes in six truckloads for Valenzuela City were duly delivered. However,
of the six trucks en route to Bulacan, only five reached the destination. One truck
failed to deliver its cargo.
The said truck was later recovered but without the copper cathodes. Columbia
filed with R&B Insurance a claim for insurance indemnity. R&B Insurance paid
Columbia the amount of ₱1,896,789.62 as insurance indemnity.
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R&B Insurance, thereafter, filed a complaint for damages against both

Loadmasters and Glodel, seeking reimbursement of the amount it had paid to
Columbia for the loss of the subject cargo.
The RTC held Glodel liable for damages for the loss of the subject cargo and was
ordered to pay R&B Insurance.
On appeal, the CA rendered the assailed decision holding Loadmasters liable to
appellant Glodel for the insurance indemnity which Glodel had to pay to R&B
Insurance Corporation.
RULINGS:
1. YES.
Loadmasters is a common carrier because it is engaged in the business of
transporting goods by land, through its trucking service. It is a common carrier as
distinguished from a private carrier wherein the carriage is generally undertaken by
special agreement and it does not hold itself out to carry goods for the general public.
The distinction is significant in the sense that “the rights and obligations of the
parties to a contract of private carriage are governed principally by their stipulations,
not by the law on common carriers.”
In the present case, there is no indication that the undertaking in the contract
between Loadmasters and Glodel was private in character. There is no showing that
Loadmasters solely and exclusively rendered services to Glodel.
2. When the Court speaks of extraordinary diligence, it is that extreme measure of

care and caution which persons of unusual prudence and circumspection observe for
securing and preserving their own property or rights. This exacting standard imposed
on common carriers in a contract of carriage of goods is intended to tilt the scales in
favor of the shipper who is at the mercy of the common carrier once the goods have
been lodged for shipment. Thus, in case of loss of the goods, the common carrier is
presumed to have been at fault or to have acted negligently.
The Civil Code provides that the exercise of extraordinary diligence lasts from
the time the goods are unconditionally placed in the possession of, and received by,
the carrier for transportation until the same are delivered, actually or constructively,
by the carrier to the consignee, or to the person who has a right to receive them.
This presumption of fault or negligence, however, may be rebutted by proof that
the common carrier has observed extraordinary diligence over the goods.
3. YES.
R&B Insurance is subrogated to the rights of the insured to the extent of the
amount it paid the consignee under the marine insurance, as provided under Article
2207 of the Civil Code.
As subrogee of the rights and interest of the consignee, R&B Insurance has the
right to seek reimbursement from either Loadmasters or Glodel or both for breach of
contract and/or tort.
Premises considered, the Court is of the view that both Loadmasters and Glodel
are jointly and severally liable to R & B Insurance for the loss of the subject cargo.
Under Article 2194 of the New Civil Code, “the responsibility of two or more persons
who are liable for a quasi-delict is solidary.”
4. YES.
Undoubtedly, Glodel has a definite cause of action against Loadmasters for
breach of contract of service as the latter is primarily liable for the loss of the subject
cargo. In this case, however, it cannot succeed in seeking judicial sanction against
Loadmasters because the records disclose that it did not properly interpose a cross-
claim against the latter. Glodel did not even pray that Loadmasters be liable for any
and all claims that it may be adjudged liable in favor of R&B Insurance. Under the
Rules, a compulsory counterclaim, or a cross-claim, not set up shall be barred. Thus,
a cross-claim cannot be set up for the first time on appeal.
5. NO.
The Court clarifies that there exists no principal-agent relationship between
Glodel and Loadmasters, as erroneously found by the CA. Article 1868 of the Civil
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Code provides: "By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of another, with the consent
or authority of the latter." The elements of a contract of agency are:
a. consent, express or implied, of the parties to establish the relationship;
b. the object is the execution of a juridical act in relation to a third person;
c. the agent acts as a representative and not for himself;
d. The agent acts within the scope of his authority.
Accordingly, there can be no contract of agency between the parties.
Loadmasters never represented Glodel. Neither was it ever authorized to make such
representation. It is a settled rule that the basis for agency is representation, that is,
the agent acts for and on behalf of the principal on matters within the scope of his
authority and said acts has the same legal effect as if they were personally executed by
the principal. On the part of the principal, there must be an actual intention to
appoint or an intention naturally inferable from his words or actions, while on the part
of the agent, there must be an intention to accept the appointment and act on it. Such
mutual intent is not obtaining in this case.
6.
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC. vs. COURT OF APPEALS
G.R. No. 166250, July 26, 2010
ISSUES:
(1) Whether or not petitioner Unsworth Transport International is a Common Carrier
(2) What are the liabilities of Unsworth Transport International as a freight forwarder
(3) Whether or not Unsworth Transport International exercised the required ordinary
diligence
(4) Whether or not the Package Limitation Rule under the COGSA is applicable in the
case at bar
(5) Whether or not the court of appeals committed grave abuse of discretion amounting to
lack or excess of jurisdiction in upholding the decision in the RTC
FACTS:
The shipper, Sylvex Purchasing Corporation, delivered to Unsworth Transport
International a shipment of 27 drums of various raw materials for pharmaceutical
manufacturing, consisting of: 1) 3 drums (of) extracts, flavoring liquid, flammable
liquid x x x banana flavoring; 2) 2 drums (of) flammable liquids x x x turpentine oil; 2
pallets. STC: 40 bags dried yeast; and 3) 20 drums (of) Vitabs: Vitamin B Complex
Extract. UTI issued Bill of Lading No. C320/C15991-2, covering the aforesaid
shipment. The subject shipment was insured with private respondent Pioneer
Insurance and Surety Corporation in favor of Unilab against all risks in the amount of
P1,779,664.77 under and by virtue of Marine Risk Note Number MC RM UL 0627 92
and Open Cargo Policy No. HO-022-RIU.
On the same day that the bill of lading was issued, the shipment was loaded in
a sealed 1x40 container van, with no. APLU-982012, boarded on APLs vessel M/V
Pres. Jackson, Voyage 42, and transshipped to APLs M/V Pres. Taft for delivery to
petitioner in favor of the consignee United Laboratories, Inc. (Unilab).
The shipment arrived at the port of Manila and petitioner received the said
shipment in its warehouse after it stamped the Permit to Deliver Imported Goods
procured by the Champs Customs Brokerage. Three days thereafter, or on October 9,
1992, Oceanica Cargo Marine Surveyors Corporation (OCMSC) conducted a stripping
survey of the shipment located in petitioners warehouse.
The arrastre Jardine Davies Transport Services, Inc. (Jardine) issued Gate Pass
No. 7614 which stated that 22 drums Raw Materials for Pharmaceutical Mfg. were
loaded on a truck with Plate No. PCK-434 facilitated by Champs for delivery to Unilabs
warehouse. The materials were noted to be complete and in good order in the gate
pass. On the same day, the shipment arrived in Unilabs warehouse and was
immediately surveyed by an independent surveyor.
The same independent surveyor conducted final inspection surveys which
yielded the same results. Consequently, Unilabs quality control representative rejected
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one paper bag containing dried yeast and one steel drum containing Vitamin B
Complex as unfit for the intended purpose.
Unilab filed a formal claim for the damage against private respondent and UTI.
UTI denied liability on the basis of the gate pass issued by Jardine that the goods were
in complete and good condition; while private respondent paid the claimed amount. By
virtue of the Loss and Subrogation Receipt issued by Unilab in favor of private
respondent, the latter filed a complaint for Damages against APL, UTI and petitioner
with the RTC of Makati. The case was docketed as Civil Case No. 93-3473 and was
raffled to Branch 134.
RULINGS:
1. NO.
Admittedly, petitioner is a freight forwarder. The term freight forwarder" refers
to a firm holding itself out to the general public (other than as a pipeline, rail, motor,
or water carrier) to provide transportation of property for compensation and, in the
ordinary course of its business, (1) to assemble and consolidate, or to provide for
assembling and consolidating, shipments, and to perform or provide for break-bulk
and distribution operations of the shipments; (2) to assume responsibility for the
transportation of goods from the place of receipt to the place of destination; and (3) to
use for any part of the transportation a carrier subject to the federal law pertaining to
common carriers.
2. UTI is liable as a common carrier.

Common carriers, as a general rule, are presumed to have been at fault or
negligent if the goods they transported deteriorated or got lost or destroyed. That is,
unless they prove that they exercised extraordinary diligence in transporting the
goods. In order to avoid responsibility for any loss or damage, therefore, they have the
burden of proving that they observed such diligence.[27] Mere proof of delivery of the
goods in good order to a common carrier and of their arrival in bad order at their
destination constitutes a prima facie case of fault or negligence against the carrier. If
no adequate explanation is given as to how the deterioration, loss, or destruction of
the goods happened, the transporter shall be held responsible.
A freight forwarders liability is limited to damages arising from its own
negligence, including negligence in choosing the carrier; however, where the forwarder
contracts to deliver goods to their destination instead of merely arranging for their
transportation, it becomes liable as a common carrier for loss or damage to goods. A
freight forwarder assumes the responsibility of a carrier, which actually executes the
transport, even though the forwarder does not carry the merchandise itself.
3. NO.
All these conclusively prove the fact of shipment in good order and condition,
and the consequent damage to one steel drum of Vitamin B Complex Extract while in
the possession of petitioner which failed to explain the reason for the damage. Further,
petitioner failed to prove that it observed the extraordinary diligence and
precaution which the law requires a common carrier to exercise and to follow
in order to avoid damage to or destruction of the goods entrusted to it for safe
carriage and delivery.
Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general
rule, are presumed to have been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed. That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. In order to avoid responsibility for
any loss or damage, therefore, they have the burden of proving that they observed
such diligence. Mere proof of delivery of the goods in good order to a common carrier
and of their arrival in bad order at their destination constitutes a prima facie case of
fault or negligence against the carrier. If no adequate explanation is given as to how
the deterioration, loss, or destruction of the goods happened, the transporter shall be
held responsible.
4. YES.
We affirm the applicability of the Package Limitation Rule under the COGSA,
contrary to the RTC and the CA's findings.
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It is to be noted that the Civil Code does not limit the liability of the common
carrier to a fixed amount per package. In all matters not regulated by the Civil Code,
the rights and obligations of common carriers are governed by the Code of Commerce
and special laws. Thus, the COGSA supplements the Civil Code by establishing a
provision limiting the carrier's liability in the absence of a shipper's declaration of a
higher value in the bill of lading. Section 4(5) of the COGSA provides:
“(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or
damage to or in connection with the transportation of goods in an amount exceeding
$500 per package of lawful money of the United States, or in case of goods not shipped
in packages, per customary freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the shipper before
shipment and inserted in the bill of lading. This declaration, if embodied in the bill of
lading, shall be prima facie evidence, but shall not be conclusive on the carrier.”
In the present case, the shipper did not declare a higher valuation of the goods
to be shipped. Contrary to the CA's conclusion, the insertion of the words "L/C No. LC
No. 1-187-008394/ NY 69867 covering shipment of raw materials for pharmaceutical
Mfg. x x x" cannot be the basis of petitioner's liability. Furthermore, the insertion of an
invoice number does not in itself sufficiently and convincingly show that petitioner
had knowledge of the value of the cargo
5. NO.
It is a Well-established rule that factual questions may not be raised in a
petition for review on certiorarias clearly stated in Section 1, Rule 45 of the Rules of
Court, viz.:
“Section 1. Filing of petition with Supreme Court. - A party desiring to appeal by
certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law,
may file with the Supreme Court a verified petition for review on certiorari. The petition
shall raise only questions of law which must be distinctly set forth.”
7.
SPOUSES TEODORO AND NANETTE PERENA vs. SPOUSES TERESITA PHILIPPINE
NICOLAS AND L. ZARATE
G.R. No. 157917, August 29, 2012
DOCTRINE:
 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.
ISSUES:
(2) Whether or not Perenas and PNR are jointly and severally liable for damages
(3) Whether or not defendant Philippine National Railways, being the operator of the
railroad system, is liable for negligence
(4) Whether or not the indemnity for loss of Aaron’s earning capacity was proper
(5) Whether or not the amounts of damages were excessive
FACTS:
Perenas were engaged in the business of transporting students to Don Bosco.
The Zarates engaged Perenas services to transport their son, Aaron, to school.
While on the way to school, the van’s air-conditioned unit was turned on and
the stereo playing loudly. The driver took a detour because they were running late due
to the traffic in SLEX. The detour was through a narrow path underneath the
Magallanes Interchange used as short cut into Makati. When the van was to traverse
the PNR railroad crossing, the van was tailing a large passenger bus so the driver’s
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view of the oncoming train was blocked. The train hit the van at the rear end and the
impact threw 9 students including Aaron out of the van. Aaron landed in the path of
the train which dragged his body and severed his head, instantaneously killing him.
The Zarates filed for damages against Alfaro, Perenas, PNR, and the train driver.
The cause of action against Perena was for contract of carriage while for PNR, quasi
delict. Perena posited the defense of diligence of a good father in the selection and
supervision of their driver
RULINGS:
1. YES. A school bus operator is a common carrier.
Under Article 1733 of the Civil Code, Common carriers are persons,
In the case at bar, there is no question that the Perenas, 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 clientele, the
Perenas 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.
2. YES.
The lower courts correctly held both Perenas and PNR are "jointly and severally"
liable for damages arising from the death of Aaron.
They had been impleaded in the same complaint as defendants against whom
the Zarates had the right to relief, whether jointly, severally, or in the alternative, in
respect to or arising out of the accident, and questions of fact and of law were common
as to the Zarates. Although the basis of the right to relief of the Zarates (i.e., breach of
contract of carriage) against the Perenas was distinct from the basis of the Zarates
right to relief against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they
nonetheless could be held jointly and severally liable by virtue of their respective
negligence combining to cause the death of Aaron.
3. YES.
the RTC rightly found the PNR guilty of negligence despite the school van of the
Perenas traversing the railroad tracks at a point not dedicated by the PNR as a
railroad crossing for pedestrians and motorists, because the PNR did not ensure the
safety of others through the placing of crossbars, signal lights, warning signs, and
other permanent safety barriers to prevent vehicles or pedestrians from crossing there.
The RTC observed that the fact that a crossing guard had been assigned to man that
point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks
to others as well as the need to control the vehicular and other traffic there.
Verily, the Perenas and the PNR were joint tortfeasors.
4. YES.
Although agreeing with the RTC on the liability, the Court of Appeals modified
the amount. Both lower courts took into consideration that Aaron, while only a high
school student, had been enrolled in one of the reputable schools in the Philippines
and that he had been a normal and able-bodied child prior to his death. The basis for
the computation of Aaron’s earning capacity was not what he would have become or
what he would have wanted to be if not for his untimely death, but the minimum wage
in effect at the time of his death. Moreover, the RTC s computation of Aaron s life
expectancy rate was not reckoned from his age of 15 years at the time of his death,
but on 21 years, his age when he would have graduated from college.
We find the considerations taken into account by the lower courts to be
reasonable and fully warranted.
Yet, the Perenas submit that the indemnity for loss of earning capacity was
speculative and unfounded. They cited People v. Teehankee, Jr., where the Court
deleted the indemnity for victim Jussi Leino’s loss of earning capacity as a pilot for
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being speculative due to his having graduated from high school at the International
School in Manila only two years before the shooting, and was at the time of the
shooting only enrolled in the first semester at the Manila Aero Club to pursue his
ambition to become a professional pilot. That meant, according to the Court, that he
was for all intents and purposes only a high school graduate.
We reject the Perenas submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation
there of Jussi Leino was not akin to that of Aaron here. The CA and the RTC were not
speculating that Aaron would be some highly-paid professional, like a pilot (or, for that
matter, an engineer, a physician, or a lawyer). Instead, the computation of Aaron s
earning capacity was premised on him being a lowly minimum wage earner despite his
being then enrolled at a prestigious high school like Don Bosco in Makati, a fact that
would have likely ensured his success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of earnings
should not be taken against his parents and in favor of the defendants whose
negligence not only cost Aaron his life and his right to work and earn money, but also
deprived his parents of their right to his presence and his services as well. Our law
itself states that the loss of the earning capacity of the deceased shall be the liability of
the guilty party in favor of the heirs of the deceased, and shall in every case be
assessed and awarded by the court "unless the deceased on account of permanent
physical disability not caused by the defendant, had no earning capacity at the time of
his death."
Accordingly, we emphatically hold in favor of the indemnification for Aaron’s
loss of earning capacity despite him having been unemployed, because compensation
of this nature is awarded not for loss of time or earnings but for loss of the deceased s
power or ability to earn money.
5. NO.
The moral damages of P 2,500,000.00 were really just and reasonable under
the established circumstances of this case because they were intended by the law to
assuage the Zarates deep mental anguish over their son’s unexpected and violent
death, and their moral shock over the senseless accident. That amount would not be
too much, considering that it would help the Zarates obtain the means, diversions or
amusements that would alleviate their suffering for the loss of their child. At any rate,
reducing the amount as excessive might prove to be an injustice, given the passage of
a long time from when their mental anguish was inflicted on them on August 22,
1996.
Anent the P 1,000,000.00 allowed as exemplary damages, we should not reduce
the amount if only to render effective the desired example for the public good. As a
common carrier, the Perenas needed to be vigorously reminded to observe their duty to
exercise extraordinary diligence to prevent a similarly senseless accident from
happening again. Only by an award of exemplary damages in that amount would
suffice to instill in them and others similarly situated like them the ever-present need
for greater and constant vigilance in the conduct of a business imbued with public
interest.
8.
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY vs. PKS SHIPPING
COMPANY
G.R. No. 149038, April 9, 2003
DOCTRINE:
 The law makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an
ancillary activity (in local idiom, as `a sideline).
 Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the `general public, i.e., the general
community or population, and one who offers services or solicits business only from a
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narrow segment of the general population. We think that Article 1732 deliberately
refrained from making such distinctions.
ISSUES:
(1) Whether or not PKS Shipping Company is a Common Carrier
(2) Whether or not PKS Shipping is exempted from liability over the goods
(3) What was the doctrine laid down in the case at bar?
(4) Whether or not an issue whether a carrier is private or common on the basis of the
facts found by a trial court or the appellate court can be a valid and reviewable
question of law
(5) Whether or not Section 13, paragraph (b) of the Public Service Act is applicable and
may coincide with Article 1732 of the Civil Code
FACTS:
Davao Union Marketing Corporation (DUMC) contracted the services of PKS
Shipping Company (PKS Shipping) for the shipment of 75,000 bags of cement worth
P3,375,000.
DUMC insured the goods for its full value with Philippine American General
Insurance Company (Philamgen). The goods were loaded aboard the dumb barge
“Limar I” belonging to PKS Shipping.
While Limar I was being towed by PKS’ tugboat MT Iron Eagle, the barge sank a
couple of miles off the coast bringing down with it the entire cargo of 75,000 bags of
cement.
DUMC filed a formal claim with Philamgen for the full amount of the insurance.
Philamgen promptly made payment, it then sought reimbursement from PKS Shipping
of the sum paid to DUMC but the shipping company refused to pay so Philamgen to
file suit against PKS Shipping .
RULINGS:
1. YES.
Article 1732 provides that Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air for compensation, offering their services to the
public.
Contrary to the conclusion made by the appellate court, its factual findings
indicate that PKS Shipping has engaged itself in the business of carrying goods for
others, although for a limited clientele, undertaking to carry such goods for a fee. The
regularity of its activities in this area indicates more than just a casual activity on its
part. Neither can the concept of a common carrier change merely because individual
contracts are executed nor entered into with patrons of the carrier. Such restrictive
interpretation would make it easy for a common carrier to escape liability by the
simple expedient of entering into those distinct agreements with clients.
2. YES.
Article 1733 of the Civil Code requires common carriers to observe
extraordinary diligence in the vigilance over the goods they carry.
In case of loss, destruction or deterioration of goods, common carriers are
presumed to have been at fault or to have acted negligently, and the burden of proving
otherwise rests on them. The provisions of Article 1733, notwithstanding, common
carriers are exempt from liability for loss, destruction, or deterioration of the goods
due to any of the following causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers; and
(5) Order or act of competent public authority.
3. The prevailing doctrine on the question is that enunciated in the leading case of
De Guzman vs. Court of Appeals. Applying Article 1732 of the Code, in conjunction
with Section 13(b) of the Public Service Act, this Court has held:
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The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as an ancillary activity (in local idiom, as `a sideline). Article 1732 also carefully
avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the `general public, i.e., the general community or population,
and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1732 deliberately refrained from making
such distinctions.
4. YES.
The findings of fact made by the Court of Appeals, particularly when such
findings are consistent with those of the trial court, may not at liberty be reviewed by
this Court in a petition for review under Rule 45 of the Rules of Court. The
conclusions derived from those factual findings, however, are not necessarily just
matters of fact as when they are so linked to, or inextricably intertwined with, a
requisite appreciation of the applicable law. In such instances, the conclusions made
could well be raised as being appropriate issues in a petition for review before this
Court.
Thus, an issue whether a carrier is private or common on the basis of the facts
found by a trial court or the appellate court can be a valid and reviewable question of
law
5. YES.
Section 13, paragraph (b), of the Public Service Act; defines public service to
be…
“x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship, or
steamship line, pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant,
ice refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless communication
systems, wire or wireless broadcasting stations and other similar public services. x x
x. (Underscoring supplied)”
The concept of `common carrier under Article 1732 may be seen to coincide
neatly with the notion of `public service, under the Public Service Act (Commonwealth
Act No. 1416, as amended) which at least partially supplements the law on common
carriers set forth in the Civil Code.
9.
SPOUSES DANTE AND LEONORA CRUZ vs. SUN HOLIDAYS, INC.
G.R. No. 186312, June 29, 2010
ISSUES:
(1) Whether or not Sun Holidays, Inc. is a Common Carrier
(2) Whether or not Sun Holidays, Inc. exercised Extraordinary Diligence as required for by
the provisions of the Civil Code for Common Carriers
(3) What are the elements of a Fortuitous Event?
(4) When can a common carrier be free from any liabilities?
(5) What is the Doctrine laid down in the case at bar?
FACTS:
Spouses Dante and Leonora Cruz lodged a Complaint against Sun Holidays,
Inc. with the Regional Trial Court (RTC) of Pasig City for damages arising from the
death of their son Ruelito C. Cruz (Ruelito) who perished with his wife on board the
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boat M/B Coco Beach III that capsized en route to Batangas from Puerto Galera,
Oriental Mindoro where the couple had stayed at Coco Beach Island Resort (Resort)
owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort was by virtue of a
tour package-contract with respondent that included transportation to and from the
Resort and the point of departure in Batangas.
Miguel C. Matute (Matute), a scuba diving instructor and one of the survivors,
gave his account of the incident that led to the filing of the complaint as follows:
Matute stayed at the Resort. He was originally scheduled to leave the Resort but was
advised to stay for another night because of strong winds and heavy rains.
As it was still windy, Matute and 25 other Resort guests including petitioners
son and his wife trekked to the other side of the Coco Beach mountain that was
sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry
them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from
the beach and into the open seas, the rain and wind got stronger, causing the boat to
tilt from side to side and the captain to step forward to the front, leaving the wheel to
one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came
one after the other, M/B Coco Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the
boat. Upon seeing the captain, Matute and the other passengers who reached the
surface asked him what they could do to save the people who were still trapped under
the boat. The captain replied Iligtas niyo na lang ang sarili niyo (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in
Sabang, Puerto Galera passed by the capsized M/B Coco Beach III. Boarded on those
two boats were 22 persons, consisting of 18 passengers and four crew members, who
were brought to Pisa Island. Eight passengers, including petitioners son and his wife,
died during the incident.
At the time of Ruelitos death, he was 28 years old and employed as a
contractual worker for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi
Arabia, with a basic monthly salary of $900.
RULINGS:
1. YES.
Sun Holidays, Inc. is a Common Carrier.
Article 1732 of the Civil Code defines Common carriers as persons,
Its ferry services are so intertwined with its main business as to be properly
considered ancillary thereto. The constancy of respondent's ferry services in its resort
operations is underscored by its having its own Coco Beach boats. And the tour
packages it offers, which include the ferry services, may be availed of by anyone who
can afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of
no moment. It would be imprudent to suppose that it provides said services at a loss.
The Court is aware of the practice of beach resort operators offering tour packages to
factor the transportation fee in arriving at the tour package price. That guests who
opt not to avail of respondent's ferry services pay the same amount is likewise
inconsequential. These guests may only be deemed to have overpaid.
2. NO.
Art. 1733. Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by them, according to
all the circumstances of each case.
A very cautious person exercising the utmost diligence would thus not brave
such stormy weather and put other people's lives at risk. The extraordinary diligence
required of common carriers demands that they take care of the goods or lives
entrusted to their hands as if they were their own. This respondent failed to do.
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In the case at bar Sun Holidays, Inc. failed to prove that it exercised the
extraordinary diligence required of common carriers, it is presumed to have acted
recklessly, thus warranting the award too of exemplary damages, which are granted in
contractual obligations if the defendant acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.
3. The elements of a "fortuitous event" are:

a. the cause of the unforeseen and unexpected occurrence, or the failure of the debtors
to comply with their obligations, must have been independent of human will;
b. the event that constituted the caso fortuito must have been impossible to foresee or, if
foreseeable, impossible to avoid;
c. the occurrence must have been such as to render it impossible for the debtors to fulfill
their obligation in a normal manner; and
d. the obligor must have been free from any participation in the aggravation of the
resulting injury to the creditor.
4. To fully free a common carrier from any liability, the fortuitous event must have
been the proximate and only cause of the loss. And it should have exercised due
diligence to prevent or minimize the loss before, during and after the occurrence of the
fortuitous event.[
Respondent cites the squall that occurred during the voyage as the fortuitous
event that overturned M/B Coco Beach III. As reflected above, however, the
occurrence of squalls was expected under the weather condition of September 11,
2000. Moreover, evidence shows that M/B Coco Beach III suffered engine trouble
before it capsized and sank.
The incident was, therefore, not completely free from human intervention.
5. Article 1732. Common carriers are persons, corporations, firms or associations

land, water, or air for compensation, offering their services to the public.
only as an ancillary activity (in local idiom, as "a sideline"). Article 1732 also carefully
episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1733 deliberately refrained
from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be
seen to coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the
law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of
the Public Service Act, "public service" includes:
“. . . every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether
common carrier, railroad, street railway, traction railway, subway motor vehicle, either
for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or
passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water
supply and power petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar public services . . .”
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10.
NATIONAL STEEL CORPORATION vs. COURT OF APPEALS AND VLASONS
SHIPPING, INC.
G.R. No. 112287, December 12, 1997
ISSUES:
(1) Whether or not Vlassons Shipping, Inc. contracted with National Steel Corp as a
Common Carrier or as a Private Carrier
(2) Whether or not Vlassons Shipping, Inc. exercised due diligence in making MV Vlasons
I seaworthy for the intended purpose under the charter party
(3) Whether or not the damage to the cargo should be attributed to the willful negligence
of the officers and crew of the vessel or of the stevedores hired by National Steel
Corp.
(4) Whether the rusting of the tinplates was caused by its own sweat or by contact with
seawater
(5) What is the effect of National Steel Corporations failure to insure the cargo?
FACTS:
The MV Vlasons I is a vessel which renders tramping service and, as such, does
not transport cargo or shipment for the general public. Its services are available only
to specific persons who enter into a special contract of charter party with its owner.
The ship is a private carrier, and it is in this capacity that its owner, Vlasons
Shipping, Inc. (VSA), entered into a contract of affreightment or contract of voyage
charter hire with National Steel Corporation (NSC) on 17 July 1974, whereby NSC
hired VSI’s vessel, the MV ‘VLASONS I’ to make 1 voyage to load steel products at
Iligan City and discharge them at North Harbor, Manila
The shipment was placed in the 3 hatches of the ship which arrived with the
cargo at Pier 12, North Harbor, Manila, on 12 August 1974. The following day, when
the vessel’s 3 hatches containing the shipment were opened by NSC’s agents, nearly
all the skids of tin plates and hot rolled sheets were allegedly found to be wet and
rusty. The cargo was discharged and unloaded by stevedores hired by the Charterer.
On 6 September 1974 NSC filed with VSI its claim for damages suffered due to
the downgrading of the damaged tinplates in the amount of P941,145.18. Then on 3
October 1974, NSC formally demanded payment of said claim but VSI refused and
failed to pay.
On appeal, and on 12 August 1993, the Court of Appeals modified the decision
of the trial court by reducing the demurrage from P88,000.00 to P44,000.00 and
deleting the award of attorney’s fees and expenses of litigation. NSC and VSI filed
separate motions for reconsideration. The CA denied both motions. NSC and VSI filed
their respective petitions for review before the Supreme Court.
RULINGS:
1. NO. Vlassons Shipping Inc. is a Private Carrier
Article 1732 of the Civil Code defines a common carrier as "persons,
services to the public."
In the instant case, it is undisputed that VSI did not offer its services to the
general public. As found by the Regional Trial Court, it carried passengers or goods
only for those it chose under a "special contract of charter party." As correctly
concluded by the Court of Appeals, the MV Vlasons I "was not a common but a private
carrier”, consequently, the rights and obligations of VSI and NSC, including their
respective liability for damage to the cargo, are determined primarily by stipulations in
their contract of private carriage or charter party. 15 Recently, in Valenzuela
Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers
Shipping Corporation, 16 the Court ruled:
“. . . in a contract of private carriage, the parties may freely stipulate their duties and
obligations which perforce would be binding on them. Unlike in a contract involving a
common carrier, private carriage does not involve the general public. Hence, the stringent
provisions of the Civil Code on common carriers protecting the general public cannot
justifiably be applied to a ship transporting commercial goods as a private carrier.
Page 19
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Alexandria R.
Consequently, the public policy embodied therein is not contravened by stipulations in a

charter party that lessen or remove the protection given by law in contracts involving
common carriers.”
2. YES.
Art. 1733 states that Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by
them, according to all the circumstances of each case.
In any event, the records reveal that VSI exercised due diligence to make the
ship seaworthy and fit for the carriage of NSC's cargo of steel and tinplates. This is
shown by the fact that it was dry locked and inspected by the Philippine Coast Guard
before it proceeded to Iligan City for its voyage to Manila under the contract of voyage
charter hire. The vessel's voyage from Iligan to Manila was the vessel's first voyage
after drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy,
fitted and equipped; it met all requirements for trading as cargo vessel. The Court of
Appeals itself sustained the conclusion of the trial court that MV Vlasons I was
seaworthy. We find no reason to modify or reverse this finding of both the trial and the
appellate courts.
3. Stevedores hired by National Steel Corp.

The damage to the tinplates was occasioned not by airborne moisture but by
contact with rain and seawater which the stevedores negligently allowed to seep in
during the unloading.
The fact that NSC actually accepted and proceeded to remove the cargo from
the ship during unfavorable weather will not make VSI liable for any damage caused
thereby. In passing, it may be noted that the NSC may seek indemnification, subject to
the laws on prescription, from the stevedoring company at fault in the discharge
operations. "A stevedore company engaged in discharging cargo . . . has the duty to
load the cargo . . . in a prudent manner, and it is liable for injury to, or loss of, cargo
caused by its negligence . . . and where the officers and members and crew of the vessel
do nothing and have no responsibility in the discharge of cargo by stevedores . . . the
vessel is not liable for loss of, or damage to, the cargo caused by the negligence of the
stevedores . . ."
4. Rusting was caused by contact with rain and seawater.

As previously discussed, the damage to the tinplates was occasioned not by
airborne moisture but by contact with rain and seawater which the stevedores
negligently allowed to seep in during the unloading.
5. NONE.
The obligation of NSC to insure the cargo stipulated in the Contract of Voyage
Charter Hire is totally separate and distinct from the contractual or statutory
responsibility that may be incurred by VSI for damage to the cargo caused by the
willful negligence of the officers and the crew of MV Vlasons I.
Clearly, therefore, NSC's failure to insure the cargo will not affect its right, as
owner and real party in interest, to file an action against VSI for damages caused by
the latter's willful negligence. We do not find anything in the charter party that would
make the liability of VSI for damage to the cargo contingent on or affected in any manner
by NSC's obtaining an insurance over the cargo.
11.
VIRGINES CALVO vs. UCPB GENERAL INSURANCE CO., INC.
G.R. No. 148496, March 19, 2002
ISSUES:
(1) Whether or not Calvo is a Common Carrier or a Private Carrier
(2) Whether or not Calvo was relieved from liability for damage
(3) How was Extraordinary Diligence in the vigilance over goods explained in the case at
bar?
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Thiam, Patrice
Alexandria R.
(4) What is the rule for the provision of the civil code to apply?
(5) What is the doctrine laid down in the case at bar?
FACTS:
Virgines Calvo, owner of Transorient Container Terminal Services, Inc. (TCTSI),
and a custom broker, entered into a contract with San Miguel Corporation (SMC) for
the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner
board from the port area to the Tabacalera Compound, Ermita, Manila. The cargo was
insured by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, contained in 30 metal vans, arrived in Manila on board “M/V
Hayakawa Maru”. After 24 hours, they were unloaded from vessel to the custody of the
arrastre operator, Manila Port Services, Inc. m 25, the goods were inspected by Marine
Cargo Surveyors, reported that 15 reels of the semi-chemical fluting paper were
“wet/stained/torn” and 3 reels of kraft liner board were also torn. The damages cost
P93,112.00.
SMC collected the said amount from respondent UCPB under its insurance
contract. Respondent on the other hand, as a subrogee of SMC, brought a suit against
petitioner in RTC, Makati City. On December 20, 1995, the RTC rendered judgment
finding petitioner liable for the damage to the shipment. The decision was affirmed by
the CA.
RULINGS:
1. Calvo is a Private Carrier
She is not a common carrier but a private carrier because, as a customs broker
and warehouseman, she does not indiscriminately hold her services out to the public
but only offers the same to select parties with whom she may contract in the conduct
of her business.
BUT The contention has no merit. In De Guzman v. Court of Appeals, the
Court dismissed a similar contention and held the party to be a common carrier, thus
—
The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms or associations
land, water, or air for compensation, offering their services to the public."
only as an ancillary activity. Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or population, and one
who offers services or solicits business only from a narrow segment of the general
population. We think that Article 1732 deliberately refrained from making such
distinctions.
So understood, the concept of "common carrier" under Article 1732 may be
seen to coincide neatly with the notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the
law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of
the Public Service Act, "public service" includes:
". . . every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele, whether
common carrier, railroad, street railway, traction railway, subway motor vehicle, either
for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or
passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power,
water supply and power petroleum, sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other similar public services. . ."
Page 21
Thiam, Patrice
Alexandria R.
There is greater reason for holding petitioner to be a common carrier because

the transportation of goods is an integral part of her business. To uphold petitioner’s
contention would be to deprive those with whom she contracts the protection which
the law affords them notwithstanding the fact that the obligation to carry goods for her
customers, as already noted, is part and parcel of petitioner’s business.
2. NO.
Calvo’s liability, as a private carrier, is the same as a Common Carrier.
Under Article 1733 of the civil code, Common carriers, from the nature of their
them, according to all the circumstances of each case. . . .
Anent petitioner’s insistence that the cargo could not have been damaged while
in her custody as she immediately delivered the containers to SMC’s compound,
suffice it to say that to prove the exercise of extraordinary diligence, petitioner must do
more than merely show the possibility that some other party could be responsible for
the damage. It must prove that it used "all reasonable means to ascertain the nature
and characteristic of goods tendered for [transport] and that [it] exercise[d] due care in
the handling [thereof]." Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which
provides —
Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
”. . . . (4) The character of the goods or defects in the packing or in the containers. . . . .”
3. The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required precaution
for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage
and delivery. It requires common carriers to render service with the greatest skill and
foresight and "to use all reasonable means to ascertain the nature and characteristic
of goods tendered for shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires."
4. For this provision to apply, the rule is that if the improper packing or, in this
case, the defect/s in the container, is/are known to the carrier or his employees or
apparent upon ordinary observation, but he nevertheless accepts the same without
protest or exception notwithstanding such condition, he is not relieved of liability for
damage resulting therefrom.
In this case, petitioner accepted the cargo without exception despite the
apparent defects in some of the container vans. Hence, for failure of petitioner to prove
that she exercised extraordinary diligence in the carriage of goods in this case or that
she is exempt from liability, the presumption of negligence as provided under Art.
1735 holds
5. The above article makes no distinction between one whose principal business
only as an ancillary activity.
Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general population. We
think that Article 1732 deliberately refrained from making such distinctions.
12.
MR. AND MRS. FABRE, JR. AND PORFIRIO CABIL vs. COURT OF APPEALS
G.R. No. 111127, July 26, 1996
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Alexandria R.
ISSUES:
(1) Whether or not spouses Fabre and his wife are common carriers
(2) Whether or not petitioner, bus driver Porfirio Cabil, were negligent
(3) Whether or not Spouses Fabre and his wife were liable for the injuries suffered by
private respondents
(4) Whether or not Spouses Fabre and his wife, together with his employees, exercised
due diligence?
(5) Whether or not damages can be awarded and, if so, up to what extent?
FACTS:
Petitioners, Engracio Fabre, Jr. and his wife, were owners of a Mazda minibus.
They used the bus principally in connection with a bus service for school children
which they operated in Manila. It was driven by Porfirio Cabil.
Private respondent, Word for the World Christian Fellowship Inc. (WWCF),
arranged with the petitioners for the transportation of 33 members of its Young Adults
Ministry from Manila to La Union and back in consideration of which private
respondent paid petitioners the amount of P3,000.00.
The usual route to Caba, La Union was through Carmen, Pangasinan. However,
the bridge at Carmen was under repair, so that petitioner Cabil, who was unfamiliar
with the area (it being his first trip to La Union), was forced to take a detour through
the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came
upon a sharp curve on the highway. The road was slippery because it was raining,
causing the bus, which was running at the speed of 50 kilometers per hour, to skid to
the left road shoulder. The bus hit the left traffic steel brace and sign along the road
and rammed the fence of one Jesus Escano, then turned over and landed on its left
side, coming to a full stop only after a series of impacts. The bus came to rest of the
road. A coconut tree which it had hit fell on it and smashed its front portion. Because
of the mishap, several passengers were injured particularly Amyline Antonio.
Criminal complaint was filed against the driver and the spouses were also made
jointly liable. Spouses Fabre on the other hand contended that they are not liable
since they are not a common carrier. The RTC of Makati ruled in favor of the plaintiff
and the defendants were ordered to pay jointly and severally to the plaintiffs. The
Court of Appeals affirmed the decision of the trial court.
RULINGS:
1. YES.
Article 1732 of the Civil Code defines Common Carriers as persons,
The Supreme Court held that this case actually involves a contract of carriage.
Petitioners, the Fabres, did not have to be engaged in the business of public
transportation for the provisions of the Civil Code on common carriers to apply to them.
offering its services to the "general public," i.e., the general community or population,
such distinctions.
2. YES.
Pursuant to Articles 2176 and 2180 of the Civil Code his negligence gave rise to
the presumption that his employers, the Fabres, were themselves negligent in the
selection and supervisions of their employee.
The finding that Cabil drove his bus negligently, while his employer, the Fabres,
who owned the bus, failed to exercise the diligence of a good father of the family in the
selection and supervision of their employee is fully supported by the evidence on
Page 23
Thiam, Patrice
Alexandria R.
record. These factual findings of the two courts we regard as final and conclusive,
supported as they are by the evidence. Indeed, it was admitted by Cabil that on the
night in question, it was raining, and as a consequence, the road was slippery, and it
was dark. He averred these facts to justify his failure to see that there lay a sharp
curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50
kilometers per hour and only slowed down when he noticed the curve some 15 to 30
meters ahead. 3 By then it was too late for him to avoid falling off the road. Given the
conditions of the road and considering that the trip was Cabil's first one outside of
Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony
4that the vehicles passing on that portion of the road should only be running 20
kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very
high speed.
Considering the foregoing, the fact that it was raining and the road was
slippery, that it was dark, that he drove his bus at 50 kilometers an hour when even
on a good day the normal speed was only 20 kilometers an hour, and that he was
unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for
the injuries suffered by private respondent Amyline Antonio.
3. YES.
Article 1759 of the Civil Code provides for the Common carriers liability 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.
This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and supervision
of their employees.
Supporting the finding of the trial court and of the appellate court that
petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify findings
them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the
Civil Code.
4. YES.
As common carriers, the Fabres were found to exercise "extraordinary diligence"
for the safe transportation of the passengers to their destination. This duty of care is
not excused by proof that they exercise the diligence of a good father of the family in
the selection and supervision of their employee.
5. YES.
While the decisions of the trial court and the Court of Appeals do not
sufficiently indicate the factual and legal basis for them, we find that they are
nevertheless supported by evidence in the records of this case. Viewed as an action for
quasi delict, this case falls squarely within the purview of Art. 2219(2) providing for
the payment of moral damages in cases of quasi delict. On the theory that petitioners
are liable for breach of contract of carriage, the award of moral damages is authorized
by Art. 1764, in relation to Art. 2220, since Cabil's gross negligence amounted to bad
faith. 12 Amyline Antonio's testimony, as well as the testimonies of her father and co-
passengers, fully establishes the physical suffering and mental anguish she endured
as a result of the injuries caused by petitioners' negligence.
The award of exemplary damages and attorney's fees was also properly made.
However, for the same reason that it was error for the appellate court to increase the
award of compensatory damages, we hold that it was also error for it to increase the
award of moral damages and reduce the award of attorney's fees, inasmuch as private
respondents, in whose favor the awards were made, have not appealed.
13.
ASIA LIGHTERAGE AND SHIPPING, INC. vs. COURT OF APPEALS
G.R. No. 147246, August 19, 2003
ISSUES:
(1) Whether or not Asia Lighterage and Shipping, Inc. is a Common Carrier
Page 24
Thiam, Patrice
Alexandria R.
(2) Whether or not Asia Lighterage and Shipping, Inc. exercised extraordinary diligence in
its care and custody of the consignee’s cargo
(4) What is the test to determine a common carrier?
(5) Whether or not petitioner may be relieved from liability due to a fortuitous event
FACTS:
Petitioner, Asia Lighterage and Shipping, Inc., was contracted as carrier by a
corporation from Portland, Oregon to deliver a cargo to the consignee's warehouse at
Pasig City. The cargo, however, never reached the consignee as the barge that carried
the cargo sank completely, resulting in damage to the cargo. Private respondent, as
insurer, indemnified the consignee for the lost cargo and thus, as subrogee, sought
recovery from petitioner. Both the trial court and the appellate court ruled in favor of
private respondent.
The Court ruled in favor of private respondent. Whether or not petitioner is a
common carrier, the Court ruled in the affirmative. The principal business of
petitioner is that of lighterage and drayage, offering its barges to the public, although
for limited clientele, for carrying or transporting goods by water for compensation.
Whether or not petitioner failed to exercise extraordinary diligence in its care and
custody of the consignee's goods, the Court also ruled in the affirmative. The barge
completely sank after its towing bits broke, resulting in the loss of the cargo. Petitioner
failed to prove that the typhoon was the proximate and only cause of the loss and that
it has exercised due diligence before, during and after the occurrence.
RULINGS:
1. YES.
Article 1732 of the Civil Code defines common carriers as persons,
Petitioner is a common carrier whether its carrying of goods is done on an
irregular rather than scheduled manner, and with an only limited clientele. A common
carrier need not have fixed and publicly known routes. Neither does it have to
maintain terminals or issue tickets. To be sure, petitioner fits the test of a common
carrier as laid down in Bascos vs. Court of Appeals. The test to determine a common
carrier is "whether the given undertaking is a part of the business engaged in by the
carrier which he has held out to the general public as his occupation rather than the
quantity or extent of the business transacted." In the case at bar, the petitioner
admitted that it is engaged in the business of shipping and lighterage, offering its
barges to the public, despite its limited clientele for carrying or transporting goods by
water for compensation.
We therefore hold that petitioner is a common carrier whether its carrying of
goods is done on an irregular rather than scheduled manner, and with an only limited
clientele. A common carrier need not have fixed and publicly known routes. Neither
does it have to maintain terminals or issue tickets.
2. NO.
Petitioner failed to exercise extraordinary diligence in its care and custody of the
consignee’s goods.
Common carriers are bound to observe extraordinary diligence in the vigilance
over the goods transported by them. 28 They are presumed to have been at fault or to
have acted negligently if the goods are lost, destroyed or deteriorated. 29 To overcome
the presumption of negligence in the case of loss, destruction or deterioration of the
goods, the common carrier must prove that it exercised extraordinary diligence. There
are, however, exceptions to this rule. Article 1734 of the Civil Code enumerates the
instances when the presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes only:
1. Flood, storm, earthquake, lightning, or other natural disaster or calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
Page 25
Thiam, Patrice
Alexandria R.
4. The character of the goods or defects in the packing or in the containers;

5. Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits broke,
resulting in the total loss of its cargo. Petitioner claims that this was caused by a
typhoon, hence, it should not be held liable for the loss of the cargo. However,
petitioner failed to prove that the typhoon is the proximate and only cause of the loss
of the goods, and that it has exercised due diligence before, during and after the
occurrence of the typhoon to prevent or minimize the loss. 30 The evidence shows
that, even before the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at the Engineering Island.
It even suffered a hole. Clearly, this could not be solely attributed to the typhoon. The
partly-submerged vessel was refloated but its hole was patched with only clay and
cement. The patch work was merely a provisional remedy, not enough for the barge to
sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly
exposed the cargo to further damage.
3. The principal business of the petitioner is that of lighterage and drayage and it
offers its barges to the public for carrying or transporting goods by water for
compensation. Petitioner is clearly a common carrier. In De Guzman vs CA, supra, we
considered private respondent Ernesto Cendaña to be a common carrier even if his
principal occupation was not the carriage of goods for others, but that of buying used
bottles and scrap metal in Pangasinan and selling these items in Manila.
4. The test to determine a common carrier is "whether the given undertaking is a

part of the business engaged in by the carrier which he has held out to the general
public as his occupation rather than the quantity or extent of the business
transacted."
In the case at bar, the petitioner admitted that it is engaged in the business of
shipping and lighterage, offering its barges to the public, despite its limited clientele
for carrying or transporting goods by water for compensation.
5. NO.
The petitioner cannot invoke the occurrence of the typhoon as force majeure to
escape liability for the loss sustained by the private Respondent. Surely, meeting a
typhoon head-on falls short of due diligence required from a common carrier. More
importantly, the officers/employees themselves of petitioner admitted that when the
towing bits of the vessel broke that caused its sinking and the total loss of the cargo
upon reaching the Pasig River, it was no longer affected by the typhoon. The typhoon
then is not the proximate cause of the loss of the cargo; a human factor, i.e.,
negligence had intervened.
14.
PLANTERS PRODUCTS, INC vs. COURT OF APPEALS
G.R. No. 101503, September 15, 1993
ISSUES:
(1) Whether or not private respondent is a common carrier
(2) Whether or not a common carrier becomes a private carrier by reason of a charter
party
(3) Whether or not the shipowner was able to prove that he had exercised that degree of
diligence required of him under the law
(4) How was a contract of charter party defined in the case at bar?
(5) Whether or not common carriers are responsible for the loss, destruction or
deterioration of the goods if caused by the charterer of the goods or defects in the
packaging or in the containers.
FACTS:
Mitsubishi International Corporation (Mitsubishi) of New York, U.S.A.,
9,329.7069 M/T of Urea 46% fertilizer bought by Planters Products, Inc. (PPI) on
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Alexandria R.
aboard the cargo vessel M/V "Sun Plum" owned by private Kyosei Kisen Kabushiki
Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union.
A time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform
General Charter was entered into between Mitsubishi as shipper/charterer and KKKK
as shipowner, in Tokyo, Japan. Before loading the fertilizer aboard the vessel, 4 of her
holds were all presumably inspected by the charterer's representative and found fit
The hatches remained closed and tightly sealed throughout the entire voyage.
PPI unloaded the cargo from the holds into its steel bodied dump trucks which
were parked alongside the berth, using metal scoops attached to the ship, pursuant to
the terms and conditions of the charter-party, hatches remained open throughout the
duration of the discharge. Each time a dump truck was filled up, its load of Urea was
covered with tarpaulin before it was transported to the consignee's warehouse located
some 50 meters from the wharf
Midway to the warehouse, the trucks were made to pass through a weighing
scale where they were individually weighed for the purpose of ascertaining the net
weight of the cargo. The port area was windy, certain portions of the route to the
warehouse were sandy and the weather was variable, raining occasionally while the
discharge was in progress.
Tarpaulins and GI sheets were placed in-between and alongside the trucks to
contain spillages of the fertilizer, It took 11 days for PPI to unload the cargo
Cargo Superintendents Company Inc. (CSCI), private marine and cargo
surveyor, was hired by PPI to determine the "outturn" of the cargo shipped, by taking
draft readings of the vessel prior to and after discharge, shortage in the cargo of
106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was
contaminated with dirt. Certificate of Shortage/Damaged Cargo prepared by PPI short
of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been
polluted with sand, rust and dirt.
PPI sent a claim letter 1974 to Soriamont Steamship Agencies (SSA), the
resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the
alleged shortage in the goods shipped and the diminution in value of that portion said
to have been contaminated with dirt.
RULINGS:
1. YES.
Article 1732 of the Civil Code defines common carrier as a persons,
It is not disputed that respondent carrier, in the ordinary course of business,
operates as a common carrier, transporting goods indiscriminately for all persons.
When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its
officers and compliment were under the employ of the shipowner and therefore
continued to be under its direct supervision and control. Hardly then can we charge
the charterer, a stranger to the crew and to the ship, with the duty of caring for his
cargo when the charterer did not have any control of the means in doing so. This is
evident in the present case considering that the steering of the ship, the manning of
the decks, the determination of the course of the voyage and other technical incidents
of maritime navigation were all consigned to the officers and crew who were screened,
chosen and hired by the shipowner.
2. YES. But only at the time of the voyage.

It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by one or more persons,
provided the charter is limited to the ship only, as in the case of a time-charter or
voyage-charter.
It is only when the charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a shipowner in
a time or voyage charter retains possession and control of the ship, although her holds
may, for the moment, be the property of the charterer.
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3. NO. No presumption applies to private carriers.

Article 1733 of the New Civil Code mandates that common carriers, by reason of
the nature of their business, should observe extraordinary diligence in the vigilance
over the goods they carry.
In the case of private carriers, however, the exercise of ordinary diligence in the
carriage of goods will suffice. Moreover, in the case of loss, destruction or deterioration
of the goods, common carriers are presumed to have been at fault or to have acted
negligently, and the burden of proving otherwise rests on them. On the contrary, no
such presumption applies to private carriers, for whosoever alleges damage to or
deterioration of the goods carried has the onus of proving that the cause was the
negligence of the carrier.
4. A "charter-party" is defined as a contract by which an entire ship, or some

principal part thereof, is let by the owner to another person for a specified time or use;
A contract of affreightment by which the owner of a ship or other vessel lets the whole
or a part of her to a merchant or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of freight;
Charter parties are of two types:
(a) contract of affreightment which involves the use of shipping space on vessels leased by
the owner in part or as a whole, to carry goods for others; and,
(b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to
the charterer with a transfer to him of its entire command and possession and
consequent control over its navigation, including the master and the crew, who are his
servants.
Contract of affreightment may either be time charter, wherein the vessel is
leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is
leased for a single voyage. In both cases, the charter-party provides for the hire of
vessel only, either for a determinate period of time or for a single or consecutive
voyage, the shipowner to supply the ship's stores, pay for the wages of the master and
the crew, and defray the expenses for the maintenance of the ship.
5. YES.
Article 1734 of the New Civil Code provides that common carriers are not
responsible for the loss, destruction or deterioration of the goods if caused by the
charterer of the goods or defects in the packaging or in the containers. The Code of
Commerce also provides that all losses and deterioration which the goods may suffer
during the transportation by reason of fortuitous event, force majeure, or the inherent
defect of the goods, shall be for the account and risk of the shipper, and that proof of
these accidents is incumbent upon the carrier.
The carrier, nonetheless, shall be liable for the loss and damage resulting from
the preceding causes if it is proved, as against him, that they arose through his
negligence or by reason of his having failed to take the precautions which usage has
established among careful persons.
15.
HOME INSURANCE COMPANY vs. AMERICAN STEAMSHIP AGENCIES, INC.
G.R. No. 25599, April 4, 1968
DOCTRINE:
 The provisions of our Civil Code on common carriers were taken from Anglo-American
law. 7 Under American jurisprudence, a common carrier undertaking to carry a special
cargo or chartered to a special person only, becomes a private carrier. 8 As a private
carrier, a stipulation exempting the owner from liability for the negligence of its agent is
not against public policy, 9 and is deemed valid.
 Such doctrine we find reasonable. The Civil Code provisions on common carriers should
not be applied where the carrier is not acting as such but as a private carrier. The
stipulation in the charter party absolving the owner from liability for loss due to the
negligence of its agent would be void only if the strict public policy governing common
carriers is applied. Such policy has no force where the public at large is not involved, as
in the case of a ship totally chartered for the use of a single party.
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ISSUES:
(1) Whether or not a stipulation in the charter party of the owner’s non liability valid?
(2) Whether or not American Steamhip Agencies may be absolved from liability for loss
(3) What is the effect where contract is one of affreignment?
(5) What is the rule with regards to a charter of the entire vessel?
FACTS:
Consorcio Pesquero del Peru of South America shipped freight pre-paid at
Chimbate, Peru, 21,740 jute bags of Peruvian fish meal through SS Crowborough. The
cargo, consigned to San Miguel Brewery, Inc., now San Miguel Corporation, and
insured by Home Insurance Company for $202,505, arrived in Manila and was
discharged into the lighters of Luzon Stevedoring Company. When the cargo was
delivered to consignee San Miguel Brewery Inc., there were shortages amounting to
P12,033.85, causing the latter to lay claims against Luzon Stevedoring Corporation,
Home Insurance Company and the American Steamship Agencies, owner and operator
of SS Crowborough.
Because the others denied liability, Home Insurance Company paid the
consignee P14,870.71. Having been refused reimbursement by both the Luzon
Stevedoring Corporation and American Steamship Agencies, Home Insurance
Company, as subrogee to the consignee, filed against them before the Court of First
Instance a complaint for recovery of P14,870.71 with legal interest, plus attorney's
fees.
In answer, Luzon Stevedoring Corporation alleged that it delivered with due
diligence the goods in the same quantity and quality that it had received the same
from the carrier. It also claimed that plaintiff's claim had prescribed under Article 366
of the Code of Commerce stating that the claim must be made within 24 hours from
receipt of the cargo.
American Steamship Agencies denied liability by alleging that under the
provisions of the Charter party referred to in the bills of lading, the charterer, not the
shipowner, was responsible for any loss or damage of the cargo. Furthermore, it
claimed to have exercised due diligence in stowing the goods and that as a mere
forwarding agent, it was not responsible for losses or damages to the cargo.
The Court of First Instance absolved the Luzon Stevedoring Corporation from
any liability and ordered the American Steamship Agencies to pay the sum.
RULINGS:
1. YES.
The bills of lading provided at the back thereof that the bills of lading shall be
governed by and subject to the terms and conditions of the charter party, if any,
otherwise, the bills of lading prevail over all the agreements.
Section 2, paragraph 2 of the charter party, provides that the owner is liable for
loss or damage to the goods caused by personal want of due diligence on its part or its
manager to make the vessel in all respects seaworthy and to secure that she be
properly manned, equipped and supplied or by the personal act or default of the owner
or its manager. Said paragraph, however, exempts the owner of the vessel from any
loss or damage or delay arising from any other source, even from the neglect or fault of
the captain or crew or some other person employed by the owner on board, for whose
acts the owner would ordinarily be liable except for said paragraph.
2. YES.
The Court of First Instance declared the contract as contrary to Article 587 of
the Code of Commerce making the ship agent civilly liable for indemnities suffered by
third persons arising from acts or omissions of the captain in the care of the goods
and Article 1744 of the Civil Code under which a stipulation between the common
carrier and the shipper or owner limiting the liability of the former for loss or
destruction of the goods to a degree less than extraordinary diligence is valid provided
it be reasonable, just and not contrary to public policy. The release from liability in
this case was held unreasonable and contrary to the public policy on common
carriers.
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3. Where the charter party contract shows that altho possession and control of the
ship were not entirely transferred to the charterer, the vessel was chartered to its full
and complete capacity and the charterer had the option to go north or south or vice-
versa, loading, stowing and discharging at its risk and expense, said contract is one of
affreightment rather than a demise.
As such, in the absence of stipulation, the liability of the shipowner for acts or
negligence of its captain and crew would remain.
4. Under American jurisprudence, a common carrier undertaking to carry a

special cargo or chartered to a special person only, becomes a private carrier.8 As a
private carrier, a stipulation exempting the owner from liability for the negligence of its
agent is not against public policy, and is deemed valid
The Civil Code provisions on common carriers should not be applied where the
carrier is not acting as such but as a private carrier. The stipulation in the charter
party absolving the owner from liability for loss due to the negligence of its agent
would be void only if the strict public policy governing common carriers is applied.
Such policy has no force where the public at large is not involved, as in the case of a
ship totally chartered for the use of a single party.
5. In a charter of the entire vessel, the bill of lading issued by the master to the
charterer, as shipper, is in fact and legal contemplation merely a receipt and a
document of title not a contract, for the contract is the charter party. The consignee
may not claim ignorance of said charter party because the bills of lading expressly
referred to the same. Accordingly, the consignees under the bills of lading must
likewise abide by the terms of the charter party. And as stated, recovery cannot be had
thereunder, for loss or damage to the cargo, against the shipowners, unless the same
is due to personal acts or negligence of said owner or its manager, as distinguished
from its other agents or employees. In this case, no such personal act or negligence
has been proved.
16.
FISHER vs. YANGCO
G.R. No. 8095, November 5, 1914
ISSUES:
(1) Whether or not the refusal of the owner and officer of a steam vessel, to accept for
carriage dynamite, powder or other explosives for carriage can be held to be a lawful
act
(2) What is the nature of the business of a common carrier as a public employment?
(3) Whether or not the acts complained of had the effect of making or giving an
unreasonable or unnecessary preference or advantage to any invalidates the
provisions.
(4) What is the rule laid down in the case at bar?
(5) What are the provisions which includes the duties and liabilities of common carriers in
this jurisdiction?
FACTS:
The complained alleges that plaintiff is a stockholder in Yangco Steamship
Company, the owner of the large steam vessels, duly licensed to engage in the
coastwise trade of the Philippine Island; that on or about June 10, 1912, the directors
of the company, adopted a resolution which was thereafter ratified and affirmed by the
stockholders of the company “expressly declaring and providing that the classes of
merchandise to be carried by the company in its business as common carrier do not
include dynamite, powder or other explosives, and expressly prohibiting the officers,
agents an d servants of the company from offering to carry, accepting for carriage or
carrying said dynamite, powder or other explosives.”
RULINGS:
1. YES.
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The traffic in dynamite gun powder and other explosive is vitally essential to the
material and general welfare of the inhabitants of this islands and it these products
are to continue in general use throughout the Philippines they must be transported
from water to port to port in various island which make up the Archipelago.
It follows that a refusal by a particular vessel engage as a common carrier of
merchandise in coastwise trade in the Philippine Island to accept such explosives for
carriage constitutes a violation.
The prohibition against discrimination penalized under the statute, unless it
can be shown that there is so Real and substantial danger of disaster necessarily
involved in the courage of any or all of this article of merchandise as to render such
refusal a due or unnecessary or a reasonable exercise or prudence and discretion on
the part of the ship owner.
2. The nature of the business of a common carrier as a public employment is such

that it is clearly within the power of the state to impose such just and reasonable
regulations thereon in the interest of the public as the legislator’ may deem proper. Of
course such regulations must not have the effect of depriving an owner of his property
without due process of law, nor of confiscating or appropriating private property
without just compensation, nor of limiting or prescribing irrevocably vested rights or
privileges lawfully acquired under a charter or franchise. But aside from such
constitutional limitations, the determination of the nature and extent of the
regulations which should be prescribed rests in the hands of the legislator.
Common carriers exercise a sort of public office, and have duties to perform in
which the public is interested. Their business is, therefore, affected with a public
interest, and is subject of public regulation. (New Jersey Steam Nav. Co. v. Merchants
Bank, 6 How., 344, 382; Munn v. Illinois, 94 U. S., 113, 130.)
Indeed, this right of regulation is so far beyond question that it is well settled
that the power of the state to exercise legislative control over railroad companies and
other carriers "in all respects necessary to protect the public against danger, injustice
and oppression" may be exercised through boards of commissioners. (New York etc. R.
Co. v. Bristol, 151 U. S., 556, 571; Connecticut etc. R. Co. v. Woodruff, 153 U. S., 689.)
3. YES.
The question, then, of construing and applying the statute, in cases of alleged
violations of its provisions, always involves a consideration as to whether the acts
complained of had the effect of making or giving an "unreasonable or unnecessary
preference or advantage" to any person, locality or particular kind of traffic, or of
subjecting any person, locality, or particular kind of traffic to any undue or
unreasonable prejudice or discrimination. It is very clear therefore that the language of
the statute itself refutes any contention as to its invalidity based on the alleged
unreasonableness of its mandatory or prohibitor provisions.
4. Whatever may have been the rule at common law, common carriers in this
jurisdiction cannot lawfully decline to accept a particular class of goods for carriage to
the prejudice of the traffic in those goods unless it appears that for some sufficient
reason the discrimination against the traffic in such goods is reasonable and
necessary. Mere prejudice or whim will not suffice. The grounds of the discrimination
must be substantial ones, such as will justify the courts in holding the discrimination
to have been reasonable and necessary under all the circumstances of the case.
5. Sections 2, 3 and 4 of Act No. 98 of the Philippine Commision and, until,

and unless the statute be declared invalid or unconstitutional.
"Section 2. It shall be unlawful for any common carrier engaged in the
transportation of passengers or property as above set forth to make or give any
unnecessary or unreasonable preference or advantage to any particular person,
company, firm, corporation or locality, or any particular kind of traffic in any respect
whatsoever, or to subject any particular person, company, firm, corporation or locality, or
any particular kind of traffic, to any undue or unreasonable prejudice or discrimination
whatsoever, and such unjust preference or discrimination is also hereby prohibited and
declared to be unlawful.”
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"Section. 3. No common carrier engaged in the carriage of passengers or property

as aforesaid shall, under any pretense whatsoever, fail or refuse to receive for carriage,
and as promptly as it is able to do so without discrimination, to carry any person or
property offering for carriage, and in the order in which such persons or property are
offered for carriage, nor shall any such common carrier enter into any arrangement,
contract or agreement with any other person or corporation whereby the latter is given
an exclusive or preferential privilege over any other person or persons to control or
monopolize the carriage of any class or kind of property to the exclusion or partial
exclusion of any other person or persons, and the entering into any such arrangement,
contract or agreement, under any form or pretense whatsoever, is hereby prohibited and
declared to be unlawful.
"Section. 4. Any willful violation of the provisions of this Act by any common
carrier engaged in the transportation of passengers or property as hereinbefore set forth
is hereby declared to be punishable by a fine not exceeding five thousand dollars money
of the United States, or by imprisonment not exceeding two years, or both, within the
discretion of the court."
17.
SALUDO vs. COURT OF APPEALS
G.R. No. 95536, March 23, 1992
ISSUES:
(1) Whether or not there was delivery of the cargo upon mere issuance of the airway bill
(2) Whether or not the delay in the delivery of the casketed remains of petitioners mother
was due to the fault of respondent airline companies
(3) Whether or not private respondents should be held liable for actual, moral and
exemplary damages
(4) Whether or not damages are recoverable by petitioners for the humiliating, arrogant
and indifferent acts of the employees of TWA and PAL
(5) Whether or not the one-day delay in the delivery of the same constitutes contractual
breach as would entitle petitioners to damages
FACTS:
After the death of petitioner's mother, Crispina Galdo Saludo, in Chicago
Illinois, Pomierski and Son Funeral Home of Chicago, made the necessary
preparations and arrangements for the shipment, of the remains from Chicago to the
Philippines. Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at the
Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically
sealed casket that is airtight and waterproof wherein was contained the remains of
Crispina Saludo Galdo).
Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services)
at the airport (Chicago) which made the necessary arrangements such as flights,
transfers, etc.; C.M.A.S. is a national service used by undertakers to throughout the
nation (U.S.A.). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air
Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as
the consignee. The requested routing was from Chicago to San Francisco on board
TWA Flight 131 and from San Francisco to Manila on board PAL Flight No. 107 of the
same day, and from Manila to Cebu on board PAL Flight 149.
Maria Saludo upon arriving at San Francisco Airport, she then called Pomierski
that her mother's remains were not at the West Coast terminal, and Pomierski
immediately called C.M.A.S., which in a matter of 10 minutes informed him that the
remains were on a plane to Mexico City, that there were two bodies at the terminal,
and somehow they were switched.
The following day, the shipment or remains of Crispina Saludo arrived (in) San
Francisco from Mexico on board American Airlines. This shipment was transferred to
or received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This casket
bearing the remains of Crispina Saludo, which was mistakenly sent to Mexico and was
opened (there), was resealed by Crispin F. Patagas for shipment to the Philippines (See
Exh. B-1).
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The shipment was immediately loaded on PAL flight for Manila that same
evening and arrived (in) Manila a day after its expected arrival. Aggrieved by the
incident, the petitioners instituted an action against respondents and were asked to
pay for damages.
Petitioner allege that private respondents received the casketed remains of
petitioners' mother, as evidenced by the issuance of PAL Air Waybill No. 079-
01180454 18 by Air Care International as carrier's agent; and from said date, private
respondents were charged with the responsibility to exercise extraordinary diligence so
much so that for the alleged switching of the caskets one day after private respondents
received the cargo, the latter must necessarily be liable.
RULINGS:
1. NO.
A receipt is not essential to a complete delivery of goods to the carrier for
transportation but, when issued, is competent and prima facie, but not conclusive,
evidence of delivery to the carrier. A bill of lading, when properly executed and
delivered to a shipper, is evidence that the carrier has received the goods described
therein for shipment. Except as modified by statute, it is a general rule as to the
parties to a contract of carriage of goods in connection with which a bill of lading is
issued reciting that goods have been received for transportation, that the recital being
in essence a receipt alone, is not conclusive, but may be explained, varied or
contradicted by parol or other evidence.
2. NO.
A common carrier undertaking to transport property has the implicit duty to
carry and deliver it within reasonable time, absent any particular stipulation regarding
time of delivery, and to guard against delay. In case of any unreasonable delay, the
carrier shall be liable for damages immediately and proximately resulting from such
neglect of duty.
As found by the trial court, the delay in the delivery of the remains of Crispina
Saludo, undeniable and regrettable as it was, cannot be attributed to the fault,
negligence or malice of private respondents,a conclusion concurred in by respondent
court and which we are not inclined to disturb.
3. YES.
The facts show that petitioners’ right to be treated with due courtesy in
accordance with the degree of diligence required by law to be exercised by every
common carrier was violated by TWA and this entitles them, at least, to nominal
damages from TWA alone.
Articles 2221 and 2222 of the Civil Code make it clear that nominal damages
are not intended for indemnification of loss suffered but for the vindication or
recognition of a right violated or invaded. They are recoverable where some injury has
been done but the amount of which the evidence fails to show, the assessment of
damages being left to the discretion of the court according to the circumstances of the
case.
In the exercise of our discretion, we find an award of P40,000.00 as nominal
damages in favor of petitioners to be a reasonable amount under the circumstances of
this case.
4. YES.
The records reveal that petitioners, particularly Maria and Saturnino Saludo,
agonized for nearly five hours, over the possibility of losing their mother’s mortal
remains, unattended to and without any assurance from the employees of TWA that
they were doing anything about the situation. This is not to say that petitioners were
to be regaled with extra special attention. They were, however, entitled to the
understanding and humane consideration called for by and commensurate with the
extraordinary diligence required of common carriers, and not the cold insensitivity to
their predicament. It is hard to believe that the airline’s counter personnel were totally
helpless about the situation. Common Sense could and should have dictated that they
exert a little extra effort in making a more extensive inquiry, by themselves or through
their superiors, rather than just shrug off the problem with a callous and uncaring
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Thiam, Patrice
Alexandria R.
remark that they had no knowledge about it. With all the modern communications
equipment readily available to them, which could have easily facilitated said inquiry
and which are used as a matter of course by airline companies in their daily
operations, their apathetic stance while not legally reprehensible is morally deplorable.
5. YES.
The contention that there was contractual breach on the part of private
respondents is founded on the postulation that there was ambiguity in the terms of
the airway bill, hence petitioners’ insistence on the application of the rules on
interpretation of contracts and documents. We find no such ambiguity. The terms are
clear enough as to preclude the necessity to probe beyond the apparent intendment of
the contractual provisions.
The hornbook rule on interpretation of contracts consecrates the primacy of the
intention of the parties, the same having the force of law between them. When the
terms of the agreement are clear and explicit, that they do not justify an attempt to
read into any alleged intention of the parties, the terms are to be understood literally
just as they appear on the face of the contract. The various stipulations of a contract
shall be interpreted together and such a construction is to be adopted as will give
effect to all provisions thereof. A contract cannot be construed by parts, but its
clauses should be interpreted in relation to one another. The whole contract must be
interpreted or read together in order to arrive at its true meaning. Certain stipulations
cannot be segregated and then made to control; neither do particular words or phrases
necessarily determine the character of a contract. The legal effect of the contract is not
to be determined alone by any particular provision disconnected from all others, but in
the ruling intention of the parties as gathered from all the language they have used
and from their contemporaneous and subsequent acts.
18.
MAERSK LINE vs. COURT OF APPEALS
G.R. No. 94761, May 17, 1993
ISSUES:
(1) Whether or not Maersk Line is liable to damages to Castillo due to delay in the delivery
of the shipment in the absence in the bill of lading of a stipulation on the period of
delivery
(2) Whether or not a defendant's cross-claim against co-defendant survives or subsists
even after the dismissal of the complaint against defendant-cross-claimant
(4) Whether or not the delay of the delivery of the goods falls beyond the realm of
reasonableness
(5) What is the rule regarding a carrier’s liability in case of delay?
FACTS:
Maersk Line is engaged in the transportation of goods by sea and doing
business in the Philippines through its general agent Compania General de Tabacos
de Filiinas. Efren Castillo is the proprietor of Ethegal Laboratories, a firm engaged in
manufacturing pharmaceutical products.
Castillo ordered from Eli Lilly, Inc. of Puerto Rico through its agent in the
Philippines, Elanco Products, 600,000 empty gelatin capsules (placed in 6 drums of
100,000 capsules each valued at US$1668.71) for the manufacture of his
pharmaceutical products. Eli Lilly advised Castillo (consignee) through a
Memorandum of Shipment that the capsules were already shipped (from Oakland,
California to the Philippines) on board MV Anders Maerskline under Voyage # 7703.
For unknown reasons, the cargo of capsules were misshipped and diverted to
Richmond, Virginia, USA and then transported back to Oakland, Caifornia.
The goods finally arrived in the Philippines on 10 June 1977 (2 months after the date
specified in the memorandum). Castillo, as consignee refused to take the goods on
account of its failure to arrive on time. Castillo filed an action for rescission of contract
with damages against Eli Lilly.
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Eli Lilly denied that it committed a breach of contract and alleged that the
subject shipment was transported in accordance with the provisions of the bill of
lading and that its liability under the law on transportation of good attaches only in
case of loss, destruction or deterioration of the goods as provided for in Article 1734 of
the Civil Code.
Eli Lilly filed compulsory and cross-claims. It alleged that the delay in the
arrival of the merchandise was solely due to the gross negligence of Maersk Line. It
also moved for the dismissal of the complaint on the ground that the evidence shows
that the delay in the delivery of the shipment was attributable solely to Maersk Line.
After trial between Castillo and Maersk Line, the court ruled in favor of Castillo:
That there was a breach in the performance (due to negligence) of their
obligation to ship the 6 drums of empty gelatin capsules
Maersk Line to pay Castillo P369,000.00 as unrealized profit, P200,000.00 as
moral damages, P10,000.00 as exemplary damages, P11,680.97 as cost of credit line,
P50,000.00 as attorney’s fees and to pay the costs of suit
RULINGS:
1. YES.
we hold that exemplary damages may be awarded to the private respondent. In
contracts, exemplary damages may be awarded if the defendant acted in a wanton,
fraudulent, reckless, oppresive or malevolent manner. There was gross negligence on
the part of the petitioner in mishiping the subject goods destined for Manila but was
inexplicably shipped to Richmond, Virginia, U.S.A. Gross carelessness or negligence
contitutes wanton misconduct, hence, exemplary damages may be awarded to the
aggrieved party (Radio Communication of the Phils., Inc. v. Court of Appeals, 195 SCRA
147 [1991]).
Although attorney's fees are generally not recoverable, a party can be held lible
for such if exemplary damages are awarded (Artice 2208, New Civil Code). In the case
at bar, we hold that private respondent is entitled to reasonable attorney`s fees since
petitioner acted with gross negligence amounting to bad faith.
2. NO.
Respondent court, erred in declaring that the trial court based petitioner's
liability on the cross-claim of Eli Lilly, Inc. As borne out by the record, the trial court
anchored its decision on petitioner's delay or negligence to deliver the six (6) drums of
gelatin capsules within a reasonable time on the basis of which petitioner was held
liable for damages under Article 1170 of the New Civil Code which provides that those
who in the performance of their obligations are guilty of fraud, negligence, or delay
and those who in any manner contravene the tenor thereof, are liable for damages.
Nonetheless, petitioner maintains that it cannot be held for damages for the
alleged delay in the delivery of the 600,000 empty gelatin capsules since it acted in
good faith and there was no special contract under which the carrier undertook to
deliver the shipment on or before a specific date
3. It is a long standing jurisprudential rule that a bill of lading operates both as a

receipt and as contract to transport and deliver the same a therein stipulated. As a
contract, it names the parties, which includes the consignee, fixes the route,
destination, and freight rates or charges, and stipulates the rights and obligations
assumed by the parties. Being a contract, it is the law between the parties who are
bound by its terms and conditions provided that these are not contrary to law, morals,
good customs, public order and public policy. A bill of lading usually becomes effective
upon its delivery to and acceptance by the shipper. It is presumed that the
stipulations of the bill were, in the absence of fraud, concealment or improper
conduct, known to the shipper, and he is generally bound by his acceptance whether
he reads the bill or not.
4. YES.
An examination of the subject bill of lading shows that the subject shipment
was estimated to arrive in Manila. While there was no special contract entered into by
the parties indicating the date of arrival of the subject shipment, petitioner
nevertheless, was very well aware of the specific date when the goods were expected to
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Alexandria R.
arrive as indicated in the bill of lading itself. In this regard, there arises no need to
execute another contract for the purpose as it would be a mere superfluity.
In the case before us, we find that a delay in the delivery of the goods spanning
a period of two (2) months and seven (7) days falls was beyond the realm of
reasonableness. Described as gelatin capsules for use in pharmaceutical products,
subject shipment was delivered to, and left in, the possession and custody of
petitioner-carrier for transport to Manila via Oakland, California. But through
petitioner's negligence was mishipped to Richmond, Virginia. Petitioner's insitence that
it cannot be held liable for the delay finds no merit.
5. The oft-repeated rule regarding a carrier's liability for delay is that in the
absence of a special contract, a carrier is not an insurer against delay in
transportation of goods. When a common carrier undertakes to convey goods, the law
implies a contract that they shall be delivered at destination within a reasonable time,
in the absence, of any agreement as to the time of delivery. But where a carrier has
made an express contract to transport and deliver properly within a specified time, it
is bound to fulfill its contract and is liable for any delay, no matter from what cause it
may have arisen. This result logically follows from the well-settled rule that where the
law creates a duty or charge, and the default in himself, and has no remedy over, then
his own contract creates a duty or charge upon himself, he is bound to make it good
notwithstanding any accident or delay by inevitable necessity because he might have
provided against it by contract. Whether or not there has been such an undertaking
on the part of the carrier is to be determined from the circumstances surrounding the
case and by application of the ordinary rules for the interpretation of contracts.
19.
TRANS-ASIA SHIPPING LINES, INC. vs. COURT OF APPEALS
G.R. No. 118126, March 4, 1996
ISSUES:
(1) Whether or not Trans-Asia Shipping Lines, Inc. was negligent
(2) Whether or not there was a contract of carriage between Trans-Asia Shipping Lines
and Atty. Renato Arryoyo
(3) Whether or not Plaintiff-appellant is entitled to moral damages
(4) What are the liabilities which will be awarded to the private respondent for damages?
FACTS:
Respondent Atty. Renato Arroyo, a public attorney, bought a ticket from herein
petitioner for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from
Cebu City on November 12, 1991.
At around 5:30 in the evening of November 12, 1991, respondent boarded the
M/V Asia Thailand vessel during which he noticed that some repairs were being
undertaken on the engine of the vessel. The vessel departed at around 11:00 in the
evening with only one (1) engine running.
After an hour of slow voyage, the vessel stopped near Kawit Island and dropped
its anchor thereat. After half an hour of stillness, some passengers demanded that
they should be allowed to return to Cebu City for they were no longer willing to
continue their voyage to Cagayan de Oro City. The captain acceded to their request
and thus the vessel headed back to Cebu City.
In Cebu City, plaintiff together with the other passengers who requested to be
brought back to Cebu City, were allowed to disembark. Thereafter, the vessel
proceeded to Cagayan de Oro City. Petitioner, the next day, boarded the M/V Asia
Japan for its voyage to Cagayan de Oro City, likewise a vessel of defendant.
On account of this failure of defendant to transport him to the place of
destination on November 12, 1991, respondent Arroyo filed before the trial court “an
action for damage arising from bad faith, breach of contract and from tort,” against
petitioner. The trial court ruled only for breach of contract. The CA reversed and set
aside said decision on appeal.
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Alexandria R.
RULINGS:
1. YES.
Before commencing the contracted voyage, the petitioner undertook some
repairs on the cylinder head of one of the vessel’s engines. But even before it could
finish these repairs, it allowed the vessel to leave the port of origin on only one
functioning engine, instead of two. Moreover, even the lone functioning engine was not
in perfect condition as sometime after it had run its course, it conked out. This caused
the vessel to stop and remain adrift at sea, thus in order to prevent the ship from
capsizing, it had to drop anchor.
Plainly, the vessel was unseaworthy even before the voyage began. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a
sufficient number of competent officers and crew.[21] The failure of a common carrier
to maintain in seaworthy condition its vessel involved in a contract of carriage is a
clear breach of is duty prescribed in Article 1755 of the Civil Code.
2. YES.
Undoubtedly, there was, between the petitioner and the private respondent, a
contract of common carriage. The laws of primary application then are the provisions
on common carriers under Section 4, Chapter 3, Title VIII, Book IV of the Civil Code,
while for all other matters not regulated thereby, the Code of Commerce and special
laws.
Under Article 1733 of the Civil Code, the petitioner was bound to observe
extraordinary diligence in ensuring the safety of the private respondent. That meant
that the petitioner was, pursuant to Article 1755 of the said Code, bound to carry the
private respondent safely as far as human care and foresight could provide, using the
utmost diligence of very cautious persons, with due regard for all the circumstances.
In this case, we are in full accord with the Court of Appeals that the petitioner failed to
discharge this obligation
3. YES.
The Court finds that plaintiff-appellant is entitled to the award of moral and
exemplary damages for the breach committed by defendant-appellee.
As discussed, defendant-appellee in sailing to Cagayan de Oro City with only one
engine and with full knowledge of the true condition of the vessel, acted in bad faith
with malice, in complete disregard for the safety of the passengers and only for its own
personal advancement/interest.
Article 2201 of the Civil Code provides:
“In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the non-performance
of the obligation.
Plaintiff-appellant is entitled to moral damages for the mental anguish, fright and
serious anxiety he suffered during the voyage when the vessels engine broke down and
when he disembarked from the vessel during the wee hours of the morning at Cebu City
when it returned.
Moral damages are recoverable in a damage suit predicated upon a breach of
contract of carriage where it is proved that the carrier was guilty of fraud or bad faith
even if death does not result.
Fraud and bad faith by defendant-appellee having been established, the award
of moral damages is in order.
To serve as a deterrent to the commission of similar acts in the future, exemplary
damages should be imposed upon defendant-appellee. [17Exemplary damages are
designed by our civil law to permit the courts to reshape behavior that is socially
deleterious in its consequence by creating x x x negative incentives or deterrents against
such behavior.
Moral damages having been awarded, exemplary damages maybe properly
awarded. When entitlement to moral damages has been established, the award of
exemplary damages is proper.”
4. Article 1764 of the Civil Code expressly provides:
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Alexandria R.
ART. 1764. Damages in cases comprised in this Section shall be awarded in

accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also
apply to the death of a passenger caused by the breach of contract by common carrier.
The damages comprised in Title XVIII of the Civil Code are actual or
compensatory, moral, nominal, temperate or moderate, liquidated, and exemplary.
In his complaint, the private respondent claims actual or compensatory, moral,
and exemplary damages.
Actual or compensatory damages represent the adequate compensation for
pecuniary loss suffered and for profits the obligee failed to obtain.
In contracts or quasi-contracts, the obligor is liable for all the damages which
may be reasonably attributed to the non-performance of the obligation if he is guilty of
fraud, bad faith, malice, or wanton attitude.
Moral damages include moral suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, or similar
injury. They may be recovered in the cases enumerated in Article 2219 of the Civil
Code, likewise, if they are the proximate result of, as in this case, the petitioners
breach of the contract of carriage. Anent a breach of a contract of common carriage,
moral damages may be awarded if the common carrier, like the petitioner, acted
fraudulently or in bad faith.
Exemplary damages are imposed by way of example or correction for the public good,
in addition to moral, temperate, liquidated or compensatory damages. In contracts
and quasi-contracts, exemplary damages may be awarded if the defendant acted in a
wanton fraudulent, reckless, oppressive or malevolent manner. It cannot, however, be
considered as a matter of right; the court having to decide whether or not they should
be adjudicated. Before the court may consider an award for exemplary damages, the
plaintiff must first show that he is entitled to moral, temperate or compensatory
damages; but it is not necessary that he prove the monetary value thereof.
5. In case of interruption of a vessels voyage and the consequent delay in that

vessels arrival at its port of destination, is the right of a passenger affected thereby to
be determined and governed by the vague Civil Code provision on common carriers, or
shall it be, in the absence of a specific provision thereon, governed by Art. 698 of the
Code of Commerce? The petitioner considers it a "novel question of law."
As this Court sees it, what stands for resolution is a common carriers liability
for damages to a passenger who disembarked from the vessel upon its return to the
port of origin, after it suffered engine trouble and had to stop at sea, having
commenced the contracted voyage on one engine.
20.
REGIONAL CONTAINER LINES OF SINGAPORE AND EDSA SHIPPING AGENCY vs.
THE NETHERLANDS INSURANCE CO. (ph), INC.
G.R. No. 168151, September 4, 2009
ISSUES:
(1) Whether or not RCL and EDSA Shipping are liable as common carriers under the
theory of presumption of negligence
(2) Whether or not RCL and EDSA exercised due diligence as required for by law over the
goods
(3) To whom shall the burden of proof be shifted?
(4) What is the rule for liabilities of a common carrier in case of loss or damaged cargo?
(5) What provisions of the Civil Code governs the case at bar?
FACTS:
Epoxy Molding Compound (the merchandise) was to be shipped from SG to
Manila. -The merchandise is temperature sensitive thus it is refrigerated in transit at
O degrees Celsius. -Unloaded from the ship in good condition, refrigerator was
working well.-However, goods were damaged because temperature in the ref
fluctuated to 33 degree C allegedly because of burnt condenser more of the ref
container-Temic claimed from Netherlands, Netherlands paid the insurance claim-
Netherlands filed a complaint for subrogation of insurance settlement against RCL -
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Alexandria R.
RCL and agent EDSA Shipping denied any negligence in the shipment, and that there
is no valid subrogation
RULINGS:
1. YES.
The Supreme court held that common carriers are presumed to have been
negligent if it fails to prove that it exercised extraordinary vigilance over the
goods it transported. When the goods shipped are either lost or arrived in
damaged condition, a presumption arises against the carrier of its failure to observe
that diligence, and there need not be an express finding of negligence to hold it liable.
RCL and EDSA Shipping failed to prove that they did exercise that degree of
diligence required by law over the goods they transported. Indeed, there is
sufficient evidence showing that the fluctuation of the temperature in the
refrigerated container van, as recorded in the temperature chart, occurred after
the cargo had been discharged from the vessel and was already under the custody of
the arrastre operator, ICTSI. This evidence, however, does not disprove that the
condenser fan –which caused the fluctuation of the temperature in the refrigerated
container –was not damaged while the cargo was being unloaded from the ship. It is
settled in maritime law jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier; RCL and EDSA Shipping
failed to dispute this.
2. NO.
RCL and EDSA Shipping failed to prove that they did exercise that degree of
diligence required by law over the goods they transported. Indeed, there is sufficient
evidence showing that the fluctuation of the temperature in the refrigerated container
van, as recorded in the temperature chart, occurred after the cargo had been
discharged from the vessel and was already under the custody of the arrastre
operator, ICTSI. This evidence, however, does not disprove that the condenser fan -
which caused the fluctuation of the temperature in the refrigerated container - was not
damaged while the cargo was being unloaded from the ship. It is settled in maritime
law jurisprudence that cargoes while being unloaded generally remain under the
custody of the carrier; RCL and EDSA Shipping failed to dispute this.
3. Shipper.
To exculpate itself from liability for the loss/damage to the cargo under any of
the causes, the common carrier is burdened to prove any of the causes in Article 1734
of the Civil Code claimed by it by a preponderance of evidence.
If the carrier succeeds, the burden of evidence is shifted to the shipper to prove
that the carrier is negligent. RCL and EDSA Shipping, however, failed to satisfy this
standard of evidence and in fact offered no evidence at all on this point; a reversal of a
dismissal based on a demurrer to evidence bars the defendant from presenting
evidence supporting its allegations.
4. In Central Shipping Company, Inc. v. Insurance Company of North America,6

we reiterated the rules for the liability of a common carrier for lost or damaged cargo
as follows:
a. Common carriers are bound to observe extraordinary diligence over the goods they
transport, according to all the circumstances of each case;
b. In the event of loss, destruction, or deterioration of the insured goods, common
carriers are responsible, unless they can prove that such loss, destruction, or
deterioration was brought about by, among others, "flood, storm, earthquake,
lightning, or other natural disaster or calamity"; and
c. In all other cases not specified under Article 1734 of the Civil Code, common carriers
are presumed to have been at fault or to have acted negligently, unless they observed
extraordinary diligence.
5. ARTICLE 1733. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them according to
all the circumstances of each case.
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Thiam, Patrice
Alexandria R.
Such extraordinary diligence in the vigilance over the goods is further expressed
in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence
for the safety of the passengers is further set forth in articles1755 and 1756.
ARTICLE 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes only:
a. Flood, storm, earthquake, lightning, or other natural disaster or calamity;
b. Act of the public enemy in war, whether international or civil;
c. Act of omission of the shipper or owner of the goods;
d. The character of the goods or defects in the packing or in the containers;
e. Order or act of competent public authority.
ARTICLE 1735. In all cases other that those mentioned in Nos. 1, 2, 3, 4 and 5
of the preceding article, if the goods are lost, destroyed, or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as required by article 1733.
ARTICLE 1736. The extraordinary responsibility of the common carrier lasts
from the time the goods are unconditionally placed in the possession of, and received
by the carrier for transportation until the sane are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to
receive them, without prejudice to the provisions of articles 1738.
ARTICLE 1738. The extraordinary liability of the common carrier continues to
be operative even during the time the goods are stored in a warehouse of the carrier at
the place of destination, until the consignee has been advised of the arrival of the
goods and has had reasonable opportunity thereafter to remove them or otherwise
dispose of them.
ARTICLE 1742. Even if the loss, destruction, or deterioration of the goods
should be caused by the character of the goods, or the faulty nature of the packing or
of the containers, the common carrier must exercise due diligence to forestall or lessen
the loss.
21.
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES
TRANSPORT SERVICES, INC vs. PHILIPPINE FIRST INSURANCE CO., INC.
G.R. No. 143133, June 5, 2002
ISSUES:
(1) Whether or not petitioners have overcome the presumption of negligence of a common
carrier
(2) Whether or not the notice of loss was timely filed
(3) Whether or not the package limitation of liability is applicable
(4) Whether or not a notation in the bill of lading at the time of loading is sufficient to
show pre-shipment damage and to exempt herein defendants from liability
(5) Whether or not petitioners exercised extraordinary diligence over the goods.
FACTS:
CMC Trading A.G. shipped on board the MN ‘Anangel Sky’ at Hamburg,
Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to
Manila consigned to the Philippine Steel Trading Corporation. MN Anangel Sky arrived
at the port of Manila and discharged the subject cargo. Four (4) coils were found to be
in bad order. Finding the four (4) coils in their damaged state to be unfit for the
intended purpose, the consignee declared the same as total loss.
Despite receipt of a formal demand, Philippine First insurance refused to
submit to the consignee’s claim. Consequently, Belgian Overseas paid the consignee
P506,086.50, and was subrogated to the latter’s rights and causes of action against
defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for
recovery of the amount paid by them, to the consignee as insured.
Defendants-appellees imputed that the damage and loss was due to pre-
shipment damage, to the inherent nature, vice or defect of the goods, or to perils,
danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or
omission of the shipper of the goods or their representatives. In addition thereto,
defendants-appellees argued that their liability, if there be any, should not exceed the
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Alexandria R.
limitations of liability provided for in the bill of lading and other pertinent laws.
Finally, defendants-appellees averred that, in any event, they exercised due diligence
and foresight required by law to prevent any damage/loss to said shipment.”
RULINGS:
1. NO.
Well-settled is the rule that common carriers, from the nature of their business
and for reasons of public policy, are bound to observe extraordinary diligence and
vigilance with respect to the safety of the goods and the passengers they transport.
Thus, common carriers are required to render service with the greatest skill and
foresight and “to use all reasonable means to ascertain the nature and characteristics
of the goods tendered for shipment, and to exercise due care in the handling and
stowage, including such methods as their nature requires.” The extraordinary
responsibility lasts from the time the goods are unconditionally placed in the
possession of and received for transportation by the carrier until they are delivered,
actually or constructively, to the consignee or to the person who has a right to receive
them.
Owing to this high degree of diligence required of them, common carriers, as a
general rule, are presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is, unless they prove that they
exercised extraordinary diligence in transporting the goods. In order to avoid
responsibility for any loss or damage, therefore, they have the burden of proving that
they observed such diligence.
However, the presumption of fault or negligence will not arise if the loss is due
to any of the following causes:
1. flood, storm, earthquake, lightning, or other natural disaster or calamity;
2. an act of the public enemy in war, whether international or civil;
3. an act or omission of the shipper or owner of the goods;
4. the character of the goods or defects in the packing or the container; or
5. an order or act of competent public authority.
This is a closed list. If the cause of destruction, loss or deterioration is other
than the enumerated circumstances, then the carrier is liable therefor.
Corollary to the foregoing, mere proof of delivery of the goods in good order to a
common carrier and of their arrival in bad order at their destination constitutes a
prima facie case of fault or negligence against the carrier. If no adequate explanation is
given as to how the deterioration, the loss or the destruction of the goods happened,
the transporter shall be held responsible.
2. YES.
As cited in the provisions of the COGSA, A failure to file a notice of claim within
three days will not bar recovery if it is nonetheless filed within one year. This one-year
prescriptive period also applies to the shipper, the consignee, the insurer of the goods
or any legal holder of the bill of lading.
In Loadstar Shipping Co., Inc. v. Court of Appeals, we ruled that a claim is not
barred by prescription as long as the one-year period has not lapsed. Thus, in the
words of Chief Justice Hilario G. Davide Jr.
"Inasmuch as neither the Civil Code nor the Code of Commerce states a specific
prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) — which
provides for a one-year period of limitation on claims for loss of, or damage to, cargoes
sustained during transit — may be applied suppletorily to the case at bar."
In the present case, the cargo was discharged on July 31, 1990, while the
Complaint was filed by respondent on July 25, 1991, within the one-year prescriptive
period.
3. YES.
the right and the obligations of common carriers shall be governed by the Code of
Commerce and special laws. Thus, the COGSA, which is suppletory to the provisions
of the Civil Code, supplements the latter by establishing a statutory provision limiting
the carrier’s liability in the absence of a shipper’s declaration of a higher value in the
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Alexandria R.
bill of lading. The provisions on limited liability are as much a part of the bill of lading
as though physically in it and as though placed there by agreement of the parties.
In the light of the foregoing, petitioners’ liability should be computed based on
US$500 per package and not on the per metric ton price declared in the Letter of
Credit. In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, we explained
the meaning of package:
"When what would ordinarily be considered packages are shipped in a container
supplied by the carrier and the number of such units is disclosed in the shipping
documents, each of those units and not the container constitutes the ‘package’
referred to in the liability limitation provision of Carriage of Goods by Sea Act."
Considering, therefore, the ruling in Eastern Shipping Lines and the fact that
the Bill of Lading clearly disclosed the contents of the containers, the number of units,
as well as the nature of the steel sheets, the four damaged coils should be considered
as the shipping unit subject to the US$500 limitation.
4. NO.
A bill of lading serves two functions. First, it is a receipt for the goods shipped.
Second, it is a contract by which three parties — namely, the shipper, the carrier, and
the consignee — undertake specific responsibilities and assume stipulated obligations.
In a nutshell, the acceptance of the bill of lading by the shipper and the consignee,
with full knowledge of its contents, gives rise to the presumption that it constituted a
perfected and binding contract.
Further, a stipulation in the bill of lading limiting to a certain sum the common
carrier’s liability for loss or destruction of a cargo — unless the shipper or owner
declares a greater value — is sanctioned by law. There are, however, two conditions to
be satisfied: (1) the contract is reasonable and just under the circumstances, and (2) it
has been fairly and freely agreed upon by the parties. 60 The rationale for this rule is
to bind the shippers by their agreement to the value (maximum valuation) of their
goods.
In the case before us, there was no stipulation in the Bill of Lading limiting the
carrier’s liability. Neither did the shipper declare a higher valuation of the goods to be
shipped. This fact notwithstanding, the insertion of the words "L/C No. 90/02447
cannot be the basis for petitioners’ liability.
5. NO.
Petitioners failed to prove that they observed the extraordinary diligence and
precaution which the law requires a common carrier to know and to follow to avoid
damage to or destruction of the goods entrusted to it for safe carriage and delivery.
True, the words "metal envelopes rust stained and slightly dented" were noted
on the Bill of Lading; however, there is no showing that petitioners exercised due
diligence to forestall or lessen the loss. Having been in the service for several years, the
master of the vessel should have known at the outset that metal envelopes in the said
state would eventually deteriorate when not properly stored while in transit. Equipped
with the proper knowledge of the nature of steel sheets in coils and of the proper way
of transporting them, the master of the vessel and his crew should have undertaken
precautionary measures to avoid possible deterioration of the cargo. But none of these
measures was taken. 38 Having failed to discharge the burden of proving that they
have exercised the extraordinary diligence required by law, petitioners cannot escape
liability for the damage to the four coils.
In their attempt to escape liability, petitioners further contend that they are
exempted from liability under Article 1734(4) of the Civil Code. They cite the notation
"metal envelopes rust stained and slightly dented" printed on the Bill of Lading as
evidence that the character of the goods or defect in the packing or the containers was
the proximate cause of the damage. We are not convinced.
22.
HERMINIO MARIANO, JR. vs. ILDEFONSO C. CALLEJAS and EDGAR DE BORJA
G.R. No. 166640, July 31, 2009
DOCTRINE:
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• While the law requires the highest degree of diligence from common carriers in the
safe transport of their passengers and creates a presumption of negligence against
them, it does not, however, make the carrier an insurer of the absolute safety of its
passengers.
• It is clear that neither the law nor the nature of the business of a transportation
company makes it an insurer of the passenger's safety, but that its liability for
personal injuries sustained by its passenger rests upon its negligence, its failure to
exercise the degree of diligence that the law requires.
ISSUES:
(1) Whether or not Callejas and De Borja were negligent
(2) Whether or not petitioners are held guilty of breach of contract of carriage.
(3) What are the obligations of the petitioners as a common carrier?
(4) Whether or not the death of the passenger will give rise to the presumption of
negligence against the common carrier
FACTS:
Petitioner, Herminio Mariano, Jr., is the surviving spouse of Dr. Frelinda
Mariano who was a passenger of a Celyrosa Express bus bound for Tagaytay when she
met her death. Respondent, Ildefonso C. Callejas, is the registered owner of Celyrosa
Express, while respondent, Edgar de Borja, was the driver of the bus on which the
deceased was a passenger.
The Celyrosa Express bus, carrying Dr. Mariano as its passenger, collided with
an Isuzu truck with trailer. The passenger bus was bound for Tagaytay while the
trailer truck came from the opposite direction, bound for Manila. The trailer truck
bumped the passenger bus on its left middle portion. Due to the impact, the passenger
bus fell on its right side on the right shoulder of the highway and caused the death of
Dr. Mariano and physical injuries to four other passengers.
Petitioner filed a complaint for breach of contract of carriage and damages
against respondents. Respondents denied liability for the death of Dr. Mariano. They
claimed that the proximate cause of the accident was the recklessness of the driver of
the trailer truck which bumped their bus while allegedly at a halt on the shoulder of
the road in its rightful lane. Thus, respondent Callejas filed a third-party complaint
against Liong Chio Chang, the owner of the trailer truck.
RULING:
1. No. Callejas and De Borja exercised utmost diligence in the discharge of their
duty.
While the law requires the highest degree of diligence from common carriers in
the safe transport of their passengers and creates a presumption of negligence against
passengers.
Thus, it is clear that neither the law nor the nature of the business of a
transportation company makes it an insurer of the passenger's safety, but that its
liability for personal injuries sustained by its passenger rests upon its negligence, its
failure to exercise the degree of diligence that the law requires.
In the case at bar, petitioner cannot succeed in his contention that respondents
failed to overcome the presumption of negligence against them. The totality of evidence
shows that the death of petitioners spouse was caused by the reckless negligence of
the driver of the Isuzu trailer truck which lost its brakes and bumped the Celyrosa
Express bus.
2. The Court of Appeals reversed the decision of the trial court.

It reasoned:
“. . . the presumption of fault or negligence against the carrier is only a
disputable presumption. It gives in where contrary facts are established proving either
that the carrier had exercised the degree of diligence required by law or the injury
suffered by the passenger was due to a fortuitous event. Where, as in the instant case,
the injury sustained by the petitioner was in no way due to any defect in the means of
transport or in the method of transporting or to the negligent or wilful acts of private
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Alexandria R.
respondent's employees, and therefore involving no issue of negligence in its duty to

provide safe and suitable cars as well as competent employees, with the injury arising
wholly from causes created by strangers over which the carrier had no control or even
knowledge or could not have prevented, the presumption is rebutted and the carrier is
not and ought not to be held liable. To rule otherwise would make the common carrier
the insurer of the absolute safety of its passengers which is not the intention of the
lawmakers”
3. Celyrosa Express, a common carrier, through its driver, respondent De Borja,

and its registered owner, respondent Callejas, has the express obligation "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," and to
observe extraordinary diligence in the discharge of its duty.
4. YES.
Article 1733 provides that Common carriers, from the nature of their business
and for reasons of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.
In article 1755, 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.
And in Article 1756 In case of death of the passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed in articles 1733 and 1755.
In the Case at bar, The death of the wife of the petitioner in the course of
transporting her to her destination gave rise to the presumption of negligence of the
carrier. To overcome the presumption, respondents have to show that they observed
extraordinary diligence in the discharge of their duty, or that the accident was caused
by a fortuitous event.
5. While the law requires the highest degree of diligence from common carriers in
the safe transport of their passengers and creates a presumption of negligence against
passengers.
It is clear that neither the law nor the nature of the business of a transportation
company makes it an insurer of the passenger's safety, but that its liability for
personal injuries sustained by its passenger rests upon its negligence, its failure to
exercise the degree of diligence that the law requires.
23.
SALUDO vs. COURT OF APPEALS
G.R. No. 95536, March 23, 1992
ISSUES:
(1) Whether or not there was delivery of the cargo upon mere issuance of the airway bill
2. Whether or not the delay in the delivery of the casketed remains of petitioners mother
was due to the fault of respondent airline companies
3. Whether or not private respondents should be held liable for actual, moral and
exemplary damages
4. Whether or not damages are recoverable by petitioners for the humiliating, arrogant
and indifferent acts of the employees of TWA and PAL
5. Whether or not the one-day delay in the delivery of the same constitutes contractual
breach as would entitle petitioners to damages
FACTS:
After the death of petitioner's mother, Crispina Galdo Saludo, in Chicago
Illinois, Pomierski and Son Funeral Home of Chicago, made the necessary
preparations and arrangements for the shipment, of the remains from Chicago to the
Philippines. Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at the
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Alexandria R.
Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically
sealed casket that is airtight and waterproof wherein was contained the remains of
Crispina Saludo Galdo).
Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services)
at the airport (Chicago) which made the necessary arrangements such as flights,
transfers, etc.; C.M.A.S. is a national service used by undertakers to throughout the
nation (U.S.A.). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air
Care International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as
the consignee. The requested routing was from Chicago to San Francisco on board
TWA Flight 131 and from San Francisco to Manila on board PAL Flight No. 107 of the
same day, and from Manila to Cebu on board PAL Flight 149.
Maria Saludo upon arriving at San Francisco Airport, she then called Pomierski
that her mother's remains were not at the West Coast terminal, and Pomierski
immediately called C.M.A.S., which in a matter of 10 minutes informed him that the
remains were on a plane to Mexico City, that there were two bodies at the terminal,
and somehow they were switched.
The following day, the shipment or remains of Crispina Saludo arrived (in) San
Francisco from Mexico on board American Airlines. This shipment was transferred to
or received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This casket
bearing the remains of Crispina Saludo, which was mistakenly sent to Mexico and was
opened (there), was resealed by Crispin F. Patagas for shipment to the Philippines (See
Exh. B-1).
The shipment was immediately loaded on PAL flight for Manila that same
evening and arrived (in) Manila a day after its expected arrival. Aggrieved by the
incident, the petitioners instituted an action against respondents and were asked to
pay for damages.
Petitioner allege that private respondents received the casketed remains of
petitioners' mother, as evidenced by the issuance of PAL Air Waybill No. 079-
01180454 18 by Air Care International as carrier's agent; and from said date, private
respondents were charged with the responsibility to exercise extraordinary diligence so
much so that for the alleged switching of the caskets one day after private respondents
received the cargo, the latter must necessarily be liable.
RULINGS:
1. NO.
A receipt is not essential to a complete delivery of goods to the carrier for
transportation but, when issued, is competent and prima facie, but not conclusive,
evidence of delivery to the carrier. A bill of lading, when properly executed and
delivered to a shipper, is evidence that the carrier has received the goods described
therein for shipment. Except as modified by statute, it is a general rule as to the
parties to a contract of carriage of goods in connection with which a bill of lading is
issued reciting that goods have been received for transportation, that the recital being
in essence a receipt alone, is not conclusive, but may be explained, varied or
contradicted by parol or other evidence.
2. NO.
A common carrier undertaking to transport property has the implicit duty to
carry and deliver it within reasonable time, absent any particular stipulation regarding
time of delivery, and to guard against delay. In case of any unreasonable delay, the
carrier shall be liable for damages immediately and proximately resulting from such
neglect of duty.
As found by the trial court, the delay in the delivery of the remains of Crispina
Saludo, undeniable and regrettable as it was, cannot be attributed to the fault,
negligence or malice of private respondents,a conclusion concurred in by respondent
court and which we are not inclined to disturb.
3. YES.
The facts show that petitioners’ right to be treated with due courtesy in
accordance with the degree of diligence required by law to be exercised by every
common carrier was violated by TWA and this entitles them, at least, to nominal
damages from TWA alone.
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Alexandria R.
Articles 2221 and 2222 of the Civil Code make it clear that nominal damages
are not intended for indemnification of loss suffered but for the vindication or
recognition of a right violated or invaded. They are recoverable where some injury has
been done but the amount of which the evidence fails to show, the assessment of
damages being left to the discretion of the court according to the circumstances of the
case.
In the exercise of our discretion, we find an award of P40,000.00 as nominal
damages in favor of petitioners to be a reasonable amount under the circumstances of
this case.
4. YES.
The records reveal that petitioners, particularly Maria and Saturnino Saludo,
agonized for nearly five hours, over the possibility of losing their mother’s mortal
remains, unattended to and without any assurance from the employees of TWA that
they were doing anything about the situation. This is not to say that petitioners were
to be regaled with extra special attention. They were, however, entitled to the
understanding and humane consideration called for by and commensurate with the
extraordinary diligence required of common carriers, and not the cold insensitivity to
their predicament. It is hard to believe that the airline’s counter personnel were totally
helpless about the situation. Common Sense could and should have dictated that they
exert a little extra effort in making a more extensive inquiry, by themselves or through
their superiors, rather than just shrug off the problem with a callous and uncaring
remark that they had no knowledge about it. With all the modern communications
equipment readily available to them, which could have easily facilitated said inquiry
and which are used as a matter of course by airline companies in their daily
operations, their apathetic stance while not legally reprehensible is morally deplorable.
5. YES.
The contention that there was contractual breach on the part of private
respondents is founded on the postulation that there was ambiguity in the terms of
the airway bill, hence petitioners’ insistence on the application of the rules on
interpretation of contracts and documents. We find no such ambiguity. The terms are
clear enough as to preclude the necessity to probe beyond the apparent intendment of
the contractual provisions.
The hornbook rule on interpretation of contracts consecrates the primacy of the
intention of the parties, the same having the force of law between them. When the
terms of the agreement are clear and explicit, that they do not justify an attempt to
read into any alleged intention of the parties, the terms are to be understood literally
just as they appear on the face of the contract. The various stipulations of a contract
shall be interpreted together and such a construction is to be adopted as will give
effect to all provisions thereof. A contract cannot be construed by parts, but its
clauses should be interpreted in relation to one another. The whole contract must be
interpreted or read together in order to arrive at its true meaning. Certain stipulations
cannot be segregated and then made to control; neither do particular words or phrases
necessarily determine the character of a contract. The legal effect of the contract is not
to be determined alone by any particular provision disconnected from all others, but in
the ruling intention of the parties as gathered from all the language they have used
and from their contemporaneous and subsequent acts.
24.
NATIONAL TRUCKING AND FORWARDING CORPORATION vs. LORENZO
SHIPPING CORPORATION
G.R. No. 153563, February 07, 2005
ISSUES:
(1) Whether or not Lorenzo Shipping Corporation failed to exercise extraordinary diligence
required by law
(2) Whether or not Lorenzo Shipping Corporation is presumed a fault or negligent as
common carrier for the loss or deterioration of the goods
(3) Whether or not the damages and attorney’s fees are due to the respondent?
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(5) What is the general rule with regards to the awarding of attorney’s fees as laid down in
the case at bar?
FACTS:
The Republic of the Philippines signed an agreement through the Department of
Health and the Cooperative for American Relief Everywhere, Inc. (CARE) wherein it
would acquire from the US government donations of Non-Fat Dried Milk and other
food products. In turn, the Philippines will transport and distribute the donated to the
intended beneficiaries of the country. As a result, it entered into a contract of carriage
of goods with the herein respondent. The latter shipped 4,868 bags of non-fat dried
milk from Sept-Dec 1988. The consignee named in the bills was Abdurahman Jama,
petitioner’s branch supervisor in Zamboanga City. Upon reaching the port of
Zamboanga, respondent’s agent, Efren Ruste Shipping Agency unloaded the said
milks. Before each delivery, Rogelio Rizada and Ismael Zamora both delivery checkers
of Efren Ruste requested Abdurahman to surrender the originals of the Bill of Lading.
However, the petitioner alleged that they did not receive anything and they filed a
claim against the herein respondent. The petitioner contended that the respondents
failed to exercise extraordinary diligence.
RULINGS:
1. NO.
Article 17338 of the Civil Code demands that a common carrier observe
extraordinary diligence over the goods transported by it. Extraordinary diligence 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.9 This
exacting standard imposed on common carriers in a contract of carriage of goods is
intended to tilt the scales in favor of the shipper who is at the mercy of the common
carrier once the goods have been lodged for shipment. Hence, in case of loss of goods
in transit, the common carrier is presumed under the law to have been at fault or
negligent.10 However, the presumption of fault or negligence, may be overturned by
competent evidence showing that the common carrier has observed extraordinary
diligence over the goods.
In the instant case, we agree with the court a quo that the respondent
adequately proved that it exercised extraordinary diligence. Although the original bills
of lading remained with petitioner, respondent's agents demanded from Abdurahman
the certified true copies of the bills of lading. They also asked the latter and in his
absence, his designated subordinates, to sign the cargo delivery receipts.
2. NO.
Petitioner contends that the respondent is presumed negligent and liable for
failure to abide by the terms and conditions of the bills of lading; that Abdurahman
Jama's failure to testify should not be held against petitioner; and that the testimonies
of Rogelio Rizada and Ismael Zamora, as employees of respondent's agent, Efren Ruste
Shipping Agency, were biased and could not overturn the legal presumption of
respondent's fault or negligence.
For its part, the respondent avers that it observed extraordinary diligence in the
delivery of the goods. Prior to releasing the goods to Abdurahman, Rogelio and Ismael
required the surrender of the original bills of lading, and in their absence, the certified
true copies showing that Abdurahman was indeed the consignee of the goods. In
addition, they required Abdurahman or his designated subordinates to sign the
delivery receipts upon completion of each delivery.
3. NO.
Respondent failed to show proof of actual pecuniary loss, hence, no actual
damages are due in favor of respondent.
Moreover, an award of attorney's fees, in the concept of damages under Article
2208 of the Civil Code,12requires factual and legal justifications. While the law allows
some degree of discretion on the part of the courts in awarding attorney's fees and
expenses of litigation, the discretion must be exercised with great care approximating
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Thiam, Patrice
Alexandria R.
as closely as possible, the instances exemplified by the law.13 We have searched but
found nothing in petitioner's suit that justifies the award of attorney's fees.
4. In case the consignee, upon receiving the goods, cannot return the bill of lading
subscribed by the carrier, because of its loss or of any other cause, he must give the
latter a receipt for the goods delivered, this receipt producing the same effects as the
return of the bill of lading. (Emphasis supplied)
Conformably with the aforecited provision, the surrender of the original bill of
lading is not a condition precedent for a common carrier to be discharged of its
contractual obligation. If surrender of the original bill of lading is not possible,
acknowledgment of the delivery by signing the delivery receipt suffices. This is what
respondent did.
5. The right to litigate should bear no premium. An adverse decision does not ipso
facto justify an award of attorney's fees to the winning party.11 When, as in the
instant case, petitioner was compelled to sue to protect the credibility of the
government with international organizations, we are not inclined to grant attorney's
fees. We find no ill motive on petitioner's part, only an erroneous belief in the
righteousness of its claim.
Moreover, an award of attorney's fees, in the concept of damages under Article
2208 of the Civil Code, requires factual and legal justifications. While the law allows
some degree of discretion on the part of the courts in awarding attorney's fees and
expenses of litigation, the discretion must be exercised with great care approximating
as closely as possible, the instances exemplified by the law. We have searched but
found nothing in petitioner's suit that justifies the award of attorney's fees.
25.
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN vs. NAVIDAD
G.R. No. 145804, February 6, 2003
ISSUES:
(1) Whether or not LRTA and Roman should be liable according to the Contract of
Carriage
(2) Whether or not Petitioners are liable for the death of Nicanor Navidad, Jr.
(3) What are the liabilities of the employers in case of negligence or fault on the part of the
employee
(4) What provisions of the Civil Code governs the liability of a common carrier for death of
or injury to its passengers
(5) Whether or not the awarding of nominal damages in addition to actual damages is
tenable?
FACTS:
Drunk Nicanor Navidad (Nicanor) entered the EDSA LRT station after
purchasing a “token”. While Nicanor was standing at the platform near the LRT tracks,
the guard Junelito Escartin approached him.
Due to misunderstanding, they had a fist fight Nicanor fell on the tracks and killed
instantaneously upon being hit by a moving train operated by Rodolfo Roman. The
widow of Nicanor, along with her children, filed a complaint for damages against
Escartin, Roman, LRTA, Metro Transit Org. Inc. and Prudent (agency of security
guards) for the death of her husband.
LRTA and Roman filed a counter-claim against Nicanor and a cross-claim
against Escartin and Prudent denied liability in which he averred that it had exercised
due diligence in the selection and surpervision of its security guards.
LRTA and Roman presented evidence. Prudent and Escartin filed a demurrer
contending that Navidad had failed to prove that Escartin was negligent in his
assigned task
RULINGS:
1. NO
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Thiam, Patrice
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Art. 1763. 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
common carrier’s employees through the exercise of the diligence of a good father of a
family could have prevented or stopped the act or omission.
Carriers presumed to be at fault or been negligent and by simple proof of injury,
the passenger is relieaved of the duty to still establish the fault or negligence of the
carrier or of its employees and the burden shifts upon the carrier to prove that the
injury is due to an unforeseen event or to force majeure
Where it hires its own employees or avail itself of the services of an outsider or
an independent firm to undertake the task, the common carrier is NOT relieved of its
responsibilities under the contract of carriage
As a general rule, Prudent can be liable only for tort under Art. 2176 and
related provisions in conjunction with Art. 2180 of the Civil Code. (Tort may arise even
under a contract, where tort [quasi-delict liability] is that which breaches the contract)
There being, similarly, no showing that petitioner Rodolfo Roman himself is
guilty of any culpable act or omission, he must also be absolved from liability.
Needless to say, the contractual tie between the LRT and Navidad is not itself a
juridical relation between the latter and Roman; thus, Roman can be made liable only
for his own fault or negligence.
2. YES.
The law requires common carriers to carry passengers safely using the utmost
diligence of very cautious persons with due regard for all circumstances. Such duty of
a common carrier to provide safety to its passengers so obligates it not only during the
course of the trip but for so long as the passengers are within its premises and where
they ought to be in pursuance to the contract of carriage. The statutory provisions
render a common carrier liable for death of or injury to passengers (a) through the
negligence or wilful acts of its employees or b) on account of wilful acts or negligence
of other passengers or of strangers if the common carriers employees through the
exercise of due diligence could have prevented or stopped the act or omission. In case
of such death or injury, a carrier is presumed to have been at fault or been negligent,
and by simple proof of injury, the passenger is relieved of the duty to still establish the
fault or negligence of the carrier or of its employees and the burden shifts upon the
carrier to prove that the injury is due to an unforeseen event or to force majeure.
In the absence of satisfactory explanation by the carrier on how the accident
occurred, which petitioners, according to the appellate court, have failed to show, the
presumption would be that it has been at fault, an exception from the general rule
that negligence must be proved.
3. The premise, however, for the employers liability is negligence or fault on the
part of the employee. Once such fault is established, the employer can then be made
liable on the basis of the presumption juris tantum that the employer failed to exercise
diligentissimi patris families in the selection and supervision of its employees. The
liability is primary and can only be negated by showing due diligence in the selection
and supervision of the employee, a factual matter that has not been shown. Absent
such a showing, one might ask further, how then must the liability of the common
carrier, on the one hand, and an independent contractor, on the other hand, be
described? It would be solidary. A contractual obligation can be breached by tort and
when the same act or omission causes the injury, one resulting in culpa contractual
and the other in culpa aquiliana, Article 2194 of the Civil Code can well apply.15 In
fine, a liability for tort may arise even under a contract, where tort is that which
breaches the contract.16 Stated differently, when an act which constitutes a breach of
contract would have itself constituted the source of a quasi-delictual liability had no
contract existed between the parties, the contract can be said to have been breached
by tort, thereby allowing the rules on tort to apply.
4. Law and jurisprudence dictate that a common carrier, both from the nature of
its business and for reasons of public policy, is burdened with the duty of exercising
utmost diligence in ensuring the safety of passengers.4 The Civil Code, governing the
liability of a common carrier for death of or injury to its passengers, provides:
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Thiam, Patrice
Alexandria R.
Article 1755. 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.
Article 1756. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed in articles 1733 and 1755.
Article 1759. Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the formers employees, although
such employees may have acted beyond the scope of their authority or in violation of
the orders of the common carriers.
of their employees.
Article 1763. 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 common carriers employees through the exercise of the diligence of a
good father of a family could have prevented or stopped the act or omission.
5. NO.
The award of nominal damages in addition to actual damages is untenable.
Nominal damages are adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by him. It is an established
rule that nominal damages cannot co-exist with compensatory damages.
26.
LA MALLORCA vs. COURT OF APPEALS
G.R No. L-20761, July, 27, 1966
ISSUES:
(1) Whether or not La Mallorca is a Common Carrier
(2) Whether or not the child was no longer the passenger of the bus involved in the
incident
(3) Whether or not respondents are liable for quasi delict considering that respondents
complain was one for a breach of contract
(4) Whether or not La Mallorca exercised due diligence as required for by law
FACTS:
Plaintiffs, husband and wife, together with their three minor daughters
(Milagros, 13 years old, Raquel, about 4 years old and Fe, 2 years old) boarded the
Pambusco at San Fernando Pampanga, bound for Anao, Mexico, Pampanga. Such bus
is owned and operated by the defendant.
They were carrying with them four pieces of baggage containing their personal
belonging. The conductor of the b us issued three tickets covering the full fares of the
plaintiff and their eldest child Milagros. No fare was charged on Raquel and Fe, since
both were below the height which fare is charged in accordance with plaintiff’s rules
and regulations.
After about an hour’s trip, the bus reached Anao where it stopped to allow the
passengers bound therefore, among whom were the plaintiffs and their children to get
off. Mariano Beltran, carrying some of their baggage was the first to get down the bus,
followed by his wife and children. Mariano led his companion to a shaded spot on the
left pedestrian side of the road about four or five meters away from the vehicle.
Afterwards, he returned to the bus in controversy to get his paying, which he had left
behind, but in so doing, his daughter followed him unnoticed by his father. While said
Mariano Beltran was on he running board of the bus waiting for the conductor to
hand him his bayong which he left under one its seats near the door, the bus, whose
motor was not shut off while unloading suddenly started moving forward, evidently to
resume its trip, notwithstanding the fact that the conductor was still attending to the
baggage left behind by Mariano Beltran. Incidentally, when the bus was again placed
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Alexandria R.
in a complete stop, it had traveled about 10 meters from point where plaintiffs had
gotten off.
Sensing the bus was again in motion; Mariano immediately jumped form the
running board without getting his bayong from conductor. He landed on the side of
the road almost board in front of the shaded place where he left his wife and his
children. At that time, he saw people beginning to gather around the body of a child
lying prostrate on the ground, her skull crushed, and without life. The child was none
other than his daughter Raquel, who was run over by the bus in which she rode
earlier together her parent.
For the death of the said child, plaintiffs comment the suit against the
defendant to recover from the latter damages.
RULINGS:
1. YES.
Article 1732 of the Civil code defines Common carriers as persons,
La Mallorca is engaged in the business of transporting passengers for
compensation and thus offering itself to the public, making him a common carrier.
2. There can be no controversy that as far as the father is concerned, when he

returned to the bus for his bayong which was not unloaded, the relation of passenger
and carrier between him and the petitioner remained subsisting. The relation of carrier
and passenger does not necessarily cease where the latter, after alighting from the car
aids the carrier’s servant or employee in removing his baggage from the car.
It is a rule that the relation of carrier and passenger does not cease 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 a
reasonable opportunity to leave the carrier’s premises.
The father returned to the bus to get one of his baggages which was not
unloaded when they alighted from the bus. Raquel must have followed her father.
However, although the father was still on the running board of the bus awaiting for
the conductor to hand him the bag or bayong, the bus started to run, so that even he
had jumped down from the moving vehicle. It was that this instance that the child,
who must be near the bus, was run over and killed. In the circumstances, it cannot be
claimed that the carrier’s agent had exercised the “utmost diligence” of a “very
cautious person” required by Article 1755 of the Civil Code to be observed by a
common carrier in the discharge of its obligation to transport safely its passengers.
The driver, although stopping the bus, nevertheless did not put off the engine. He
started to run the bus even before the conductor gave him the signal to go and while
the latter was still unloading part of the baggage of the passengers Beltran and family.
The presence of the said passengers near the bus was not unreasonable and they are,
therefore, to be considered still as passengers of the carrier, entitled to the protection
under their contract of carriage.
3. YES.
It is clearly an allegation for quasi-delict. The inclusion of this averment for
quasi-delict, while incompatible with the other claim under the contract of carriage, is
permissible under Section 2 of Rule 8 of the New Rules of Court, which allows a
plaintiff to allege causes of action in the alternative, be they compatible with each
other or not, to the end that the real matter in controversy may be resolved and
determined.
The plaintiffs sufficiently pleaded the culpa or negligence upon which the claim
was predicated when it was alleged in the complaint that "the death of Raquel Beltran,
plaintiffs' daughter, was caused by the negligence and want of exercise of the utmost
diligence of a very cautious person on the part of the defendants and their agent." This
allegation was also proved when it was established during the trial that the driver,
even before receiving the proper signal from the conductor, and while there were still
persons on the running board of the bus and near it, started to run off the vehicle. The
presentation of proof of the negligence of its employee gave rise to the presumption
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Thiam, Patrice
Alexandria R.
that the defendant employer did not exercise the diligence of a good father of the
family in the selection and supervision of its employees. And this presumption, as the
Court of Appeals found, petitioner had failed to overcome. Consequently, petitioner
must be adjudged peculiarily liable for the death of the child Raquel Beltran.
4. NO.
In this case, there was no “utmost diligence”. Firstly, the driver, although
stopping the bus, did not put off the engine. Secondly, he started to run the bus even
before the bus conductor gave him the signal and while the latter was unloading
cargo. Here, the presence of said passengers near the bus was not unreasonable and
the duration of responsibility still exist.
5. It has been recognized as a rule that 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 a reasonable opportunity to leave the carrier's premises.
And, what is a reasonable time or a reasonable delay within this rule is to be
determined from all the circumstances. Thus, a person who, after alighting from a
train, walks along the station platform is considered still a passenger. So also, where a
passenger has alighted at his destination and is proceeding by the usual way to leave
the company's premises, but before actually doing so is halted by the report that his
brother, a fellow passenger, has been shot, and he in good faith and without intent of
engaging in the difficulty, returns to relieve his brother, he is deemed reasonably and
necessarily delayed and thus continues to be a passenger entitled as such to the
protection of the railroad and company and its agents
27.
NECISITO vs. PARAS
G.R. No. L-10605, June 30, 1958
ISSUES:
(1) Whether or not the carrier is liable for the manufacturing defect of the steering
knuckle
(2) Whether the evidence discloses that in regard thereto the carrier exercised the
diligence required by law
(3) What are the rights of the heirs of deceased passenger to recover moral damages?
(4) What is the rule where injury is patent and indemnity cannot be denied?
FACTS:
A mother and her son boarded a passenger auto-truck of the Philippine Rabbit
Bus Lines. While entering a wooden bridge, its front wheels swerved to the right, the
driver lost control and the truck fell into a breast-deep creek. The mother drowned and
the son sustained injuries. These cases involve actions ex contractu against the
owners of PRBL filed by the son and the heirs of the mother. Lower Court dismissed
the actions, holding that the accident was a fortuitous event.
RULINGS:
1. YES.
The rationale of the carrier’s liability is the fact that the passenger has neither
choice nor control over the carrier in the selection and use of the equipment and
appliances in use by the carrier. Having, no privity whatever with the manufacturer or
vendor of the defective equipment, the passenger has no remedy against him, while
the carrier usually has. It is but logical, therefore, that the carrier, while not an
insurer of the safety of his passengers, should nevertheless be held to answer for the
flaws of his equipment if such flaws were at all discoverable.
2. NO.
The periodical, usual inspection of the steering knuckle did not measure up to
the “utmost diligence of a very cautious person” as “far as human care and foresight
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Alexandria R.
can provide” and therefore the knuckle’s failure cannot be considered a fortuitous
event that exempts the carrier from responsibility.
3. In case of accident due to a carrier’s negligence, the heirs of a deceased

passenger may recover moral damages, even though a passenger who is injured, but
manages to survive, is not entitled to them. This special rule (Arts. 1264 and 2206,
No. 3) in case of death controls the general rule of Article 2220.
4. Where the injury is patent and not denied, the court is empowered to calculate
moderate damages, although there is no definite proof of the pecuniary loss suffered
by the injured party.
5. It is clear that the carrier is not an insurer of the passengers’ safety. His liability
rests upon negligence, his failure to exercise the "utmost" degree of diligence that the
law requires, and by Art. 1756, in case of a passenger’s death or injury the carrier
bears the burden of satisfying the court that he has duly discharged the duty of
prudence required. In the American law, where the carrier is held to the same degree
of diligence as under the new Civil Code, the rule on the liability of carriers for defects
of equipment is thus expressed: "The preponderance of authority is in favor of the
doctrine that a passenger is entitled to recover damages from a carrier for an injury
resulting from a defect in an appliance purchased from a manufacturer, whenever it
appears that the defect would have been discovered by the carrier if it had exercised
the degree of care which under the circumstances was incumbent upon it, with regard
to inspection and application of the necessary tests. For the purposes of this doctrine,
the manufacturer is considered as being in law the agent or servant of the carrier, as
far as regards the work of constructing the appliance. According to this theory, the
good repute of the manufacturer will not relieve the carrier from liability"
28.
TIU vs. ARRIESGADO
G.R. No. 138060, September 1, 2004
ISSUES:
(1) Whether or not petitioner Las Pinas was negligent in driving the III-fate bus
(2) Whether or not petitioner Tiu failed to overcome the presumption of negligence against
him as one engaged in the business of common carriage
(3) Whether or not respondents Pedrano and Condor were likewise negligent
(4) Whether or not the doctrine of last clear chance is applicable in the case at bar
(5) What are the liabilities of PPSII as insurer?
FACTS:
At about 10:00 p.m. of March 15, 1987, the cargo truck marked "Condor Hollow
Blocks and General Merchandise" bearing plate number GBP-675 was loaded with
firewood in Bogo, Cebu and left for Cebu City. Upon reaching Sitio Aggies, Poblacion,
Compostela, Cebu, just as the truck passed over a bridge, one of its rear tires
exploded. The driver, Sergio Pedrano, then parked along the right side of the national
highway and removed the damaged tire to have it vulcanized at a nearby shop, about
700 meters away. Pedrano left his helper, Jose Mitante, Jr. to keep watch over the
stalled vehicle, and instructed the latter to place a spare tire six fathoms away behind
the stalled truck to serve as a warning for oncoming vehicles. The trucks tail lights
were also left on. It was about 12:00 a.m., March 16, 1987.
At about 4:45 a.m., D Rough Riders passenger bus with plate number PBP-724
driven by Virgilio Te Laspiñas was cruising along the national highway of Sitio Aggies,
Poblacion, Compostela, Cebu. The passenger bus was also bound for Cebu City, and
had come from Maya, Daanbantayan, Cebu. Among its passengers were the Spouses
Pedro A. Arriesgado and Felisa Pepito Arriesgado, who were seated at the right side of
the bus, about three (3) or four (4) places from the front seat.
As the bus was approaching the bridge, Laspiñas saw the stalled truck, which
was then about 25 meters away. He applied the breaks and tried to swerve to the left
to avoid hitting the truck. But it was too late; the bus rammed into the trucks left rear.
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Alexandria R.
The impact damaged the right side of the bus and left several passengers injured.
Pedro Arriesgado lost consciousness and suffered a fracture in his right colles. His
wife, Felisa, was brought to the Danao City Hospital. She was later transferred to the
Southern Island Medical Center where she died shortly thereafter.
Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of
carriage, damages and attorneys fees before the Regional Trial Court of Cebu City,
Branch 20, against the petitioners, D Rough Riders bus operator William Tiu and his
driver, Virgilio Te Laspiñas on May 27, 1987. The respondent alleged that the
passenger bus in question was cruising at a fast and high speed along the national
road, and that petitioner Laspiñas did not take precautionary measures to avoid the
accident.
The petitioners, for their part, filed a Third-Party Complaint against the
following: respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII), petitioner
Tiu’s insurer; respondent Benjamin Condor, the registered owner of the cargo truck;
and respondent Sergio Pedrano, the driver of the truck. They alleged that petitioner
Laspiñas was negotiating the uphill climb along the national highway of Sitio Aggies,
Poblacion, Compostela, in a moderate and normal speed. It was further alleged that
the truck was parked in a slanted manner, its rear portion almost in the middle of the
highway, and that no early warning device was displayed. Petitioner Laspiñas
promptly applied the brakes and swerved to the left to avoid hitting the truck head-on,
but despite his efforts to avoid damage to property and physical injuries on the
passengers, the right side portion of the bus hit the cargo truck’s left rear.
RULINGS:
1. YES.
Indeed, petitioner Laspiñas' negligence in driving the bus is apparent in the
records. By his own admission, he had just passed a bridge and was traversing the
highway of Compostela, Cebu at a speed of 40 to 50 kilometers per hour before the
collision occurred. The maximum speed allowed by law on a bridge is only 30
kilometers per hour.29 And, as correctly pointed out by the trial court, petitioner
Laspiñas also violated Section 35 of the Land Transportation and Traffic Code,
Republic Act No. 4136, as amended:
Sec. 35. Restriction as to speed. - (a) Any person driving a motor vehicle on a
highway shall drive the same at a careful and prudent speed, not greater nor less than
is reasonable and proper, having due regard for the traffic, the width of the highway,
and or any other condition then and there existing; and no person shall drive any
motor vehicle upon a highway at such speed as to endanger the life, limb and property
of any person, nor at a speed greater than will permit him to bring the vehicle to a stop
within the assured clear distance ahead.30
Under Article 2185 of the Civil Code, a person driving a vehicle is presumed
negligent if at the time of the mishap, he was violating any traffic regulation.
2. NO.
Respondent Arriesgado and his deceased wife contracted with petitioner Tiu, as
owner and operator of D' Rough Riders bus service, for transportation from Maya,
Daanbantayan, Cebu, to Cebu City for the price of P18.00.35 It is undisputed that the
respondent and his wife were not safely transported to the destination agreed upon. In
actions for breach of contract, only the existence of such contract, and the fact that
the obligor, in this case the common carrier, failed to transport his passenger safely to
his destination are the matters that need to be proved.36 This is because under the
said contract of carriage, the petitioners assumed the express obligation to transport
the respondent and his wife to their destination safely and to observe extraordinary
diligence with due regard for all circumstances.37 Any injury suffered by the
passengers in the course thereof is immediately attributable to the negligence of the
carrier.38 Upon the happening of the accident, the presumption of negligence at once
arises, and it becomes the duty of a common carrier to prove that he observed
extraordinary diligence in the care of his passengers.39 It must be stressed that in
requiring the highest possible degree of diligence from common carriers and in
creating a presumption of negligence against them, the law compels them to curb the
recklessness of their drivers.40
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Alexandria R.
While evidence may be submitted to overcome such presumption of negligence,

it must be shown that the carrier observed the required extraordinary diligence, which
means that the carrier must show the utmost diligence of very cautious persons as far
as human care and foresight can provide, or that the accident was caused by
fortuitous event.
As correctly found by the trial court, petitioner Tiu failed to conclusively rebut
such presumption. The negligence of petitioner Laspiñas as driver of the passenger
bus is, thus, binding against petitioner Tiu, as the owner of the passenger bus
engaged as a common carrier.
3. NO.
Both the trial and the appellate courts failed to consider that respondent
Pedrano was also negligent in leaving the truck parked askew without any warning
lights or reflector devices to alert oncoming vehicles, and that such failure created the
presumption of negligence on the part of his employer, respondent Condor, in
supervising his employees properly and adequately.
As ruled in Poblete v. Fabros:
It is such a firmly established principle, as to have virtually formed part of the
law itself, that the negligence of the employee gives rise to the presumption of
negligence on the part of the employer. This is the presumed negligence in the
selection and supervision of employee. The theory of presumed negligence, in contrast
with the American doctrine of respondeat superior, where the negligence of the
employee is conclusively presumed to be the negligence of the employer, is clearly
deducible from the last paragraph of Article 2180 of the Civil Code which provides that
the responsibility therein mentioned shall cease if the employers prove that they
observed all the diligence of a good father of a family to prevent damages. '48
The petitioners were correct in invoking respondent Pedrano's failure to observe
Article IV, Section 34(g) of the Rep. Act No. 4136, which provides:
(g) Lights when parked or disabled. - Appropriate parking lights or flares visible
one hundred meters away shall be displayed at a corner of the vehicle whenever such
vehicle is parked on highways or in places that are not well-lighted or is placed in
such manner as to endanger passing traffic.
The manner in which the truck was parked clearly endangered oncoming traffic
on both sides, considering that the tire blowout which stalled the truck in the first
place occurred in the wee hours of the morning. The Court can only now surmise that
the unfortunate incident could have been averted had respondent Condor, the owner
of the truck, equipped the said vehicle with lights, flares, or, at the very least, an early
warning device.49 Hence, we cannot subscribe to respondents Condor and Pedrano's
claim that they should be absolved from liability because, as found by the trial and
appellate courts, the proximate cause of the collision was the fast speed at which
petitioner Laspiñas drove the bus. To accept this proposition would be to come too
close to wiping out the fundamental principle of law that a man must respond for the
foreseeable consequences of his own negligent act or omission. Indeed, our law on
quasi-delicts seeks to reduce the risks and burdens of living in society and to allocate
them among its members. To accept this proposition would be to weaken the very
bonds of society.
4. NO. The doctrine of last clear chance is inapplicable in the case at bar.
The doctrine of last clear chance applies only in a suit between the owners and
drivers of two colliding vehicles. It does not arise where a passenger demands
responsibility from the carrier to enforce its contractual obligations, for it would be
inequitable to exempt the negligent driver and its owner on the ground that the other
driver was likewise guilty of negligence. The common law notion of last clear chance
permitted courts to grant recovery to a plaintiff who has 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 of 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.
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Alexandria R.
5. Obviously, the insurer could be held liable only up to the extent of what was
provided for by the contract of insurance, in accordance with the Compulsory Motor
Vehicle Liabilities Insurance (CMVLI) law.
At the time of the incident, the schedule of indemnities for death and bodily
injuries, professional fees and other charges payable under a CMVLI coverage was
provided for under the Insurance Memorandum Circular (IMC) No. 5-78 which was
approved. As therein provided, the maximum indemnity for death was twelve
thousand (P12,000.00) pesos per victim. The schedules for medical expenses were also
provided by said IMC, specifically in paragraphs (C) to (G).
29.
PHILIPPINE CHARTER INSURANCE CORPORATION vs. UNKNOWN OWNER OF
THE VESSEL M/V “National Honor”, NATIONAL SHIPPINE CORPORATION OF
THE PHILIPPINES and INTERNATIONAL CONTAINER SERVICES, INC.
ISSUES:
(1) Whether or not the presumption of negligence is applicable in the instant case
(2) Whether or not Respondent, as common carrier, is liable for the damage sustained by
the shipment in the possession of the arrastre operator
(3) Whether or not the damage sustained by the shipment was due to its defective
packing and not to the fault and negligence of the respondents
(4) How was extraordinary diligence in the vigilance over the goods defined in the case at
bar?
(5) What is the General rule laid down in the case at bar?
FACTS:
Petitioner, Philippine Charter Insurance Corporation (PCIC), is the insurer of a
shipment on board the vessel M/V “National Honor,” represented in the Philippines by
its agent, National Shipping Corporation of the Philippines (NSCP).
The M/V “National Honor” arrived at the Manila International Container
Terminal (MICT). The International Container Terminal Services, Incorporated (ICTSI)
was furnished with a copy of the crate cargo list and bill of lading, and it knew the
contents of the crate. The following day, the vessel started discharging its cargoes
using its winch crane. The crane was operated by Olegario Balsa, a winchman from
the ICTSI, exclusive arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and
the surveyor of the ICTSI, conducted an inspection of the cargo. They inspected the
hatches, checked the cargo and found it in apparent good condition. Claudio Cansino,
the stevedore of the ICTSI, placed two sling cables on each end of Crate No. 1. No sling
cable was fastened on the mid-portion of the crate. In Dauz’s experience, this was a
normal procedure. As the crate was being hoisted from the vessel’s hatch, the mid-
portion of the wooden flooring suddenly snapped in the air, about five feet high from
the vessel’s twin deck, sending all its contents crashing down hard, resulting in
extensive damage to the shipment.
PCIC paid the damage, and as subrogee, filed a case against M/V National
Honor, NSCP and ICTSI. Both RTC and CA dismissed the complaint.
RULINGS:
1. NO.
In the present case, the trial court declared that based on the record, the loss of
the shipment was caused by the negligence of the petitioner as the shipper:
The same may be said with respect to defendant ICTSI. The breakage and
collapse of Crate No. 1 and the total destruction of its contents were not imputable to
any fault or negligence on the part of said defendant in handling the unloading of the
cargoes from the carrying vessel, but was due solely to the inherent defect and
weakness of the materials used in the fabrication of said crate.
The crate should have three solid and strong wooden batten placed side by side
underneath or on the flooring of the crate to support the weight of its contents.
2. YES.
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Alexandria R.
It avers that the "carrier cannot discharge directly to the consignee because
cargo discharging is the monopoly of the arrastre."
Liability, therefore, falls solely upon the shoulder of respondent ICTSI,
inasmuch as the discharging of cargoes from the vessel was its exclusive
responsibility.
3. YES.
It appears that the wooden batten used as support for the flooring was not
made of good materials, which caused the middle portion thereof to give way when it
was lifted. The shipper also failed to indicate signs to notify the stevedores that extra
care should be employed in handling the shipment.
The case at bar falls under one of the exceptions mentioned in Article 1734 of
the Civil Code, particularly number (4) thereof, i.e., the character of the goods or
defects in the packing or in the containers. The trial court found that the breakage of
the crate was not due to the fault or negligence of ICTSI, but to the inherent defect and
weakness of the materials used in the fabrication of the said crate.
4. The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required precaution
for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage
and delivery. It requires common carriers to render service with the greatest skill and
foresight and "to use all reasonable means to ascertain the nature and characteristic of
goods tendered for shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires."
The common carrier's duty to observe the requisite diligence in the shipment of
goods lasts from the time the articles are surrendered to or unconditionally placed in
the possession of, and received by, the carrier for transportation until delivered to, or
until the lapse of a reasonable time for their acceptance, by the person entitled to
receive them. When the goods shipped are either lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there
need not be an express finding of negligence to hold it liable. To overcome the
presumption of negligence in the case of loss, destruction or deterioration of the goods,
the common carrier must prove that it exercised extraordinary diligence.
5. The well-entrenched rule in our jurisdiction is that only questions of law may be
entertained by this Court in a Petition for Review on Certiorari .
This rule, however, is not ironclad and admits certain exceptions, such as
when
a. the conclusion is grounded on speculations, surmises or conjectures;
b. the inference is manifestly mistaken, absurd or impossible;
c. there is grave abuse of discretion;
d. the judgment is based on a misapprehension of facts;
e. the findings of fact are conflicting;
f. there is no citation of specific evidence on which the factual findings are based;
g. the findings of absence of facts are contradicted by the presence of evidence on record;
h. the findings of the Court of Appeals are contrary to those of the trial court;
i. the Court of Appeals manifestly overlooked certain relevant and undisputed facts that,
if properly considered, would justify a different conclusion;
j. the findings of the Court of Appeals are beyond the issues of the case; and
k. such findings are contrary to the admissions of both parties.
30.
LASAM vs. SMITH
G.R. No. L-9495, February 2, 1924
ISSUES:
(1) Whether or not the breach of contract was not due to a fortuitous event
(2) What is meant by “events which cannot be foreseen and which, having been foreseen,
are inevitable?
(3) What are the liabilities of the defendant?
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Alexandria R.
(4) Whether or not was due to a caso fortuito?

(5) How to determine the extent of liability for losses or damages resulting from
negligence in the fulfillment of a contractual obligation?
FACTS:
The defendant was the owner of a public garage in the town of San Fernando,
La Union, and engaged in the business of carrying passengers for hire from one point
to another in the Province of La Union and the surrounding provinces.
Defendant undertook to convey the plaintiffs from San Fernando to Currimao,
Ilocos Norte, in a Ford automobile. On leaving San Fernando, the automobile was
operated by a licensed chauffeur, but after having reached the town of San Juan, the
chauffeur allowed his assistant, Bueno, to drive the car. Bueno held no driver’s
license, but had some experience in driving. The car functioned well until after the
crossing of the Abra River in Tagudin, when, according to the testimony of the
witnesses for the plaintiffs, defects developed in the steering gear so as to make
accurate steering impossible, and after zigzagging for a distance of about half
kilometer, the car left the road and went down a steep embankment.
The automobile was overturned and the plaintiffs pinned down under it. Mr.
Lasam escaped with a few contusions and a dislocated rib, but his wife, Joaquina,
received serious injuries, among which was a compound fracture of one of the bones
in her left wrist. She also suffered nervous breakdown from which she has not fully
recovered at the time of trial.
The complaint was filed about a year and a half after and alleges that the
accident was due to defects in the automobile as well as to the incompetence and
negligence of the chauffeur.
The trial court held, however, that the cause of action rests on the defendant’s
breach of the contract of carriage and that, consequently, articles 1101-1107 of the
Civil Code, and not article 1903, are applicable.
The court further found that the breach of contract was not due to fortuitous
events and that, therefore the defendant was liable in damages.
RULINGS:
1. YES.
It is sufficient to reiterate that the source of the defendant’s legal liability is the
contract of carriage; that by entering into that contract he bound himself to carry the
plaintiffs safely and securely to their destination; and that having failed to do so he is
liable in damages unless he shows that the failure to fulfill his obligation was due to
causes mentioned in article 1105 of the Civil Code, which reads: “No one shall be
liable for events which could not before seen or which, even if foreseen, were
inevitable, with the exception of the cases in which the law expressly provides
otherwise and those in which the obligation itself imposes such liability.” As will be
seen, some extraordinary circumstances independent of the will of the obligor, or of
his employees, is an essential element of a caso fortuito.
In the present case, this element is lacking. It is not suggested that the accident
in question was due to an act of God or to adverse road conditions which could have
been foreseen. As far as the record shows, the accident was caused either by defects in
the automobile or else through the negligence of its driver. That is not a caso fortuito.
2. The Spanish authorities regard the language employed as an effort to define the term
caso fortuito and hold that the two expressions are synonymous.
Escriche defines caso fortuito as "an unexpected event or act of God which
could either be foreseen nor resisted, such as floods, torrents, shipwrecks,
conflagrations, lightning, compulsion, insurrections, destructions, destruction of
buildings by unforseen accidents and other occurrences of a similar nature."
In discussing and analyzing the term caso fortuito the Enciclopedia Juridica Espanola
says: "In a legal sense and, consequently, also in relation to contracts, a caso fortuito
presents the following essential characteristics:
a. The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to
comply with his obligation, must be independent of the human will.
b. It must be impossible to foresee the event which constitutes the caso fortuito, or if it can
be foreseen, it must be impossible to avoid.
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Alexandria R.
c. The occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner. And
d. the obligor (debtor) must be free from any participation in the aggravation of the injury
resulting to the creditor."
3. Upon the facts stated, the defendant's liability is contractual.

It is sufficient to reiterate that the source of the defendant's legal liability is the
contract of carriage; that by entering into that contract he bound himself to carry the
plaintiffs safely and securely to their destination; and that having failed to do so he is
liable in damages unless he shows that the failure to fulfill his obligation was due to
causes mentioned in article 1105 of the Civil Code, which reads as follows:
No one shall be liable for events which could not be foreseen or which, even if
foreseen, were inevitable, with the exception of the cases in which the law expressly
provides otherwise and those in which the obligation itself imposes such liability.
4. NO.
These authorities agree that some extraordinary circumstance independent of
the will of the obligor, or of his employees, is an essential element of a caso fortuito.
Turning to the present case, it is at once apparent that this element is lacking. It is
not suggested that the accident in question was due to an act of God or to adverse
road conditions which could not have been foreseen. As far as the records shows, the
accident was caused either by defects in the automobile or else through the negligence
of its driver. That is not a caso fortuito.
5. In determining the extent of the liability for losses or damages resulting from
negligence in the fulfillment of a contractual obligation, the courts have "a
discretionary power to moderate the liability according to the circumstances" (De Guia
vs. Manila Electric Railroad & Light Co., 40 Phil., 706; art. 1103, Civil Code),
we do not think that the evidence is such as to justify us in interfering with the
discretion of the court below in this respect.
As pointed out by that court in its well-reasoned and well-considered decision,
by far the greater part of the damages claimed by the plaintiffs resulted from the
fracture of a bone in the left wrist of Joaquina Sanchez and from her objections to
having a decaying splinter of the bone removed by a surgical operation. As a
consequence of her refusal to submit such an operation, a series of infections ensued
and which required constant and expensive medical treatment for several years. We
agree with the court below that the defendant should not be charged with these
expenses.
31.
JUNTILLA vs. FONTANAR
G.R. No. L-45637, May 31, 1985
ISSUES:
(1) Whether or not the respondents shall be held liable for the breach of contract?
(2) Whether or not the explosion of the tire is considered a fortuitous event?
(3) Whether or not the defendants and their employee failed to exercise the due diligence
required of common carriers
(4) Whether or not the doctrine laid down in the case of Necesito Et. Al vs. Paras is
applicable in the case at bar
(5) What are the essential characteristics of a caso fortuito?
FACTS:
A Jeepney was driven by Berfol Camoro from Danao City to Cebu City. It was
Clemente Fontanar but was actually owned by defendant Fernando Banzon. When the
jeepney reached Mandaue City, the right rear tire exploded causing the vehicle to turn
turtle. Roberto Juntilla was sitting at the front seat was thrown out of the vehicle.
Upon landing on the ground, he momentarily lost consciousness. When he
came to his senses, he found that he had a lacerated wound on his right palm. He
also injured his left arm, right thigh and on his back. Because of his shock and
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Alexandria R.
injuries, he went back to Danao City but on the way, he discovered that his "Omega"
wrist watch worth P 852.70 was lost. Upon his arrival in Danao City, he immediately
entered the Danao City Hospital to attend to his injuries, and also requested his
father-in-law to proceed immediately to the place of the accident and look for the
watch.
Roberto Juntilla filed for breach of contract with damages. Respondents claimed
that it was beyond their control since tire that exploded was newly bought and was
only slightly used
RULINGS:
1. YES.
Such event was not fortuitous in nature. The respondents shall be held liable
for the breach of contract and shall pay damages that shall earn interest at 12% per
annum starting from January 27, 1975 and the attorney’s fees of six hundred pesos.
2. NO.
In the case at bar, the cause of the unforeseen and unexpected occurrence was
not independent of the human will. The accident was caused either through negligence
of the driver or because of mechanical defects in the tire.
Since the jeepney turned turtle and jumped into a ditch immediately after its
right rear tire exploded, this would be evidence that can prove that the jeep was
running at a very fast speed before the accident happened. Had the jeep runs at a
regular and safe speed, it will not jump into a ditch when its right rear tire blows up.
3. YES.
We agree with the observation of the petitioner that a public utility jeep running
at a regular and safe speed will not jump into a ditch when its right rear tire blows up.
There is also evidence to show that the passenger jeepney was overloaded at the time
of the accident.
The petitioner stated that there were three (3) passengers in the front seat and
fourteen (14) passengers in the rear. The records show that this obligation was not
met by the respondents.
4. "The rationale of the carrier’s liability is the fact that the passenger has neither
choice nor control over the carrier in the selection and use of the equipment and
appliances in use by the carrier. Having no privity whatever with the manufacturer or
vendor of the defective equipment, the passenger has no remedy against him, while
the carrier usually has. It is but logical, therefore, that the carrier, while not an
insurer of the safety of his passengers, should nevertheless be held to answer for the
flaws of his equipment if such flaws were at all discoverable. . . ." It is sufficient to
reiterate that the source of a common carrier’s legal liability is the contract of carriage,
and by entering into the said contract, it binds itself to carry the passengers safely as
far as human care and foresight can provide, using the utmost diligence of a very
cautious person, with a due regard for all the circumstances. The records show that
this obligation was not met by the respondents.
5. In the case of Lasam v. Smith (45 Phil. 657), the essential characteristics of caso
fortuito are:
a. The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor
to comply with his obligation, must be independent of the human will.
b. It must be impossible to foresee the event which constitutes the caso fortuito, or if it
can be foreseen, it must be impossible to avoid.
c. The occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner. And
d. the obligor (debtor) must be free from any participation in the aggravation of the injury
resulting to the creditor.’
32.
GANZON vs. COURT OF APPEALS
G.R. No. L-48757, May 30, 1988
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Alexandria R.
ISSUES:
(1) Whether or not Ganzon is guilty of breach of contract of transportation?
(2) Whether or not a contract of carriage has been perfected?
(3) Whether or not Ganzon failed to show that the loss of the scraps was due to any of the
causes enumerated in Art. 1734?
(4) Whether or not the theory of caso fortuito is applicable in the case at bar?
(5) Whether or not Ganzon could be absolved from responsibility on the ground that he
was ordered by competent public authority to unload the scrap iron?
FACTS:
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro
B. Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila
on board the lighter LCT "Batman. Pursuant to that agreement, Mauro B. Ganzon sent
his lighter "Batman" to Mariveles where it docked in three feet of water. Gelacio
Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of the lighter,
for loading which was actually begun on the same date by the crew of the lighter
under the captain's supervision. When about half of the scrap iron was already loaded,
Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from
Gelacio Tumambing. The latter resisted the shakedown and after a heated argument
between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing
who sustained injuries.
After sometime, the loading of the scrap iron was resumed. But on December 4,
1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain
Filomeno Niza and his crew to dump the scrap iron where the lighter was docked. The
rest was brought to the compound of NASSCO. Later on Acting Mayor Rub issued a
receipt stating that the Municipality of Mariveles had taken custody of the scrap iron.
Tumabing sued Ganzon; the latter alleged that the goods have not been
unconditionally placed under his custody and control to make him liable. The trial
court dismissed the case but on appeal, respondent Court rendered a decision
reversing the decision of the trial court and ordering Ganzon to pay damages.
RULINGS:
1. YES.
Article 1734 states that Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due to any of the
following causes only:
(3) Act of omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
Ganzon has failed to show that the loss of the scraps was due to any of the
causes enumerated in Art. 1734; hence he is presumed to have been at fault or to
have acted negligently; he could have been exempted from any liability had he been
able to prove that he observed extraordinary diligence in the vigilance over the goods
in his custody, according to all the circumstances of the case, or that the loss was due
to an unforeseen event or to force majeure, but he failed to do so.
2. YES.
In the case at bar, the said act of delivery, the scraps were unconditionally
placed in the possession and control of the common carrier, and upon their receipt by
the carrier for transportation, the contract of carriage was deemed perfected.
3. YES.
Ganzon has failed to show that the loss of the scraps was due to any of the
causes enumerated in Art. 1734; hence he is presumed to have been at fault or to
have acted negligently; he could have been exempted from any liability had he been
able to prove that he observed extraordinary diligence in the vigilance over the goods
in his custody, according to all the circumstances of the case, or that the loss was due
to an unforeseen event or to force majeure, but he failed to do so.
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4. NO.
Ganzon was not duty bound to obey the illegal order to dump into the sea the
scrap iron; moreover, there is absence of sufficient proof that the issuance of the same
order was attended with such force or intimidation as to completely overpower the will
of the petitioner’s employees; mere difficulty in the fulfillment of the obligation is not
considered force majeure.
5. NO.
It must be shown that Acting Mayor Basilio Rub had the power to issue the
disputed order, or that it was lawful, or that it was issued under legal process of
authority. The appellee failed to establish this. Indeed, no authority or power of the
acting mayor to issue such an order was given in evidence. Neither has it been shown
that the cargo of scrap iron belonged to the Municipality of Mariveles. What we have in
the record is the stipulation of the parties that the cargo of scrap iron was
accumulated by the appellant through separate purchases here and there from private
individuals.
The fact remains that the order given by the acting mayor to dump the scrap
iron into the sea was part of the pressure applied by Mayor Jose Advincula to
shakedown Tumambing for P5,000.00. The order of the acting mayor did not
constitute valid authority for Ganzon and his representatives to carry out.
33.
CANGCO vs. MANILA RAIL ROAD
G.R. No. L-12191, October 14, 1918
ISSUES:
(1) Whether or not Manila Railroad Co. is liable for damages?
(2) Whether or not Manila Rail Road should be held liable?
(3) Whether or not Article 1903 of the Civil Code is applicable in the case at bar?
(4) What is the distinction between culpa contractual and culpa aquiliana in the case at
bar?
FACTS:
Jose Cangco arose from his seat in the 2nd class-car where he was riding and,
making, his exit through the door, took his position upon the steps of the coach,
seizing the upright guardrail with his right hand for support.
As the train slowed down another passenger and also an employee of the
railroad company Emilio Zuñiga got off the same car alighting safely at the point
where the platform begins to rise from the level of the ground.
When the train had proceeded a little farther Cangco stepped off but 1 or both
of his feet came in contact with a sack of watermelons so his feet slipped from under
him and he fell violently on the platform. His body rolled from the platform and was
drawn under the moving car, where his right arm was badly crushed and lacerated.
The car moved forward possibly 6 meters before it came to a full stop. He was
bought to the hospital in the city of Manila where an examination was made and his
arm was amputated. The operation was unsatisfactory so he had second operation at
another hospital was performed and the member was again amputated higher up near
the shoulder expending a total of P790.25.
It is customary season for harvesting these melons and a large lot had been
brought to the station for the shipment to the market.
RULINGS:
1. YES.
Art. 2176 of the Civil Code states that whoever, by act or omission causes
damage to another, there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing contractual relation between
the parties, is called a quasi-delict and is governed by the provisions of this Chapter.
(1902a).
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The foundation of defendant’s liability is its contract of carriage with plaintiff,

which carries by implication the duty to carry him safely and provide safe means of
entering and leaving its trains. Thus, non-performance of the contract could not be
excused by proof that the fault was imputable to defendant’s employees.
2. YES.
The employees of the railroad company were guilty of negligence.
It necessarily follows that the defendant company is liable for the damage
thereby occasioned unless recovery is barred by the plaintiff's own contributory
negligence.
In resolving this problem it is necessary that each of these conceptions of
liability, to-wit, the primary responsibility of the defendant company and the
contributory negligence of the plaintiff should be separately examined.
3. NO.
Article 1903 of the Civil Code is not applicable to obligations arising ex
contractu, but only to extra-contractual obligations — or to use the technical form of
expression, that article relates only to culpa aquiliana and not to culpa contractual.
Article 1903 of the Civil Code is not applicable to acts of negligence which constitute
the breach of a contract.
4. Manresa says that the liability arising from extra-contractual culpa is always
based on a voluntary act or omission which causes damage not through willful intent,
but through mere negligence or inattention. Therefore, an act or omission may be
voluntary but not willful, that is, with intent to harm. Culpa aquiliana can be further
distinguished from culpa contractual in the following ways: Source. Extra-contractual
obligations have their source in those mutual duties which civilized society imposes
upon its members, the breach of which give rise to an obligation to indemnify the
injured party. As such, in cases of culpa aquiliana it is the wrongful or negligent act or
omission that creates the vinculum juris, whereas in contractual relations the
vinculum exists independently of the breach. Burden of proof. In culpa aquiliana,
where the plaintiff’s cause of action depends on a negligent act or omission, the
burden of proof rests upon the plaintiff to prove negligence. On the other hand, since
an obligation already exists in culpa contractual, mere proof of the contract and of its
nonperformance are sufficient prima facie for a recovery. Defense of employer for
negligence of employee. The presumption of negligence in Art. 1903 is rebuttable, and
the employer is relieved of liability upon proof that he has exercised due diligence in
the selection and supervision of employees. However, the same does not apply in culpa
contractual. The Court also describes the fields of contractual and non-contractual
obligations as “concentric”. That is to say, the fact that a person is bound to another
by contract does not relieve him from extra-contractual liability to the latter.
5. As a general rule it is logical that in case of extra-contractual culpa, a suing

creditor should assume the burden of proof of its existence, as the only fact upon
which his action is based; while on the contrary, in a case of negligence which
presupposes the existence of a contractual obligation, if the creditor shows that it
exists and that it has been broken, it is not necessary for him to prove negligence.
(Manresa, vol. 8, p. 71 [1907 ed., p. 76]).
34.
SY vs. MALATE
G.R. No. L-8937, November 29, 1957
ISSUES:
(1) Whether or not a Contract of carriage exist in the case at bar?
(2) Whether or not the third-party complaint involves a prejudicial question
(3) Whether or not the main complaint cannot be decided until the third-party complaint
is decided?
(4) Whether or not Malate Taxicab & Garage, Inc. was responsible for the collision, and
hence, civilly responsible to the plaintiff-appellee?
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(5) Whether or not an express finding thereon in view of the provisions of the aforequoted
Article 1756 of the new Civil Code is necessary?
FACTS:
Olegario Brito Sy engaged a taxicab owned and operated by Malate Taxicab and
Garage, Inc. and driven by Catalino Ermino, to take him to his place of business. He
told the driver to turn to the right, but the latter did not heed him and instead
countered that they better pass along Katigbak Drive. At the intersection, the taxi
collided with an army wagon driven by Sgt. Jesus De quito, as a result of which
Olegario Brito Sy was jarred, jammed and jolted. He was taken to the Santa Isabel
Hospital suffering from bruises and contusions as well as fractured right leg.
Sy filed action against the Malate Taxicab & Garage, Inc., based upon a
contract of carriage, to recover the sums of damages. Defendant alleged that the
collision subject of the complaint was not due to the negligence of its driver but to that
of Sgt. Jesus Dequito, the driver of the army wagon.
A third-party complaint against Sgt. Jesus Dequito alleging that the cause of
the collision between the taxicab and the army wagon was the negligence of the army
sergeant. It appears, that the summons and copy of the third-party complaint were
never served upon third-party defendant Dequito and for this reason the main case
was set for trial, defendant failed to appear, whereupon plaintiff presented his
evidence, and judgment was rendered against the defendant.
RULINGS:
1. YES.
Article 1755 of the Civil Code states that A common carriers are bound to carry
the passengers to safety 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.
The action initiated therefor is based on a contract of carriage and not on tort.
When plaintiff rode on defendant-appellant's taxicab, the latter assumed the express
obligation to transport him to his destination safely, and to observe extraordinary
diligence with a due regard for all the circumstances, and any injury that might be
suffered by the passenger is right away attributable to the fault or negligence of the
carrier.
2. NO.
A Pre-judicial question is understood in law to be that which precedes the
criminal action, or that which requires a decision before final judgment is rendered in
the principal action with which said question is closely connected. Not all previous
questions are pre-judicial questions are necessarily previous, although all pre-judicial
questions are necessarily previous.
In the case at bar, the third-party complaint is not a pre-judicial question, as
the issue in the main action is not entirely dependent upon those in the third-party
complaint;
It is, in fact, the third-party complaint that is dependent upon the main case at
least in the amount of damages which defendant appellant seeks to be reimbursed in
its third-party complaint.
3. NO.
The complaint is based on a contractual obligation of transportation of
passenger which defendant-appellant failed to carry out, and the action is entirely
different and independent from that in the third-party complaint which is based an
alleged tortious act committed by the third-party defendant Sgt. Dequito. The main
case, therefore, is entirely severable and may be litigated independently. Moreover,
whatever the outcome of the third-party complaint might be would not in any way
affect or alter the contractual liability of the appellant to plaintiff. If the collision was
due to the negligence of the third-party defendant, as alleged, then defendant
appellant may file a separate civil action for damages based on tort ex-delicto or upon
quasi-delict, as the case may be.
4. NO.
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The court need not make an express finding of fault or negligence on the part of
the defendant appellant in order to hold it responsible to pay the damages sought for
by the plaintiff, for the action initiated therefor is based on a contract of carriage and
not on tort.
When plaintiff rode on defendant-appellant's taxicab, the latter assumed the
express obligation to transport him to his destination safely, and to observe
extraordinary diligence with a due regard for all the circumstances, and any injury
that might be suffered by the passenger is right away attributable to the fault or
negligence of the carrier (Article 1756, supra).
5. NO.
It is noteworthy, however, that at the hearing in the lower court defendant-
appellant failed to appear and has not presented any evidence at all to overcome and
overwhelm the presumption of negligence imposed upon it by law; hence, there was no
need for the lower court to make an express finding thereon in view of the provisions
of the aforequoted Article 1756 of the new Civil Code.
35.
SARKIES TOUR vs. COURT OF APPEALS
G.R. No. 108897, October 2, 1997
ISSUES:
(2) Whether or not the petitioner is liable for the loss of the goods
(3) Whether or not petitioner, as a common carrier, is responsible for the loss?
(4) Whether or not private respondent was entitled to moral and exemplary damages?
(5) Whether or not the award for exemplary damages was with legal basis?
FACTS:
Fatima boarded petitioner’s bus from Manila to Legazpi. Her belongings
consisting of three 3 bags were kept at the baggage compartment of the bus, but
during the stopover in Daet, it was discovered that only one remained. The others
might have dropped along the way. Other passengers suggested having the route
traced, but the driver ignored it.
Fatima immediately told the incident to her mother, who went to petitioner’s
office in Legazpi and later in Manila. Petitioner offered P1,000 for each bag, but she
turned it down. Disapointed, she sought help from Philtranco bus drivers and radio
stations. One of the bags was recovered. She was told by petitioner that a team is
looking for the lost luggage.
After nine months of fruitless waiting, respondents filed a case to recover the
lost items, as well as moral and exemplary damages, attorney’s fees and expenses of
litigation. The trial court ruled in favor of respondents, which decision was affirmed
with modification by the Court of Appeals, deleting moral and exemplary damages.
RULINGS:
1. YES.
Under article 1733 of the Civil Code, Common carriers, from the nature of their
in the vigilance over the goods transported by them, and this liability lasts from the
time the goods are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or constructively, by
the carrier tothe person who has a right to receive them, unless the loss is due to any
of the excepted causes under Article 1734 thereof.
In the case at bar, the cause was due to petitioner’s negligence in not ensuring
that the doors of the baggage compartment of its bus were securely fastened. As a
result of this lack of care, almost all the luggage was lost, to the prejudice of the
paying passengers.
2. YES.
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Where the common carrier accepted its passenger’s baggage for transportation
and even had it placed in the vehicle by its own employee, its failure to collect the
freight charge is the common carrier’s own lookout. It is responsible for the
consequent loss of the baggage.
In the case at bar, defendant appellant’s employee even helped Fatima Minerva
Fortades and her brother load the luggages/baggages in the bus’ baggage
compartment, without asking that they be weighed, declared, receipted or paid for.
Neither was this required of the other passengers.
3. YES. The cause of the loss in the case at bar was petitioner's negligence in not
ensuring that the doors of the baggage compartment of its bus were securely fastened.
As a result of this lack of care, almost all of the luggages were lost, to the
prejudice of the paying passengers. Where the common carrier accepted its
passenger's baggage for transportation and even had it placed in the vehicle by its own
employee, its failure to collect the freight charge is the common carrier's own lookout.
It is responsible for the consequent loss of the baggage. In the instant case,
petitioner’s employee even helped Fatima and her brother load the luggages in the bus'
baggage compartment, without asking that they be weighed, declared, receipted or
paid for.
4. YES.
The Court agrees with the Court of Appeals in awarding P30,000.00 for the lost
items and P30,000.00 for the transportation expenses, but disagrees with the deletion
of the award of moral and exemplary damages which, in view of the foregoing proven
facts, with negligence and bad faith on the fault of petitioner having been duly
established, should be granted to respondents in the amount of P20,000.00 and
P5,000.00, respectively.
5. NO.
The award of exemplary damages should be eliminated. In Munsayac vs. De
Lara, 23 SCRA 1086, 1089 (1968), it was said: "It is not enough to say that an example
should be made, or corrective measures be employed, for the public good especially in
accident cases where public carriers are involved. The causative negligence in such
cases is personal to the employees actually in charge of the vehicles, and it is they who
should be made to pay this kind of damages by way of example or correction, unless
by the demonstrative tolerance or approval of the owners they themselves can be held
at fault and their fault is of the character described in article 2232 of the Civil Code."
In the case at bar, there is no showing that SARKIES acted "in a wanton . . . or
malevolent manner" (Art. 2232, Civil Code).
36.
UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC. vs. COURT OF APPEALS
G.R. No. 166250, July 26, 2010
ISSUES:
(1) Whether or not petitioner Unsworth Transport International is a Common Carrier
(2) What are the liabilities of Unsworth Transport International as a freight forwarder
(3) Whether or not Unsworth Transport International exercised the required ordinary
diligence
(4) Whether or not the Package Limitation Rule under the COGSA is applicable in the
case at bar
(5) Whether or not the court of appeals committed grave abuse of discretion amounting to
lack or excess of jurisdiction in upholding the decision in the RTC
FACTS:
The shipper, Sylvex Purchasing Corporation, delivered to Unsworth Transport
International a shipment of 27 drums of various raw materials for pharmaceutical
manufacturing, consisting of: 1) 3 drums (of) extracts, flavoring liquid, flammable
liquid x x x banana flavoring; 2) 2 drums (of) flammable liquids x x x turpentine oil; 2
pallets. STC: 40 bags dried yeast; and 3) 20 drums (of) Vitabs: Vitamin B Complex
Page 66
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Alexandria R.
Extract. UTI issued Bill of Lading No. C320/C15991-2, covering the aforesaid
shipment. The subject shipment was insured with private respondent Pioneer
Insurance and Surety Corporation in favor of Unilab against all risks in the amount of
P1,779,664.77 under and by virtue of Marine Risk Note Number MC RM UL 0627 92
and Open Cargo Policy No. HO-022-RIU.
On the same day that the bill of lading was issued, the shipment was loaded in
a sealed 1x40 container van, with no. APLU-982012, boarded on APLs vessel M/V
Pres. Jackson, Voyage 42, and transshipped to APLs M/V Pres. Taft for delivery to
petitioner in favor of the consignee United Laboratories, Inc. (Unilab).
The shipment arrived at the port of Manila and petitioner received the said
shipment in its warehouse after it stamped the Permit to Deliver Imported Goods
procured by the Champs Customs Brokerage. Three days thereafter, or on October 9,
1992, Oceanica Cargo Marine Surveyors Corporation (OCMSC) conducted a stripping
survey of the shipment located in petitioners warehouse.
The arrastre Jardine Davies Transport Services, Inc. (Jardine) issued Gate Pass
No. 7614 which stated that 22 drums Raw Materials for Pharmaceutical Mfg. were
loaded on a truck with Plate No. PCK-434 facilitated by Champs for delivery to Unilabs
warehouse. The materials were noted to be complete and in good order in the gate
pass. On the same day, the shipment arrived in Unilabs warehouse and was
immediately surveyed by an independent surveyor.
The same independent surveyor conducted final inspection surveys which
yielded the same results. Consequently, Unilabs quality control representative rejected
one paper bag containing dried yeast and one steel drum containing Vitamin B
Complex as unfit for the intended purpose.
Unilab filed a formal claim for the damage against private respondent and UTI.
UTI denied liability on the basis of the gate pass issued by Jardine that the goods were
in complete and good condition; while private respondent paid the claimed amount. By
virtue of the Loss and Subrogation Receipt issued by Unilab in favor of private
respondent, the latter filed a complaint for Damages against APL, UTI and petitioner
with the RTC of Makati. The case was docketed as Civil Case No. 93-3473 and was
raffled to Branch 134.
RULINGS:
1. NO.
Admittedly, petitioner is a freight forwarder. The term freight forwarder" refers
to a firm holding itself out to the general public (other than as a pipeline, rail, motor,
or water carrier) to provide transportation of property for compensation and, in the
ordinary course of its business, (1) to assemble and consolidate, or to provide for
assembling and consolidating, shipments, and to perform or provide for break-bulk
and distribution operations of the shipments; (2) to assume responsibility for the
transportation of goods from the place of receipt to the place of destination; and (3) to
use for any part of the transportation a carrier subject to the federal law pertaining to
common carriers.
2. UTI is liable as a common carrier.

Common carriers, as a general rule, are presumed to have been at fault or
negligent if the goods they transported deteriorated or got lost or destroyed. That is,
unless they prove that they exercised extraordinary diligence in transporting the
goods. In order to avoid responsibility for any loss or damage, therefore, they have the
burden of proving that they observed such diligence.[27] Mere proof of delivery of the
goods in good order to a common carrier and of their arrival in bad order at their
destination constitutes a prima facie case of fault or negligence against the carrier. If
no adequate explanation is given as to how the deterioration, loss, or destruction of
the goods happened, the transporter shall be held responsible.
A freight forwarders liability is limited to damages arising from its own
negligence, including negligence in choosing the carrier; however, where the forwarder
contracts to deliver goods to their destination instead of merely arranging for their
transportation, it becomes liable as a common carrier for loss or damage to goods. A
freight forwarder assumes the responsibility of a carrier, which actually executes the
transport, even though the forwarder does not carry the merchandise itself.
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Alexandria R.
3. NO.
All these conclusively prove the fact of shipment in good order and condition,
and the consequent damage to one steel drum of Vitamin B Complex Extract while in
the possession of petitioner which failed to explain the reason for the damage. Further,
petitioner failed to prove that it observed the extraordinary diligence and
precaution which the law requires a common carrier to exercise and to follow
in order to avoid damage to or destruction of the goods entrusted to it for safe
carriage and delivery.
Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general
such diligence. Mere proof of delivery of the goods in good order to a common carrier
and of their arrival in bad order at their destination constitutes a prima facie case of
fault or negligence against the carrier. If no adequate explanation is given as to how
the deterioration, loss, or destruction of the goods happened, the transporter shall be
held responsible.
4. YES.
We affirm the applicability of the Package Limitation Rule under the COGSA,
contrary to the RTC and the CA's findings.
the rights and obligations of common carriers are governed by the Code of Commerce
and special laws. Thus, the COGSA supplements the Civil Code by establishing a
provision limiting the carrier's liability in the absence of a shipper's declaration of a
higher value in the bill of lading. Section 4(5) of the COGSA provides:
“(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or
damage to or in connection with the transportation of goods in an amount exceeding
$500 per package of lawful money of the United States, or in case of goods not shipped
in packages, per customary freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the shipper before
shipment and inserted in the bill of lading. This declaration, if embodied in the bill of
lading, shall be prima facie evidence, but shall not be conclusive on the carrier.”
In the present case, the shipper did not declare a higher valuation of the goods
to be shipped. Contrary to the CA's conclusion, the insertion of the words "L/C No. LC
No. 1-187-008394/ NY 69867 covering shipment of raw materials for pharmaceutical
Mfg. x x x" cannot be the basis of petitioner's liability. Furthermore, the insertion of an
invoice number does not in itself sufficiently and convincingly show that petitioner
had knowledge of the value of the cargo
5. NO.
It is a Well-established rule that factual questions may not be raised in a
petition for review on certiorarias clearly stated in Section 1, Rule 45 of the Rules of
Court, viz.:
“Section 1. Filing of petition with Supreme Court. - A party desiring to appeal by
certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law,
may file with the Supreme Court a verified petition for review on certiorari. The petition
shall raise only questions of law which must be distinctly set forth.”
37.
KENG HUA v COURT OF APPEALS
G.R. No. 116863, February 12, 1998
ISSUES:
(1) Whether or not the petitioner was bound by the bill of lading?
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(2) Whether or not interest may not be allowed to run from the date of private
respondents extrajudicial demands on March 8, 1983 for P50,260 or on April 24, 1983
for P37,800, considering that, in both cases, there was no demand for interest?
(3) Whether or not Keng Hua was correct in not accepting the over shipment?
(4) Whether or not the award of damages to Sea-Land was proper?
(5) Whether or not the award of legal interest from the date of Sea-Land’s extrajudicial
demand was proper?
FACTS:
Sea-Land Service, a shipping company, is a foreign corporation licensed to do
business in the Philippines. On 29 June 1982, SeaLand received at its Hong Kong
terminal a sealed container, Container SEAU 67523, containing 76 bales of “unsorted
waste paper” for shipment to Keng Hua Paper Products, Co. in Manila. A bill of lading
to cover the shipment was issued by Sea-Land. On 9 July 1982, the shipment was
discharged at the Manila International Container Port. Notices of arrival were
transmitted to Keng Hua but the latter failed to discharge the shipment from the
container during the “free time” period or grace period. The said shipment remained
inside the Sea-Land’s container from the moment the free time period expired on 29
July 1982 until the time when the shipment was unloaded from the container on 22
November 1983, or a total of 481 days. During the 481-day period, demurrage charges
accrued. Within the same period, letters demanding payment were sent by Sea-Land
to Keng Hua who, however, refused to settle its obligation which eventually amounted
to P67,340.00. Numerous demands were made on Keng Hua but the obligation
remained unpaid; prompting Sea Land to commence herein civil action for collection
and damages.
RULINGS:
1. YES.
Second, it is a contract by which three parties, namely, the shipper, the carrier, and
the consignee undertake specific responsibilities and assume stipulated obligations.
In the case at bar, the prolonged failure of petitioner to receive and discharge
the cargo from the private respondent’s vessel constitutes a violation of the terms of
the bill of lading. It should thus be liable for demurrage to the former.
2. YES.
When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is
made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The
actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.
3. NO.
Keng Hua’s letter proved refusal to pick up cargo and not rejection of bill of
lading; Implied acceptance Keng Hua “received the bill of lading immediately after the
arrival of the shipment”. Having been afforded an opportunity to examine the said
document, it did not immediately object to or dissent from any term or stipulation
therein. It was only six months later that it sent a letter to private respondent saying
that it could not accept the shipment. Its inaction for such a long period conveys the
clear inference that it accepted the terms and conditions of the bill of lading. Moreover,
said letter spoke only of petitioner’s inability to use the delivery permit, i.e. to pick up
the cargo, due to the shipper’s failure to comply with the terms and conditions of the
letter of credit, for which reason the bill of lading and other shipping documents were
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Alexandria R.
returned by the “banks” to the shipper. The letter merely proved its refusal to pick up
the cargo, not its rejection of the bill of lading.
4. YES.
Keng Hua argues that it is not obligated to pay any demurrage charges because,
prior to the filing of the complaint, Sea-Land made no demand for the sum of P67,340.
Moreover, Sea-Land’s loss and prevention manager, Loi Gillera, demanded P50,260,
but its counsel, Sofronio Larcia, subsequently asked for a different amount of
P37,800.
Keng Hua’s position is puerile. The amount of demurrage charges in the sum of
P67,340 is a factual conclusion of the trial court that was affirmed by the Court of
Appeals and, thus, binding on this Court. Besides such factual finding is supported by
the extant evidence.
The apparent discrepancy was a result of the variance of the dates when the
two demands were made. Necessarily, the longer the cargo remained unclaimed, the
higher the demurrage. Thus, while in his letter dated April 24, 1983, Sea-Land’s
counsel demanded payment of only P37,800, the additional demurrage incurred by
Keng Hua due to its continued refusal to receive delivery of the cargo ballooned to
P67,340 by November 22, 1983.
5. NO.
In the case at bar, it involves an obligation not arising from a loan or
forbearance of money; Thus, pursuant to Article 2209 of the Civil Code, the applicable
interest rate is 6% per annum. Since the bill of lading did not specify the amount of
demurrage, and the sum claimed by Sea-Land increased as the days went by, the total
amount demanded cannot be deemed to have been established with reasonable
certainty until the trial court rendered its judgment. Indeed, unliquidated damages or
claims, it is said, are those which are not or cannot be known until definitely
ascertained, assessed and determined by the courts after presentation of proof.”
Consequently, the legal interest rate is 6%, to be computed from September 28, 1990,
the date of the trial court’s decision. And in accordance with Eastern Shipping, the
rate of 12% per annum shall be charged on the total then outstanding, from the time
the judgment becomes final and executory until its satisfaction.
38.
LORENZO SHIPPING CORPORATION vs. CHUBB AND SONS, INC.
G.R. No. 147724, June 8, 2004
ISSUES:
(1) Whether or not Lorenzo Shipping is negligent in carrying the subject cargo
(2) Whether or not Chubb and Sons has capacity to sue before the Philippine courts
(3) Whether or not the action has prescribed
(4) Whether or not Chubb and Sons, as subrogee, has also no capacity to sue in our
jurisdiction
(5) Whether or not the cargo was damaged while on board the vessel of petitioner Lorenzo
Shipping
FACTS:
Mayer Steel Pipe Corp. loaded 581 bundles of ERW black steel pipes on board
the vessel M/V Lorcon IV, owned by Lorenzo Shipping, for shipment to Davao City.
Lorenzo Shipping issued a clean bill of lading designated as Bill of Lading No. T-3 for
the account of the consignee, Sumitomo Corp. of San Francisco, California, USA,
which in turn, insured the goods with Chubb and Sons, Inc. M/V Lorcon IV arrived at
the Sasa Wharf in Davao City. Transmarine Carriers received the subject shipment. It
discovered seawater in the hatch of M/V Lorcon IV, and found the steel pipes
submerged in it. Sumitomo then hired the services of a surveyor to inspect the
shipment prior to and subsequent to discharge. The report showed that the subject
shipment was no longer in good condition, as in fact, the pipes were found with rust
formation on top and/or at the sides. After the survey, Gear bulk loaded the shipment
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on board its vessel M/V San Mateo Victory, for carriage to the US. All bills of lading it
issued were marked “ALL UNITS HEAVILYRUSTED.”
M/V San Mateo Victory arrived at the U.S.A., where it unloaded the subject
steel pipes. The steel pipes were surveyed, and it was discovered that they are heavily
rusted. Due to its condition, Sumitomo rejected the damaged steel pipes and declared
them unfit for the purpose they were intended. It then filed a marine insurance claim
with respondent Chubb and Sons, Inc. which the latter settled in the amount of
US$104,151.00.Chubb and Sons, Inc. filed a complaint for collection of a sum of
money, against Lorenzo Shipping, Gear bulk, and Transmarine. Lorenzo Shipping
denied its liability. The RTC ruled in favor of Chubb and Sons, Inc. It appealed to the
CA, but was denied.
RULINGS:
1. YES.
Lorenzo Shipping was negligent in its care and custody of the consignee’s
goods. Lorenzo Shipping issued clean bills of lading covering the subject shipment. A
bill of lading, aside from being a contract and a receipt, is also a symbol of the goods
covered by it. A bill of lading which has no notation of any defect or damage in the
goods is called a “clean bill of lading.”
2. YES.
Lorenzo Shipping failed to raise the defense that Sumitomo is a foreign
corporation doing business in the Philippines without a license. It is therefore
estopped from litigating the issue on appeal... Secondly, assuming Arguendo that
Sumitomo cannot sue in the Philippines, it does not follow that Chubb and Sons, as
subrogee, has also no capacity to sue in our jurisdiction. The rights to which the
subrogee succeeds are the same as, but not greater than, those of the person for
whom he is substituted – he cannot acquire any claim, security, or remedy the
subrogor did not have. In other words, a subrogee cannot succeed to a right not
possessed by the subrogor. A subrogee in effect steps into the shoes of the insured
and can recover only if insured likewise could have recovered. However, when the
insurer succeeds to the rights of the insured, he does so only in relation to the debt.
The law does not prohibit foreign corporations from performing single acts of business.
A foreign corporation needs no license to sue before Philippine courts on an isolated
transaction. Where an insurance company as subrogee pays the insured of the entire
loss it suffered, the insurer-subrogee is the only real party in interest and must sue in
its own name to enforce its right of subrogation against the third party which caused
the loss.
A clean bill of lading constitutes prima facie evidence of the receipt by the
carrier of the goods as therein described. Mere proof of delivery of goods in good order
to a carrier and the subsequent arrival in damaged condition at the place of
destination raises a prima facie case against the carrier … M/V Lorcon IV of Lorenzo
Shipping received the steel pipes in good order and condition, evidenced by the clean
bills of lading it issued. When the cargo was unloaded from Lorenzo Shipping’s vessel
at the Sasa Wharf in Davao City, the steel pipes were rusted all over. M/V San Mateo
Victory of Gear bulk, Ltd, which received the cargo, issued Bills of Lading …, all of
which were marked “ALL UNITS HEAVILY RUSTED.”
3. NO.
Art 366 Code of Commerce: 24 hour period that does not begin until the
consignee has received possession of the merchandise or by delivery of the cargo by
the carrier to the consignee at the place of destination.
In this case, consignee Sumitomo only took possession of the entire shipment
when it reached the US. Only then was the delivery made and completed and only
then did the 24 hour prescriptive period run.
4. NO.
It does not follow that Chubb and Sons, as subrogee, has also no capacity to
sue in our jurisdiction. The rights to which the subrogee succeeds are the same as,
but not greater than, those of the person for whom he is substituted – he cannot
acquire any claim, security, or remedy the subrogor did not have. In other words, a
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subrogee cannot succeed to a right not possessed by the subrogor. A subrogee in effect
steps into the shoes of the insured and can recover only if insured likewise could have
recovered. However, when the insurer succeeds to the rights of the insured, he does so
only in relation to the debt.
5. YES.
R.J. Del Pan Surveyors found that the cargo hold of the M/V Lorcon IV was
flooded with seawater, and the tank top was rusty, thinning and perforated, thereby
exposing the cargo to sea water. There can be no other conclusion than that the cargo
was damaged while on board the vessel of petitioner Lorenzo Shipping, and that the
damage was due to the latter’s negligence.
39
EVERETT vs. COURT OF APPEALS
G.R. No. 122494, October 8, 1998
ISSUES:
(1) Whether or not private respondent, as consignee, who is not a signatory to the bill of
lading, is bound by the stipulations thereof
(2) Whether or not the limited liability clause in the Bill of Lading is valid
(3) Whether or not petitioner is liable for the actual value and not the maximum value
recoverable under the bill of lading
(4) Whether or not the consent of the consignee to the bill of lading is necessary to make
the terms and conditions therein binding upon him
(5) Whether or not the limited liability under Clause 18 applies to this case
FACTS:
Private respondent imported 3 crates of bus spare parts marked as MARCO
C/No. 12,MARCO C/No. 13 and MARCO C/No. 14, from its supplier, Maruman
Trading Company,Ltd. (Maruman Trading), a foreign corporation based in Inazawa,
Aichi, Japan. The crates were shipped from Nagoya, Japan to Manila on board
“ADELFAEVERETTE,” a vessel owned by petitioner’s principal, Everett Orient Lines.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO
C/No. 14 was missing. Privaterespondent claim upon petitioner for the value of the
lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred
(Y1, 552,500.00) Yen, theamount shown in an Invoice No. MTM-941.
However, petitioner offered to pay only One Hundred Thousand (Y100,000.00)
Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading
which limits the liability of petitioner. Private respondent rejected the offer and
thereafter instituted a suit for collection. The trial court rendered a decision in favour
of the private respondents and this was affirmed by the Court of Appeals. Thus, this
instant petition.
RULINGS:
1. YES.
The consignee who is not a signatory to the contract of carriage between the
shipper and the carrier, the consignee can still be bound by the contract. When
private respondent formally claimed reimbursement for the missing goods from
petitioner and subsequently filed a case against the latter based on the very same bill
of lading, it (private respondent) accepted the provisions of the contract and thereby
made itself a party thereto, or at least has come to court to enforce it. Thus private
respondent cannot now reject or disregard the carrier’s limited liability stipulation in
the bill of lading. In other words, private respondents is bound by the whole
stipulations in the bill of lading and must respect the same.
2. Yes. A stipulation in the bill of lading limiting the common carrier’s liability for
loss or destruction of a cargo to a certain sum, unless the shipper or owner declares a
greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil
Code which provide: ART. 1749. 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
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owner declares a greater value, is binding. ART. 1750. A contract fixing the sum that
may be recovered by the owner or shipper for the loss, destruction, or deterioration of
the goods is valid, if it is reasonable and just under the circumstances, and has been
freely and fairly agreed upon.
3. The Petitioner is only liable for the maximum value recoverable under the bill of
lading. Clause 18 of the covering bill of lading: 18. All claims for which the carrier may
be liable shall be adjusted and settled on the basis of the shipper's net invoice cost
plus freight and insurance premiums, if paid, and in no event shall the carrier be
liable for any loss of possible profits or any consequential loss. The carrier shall not be
liable for any loss of or any damage to or in any connection with, goods in an amount
exceeding One Hundred thousand Yen in Japanese Currency (Y100,000.00) or its
equivalent in any other currency per package or customary freight unit (whichever is
least) unless the value of the goods higher than this amount is declared in writing by
the shipper before receipt of the goods by the carrier and inserted in the Bill of Lading
and extra freight is paid as required. (Emphasis supplied) The above stipulations are
reasonable and just. In the bill of lading, the carrier made it clear that its liability
would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper,
Maruman Trading, had the option to declare a higher valuation if the value of its cargo
was higher than the limited liability of the carrier. Considering that the shipper did not
declare a higher valuation, it had itself to blame for not complying with the
stipulations.
4. The Supreme Court ruled in favour of petitioner. ARTICLE 1749 states that a
stipulation limiting the carrier’s liability to value of the goods in the bill of lading is
valid, UNLESS the shipper or owner declares a higher value. ARTICLE 1750 states
that a contract fixing the sum of what the owner or shipper may recover for the loss of
the goods is valid, if it is just and reasonable under the circumstances and is freely
and fairly agreed upon. The bill of lading expressly provided that the liability of the
carrier shall be limited to Y100,000 unless a higher amount is declared in writing by
the shipper in the bill of lading, and extra freight is paid.
5. The limited-liability clause has constantly been sustained by the Court in

numerous cases. The bill of lading expressly provided that the liability of the carrier
shall be limited to Y100,000 unless a higher amount is declared in writing by the
shipper in the bill of lading, and extra freight is paid. Consignee is bound by the
transaction, even if the shipping contract was between shipper and carrier. The
relationship between consignee and shipper is one of agency, or his status as some
stranger in whose favour some stipulation is made in the contract. He automatically
becomes a party thereto the moment he enforces and demands the fulfilment of that
stipulation. When Hernandez formally claimed reimbursement for the missing goods
based on the very same bill of lading, it accepted the provisions of the contract and
consequently became bound by it. It is thus estopped from rejecting the limited–
liability clause in the bill of lading.
40
MAGELLAN MANUFACTURING MARKETING CORPORATION vs. COURT OF
APPEALS,
G.R. No. 95529, August 22, 1991
ISSUES:
(1) Whether or not Magellan Manufacturing Marketing Corporation should be liable when
it exercised its option of Abandonment
(2) Whether or not the bill of lading which reflected the transhipment against the letter of
credit is consented by Magellan Manufacturing Marketing Corporation
(3) Whether or not a bill of lading can operate as a receipt and a contract
(4) Whether or not transhipment is dependent upon the ownership of the transporting
ships or conveyances or in the change of carrier
(5) Whether or not a transshipment without legal excuse is a violation of a contract
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FACTS:
Magellan Manufacturers Marketing Corp. (MMMC) entered into a contract with
Choju Co. of Yokohama, Japan to export 136,000 anahaw fans for and in
consideration of $23,220.00. Through its president, James Cu, MMMC then
contracted F.E. Zuellig, a shipping agent to ship the anahaw fans through Orient
Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of
lading and that transhipment is not allowed under the letter of credit. appellant
MMMC paid F.E. Zuellig the freight charges and secured a copy of the bill of lading
which was presented to Allied Bank However, when appellant's president James Cu,
went back to the bank later, he was informed that the payment was refused by the
buyer allegedly because there was no on-board bill of lading, and there was a
transhipment of goods. As a result of the refusal of the buyer to accept, upon
appellant's request, the anahaw fans were shipped back to Manila by appellees, for
which the latter demanded from appellant payment of P246,043.43. Appellant
abandoned the whole cargo and asked appellees for damages.
RULINGS:
1. NO.
Private respondents belatedly informed petitioner of the arrival of its goods in
Manila and that if it wished to take delivery of the cargo it would have to pay P52k.
Private respondents unequivocally offered petitioner the option of paying the shipping
and demurrage charges in order to take delivery of the goods or of abandoning the
same so that private respondents could sell them at public auction and thereafter
apply the proceeds in payment of the shipping and other charges. There is no dispute
that private respondents expressly and on their own volition granted petitioner an
option with respect to the satisfaction of freightage and demurrage charges. Having
given such option, especially since it was accepted by petitioner, private respondents
are estopped from reneging thereon.
Petitioner, on its part, was well within its right to exercise said option. Private
respondents, in giving the option, and petitioner, in exercising that option, are
concluded by their respective actions. To allow either of them to unilaterally back out
on the offer and on the exercise of the option would be to countenance abuse of rights
as an order of the day, doing violence to the long entrenched principle of mutuality of
contracts. By analogy, this can also apply to maritime transportation.
Further, with much more reason can petitioner in the instant case properly
abandon the goods, not only because of the unreasonable delay in its delivery but
because of the option which was categorically granted to and exercised by it as a
means of settling its liability for the cost and expenses of reshipment. And, said choice
having been duly communicated, the same is binding upon the parties on legal and
equitable considerations of estoppel.
2. YES.
Acceptance of the bill without dissent raises the presumption that all the terms
therein were brought to the knowledge of the shipper and agreed to by him and, in the
absence of fraud or mistake, he is estopped from thereafter denying that he assented
to such term.
3. YES.
It is a long standing jurisprudential rule that a bill of lading operates both as a
receipt and as a contract. It is a receipt for the goods shipped and a contract to
transport and deliver the same as therein stipulated. As a contract, it names the
parties, which includes the consignee, fixes the route, destination, and freight rates or
charges, and stipulates the rights and obligations assumed by the parties. Being a
contract, it is the law between the parties who are bound by its terms and conditions
provided that these are not contrary to law, morals, good customs, public order and
public policy. A bill of lading usually becomes effective upon its delivery to and
acceptance by the shipper. It is presumed that the stipulations of the bill were in the
absence of fraud, concealment or improper conduct, known to the shipper, and he is
generally bound by his acceptance whether he reads the bill or not.
4. NO.
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Alexandria R.
Transhipment is not dependent upon the ownership of the transporting ships or

conveyances or in the change of carrier. Transhipment, in maritime law, is defined as
"the act of taking cargo out of one ship and loading 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." or "the
transfer for further transportation from one ship or conveyance to another." Clearly,
either in its ordinary or its strictly legal acceptation, there is transhipment whether or
not the same person, firm or entity owns the vessels. In other words, the fact of
transhipment is not dependent upon the ownership of the transporting ships or
conveyances or in the change of carriers, as the petitioner seems to suggest, but
rather on the fact of actual physical transfer of cargo from one vessel to another.
5. YES.
Moreover, it is a well-known commercial usage that transhipment of freight
without legal excuse, however, competent and safe the vessel into which the transfer is
made, is a violation of the contract and an infringement of the right of the shipper, and
subjects the carrier to liability if the freight is lost even by a cause otherwise excepted.
It is highly improbable to suppose that private respondents, having been engaged in
the shipping business for so long, would be unaware of such a custom of the trade as
to have undertaken such transhipment without petitioner’s consent and unnecessarily
expose themselves to a possible liability. Verily, they could only have undertaken
transhipment with the shipper’s permission, as evidenced by the signature of James
Cu.
41.
PROVIDENCE INSURANCE CORPORATION vs. COURT OF APPEALS
G.R. No. 118030, January 15, 2004
ISSUES:
(1) Whether or not failure to make the prompt notice of claim as required is fatal to the
right of petitioner to claim indemnification for damages.
(2) Who between the parties has the obligation to make the necessary claim within the
prescribed period?
(3) What does it indicate or necessarily imply when it says that the bill of lading is in the
nature of a contract of adhesion
(4) What does the first sentence of Stipulation No. 7 of the bill of lading provides
(5) What does the Bill of Lading provide
FACTS:
The vessel MV Eduardo II received on board a shipment of plastic woven bags of
fertilizer in good order and condition which was consigned to Atlas Fertilizer
Corporation (AFC) and covered by a bill of lading. In the process of unloading at the
port of destination, certain goods were found to have fallen overboard and some
considered being unrecovered spillages. Petitioner PIC indemnified the consignee AFC
for its damages and seeks reimbursement from respondent ASC for the value of the
losses/damages to the cargo. Respondent ASC argued that the claim or demand by
petitioner had been waived, abandoned, or otherwise extinguished for failure of the
consignee to comply with the required claim for damages set forth in Stipulation No. 7
of the Bill of Lading.
RULINGS:
1. There can be no question about the validity and enforceability of Stipulation No.
7 in the Bill of Lading. The 24-hour requirement under said stipulation is, by
agreement of the contracting parties, a sine qua non for accrual of the right of action
to recover damages against the carrier.
Considering that the prompt demand was necessary to foreclose the possibility
of fraud or mistake in ascertaining the validity of claims, there was a need for the
consignee or its agent to observe the conditions provided for in Stipulation No. 7.
Hence, petitioner’s insistence that respondent carrier had knowledge of the damage
because one of respondent’s officers supervised the unloading operations and signed a
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Alexandria R.
discharging receipt, cannot be construed as sufficient compliance with the said

proviso. Moreover, a reading of the stipulation will readily show that upon the
consignee or its agent rests the obligation to make the necessary claim within the
prescribed period and not merely rely on the supposed knowledge of the damage by
the carrier.
2. Considering that a prompt demand was necessary to foreclose the possibility of

fraud or mistake in ascertaining the validity of claims, there was a need for the
consignee or its agent to observe the conditions provided for in Stipulation No. 7.
Hence, petitioner's insistence that respondent carrier had knowledge of the damage
because one of respondent carrier's officers supervised the unloading operations and
signed a discharging report, cannot be construed as sufficient compliance with the
aforementioned proviso. The Discharge Report is not the notice referred to in
Stipulation No. 7, hence, its accomplishment cannot be considered substantial
compliance of the requirement embodied therein. Moreover, a reading of the first
paragraph of Stipulation No. 7 will readily show that upon the consignee or its agent
rests the obligation to make the necessary claim within the prescribed period and not
merely rely on the supposed knowledge of the damages by the carrier.
3. A bill of lading is in the nature of a contract of adhesion, defined as one where

one of the parties imposes a ready-made form of contract which the other party may
accept or reject, but which the latter cannot modify. One party prepares the
stipulation in the contract, while the other party merely affixes his signature or his
"adhesion" thereto, giving no room for negotiation and depriving the latter of the
opportunity to bargain on equal footing. Nevertheless, these types of contracts have
been declared as binding as ordinary contracts, the reason being that the party who
adheres to the contract is free to reject it entirely
4. The first sentence of Stipulation No. 7 of the bill of lading-- All claims for
damages to the goods must be made to the carrier at the time of delivery to the
consignee or his agent if the package or containers show exterior sign of damage,
otherwise to be made in writing to the carrier within twenty-four hours from the time
of delivery.
5. The bill of lading defines the rights and liabilities of the parties in reference to
the contract of carriage. Stipulations therein are valid and binding in the absence of
any showing that the same are contrary to law, morals, customs, public order and
public policy. Where the terms of the contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of the stipulations shall
control.
42.
LITONJUA SHIPPNG COMPANY, INC. vs. NATIONAL SEAMEN BOARD
G.R. No. 51910, August 10, 1989
ISSUES:
(1) Whether or not Litonjua may be held liable
(2) How was bareboat or demise charter defined in the case at bar?
(3) How was Time charter defined in the case at bar?
(4) Whether or not an agent of the charterer may be held liable on the contract for
employment between the ship captain and the seamen recruited?
(5) What is voyage charter?
FACTS:
Petitioner Litonjua is the duly appointed local crewing Managing Office of the
Fairwind Shipping Corporation (‘Fairwind’). The M/V Dufton Bay is an ocean-going
vessel of foreign registry owned by the R.D. Mullion Ship Broking Agency Ltd.
(“Mullion”). While the Dufton Bay was in the port of Cebu and while under charter by
Fairwind, the vessel’s master contracted the services of, among others, private
respondent Gregorio Candongo to serve as Third Engineer for a period of twelve (12)
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months with a monthly wage of USS500.00. This agreement was executed before the
Cebu Area Manning Unit of the NSB. Thereafter, private respondent boarded the
vessel. Before expiration of his contract, private respondent was required to disembark
at Port Kelang, Malaysia, and was returned to the Philippines. The cause of the
discharge was described in his Seaman’s Book as by owner’s arrange”.
Shortly after returning to the Philippines, private respondent filed a complaint
before public respondent NSB, for violation of contract, against Mullion as the
shipping company and petitioner Litonjua as agent of the shipowner and of the
charterer of the vessel.
NSB rendered a judgment by default for failure of petitioners to appear during
the initial hearing, rendering the same to pay Candongo because there was no
sufficient or vcalid cause for the respondent to terminate the service of the complaint.
Litonjua contends that the shipowner, nor the charterer was the employer of
the private respondent; and the liability for damages cannot be imposed upon
petitioner which was a mere agent of the charterer.
RULINGS:
1. YES.
The first basis is the charter party which existed between Mullion, the
shipowner and Fairwind, the charterer.
It is well settled that in a defense or bare boat charter, the charterer is treated
as owner pro hac vice of the vessel, the charterer assuming in large measure the
customary right and liabilities of the shipowner in relation to third persons who have
dealt with him or with the vessel. In such case, the Master of the vessel is the agent of
the general owner of the vessel, is held liable for the expenses of the voyage including
the wages of the seamen.
Treating Fairwind as owner pro hac vice, petitioner Litonjua having failed to
show that it was not such, we believe and so hold that the petitioner Litonjua, as
Philippine agent of the charterer, may be held liable on the contract of employment
between the ship captain and private respondent.
There is a second and ethically more compelling basis for holding petitioner
Litonjua liable on the contract of employment of private respondent. The charterer of
the vessel, Fairwind, clearly benefitted from the employment of private respondent as
Third Engineer of the Dufton Bay, along with the ten (10) other Filipino crewmembers
recruited by captain Ho in Cebu at the same occasion.
In doing so, petitioner Litonjua certainly in effect represented that it was taking
care of the crewing and other requirements of a vessel chartered by its principal,
Fairwind.
Last, but certainly not least, there is the circumstance that extreme hardship
would result for private respondent if petitioner Litonjua, as Philippine agent of the
charterer, is not held liable to private respondent upon the contract of employment.
2. A bareboat or demise charter is a demise of a vessel, much as a lease of an

unfurnished house is a demise of real property. The shipowner turns over possession
of his vessel to the charterer, who then undertakes to provide a crew and victuals and
supplies and fuel for her during the term of the charter. The shipowner is not normally
required by the terms of a demise charter to provide a crew, and so the charterer gets
the "bare boat", i.e., without a crew. Sometimes, of course, the demise charter might
provide that the shipowner is to furnish a master and crew to man the vessel under
the charterer’s direction, such that the master and crew provided by the shipowner
become the agents and servants or employees of the charterer, and the charterer (and
not the owner) through the agency of the master, has possession and control of the
vessel during the charter period.
3. A time charter, upon the other hand, like a demise charter, is a contract for the
use of a vessel for a specified period of time or for the duration of one or more specified
voyages. In this case, however, the owner of a time- chartered vessel (unlike the owner
of a vessel under a demise or bareboat charter), retains possession and control
through the master and crew who remain his employees. What the time charterer
acquires is the right to utilize the carrying capacity and facilities of the vessel and to
designate her destinations during the term of the charter.
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4. Agent of the charterer held liable on the contract for employment between the
ship captain and the seamen recruited; case at bar. — It is important to note that
petitioner Litonjua did not place into the record of this case a copy of the charter party
covering the M/V Dufton Bay. We must assume that petitioner Litonjua was aware of
the nature of a bareboat or demise charter and that if petitioner did not see fit to
include in the record a copy of the charter party, which had been entered into by its
principal, it was because the charter party and the provisions thereof were not
supportive of the position adopted by petitioner Litonjua in the present case, position
diametrically opposed to the legal consequence of a bareboat charter. Treating
Fairwind as owner pro hac vice, petitioner Litonjua having failed to show that it was
not such, we believe and so hold that petitioner Litonjua, as Philippine agent of the
charterer, may be held liable on the contract of employment between the ship captain
and the private Respondent.
5. A voyage charter, or trip charter, is simply a contract of affreightment, that is, a

contract for the carriage of goods, from one or more ports of loading to one or more
ports of unloading, on one or on a series of voyages. In a voyage charter, master and
crew remain in the employ of the owner of the vessel.
43.
NATIONAL FOOD AUTHORITY vs. COURT OF APPEALS
G.R. No. 96453, August 4, 1999
ISSUES:
(1) Whether or not petitioners are liable for deadfreight
(2) Whether or not petitioners may be held liable for demurrage
(3) Whether or not personal civil liability may attach to the officers of NFA
(4) What does Article 680 of the Code of Commerce provides?
FACTS:
National Food Authority (NFA), thru its officers, entered into a “Letter of
Agreement for Vessel/Barge Hire with Hongfil for the shipment of 200,000 bags of
corn grains from Cagayan de Oro City to Manila.
The loading of bags of corn grains in the vessel commenced but it took a longer
period of 21 days, 15 hours, and 18 minutes to finish than as was certified by the
arrastre firm as there was a strike staged by the arrastre workers in view of the refusal
of the striking stevedores to attend to their work. The vessel was allowed to depart for
the port of Manila and arrived there, but unfortunately, it took a longer period of 20
days, 14 hours and 33 minutes to finish the unloading than the discharging rate
certified by the Port of Manila, due to the unavailability of a berthing space for the
vessel M/V CHARLIE/DIANE. Only 166,798 bags were unloaded at the Port of Manila.
After the discharging was completed, NFA paid Hongfil the amount of
P1,006,972.11 covering the shipment of corn grains. Thereafter, Hongfil sent its billing
to NFA claiming payment for freight covering the shut-out load or deadfreight as well
as demurrage, allegedly sustained during the loading and unloading of subject
shipment of corn grains. When NFA refused to pay the amount reflected in the billing,
Hongfil brought the present action against NFA.
RULING:
1. YES.
It bears stressing that subject Letter of Agreement is considered a Charter
Party. A charter party is classified into (1) “bareboat” or “demise” charter and (2)
contract of affreightment. Subject contract is one of affreightment, whereby the owner
of the vessel leases part or all of its space to haul goods for others. It is a contract for
special service to be rendered by the owner of the vessel. Under such contract, the
ship retains possession, command, and navigation of the ship, the charterer or
freighter merely having use of the space in the vessel in return for his payment of the
charter hire.
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Under the law, the cargo not loaded is considered a deadfreight. It is the
amount paid by or recoverable from a charterer of a ship for the portion of the ship’s
capacity the latter contracted for but failed to occupy. Explicit and succinct is the law
that the liability for deadfreight is on the charterer. (Article 680 of the Code of
Commerce).
2. NO.
Demurrage is the sum fixed in a charter party as a remuneration to the owner
of the ships for the detention of his vessel beyond the number of days allowed by the
charter party for loading or unloading or for sailing. Liability for demurrage, using the
word in its technical sense, exists only when expressly stipulated in the contract.
Shipper or charterer is liable for the payment of demurrage claims when he
exceeds the period for loading and unloading as agreed upon or the agreed “laydays”.
The period for such may or may not be stipulated in the contract. A charter party may
either provide for a fixed laydays or contain general or indefinite words such as
“customary quick dispatch” or “as fast as the streamer can load”. In the case at bar,
the charter party provides merely for a general or indefinite words of “customary quick
dispatch”. Such stipulation implies that loading and unloading of the cargo should be
within a reasonable time.
The charterer NFA could not be held liable for demurrage for it appears that
cause of delay was not imputable to either of the parties. The cause of delay during the
loading was the strike staged by the crew of the arrastre operator, and the
unavailability of a berthing space for the vessel during the unloading. Here, the Court
holds that the delay sued upon was still within the “reasonable time” embraced in the
stipulation of “Customary Quick Dispatch”.
Furthermore, considering the subject contract of affreightment contains an
express provision “Demurrage/Dispatch: NONE”, the same left the parties with no
recourse but to apply the literal meaning of such stipulation.
3. NO.
On the issue of whether personal civil liability may attach to the officers of NFA,
the court rules in the negative.
In the case of MAM Realty vs. NLRC, the Court held that a corporation, being a
juridical entity, may act only through its officers, directors and employees. Obligations
incurred or contracted by them, acting as such corporate agents, are not theirs but
the direct accountability of the corporation they represent.
The exceptions wherein personal civil liability may attach to a corporate officer
are:
a. When directors and trustees or, in appropriate cases, the officers of a corporation —
vote for or assent to patently unlawful acts of the corporation; act in bad faith or with
gross negligence in directing the corporate affairs; are guilty of conflict of interest to
the prejudice of the corporation, its stockholders or members, and other persons.
b. When a director or officer has consented to the issuance of watered stocks, or who,
having knowledge thereof, did not forth with file with the corporate secretary his
written objection thereto.
c. When a director, trustee or officer has contractually agreed or stipulated to hold
himself personally and solidarily liable with the corporation.
d. When a director, trustee or officer is made, by specific provision of law, personally
liable for his corporate action.21 (emphasis supplied)
e. The present case under scrutiny does not fall under any of such exceptions. A careful
perusal of the contract litigated upon reveals that the petitioners, as officers of NFA,
did not bind themselves to be personally liable nor did they ink any undertaking that
should NFA fail to pay Hongfil's claims, they would be personally liable. Hongfil has
not cited any provision of law under which the officers of NFA are liable under the
contract entered into.
What is more, there is nothing on record to show that the petitioner-officers
acted in bad faith or were guilty of gross negligence, to warrant personal liability.
Neither the trial court nor the Court of Appeals found of bad faith or gross negligence
on the part of the said officers of NFA.
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4. Article 680 of the Code of Commerce provides that a charterer who does not complete
the full cargo he bound himself to ship shall pay the freightage of the amount he fails
to ship, if the captain does not take other freight to complete the load of the vessel, in
which case the first charterer shall pay the difference, should there be any.
5. Article 656 of the Code of Commerce clearly provides that, if in the charter party
the time in which the loading or unloading are to take place is not stated, the usages
of the port where these acts are to take place shall be observed. After the stipulated
customary period has passed, and there is no express provision in the charter party
fixing the indemnity for delay, the Captain shall be entitled to demand demurrage for
the lay days and extra lay days which may have elapsed in loading and unloading.
44.
CALTEX PHILIPINES, INC. vs. SUPLICIO LINES, INC. ET. AL.
G.R. NO. 131166, September 30, 1999
ISSUES:
1. Whether or not Caltex is liable
2. Who is the common carrier in the case at bar
3. Is the charterer of a sea vessel liable for damages resulting from a collusion between
the chartered vessel and passenger ship
4. What is the contract entered into by petitioner and Vector
5. How could a common carrier maintain seaworthy condition of the vessel involved in its
contract and what could constitute if the common carrier failed to maintain the
seaworthiness of the same
FACTS:
MT VECTOR owned and operated by Vector Shipping left Limay, Bataan at
about 8:00pm on December 19, 1987 enroute to Masbate, loaded with petroleum
products shipped by CALTEX. On the other hand, on December 20, 1987 at about
6:30 am passenger ship owned by SUPLICIO LINES MV DONA PAZ left the port of
Tacloban headed forManila with a compliment of 59 crew members including the
master and his officers and passengers totaling 1,493 as indicated in the coastguard
clearance.
At about 10:30 pm of December 20, 1987 the two vessel collided in the open sea
within the vicinity of Dumali Point between MARINDUQUE AND ORIENTAL MINDORO.
All crew members of MV DONA PAZ died, while 2 survivors from MT VECTOR claimed
that they were sleeping at the time of incident.
The MV Dona Paz carried an estimated 4,000 passengers; many were not in the
manifest. Only 24 survived the tragedy. The Bureau of Marine Inquiry (BMI) after
investigation found that MV Vector, it’s registered owner and operator were at fault
allegedly that Caltex chartered MT Vector with gross and evident bad faith knowing
full well that MT Vector was improperly manned, ill-equipped, unseaworthy and a
hazard to safe navigation.
RULING:
1. NO.
The charterer of a vessel has no obligation before transporting its cargo to
ensure that the vessel it chartered complied with all legal requirements. The duty rests
upon the common carrier simply being engaged in “public service”. The civil code
demands diligence which required by the nature of the obligation and that which
corresponds with the circumstances of the persons, time and of the place.
In the case at bar, Caltex and Vector entered into a contract of affreighment,
also known as voyage charter wherein the ship is leased for a single voyage. The
charter party provides for the hire of the VESSEL ONLY, the ship owner to supply the
ship’s store, pay for wages of the master of the crew and defray expenses for the
maintenance of the ship. If the charterer is a contract of affreighment, which leaves
the general owner in possession of the ship as owner for the voyage,
2. MT Vector is a common carrier.
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The charter party agreement did not convert the common carrier into a private
carrier. The parties entered into a voyage charter, which retains the character of the
vessel as a common carrier. It is imperative that a public carrier shall remain as such,
voyage charter. It is only when the charter includes both the vessel and its crew, as in
a bareboat or demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in
may, for the moment, be the property of the charterer. A common carrier is a person
or corporation whose regular business is to carry passengers or property for all
persons who may choose to employ and to remunerate him. 16 MT Vector fits the
definition of a common carrier under Article 1732 of the Civil Code.
The public must of necessity rely on the care and skill of common carriers in
the vigilance over the goods and safety of the passengers, especially because with the
modern development of science and invention, transportation has become more rapid,
more complicated and somehow more hazardous. For these reasons, a passenger or a
shipper of goods is under no obligation to conduct an inspection of the ship and its
crew, the carrier being obliged by law to impliedly warrant its seaworthiness.
3. The charterer has no liability for damages under Philippine Maritime laws.
Petitioner and Vector entered into a contract of affreightment, also known as a voyage
charter.
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; a contract of
affreightment is one by which the owner of a ship or other vessel lets the whole or part
of her to a merchant or other person for the conveyance of goods, on a particular
voyage, in consideration of the payment of freight. A contract of affreightment may be
either time charter, wherein the leased vessel is leased to the charterer for a fixed
period of time, or voyage charter, wherein the ship is leased for a single voyage. In
both cases, the charter-party provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive voyage, the ship owner to
supply the ship’s store, pay for the wages of the master of the crew, and defray the
expenses for the maintenance of the ship. If the charter is a contract of affreightment,
which leaves the general owner in possession of the ship as owner for the voyage, the
rights and the responsibilities of ownership rest on the owner. The charterer is free
from liability to third persons in respect of the ship.
4. Petitioner and Vector entered into a contract of affreightment, also known as a

voyage charter.
voyage, in consideration of the payment of freight.
A contract of affreightment may be either time charter, wherein the leased
vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein
the ship is leased for a single voyage. In both cases, the charter-party provides for the
hire of the vessel only, either for a determinate period of time or for a single or
consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the
master of the crew, and defray the expenses for the maintenance of the ship.
Under a demise or bareboat charter on the other hand, the charterer mans the
vessel with his own people and becomes, in effect, the owner for the voyage or service
stipulated, subject to liability for damages caused by negligence.
If the charter is a contract of affreightment, which leaves the general owner in
possession of the ship as owner for the voyage, the rights and the responsibilities of
ownership rest on the owner. The charterer is free from liability to third persons in
respect of the ship.
5. Under the Carriage of Goods by Sea Act : Sec. 3. (1) The carrier shall be bound before
and at the beginning of the voyage to exercise due diligence to:
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a. Make the ship seaworthy;

b. Properly man, equip, and supply the ship;
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the
ship. For a vessel to be seaworthy, it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew. The failure of a
common carrier to maintain in seaworthy condition the vessel involved in its contract
of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.
45.
G.R. No. 51910, August 10, 1989
ISSUES:
FACTS:
RULINGS:
1. YES.
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Fairwind.


46.
OCEANEERING CONTRACTORS (Philippines), INC. vs. NESTOR BARRETO, doing
business as NNB Lihgterage
G.R. No. 184215, February 9, 2011
ISSUES:
(1) Whether or not Oceaneering is entitled to the disallowed amount of construction
materials pegged at P4,055,700.00 as compensatory damages
(2) Whether or not there were no valid documents showing the real value of the materials
lost and those actually recovered
(3) Whether or not the court of appeals erred in denying oceaneering's counterclaims for
actual damages amounting to (a) p3,704,700.00 representing the value of the
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materials it lost due to the sinking of [barreto's] barge; and (b) p125,000.00
representing the expenses it incurred for salvaging its cargo
(4) Whether or not the court erred in granting Oceaneering's claim for attorney's fees
(5) What is the principle laid down in the case at bar?
FACTS:
Nestor Barretto and Oceaneering Contractors (Phils.) Inc. entered into a Time
Charter Agreement for the contract price of P306,000.00. Nestor Barretto owns
Antonieta, a barge licensed and permitted to engage in coastwise trading. The barge
was hired for a renewable period of 30 calendar days for the purpose of transporting
construction materials from Manila to Ayungon,Negros Oriental.
Oceaneering hired stevedores who loaded the construction materials on the
barge. However, the barge capsized while it was transporting the construction
materials.
Baretto informed Oceaneering that the mishap was caused by the incompetence
and negligence of Oceaneering personnel in loading the cargo and that Baretto will
proceed with the salvage,refloating and repair of the barge.
Oceaneering demanded return of unused portion of the charter payment which
amounts to P224,400.00 plus expenses incurred in salvaging its construction
materials which amounts to P125,000.00. Barretto reasoned out that its unused
charter payment was withheld for he was seeking reimbursement for the amount of
P836,425 representing expenses in salvaging, refloating and repairing the barge.
Barretto filed a complaint for damages and argued that the accident was due to
the incompetence and negligence of employees hired by Oceaneering and who
attended the loading of the cargo. Oceaneering, in defense, argued that the accident
was caused by the negligence of Barretto’s employees and the dilapidated hull of the
barge which rendered it unseaworthy. The Court dismissed Barretto’s complaint and
Oceaneering’s counterclaims for lack of merit.
On appeal, Oceaneering’s prayer was partially granted holding Barretto liable
for Oceaneering’s lost cargo but the CA disallowed Oceaneering’s counterclaims for the
value of the construction materials pegged at P4,055,700.00 which were lost as a
consequence of the sinking of the barge.
Applying the rule that actual damages should be proven with a reasonable
degree of certainty, the appellate court denied Oceaneering’s claim for the value of its
lost cargo and ordered the refund of the P360,000.00 it paid for the time charter with
indemnity for attorney’s fees in the amount of P30,000.00.
Considering that it was able to salvage nine steel pipes amounting to
P351,000.00, Oceaneering insisted that it should be indemnified the sum of
P3,703,700.00 for the value of the lost cargo.
RULINGS:
1. No to P4,055,700.00 but yes to certain sums as supported by vouchers,
receipts,etc..
The court finds that CA erred in awarding the full amount of P306,000.00 for
what was prayed for refund by Oceaneering through its demand letters was only to the
extent of the unused charter payment in the amount of P224,400.00.
For lack of sufficient showing of bad faith on the part of Barretto, the CA erred
in granting Oceaneering’s claim for attorney’s fees.
The court stated that ‘actual or compensatory damages are those damages
which the injured party is entitled to recover for the wrong done and injuries received
when none were intended.’ Actual damages are awarded for ‘injuries or losses that are
actually sustained and susceptible of measurement’… intended to put the injured
party in the position in which he was before he was injured.
Hence, the amount of loss must be capable of proof or evidence such as but not
limited to sales and delivery receipts, cash and check vouchers and the like. This
means that self-serving statements of account are not sufficient basis for an award of
actual damages.
The Court awarded the value of the lost cargo that was pleaded and prayed for
in the answer and duly supported by official receipts and vouchers.
Wherefore, premises considered, the petition is PARTIALLY GRANTED and the
assailed 12 December 2007 Decision is, accordingly, MODIFIED: (a) to GRANT
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Oceaneerings claim for the value of its lost cargo in the sum of P2,226,620.00 with 6%
interest per annum computed from the filing of the complaint and to earn further
interest at the rate of 12% per annum from finality of the decision until full payment;
(b) to REDUCE the refund of the consideration for the Time Charter Agreement from
P306,000.00 to P224,400.00, with 6% interest per annum computed from 12 March
1998, likewise to earn further interest at the rate of 12% per annum from finality of
this decision; and, (c) to DELETE the CAs award of salvaging expenses and attorney’s
fees,for lack of factual and legal basis.
2. YES.
Oceaneering argues that, having determined Barretto's liability for presumed
negligence as a common carrier, the CA erred in disallowing its counterclaims for the
value of the construction materials which were lost as a consequence of the sinking of
the barge. Alongside the testimony elicited from its Operation's Manager, Engr.
Winifredo Oracion, Oceaneering calls attention to the same witness' inventory which
pegged the value of said construction materials at P4,055,700.00, as well as the
various sales receipts, order slips, cash vouchers and invoices which were formally
offered before and admitted in evidence by the RTC. Considering that it was able to
salvage only nine steel pipes amounting to P351,000.00, Oceaneering insists that it
should be indemnified the sum of P3,703,700.00 for the value of the lost cargo, with
legal interest at 12% per annum, from the date of demand until fully paid. In
addition, Oceaneering maintains that Barretto should be held liable to refund the
P306,000.00 it paid as consideration for the Time Charter Agreement and to pay the
P125,000.00 it incurred by way of salvaging expenses as well as its claim for attorney's
fees in the sum of P750,000.00.
In finding Oceaneering's petition impressed with partial merit, uppermost in our
mind is the fact that actual or compensatory damages are those damages which the
injured party is entitled to recover for the wrong done and injuries received when none
were intended.40 Pertaining as they do to such injuries or losses that are actually
sustained and susceptible of measurement,41 they are intended to put the injured
3. YES.
Art. 2199. Except as provided by law or by stipulation, one is entitled to an
adequate compensation only for such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual or compensatory damages."
Conformably with the foregoing provision, the rule is long and well settled that
there must be pleading and proof of actual damages suffered for the same to be
recovered.43 In addition to the fact that the amount of loss must be capable of proof,
it must also be actually proven with a reasonable degree of certainty, premised upon
competent proof or the best evidence obtainable.44 The burden of proof of the damage
suffered is, consequently, imposed on the party claiming the same45 who should
adduce the best evidence available in support thereof, like sales and delivery receipts,
cash and check vouchers and other pieces of documentary evidence of the same
nature. In the absence of corroborative evidence, it has been held that self-serving
statements of account are not sufficient basis for an award of actual damages.46
Corollary to the principle that a claim for actual damages cannot be predicated on
flimsy, remote, speculative, and insubstantial proof,47 courts are, likewise, required to
state the factual bases of the award.48
Applying the just discussed principles to the case at bench, we find that
Oceaneering correctly fault the CA for not granting its claim for actual damages or,
more specifically, the portions thereof which were duly pleaded and adequately proved
before the RTC. While concededly not included in the demand letters dated 12 March
199849 and 13 July 199850Oceaneering served Barretto, the former's counterclaims
for the value of its lost cargo in the sum of P4,055,700.00 and salvaging expenses in
the sum of P125,000.00 were distinctly pleaded and prayed for in the 26 January
1999 answer it filed a quo.51 Rather than the entire P4,055,700.00 worth of
construction materials reflected in the inventory52 which Engr. Oracion claims to
have prepared on 29 November 1997, based on the delivery and official receipts from
Oceaneering's suppliers,53 we are, however, inclined to grant only the following items
which were duly proved by the vouchers and receipts on record, viz.: (a)
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P1,720,850.00 worth of spiral welded pipes with coal tar epoxy procured on 22
November 1997;54 (b) P629,640.00 worth of spiral welded steel pipes procured on 28
October 1997;55 (c) P155,500.00 worth of various stainless steel materials procured
on 27 November 1997;56 (d) P66,750.00 worth of gaskets and shackles procured on
20 November 1997;57 and, (e) P4,880.00 worth of anchor bolt procured on 27
November 1997.58
4. YES.
For lack of sufficient showing of bad faith on the part of Barretto, we find that
the CA, finally, erred in granting Oceaneering's claim for attorney's fees, albeit in the
much reduced sum of P30,000.00.
In the absence of stipulation, after all, the rule is settled that there can be no
recovery of attorney's fees and expenses of litigation other than judicial costs except in
the instances enumerated under Article 2208 of the Civil Code. Being the exception
rather than the rule, attorney's fees are not awarded every time a party prevails in a
suit, in view of the policy that no premium should be placed on the right to litigate.
Even when a claimant is compelled to litigate with third persons or to incur expenses
to protect his rights, still attorney's fees may not be awarded where, as here, no
sufficient showing of bad faith can be reflected in the party's persistence in a case
other than an erroneous conviction of the righteousness of his cause.
5. Art. 2199. Except as provided by law or by stipulation, one is entitled to an

recovered.
In addition to the fact that the amount of loss must be capable of proof, it must
also be actually proven with a reasonable degree of certainty, premised upon
competent proof or the best evidence obtainable.
The burden of proof of the damage suffered is, consequently, imposed on the
party claiming the same who should adduce the best evidence available in support
thereof, like sales and delivery receipts, cash and check vouchers and other pieces of
documentary evidence of the same nature.
In the absence of corroborative evidence, it has been held that self-serving
statements of account are not sufficient basis for an award of actual damages.
flimsy, remote, speculative, and insubstantial proof, courts are, likewise, required to
state the factual bases of the award.
47.
CORPORATION
G.R. No. 150403, January 25, 2007
ISSUES:
transport
FACTS:
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RULINGS:
1. YES, There is no dispute that petitioner was a common carrier.
2. YES.
3. It is clear that it was a contract of carriage that petitioner signed with MCCII.
4. NO.
5. NO.
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force majeure.
48.
CANGCO vs. MANILA RAIL ROAD
G.R. No. L-12191, October 14, 1918
ISSUES:
(1) Whether or not Manila Railroad Co. is liable for damages?
(2) Whether or not Manila Rail Road should be held liable?
(3) Whether or not Article 1903 of the Civil Code is applicable in the case at bar?
(4) What is the distinction between culpa contractual and culpa aquiliana in the case at
bar?
FACTS:
Jose Cangco arose from his seat in the 2nd class-car where he was riding and,
making, his exit through the door, took his position upon the steps of the coach,
seizing the upright guardrail with his right hand for support.
As the train slowed down another passenger and also an employee of the
railroad company Emilio Zuñiga got off the same car alighting safely at the point
where the platform begins to rise from the level of the ground.
When the train had proceeded a little farther Cangco stepped off but 1 or both
of his feet came in contact with a sack of watermelons so his feet slipped from under
him and he fell violently on the platform. His body rolled from the platform and was
drawn under the moving car, where his right arm was badly crushed and lacerated.
The car moved forward possibly 6 meters before it came to a full stop. He was
bought to the hospital in the city of Manila where an examination was made and his
arm was amputated. The operation was unsatisfactory so he had second operation at
another hospital was performed and the member was again amputated higher up near
the shoulder expending a total of P790.25.
It is customary season for harvesting these melons and a large lot had been
brought to the station for the shipment to the market.
RULINGS:
1. YES.
Art. 2176 of the Civil Code states that whoever, by act or omission causes
damage to another, there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing contractual relation between
the parties, is called a quasi-delict and is governed by the provisions of this Chapter.
(1902a).
The foundation of defendant’s liability is its contract of carriage with plaintiff,
which carries by implication the duty to carry him safely and provide safe means of
entering and leaving its trains. Thus, non-performance of the contract could not be
excused by proof that the fault was imputable to defendant’s employees.
2. YES.
The employees of the railroad company were guilty of negligence.
It necessarily follows that the defendant company is liable for the damage
thereby occasioned unless recovery is barred by the plaintiff's own contributory
negligence.
In resolving this problem it is necessary that each of these conceptions of
liability, to-wit, the primary responsibility of the defendant company and the
contributory negligence of the plaintiff should be separately examined.
3. NO.
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Article 1903 of the Civil Code is not applicable to obligations arising ex

contractu, but only to extra-contractual obligations — or to use the technical form of
expression, that article relates only to culpa aquiliana and not to culpa contractual.
Article 1903 of the Civil Code is not applicable to acts of negligence which constitute
the breach of a contract.
4. Manresa says that the liability arising from extra-contractual culpa is always
based on a voluntary act or omission which causes damage not through willful intent,
but through mere negligence or inattention. Therefore, an act or omission may be
voluntary but not willful, that is, with intent to harm. Culpa aquiliana can be further
distinguished from culpa contractual in the following ways: Source. Extra-contractual
obligations have their source in those mutual duties which civilized society imposes
upon its members, the breach of which give rise to an obligation to indemnify the
injured party. As such, in cases of culpa aquiliana it is the wrongful or negligent act or
omission that creates the vinculum juris, whereas in contractual relations the
vinculum exists independently of the breach. Burden of proof. In culpa aquiliana,
where the plaintiff’s cause of action depends on a negligent act or omission, the
burden of proof rests upon the plaintiff to prove negligence. On the other hand, since
an obligation already exists in culpa contractual, mere proof of the contract and of its
nonperformance are sufficient prima facie for a recovery. Defense of employer for
negligence of employee. The presumption of negligence in Art. 1903 is rebuttable, and
the employer is relieved of liability upon proof that he has exercised due diligence in
the selection and supervision of employees. However, the same does not apply in culpa
contractual. The Court also describes the fields of contractual and non-contractual
obligations as “concentric”. That is to say, the fact that a person is bound to another
by contract does not relieve him from extra-contractual liability to the latter.
5. As a general rule it is logical that in case of extra-contractual culpa, a suing

creditor should assume the burden of proof of its existence, as the only fact upon
which his action is based; while on the contrary, in a case of negligence which
presupposes the existence of a contractual obligation, if the creditor shows that it
exists and that it has been broken, it is not necessary for him to prove negligence.
(Manresa, vol. 8, p. 71 [1907 ed., p. 76]).
49.
MR. AND MRS. FABRE, JR. AND PORFIRIO CABIL vs. COURT OF APPEALS
G.R. No. 111127, July 26, 1996
ISSUES:
(1) Whether or not spouses Fabre and his wife are common carriers
(2) Whether or not petitioner, bus driver Porfirio Cabil, were negligent
(3) Whether or not Spouses Fabre and his wife were liable for the injuries suffered by
private respondents
(4) Whether or not Spouses Fabre and his wife, together with his employees, exercised
due diligence?
(5) Whether or not damages can be awarded and, if so, up to what extent?
FACTS:
Petitioners, Engracio Fabre, Jr. and his wife, were owners of a Mazda minibus.
They used the bus principally in connection with a bus service for school children
which they operated in Manila. It was driven by Porfirio Cabil.
Private respondent, Word for the World Christian Fellowship Inc. (WWCF),
arranged with the petitioners for the transportation of 33 members of its Young Adults
Ministry from Manila to La Union and back in consideration of which private
respondent paid petitioners the amount of P3,000.00.
The usual route to Caba, La Union was through Carmen, Pangasinan. However,
the bridge at Carmen was under repair, so that petitioner Cabil, who was unfamiliar
with the area (it being his first trip to La Union), was forced to take a detour through
the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came
upon a sharp curve on the highway. The road was slippery because it was raining,
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causing the bus, which was running at the speed of 50 kilometers per hour, to skid to
the left road shoulder. The bus hit the left traffic steel brace and sign along the road
and rammed the fence of one Jesus Escano, then turned over and landed on its left
side, coming to a full stop only after a series of impacts. The bus came to rest of the
road. A coconut tree which it had hit fell on it and smashed its front portion. Because
of the mishap, several passengers were injured particularly Amyline Antonio.
Criminal complaint was filed against the driver and the spouses were also made
jointly liable. Spouses Fabre on the other hand contended that they are not liable
since they are not a common carrier. The RTC of Makati ruled in favor of the plaintiff
and the defendants were ordered to pay jointly and severally to the plaintiffs. The
Court of Appeals affirmed the decision of the trial court.
RULINGS:
1. YES.
Article 1732 of the Civil Code defines Common Carriers as persons,
The Supreme Court held that this case actually involves a contract of carriage.
Petitioners, the Fabres, did not have to be engaged in the business of public
transportation for the provisions of the Civil Code on common carriers to apply to them.
offering its services to the "general public," i.e., the general community or population,
such distinctions.
2. YES.
Pursuant to Articles 2176 and 2180 of the Civil Code his negligence gave rise to
the presumption that his employers, the Fabres, were themselves negligent in the
selection and supervisions of their employee.
The finding that Cabil drove his bus negligently, while his employer, the Fabres,
who owned the bus, failed to exercise the diligence of a good father of the family in the
selection and supervision of their employee is fully supported by the evidence on
record. These factual findings of the two courts we regard as final and conclusive,
supported as they are by the evidence. Indeed, it was admitted by Cabil that on the
night in question, it was raining, and as a consequence, the road was slippery, and it
was dark. He averred these facts to justify his failure to see that there lay a sharp
curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50
kilometers per hour and only slowed down when he noticed the curve some 15 to 30
meters ahead. 3 By then it was too late for him to avoid falling off the road. Given the
conditions of the road and considering that the trip was Cabil's first one outside of
Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony
4that the vehicles passing on that portion of the road should only be running 20
kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very
high speed.
Considering the foregoing, the fact that it was raining and the road was
slippery, that it was dark, that he drove his bus at 50 kilometers an hour when even
on a good day the normal speed was only 20 kilometers an hour, and that he was
unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for
the injuries suffered by private respondent Amyline Antonio.
3. YES.
Article 1759 of the Civil Code provides for the Common carriers liability 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.
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of their employees.
Supporting the finding of the trial court and of the appellate court that
petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify findings
them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the
Civil Code.
4. YES.
As common carriers, the Fabres were found to exercise "extraordinary diligence"
for the safe transportation of the passengers to their destination. This duty of care is
not excused by proof that they exercise the diligence of a good father of the family in
the selection and supervision of their employee.
5. YES.
While the decisions of the trial court and the Court of Appeals do not
sufficiently indicate the factual and legal basis for them, we find that they are
nevertheless supported by evidence in the records of this case. Viewed as an action for
quasi delict, this case falls squarely within the purview of Art. 2219(2) providing for
the payment of moral damages in cases of quasi delict. On the theory that petitioners
are liable for breach of contract of carriage, the award of moral damages is authorized
by Art. 1764, in relation to Art. 2220, since Cabil's gross negligence amounted to bad
faith. 12 Amyline Antonio's testimony, as well as the testimonies of her father and co-
passengers, fully establishes the physical suffering and mental anguish she endured
as a result of the injuries caused by petitioners' negligence.
The award of exemplary damages and attorney's fees was also properly made.
However, for the same reason that it was error for the appellate court to increase the
award of compensatory damages, we hold that it was also error for it to increase the
award of moral damages and reduce the award of attorney's fees, inasmuch as private
respondents, in whose favor the awards were made, have not appealed.
50.
VILUAN vs. COURT OF APPEALS
G.R. No. 21477-81, April 29, 1966
ISSUES:
(1) Whether or not viluan, operator of the bus that caught fire, should be held solidarily
liable for the death and injuries suffered by passengers of his bus
(3) Whether or not the respondents were brought in as principal defendants or as third-
party defendants
(4) Whether or not the third-party defendant is bound by the adjudication of the third
party plaintiff’s liability to the plaintiff, as well as of his own to the plaintiff or to the
third-party plaintiff
(5) What is the provision that covers two distinct subjects, the addition of parties
defendant to the main cause of action, and the bringing in of a third party for a
defendant’s remedy over.’
FACTS:
It appears that, as the bus owned by petitioner Viluan and driven by
Hermenegildo Aquino neared the gate of the Gabaldon school building in the
municipality of Bangar, another passenger bus owned by Patricio Hufana and driven
by Gregorio Hufana tried to overtake it but that instead of giving way, Aquino
increased the speed of his bus and raced with the overtaking bus. Aquino lost control
of his bus as a result of which it hit a post, crashed against a tree and then burst into
flames.
The heirs of those who perished sued petitioner Viluan and the latter's driver,
Hermenegildo Aquino, for damages for breach of contract of carriage. Carolina Sabado,
one of those injured, also sued petitioner and the driver for damages.
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In their answer, petitioner Viluan and her driver Aquino blamed respondent
Gregorio Hufana for the accident. With leave of court, they filed third party complaints
against Gregorio Hufana and the latter's employer, Patricio Hufana.
After trial, the court found that the accident was due to the concurrent
negligence of the drivers of the two buses and held both, together with their respective
employers, jointly and severally liable for damages.
Both petitioner Viluan and her driver Aquino and the respondents herein
appealed to the Court of Appeals. While affirming the finding that the accident was
due to the concurrent negligence of the drivers of both the Viluan and the Hufana
buses, the Court of Appeals differed with the trial court in the assessment of liabilities
of the parties. In its view only petitioner Viluan, as operator of the bus, is liable for
breach of contract of carriage. The driver, Aquino, cannot be made jointly and
severally liable with petitioner because he is merely the latter's employee and is in no
way a party to the contract of carriage.
RULINGS:
1. NO.
As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177 that in
case of injury to a passenger due to the negligence of the driver of the bus on which he
was riding and of the driver of another vehicle, the drivers as well as the owners of the
two vehicles are jointly and severally liable for damages. Some members of the Court,
though, are of the view that under the circumstances they are liable on quasi-delict.
2. In case of injury to a passenger due to the negligence of the driver of the bus on
which he was riding and of the driver of another vehicle, the drivers as well as the
owners of the two vehicles are jointly and severally liable for damages.
3. YES.
It should make no difference therefore whether the respondents were brought in
as principal defendants or as third-party defendants. As Moran points out, since the
liability of the third-party defendant is already asserted in the third-party complaint,
the amendment of the complaint to assert such liability is merely a matter of form, to
insist on which would not be in keeping with the liberal spirit of the Rules of Court. 4
Nor should it make any difference that the liability of petitioner springs from
contract while that of respondents arises from quasi-delict. As early as 1931, we
already ruled in Gutierrez v. Gutierrez, 56 Phil., 177, 5 that in case of injury to a
passenger due to the negligence of the driver of the bus on which he was riding and of
the driver of another vehicle, the drivers as well as the owners of the two vehicles are
jointly and severally liable for damages. Some members of the Court, though are of the
view that under the circumstances they are liable on quasi-delict.
4. YES.
"From the sources of Rule 14 and the decisions herein cited, it is clear that this
rule, like the admiralty rule, ‘covers two distinct subjects, the addition of parties
defendant’s remedy over.’. . .
"If the third party complaint alleged facts showing a third party’s direct liability
to plaintiff on the claim set out in plaintiff’s petition, then third party "shall" make his
defenses as provided in Rule 12 and his counterclaims against plaintiff as provided in
Rule 13. In the case of alleged direct liability, no amendment is necessary or required.
The subject-matter of the claim is contained in plaintiff’s complaint, the ground of
third party’s liability on that claim is alleged in third party complaint, and third party’s
defense to his alleged liability on the claim is set up in his answer to plaintiff’s
complaint. At that point and without amendment, the plaintiff and third party are at
issue as to their rights respecting the claim.
The next sentence in the rule, "The third-party defendant is bound by the
adjudication of the third- party plaintiff’s liability to the plaintiff, as well as of his own
to the plaintiff or to the third-party plaintiff,’ applies to both subjects.
If third party is brought in as liable only to defendant and judgment is rendered
adjudicating plaintiff’s right to recover against defendant and defendant’s right to
recover against third party, he is bound by both adjudications. That part of the
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sentence refers to the second subject. If third party is brought in as liable to plaintiff,
then third party is bound by the adjudication as between him and plaintiff. That refers
to the first subject. If third party is brought in as liable to plaintiff and also over to
defendant, then third party is bound by both adjudications.
The next sentence in the rule, `The plaintiff may amend his pleadings to assert
against the third-party defendant any claim which the plaintiff might have asserted
against the third-party defendant had he been joined originally as a defendant,’ refers
to the second subject, that is, to bringing in third party as liable to defendant only,
and does not apply to the alleged liability of third party directly to plaintiff."
5. The Court of Appeal’s ruling is based on section 5 of Rule 12 of the former

Rules of Court, 1 which was adopted from Rule 14-A of the Federal Rules of Civil
Procedure. While the latter provision has indeed been helpful to preclude a judgment
in favor of a plaintiff and against a third party defendant where the plaintiff has not
amended his complaint to assert a claim against a third party defendant, 2 yet, as
held in subsequent decisions, this rule applies only to cases where the third party
defendant is brought in on an allegation of liability to the defendants. The rule does
not apply where a third party defendant is impleaded on the ground of direct liability
to the plaintiffs, in which case no amendment of the plaintiff’s complaint is necessary.
3 As explained in the Atlantic Coast Line R. Co. v. U.S. Fidelity and Guaranty Co., 52
F. Supp. 177 (1943):
"From the sources of Rule 14 and the decisions herein cited, it is clear that this
rule, like the admiralty rule, ‘covers two distinct subjects, the addition of parties
defendant’s remedy over.’. . .
"If the third party complaint alleged facts showing a third party’s direct liability
to plaintiff on the claim set out in plaintiff’s petition, then third party "shall" make his
defenses as provided in Rule 12 and his counterclaims against plaintiff as provided in
Rule 13. In the case of alleged direct liability, no amendment is necessary or required.
The subject-matter of the claim is contained in plaintiff’s complaint, the ground of
third party’s liability on that claim is alleged in third party complaint, and third party’s
defense to his alleged liability on the claim is set up in his answer to plaintiff’s
complaint. At that point and without amendment, the plaintiff and third party are at
issue as to their rights respecting the claim.
51.
MCC INDUSTRIAL SALES vs. SSANGYONG
G.R. No. 170633 : October 17, 2007
ISSUES:
(1) Whether or not MCC is liable for breach of contract when they refused to open the L/C
in the amount of US$170,000.00 for the remaining 100MT of steel
(2) Whether the print-out and/or photocopies of facsimile transmissions are electronic
evidence and admissible as such
(3) Whether or not there was a perfected contract of sale between MCC and Ssangyong,
and, if in the affirmative, whether MCC breached the said contract;
(4) Whether or not the award of actual damages and attorney's fees in favor of Ssangyong
is proper and justified.
(5) How was “Electronic Record” defined in the case at bar?
FACTS:
Petitioner MCC Industrial Sales (MCC), a domestic corporation engaged in the
business of importing and wholesaling stainless steel products. One of its suppliers is
the Ssangyong Corporation (Ssangyong), an international trading company with head
office in Seoul, South Korea and regional headquarters in Makati City, Philippines.
The two corporations conducted business through telephone calls and facsimile or
telecopy transmissions. Ssangyong would send the pro forma invoices containing the
details of the steel product order to MCC; if the latter conforms thereto.
Ssangyong then filed, a civil action for damages due to breach of contract
against defendants MCC, Sanyo Seiki and Gregory Chan before the Regional Trial
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Court of Makati City. In its complaint, Ssangyong alleged that defendants breached
their contract when they refused to open the L/C in the amount of US$170,000.00 for
the remaining 100MT of steel under Pro Forma Invoice Nos. ST2-POSTS0401-1 and
ST2-POSTS0401-2.
After Ssangyong rested its case, defendants filed a Demurrer to Evidence40
alleging that Ssangyong failed to present the original copies of the pro forma invoices
on which the civil action was based. In an Order dated April 24, 2003, the court
denied the demurrer, ruling that the documentary evidence presented had already
been admitted in the December 16, 2002 Order41 and their admissibility finds
support in Republic Act (R.A.) No. 8792, otherwise known as the Electronic Commerce
Act of 2000. Considering that both testimonial and documentary evidence tended to
substantiate the material allegations in the complaint, Ssangyong’s evidence sufficed
for purposes of a prima facie case.
The parties did not raise the question whether the original facsimile
transmissions are “electronic data messages” or “electronic documents” within the
context of the Electronic Commerce Act (the petitioner merely assails as inadmissible
evidence the photocopies of the said facsimile transmissions).
RULINGS:
1. YES.
The Supreme Court, finds that the award of actual damages is not in accord
with the evidence on record. It is axiomatic that actual or compensatory damages
cannot be presumed, but must be proven with a reasonable degree of certainty.
Pro Forma Invoice No. ST2-POSTS080-1 (Exhibit “X”), however, is a mere
photocopy of its original. But then again, petitioner MCC does not assail the
admissibility of this document in the instant petition. Verily, evidence not objected to
is deemed admitted and may be validly considered by the court in arriving at its
judgment. Issues not raised on appeal are deemed abandoned.
Because these documents are mere photocopies, they are simply secondary
evidence, admissible only upon compliance with Rule 130, Section 5, which states,
“[w]hen the original document has been lost or destroyed, or cannot be produced in
court, the offeror, upon proof of its execution or existence and the cause of its
unavailability without bad faith on his part, may prove its contents by a copy, or by a
recital of its contents in some authentic document, or by the testimony of witnesses in
the order stated.” Furthermore, the offeror of secondary evidence must prove the
predicates thereof, namely: (a) the loss or destruction of the original without bad faith
on the part of the proponent/offeror which can be shown by circumstantial evidence of
routine practices of destruction of documents; (b) the proponent must prove by a fair
preponderance of evidence as to raise a reasonable inference of the loss or destruction
of the original copy; and (c) it must be shown that a diligent and bona fide but
unsuccessful search has been made for the document in the proper place or places. It
has been held that where the missing document is the foundation of the action, more
strictness in proof is required than where the document is only collaterally
involved.103
Given these norms, we find that respondent failed to prove the existence of the
original fax transmissions of Exhibits E and F, and likewise did not sufficiently prove
the loss or destruction of the originals. Thus, Exhibits E and F cannot be admitted in
evidence and accorded probative weight.
These invoices (ST2-POSTS0401, ST2-POSTS080-1 and ST2-POSTS080-2),
along with the other unchallenged documentary evidence of respondent Ssangyong,
preponderate in favor of the claim that a contract of sale was perfected by the parties.
With our finding that there is a valid contract, it is crystal-clear that when
petitioner did not open the L/C for the first half of the transaction (100MT), despite
numerous demands from respondent Ssangyong, petitioner breached its contractual
obligation. It is a well-entrenched rule that the failure of a buyer to furnish an agreed
letter of credit is a breach of the contract between buyer and seller. Indeed, where the
buyer fails to open a letter of credit as stipulated, the seller or exporter is entitled to
claim damages for such breach. Damages for failure to open a commercial credit may,
in appropriate cases, include the loss of profit which the seller would reasonably have
made
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2. NO.
R.A. No. 8792, otherwise known as the Electronic Commerce Act of 2000,
considers an electronic data message or an electronic document as the functional
equivalent of a written document for evidentiary purposes. The Rules on Electronic
Evidence regards an electronic document as admissible in evidence if it complies with
the rules on admissibility prescribed by the Rules of Court and related laws, and is
authenticated in the manner prescribed by the said Rules. An electronic document is
also the equivalent of an original document under the Best Evidence Rule, if it is a
printout or output readable by sight or other means, shown to reflect the data
accurately.
Thus, to be admissible in evidence as an electronic data message or to be
considered as the functional equivalent of an original document under the Best
Evidence Rule, the writing must foremost be an “electronic data message” or an
“electronic document.”
We, therefore, conclude that the terms “electronic data message” and “electronic
document,” as defined under the Electronic Commerce Act of 2000, do not include a
facsimile transmission. Accordingly, a facsimile transmission cannot be considered as
electronic evidence. It is not the functional equivalent of an original under the Best
Evidence Rule and is not admissible as electronic evidence.
Since a facsimile transmission is not an “electronic data message” or an
“electronic document,” and cannot be considered as electronic evidence by the Court,
with greater reason is a photocopy of such a fax transmission not electronic evidence.
In the present case, therefore, Pro Forma Invoice Nos. ST2-POSTS0401-1 and ST2-
POSTS0401-2 which are mere photocopies of the original fax transmittals, are not
electronic evidence, contrary to the position of both the trial and the appellate courts.
3. YES.
In general, contracts are perfected by mere consent, which is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the acceptance absolute. They
are, moreover, obligatory in whatever form they may have been entered into, provided
all the essential requisites for their validity are present. Sale, being a consensual
contract, follows the general rule that it is perfected at the moment there is a meeting
of the minds upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
The essential elements of a contract of sale are (1) consent or meeting of the
minds, that is, to transfer ownership in exchange for the price, (2) object certain which
is the subject matter of the contract, and (3) cause of the obligation which is
established.
4. NO.
This Court, however, finds that the award of actual damages is not in accord
with the evidence on record. It is axiomatic that actual or compensatory damages
cannot be presumed, but must be proven with a reasonable degree of certainty. In
Villafuerte v. Court of Appeals, we explained that:
Actual or compensatory damages are those awarded in order to compensate a
party for an injury or loss he suffered. They arise out of a sense of natural justice and
are aimed at repairing the wrong done. Except as provided by law or by stipulation, a
party is entitled to an adequate compensation only for such pecuniary loss as he has
duly proven. It is hornbook doctrine that to be able to recover actual damages, the
claimant bears the onus of presenting before the court actual proof of the damages
alleged to have been suffered, thus:
A party is entitled to an adequate compensation for such pecuniary loss
actually suffered by him as he has duly proved. Such damages, to be recoverable,
must not only be capable of proof, but must actually be proved with a reasonable
degree of certainty. We have emphasized that these damages cannot be presumed and
courts, in making an award must point out specific facts which could afford a basis for
measuring whatever compensatory or actual damages are borne.
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5. “Electronic record" means data that is recorded or stored on any medium in or

by a computer system or other similar device, that can be read or perceived by a
person or a computer system or other similar device. It includes a display, printout or
other output of that data.
The explanation for this term and its definition is as follows: The term
"ELECTRONIC RECORD" fixes the scope of our bill. The record is the data. The record
may be on any medium. It is electronic because it is recorded or stored in or by a
computer system or a similar device.
The amendment is intended to apply, for example, to data on magnetic strips on
cards or in Smart cards. As drafted, it would not apply to telexes or faxes, except
computer-generated faxes, unlike the United Nations model law on electronic
commerce. It would also not apply to regular digital telephone conversations since the
information is not recorded. It would apply to voice mail since the information has
been recorded in or by a device similar to a computer. Likewise, video records are not
covered. Though when the video is transferred to a website, it would be covered
because of the involvement of the computer. Music recorded by a computer system on
a compact disc would be covered.
52.
UCPB GENERAL INSURANCE CO., INC. vs. ABOITIZ SHIPPING CORP. EAGLE
EXPRESS LINES, DAMCO INTERMODAL SERVICES, INC., and PIMENTEL
CUSTOMS BROKERAGE CO.
G.R. NO. 168433, February 10, 2009
ISSUES:
(1) Whether or not any of the remaining parties may still be held liable by UCPB
(2) Whether or not Aboitiz may be held liable for the damaged cargo
(3) What is the purpose for the requirement to give notice of loss or damage to the goods
is not an empty formalism
(4) Whether or not Art. 366 of the Code of Commerce is applicable in the case at bar
(5) Whether or not UCPB made a gross misrepresentation to the Court when it claimed
that the issue regarding the applicability of the Code of Commerce
FACTS:
3 units of waste water treatment plant with accessories were purchased by San
Miguel Corp from Super Max Engineering. The goods came from Charleston, USA and
arrived in port of Manila on board MV Scandutch Star. From Manila it was
transported to Cebu on board of Aboitiz Supercon II. In Cebu, with clearance from the
Bureau of Customs, the goods were delivered and received by San Miguel at its plant
site. It was then discovered that the motor of the unit was damaged.
Pursuant to the insurance agreement, UCPB General Insurance paid San
Miguel P1,703,381.40 representing the value of the damaged unit. In turn, San Miguel
executed a subrogation form in favor of UCPB. Then, UCPB filed a complaint on Kuly
1992 as subrogee of San Miguel seeking to recover from Aboitiz. Aboitiz moved to
admit East Asiatic Co. as general agent of DAMCO Intermodal System. RTC held
Aboitiz, East Asiatic and DAMCO solidarily liable.
CA reversed the decision of the RTC and ruled that UCPBs right of action did
not accrue because UCPB failed to file a formal notice within 24 hours from the
damaged. In a memorandum, UCPB asserts that the claim requirement does not apply
to cases concerning damages to the merchandise had already been known to the
carrier. UCPB revealed that the damage to the cargo was found upon discharge from
the foreign carrier witnessed by the carrier’s representative who signed the request for
bad order survey and the turnover of bad order cargoes. This knowledge, UCPB
argues, dispenses with the need to give the carrier a formal notice of claim.
Incidentally, the carrier’s representative mentioned by UCPB as present at the time the
merchandise was unloaded was in fact a representative of respondent Eagle Express
Lines (Eagle Express). UCPB further claims that the issue of the applicability of Art.
366 of the Code of Commerce was never raised before the trial court and should,
therefore, not have been considered by the CA.
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Eagle Express, in its Memorandum dated February 7, 2007, asserts that it

cannot be held liable for the damage to the merchandise as it acted merely as a freight
forwarders agent in the transaction. It allegedly facilitated the transhipment of the
cargo from Manila to Cebu but represented the interest of the cargo owner, and not
the carriers.
Aboitiz, on the other hand, points out, in its Memorandum dated March 29,
2007, that it obviously cannot be held liable for the damage to the cargo which, by
UCPBs admission, was incurred not during transhipment to Cebu on board one of
Aboitizs vessels, but was already existent at the time of unloading in Manila. Aboitiz
also argues that Art. 366 of the Code of Commerce is applicable and serves as a
condition precedent to the accrual of UCPBs cause of action against it.
RULINGS:
1. That said, it is nonetheless necessary to ascertain whether any of the remaining
parties may still be held liable by UCPB. The provisions of the Code of Commerce,
which apply to overland, river and maritime transportation, come into play.
Art. 366 of the Code of Commerce states:
Art. 366. Within twenty-four hours following the receipt of the merchandise, the claim
against the carrier for damage or average which may be found therein upon opening
the packages, may be made, provided that the indications of the damage or average
which gives rise to the claim cannot be ascertained from the outside part of such
packages, in which case the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have
been paid, no claim shall be admitted against the carrier with regard to the condition
in which the goods transported were delivered.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
The law clearly requires that the claim for damage or average must be made
within 24 hours from receipt of the merchandise if, as in this case, damage cannot be
ascertained merely from the outside packaging of the cargo.
2. NO.
In charging Aboitiz with liability for the damaged cargo, the trial court condoned
UCPB's wrongful suit against Aboitiz to whom the damage could not have been
attributable since there was no evidence presented that the cargo was further
damaged during its transshipment to Cebu. Even by the exercise of extraordinary
diligence, Aboitiz could not have undone the damage to the cargo that had already
been there when the same was shipped on board its vessel.
3. The fundamental reason or purpose of such a stipulation is not to relieve the

carrier from just liability, but reasonably to inform it that the shipment has been
damaged and that it is charged with liability therefor, and to give it an opportunity to
examine the nature and extent of the injury. This protects the carrier by affording it an
opportunity to make an investigation of a claim while the matter is still fresh and
easily investigated so as to safeguard itself from false and fraudulent claims.
4. YES.
The provisions of the Code of Commerce, which apply to overland, river and
maritime transportation, come into play.
Art. 366 of the Code of Commerce states:
Art. 366. Within twenty-four hours following the receipt of the merchandise, the
claim against the carrier for damage or average which may be found therein upon
opening the packages, may be made, provided that the indications of the damage or
average which gives rise to the claim cannot be ascertained from the outside part of
such packages, in which case the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have
been paid, no claim shall be admitted against the carrier with regard to the condition
in which the goods transported were delivered.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
The law clearly requires that the claim for damage or average must be made
within 24 hours from receipt of the merchandise if, as in this case, damage cannot be
ascertained merely from the outside packaging of the cargo.
5. YES.
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UCPB obviously made a gross misrepresentation to the Court when it claimed

that the issue regarding the applicability of the Code of Commerce, particularly the
24-hour formal claim rule, was not raised as an issue before the trial court. The
appellate court, therefore, correctly looked into the validity of the arguments raised by
Eagle Express, Aboitiz and Pimentel Customs on this point after the trial court had so
ill-advisedly centered its decision merely on the matter of extraordinary diligence.
Interestingly enough, UCPB itself has revealed that when the shipment was
discharged and opened at the ICTSI in Manila in the presence of an Eagle Express
representative, the cargo had already been found damaged. In fact, a request for bad
order survey was then made and a turnover survey of bad order cargoes was issued,
pursuant to the procedure in the discharge of bad order cargo. The shipment was then
repacked and transshipped from Manila to Cebu on board MV Aboitiz Supercon II.
When the cargo was finally received by SMC at its Mandaue City warehouse, it was
found in bad order, thereby confirming the damage already uncovered in Manila.
53.
LORENZO SHIPPING CORPORATION vs. CHUBB AND SONS, INC.
G.R. No. 147724, June 8, 2004
ISSUES:
(1) Whether or not Lorenzo Shipping is negligent in carrying the subject cargo
(2) Whether or not Chubb and Sons has capacity to sue before the Philippine courts
(4) Whether or not Chubb and Sons, as subrogee, has also no capacity to sue in our
jurisdiction
(5) Whether or not the cargo was damaged while on board the vessel of petitioner Lorenzo
Shipping
FACTS:
Mayer Steel Pipe Corp. loaded 581 bundles of ERW black steel pipes on board
the vessel M/V Lorcon IV, owned by Lorenzo Shipping, for shipment to Davao City.
Lorenzo Shipping issued a clean bill of lading designated as Bill of Lading No. T-3 for
the account of the consignee, Sumitomo Corp. of San Francisco, California, USA,
which in turn, insured the goods with Chubb and Sons, Inc. M/V Lorcon IV arrived at
the Sasa Wharf in Davao City. Transmarine Carriers received the subject shipment. It
discovered seawater in the hatch of M/V Lorcon IV, and found the steel pipes
submerged in it. Sumitomo then hired the services of a surveyor to inspect the
shipment prior to and subsequent to discharge. The report showed that the subject
shipment was no longer in good condition, as in fact, the pipes were found with rust
formation on top and/or at the sides. After the survey, Gear bulk loaded the shipment
on board its vessel M/V San Mateo Victory, for carriage to the US. All bills of lading it
issued were marked “ALL UNITS HEAVILYRUSTED.”
M/V San Mateo Victory arrived at the U.S.A., where it unloaded the subject
steel pipes. The steel pipes were surveyed, and it was discovered that they are heavily
rusted. Due to its condition, Sumitomo rejected the damaged steel pipes and declared
them unfit for the purpose they were intended. It then filed a marine insurance claim
with respondent Chubb and Sons, Inc. which the latter settled in the amount of
US$104,151.00.Chubb and Sons, Inc. filed a complaint for collection of a sum of
money, against Lorenzo Shipping, Gear bulk, and Transmarine. Lorenzo Shipping
denied its liability. The RTC ruled in favor of Chubb and Sons, Inc. It appealed to the
CA, but was denied.
RULINGS:
1. YES.
Lorenzo Shipping was negligent in its care and custody of the consignee’s
goods. Lorenzo Shipping issued clean bills of lading covering the subject shipment. A
bill of lading, aside from being a contract and a receipt, is also a symbol of the goods
covered by it. A bill of lading which has no notation of any defect or damage in the
goods is called a “clean bill of lading.”
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2. YES.
Lorenzo Shipping failed to raise the defense that Sumitomo is a foreign
corporation doing business in the Philippines without a license. It is therefore
estopped from litigating the issue on appeal... Secondly, assuming Arguendo that
Sumitomo cannot sue in the Philippines, it does not follow that Chubb and Sons, as
subrogee, has also no capacity to sue in our jurisdiction. The rights to which the
subrogee succeeds are the same as, but not greater than, those of the person for
whom he is substituted – he cannot acquire any claim, security, or remedy the
subrogor did not have. In other words, a subrogee cannot succeed to a right not
possessed by the subrogor. A subrogee in effect steps into the shoes of the insured
and can recover only if insured likewise could have recovered. However, when the
insurer succeeds to the rights of the insured, he does so only in relation to the debt.
The law does not prohibit foreign corporations from performing single acts of business.
A foreign corporation needs no license to sue before Philippine courts on an isolated
transaction. Where an insurance company as subrogee pays the insured of the entire
loss it suffered, the insurer-subrogee is the only real party in interest and must sue in
its own name to enforce its right of subrogation against the third party which caused
the loss.
A clean bill of lading constitutes prima facie evidence of the receipt by the
carrier of the goods as therein described. Mere proof of delivery of goods in good order
to a carrier and the subsequent arrival in damaged condition at the place of
destination raises a prima facie case against the carrier … M/V Lorcon IV of Lorenzo
Shipping received the steel pipes in good order and condition, evidenced by the clean
bills of lading it issued. When the cargo was unloaded from Lorenzo Shipping’s vessel
at the Sasa Wharf in Davao City, the steel pipes were rusted all over. M/V San Mateo
Victory of Gear bulk, Ltd, which received the cargo, issued Bills of Lading …, all of
which were marked “ALL UNITS HEAVILY RUSTED.”
3. NO.
Art 366 Code of Commerce: 24 hour period that does not begin until the
consignee has received possession of the merchandise or by delivery of the cargo by
the carrier to the consignee at the place of destination.
In this case, consignee Sumitomo only took possession of the entire shipment
when it reached the US. Only then was the delivery made and completed and only
then did the 24 hour prescriptive period run.
4. NO.
It does not follow that Chubb and Sons, as subrogee, has also no capacity to
sue in our jurisdiction. The rights to which the subrogee succeeds are the same as,
but not greater than, those of the person for whom he is substituted – he cannot
acquire any claim, security, or remedy the subrogor did not have. In other words, a
subrogee cannot succeed to a right not possessed by the subrogor. A subrogee in effect
steps into the shoes of the insured and can recover only if insured likewise could have
recovered. However, when the insurer succeeds to the rights of the insured, he does so
only in relation to the debt.
5. YES.
R.J. Del Pan Surveyors found that the cargo hold of the M/V Lorcon IV was
flooded with seawater, and the tank top was rusty, thinning and perforated, thereby
exposing the cargo to sea water. There can be no other conclusion than that the cargo
was damaged while on board the vessel of petitioner Lorenzo Shipping, and that the
damage was due to the latter’s negligence.
54.
ANG vs. AMERICAN STEAMSHIP AGENCIES, INC.
G.R. No. L-22491. January 27, 1967
ISSUES:
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(1) Whether or not the American Steamship Agencies Inc. punishable under carriage of
goods by Sea act for misdelivery of goods
(2) How was Loss or Damage defined in the case at bar?
(3) Whether or not the goods can be deemed loss in the case at bar
(4) What is the distinction between nondelivery and misdelivery
FACTS:
Yau Yae comerical Bank LTD of Hongkong represented by Yau Yae agreed to
sell 140 packsges of galvanized steel dursink sheets to one Herminio G Teves. Said
agreement was subject to the terms and arrangements.
Pursuant to said terms and arrangements, Yau Yae through Tokyo boeki LTD of
Tokyo Japan, shipped the articles at Yakata, Japan and later to Manila which was
processed by American Staemship Agencies INC. in which under a shipping agreement
or bill of lading it consigned to order of the shipper with Mr Teves.
The article arrived in manila, and under the bill of lading of the arrival of the
goods and requested payments of the demand draft representing the purchased price
of the article, however, Mr Teves did not pay the demand draft to Hongkong and
Shanghai bank where it was to be processed the payments. Prompting the bank to
make corresponding protest and the bank likewise returned the bill of lading and
demand draft to Yau Yae which later endorsed the bill of lading to Domingo Ang.
Meanwhile, despite his non-payments of the purchase price of the articles.
Teves was able to obtain a bank guaranty in favor of American Steamship agencies
INC. as carriers agent to the effect that he would surrender the negotiable bill of lading
duly endorsed by Yau Yae on the strength of this guaranty. Teves succeded in
securing a permit to deliver imported goods from the carriers agent, which he
presented to Bureau of customs which in turn release to him the articles covered by
the bill of lading.
Subsequently, Domingo Ang claimed for the articles from the American
steamship agencies Inc. by presenting the indorsed bill of lading, but he was informed
by the latter that the articled he claimed was already delivered to Mr. Teves.
RULINGS:
1. YES.
The provision of law involved in this case speaks of "loss or damage." That there
was no damage caused to the goods which were delivered intact to Herminio G. Teves
who did not file any notice of damage, is admitted by both parties in this case. What is
to be resolved — in order to determine the applicability of the prescriptive period of
one year to the case at bar — is whether or not there was "loss" of the goods subject
matter of the complaint.
Nowhere is "loss" defined in the Carriage of Goods by Sea Act. Therefore,
recourse must be had to the Civil Code which provides in Article 18 thereof that, "In
matters which are governed by the Code of Commerce and special laws, their
deficiency shall be supplied by the provisions of this Code."
Article 1189 of the Civil Code defines the word "loss" in cases where conditions
have been imposed with the intention of suspending the efficacy of an obligation to
give. The contract of carriage under consideration entered into by and between
American Steamship Agencies, Inc. and the Yau Yue (which later on endorsed the bill
of lading covering the shipment to plaintiff herein Domingo Ang), is one involving an
obligation to give or to deliver the goods "to the order of shipper", that is, upon the
presentation and surrender of the bill of lading. This being so, said article can be
applied to the present controversy, more specifically paragraph 2 thereof which
provides that,." . . it is understood that a thing is lost when it perishes, or goes out of
commerce, or disappears in such a way that its existence is unknown or it cannot be
recovered."
2. The court ruled that, the word” loss or damage “as speaks to the provision in
this case was not transpired because only the misdelivery of goods occurred to the
defendant, and upon admitted by the defendant in motion to dismissed that the
articles belongs for Mr. Ang has been misdelivered to Mr. Teves.
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Alexandria R.
Therefore it clearly shows that the defendant violates the provision of civil code
of the Philppines particular in Article 1144, which provides; the following actions must
be brought within ten (10) years from the time the right of the action accrues,
paragraph (1) upon a written contract and Article 1146, the following action must be
instituted within four(4) years, paragraph (2) quasi delict, wherein it supplies the
deficiency provided in article 18 of the same code. To read” in matters which are
governed by the code of commerce and special laws, their deficiency shall be supplied
by the provision of this code.”
Wherefore, suits predicated not upon loss or damage but misdelivery of
goodsthat so, the defendant was not held liable for carriage of goods by sea act and
the court hereby reversed the dismissal order afterwards remanded to the lower court
for further proceedings.
3. From the allegations of the complaint, therefore, the goods cannot be deemed
"lost." They were delivered to Herminio G. Teves, so that there can only be either
delivery, if Teves really was entitled to receive them or misdelivery, if he was not so
entitled. It is not for Us now to resolve whether or not delivery of the goods to Teves
was proper, that is, whether or not there was rightful delivery or misdelivery.
4. The distinction between nondelivery and misdelivery has already been clearly
made in reference to bills of lading. As this Court said in Tan Pho v. Hassamal
Dalamal, 67 Phil. 555, 557-558:
"Considering that the bill of lading covering the goods in question has been
made to order, which means that said goods cannot be delivered without previous
payment of the value thereof, it is evident that, the said goods having been delivered to
Aldeguer without paying the price of the same, these facts constitutes misdelivery and
not nondelivery, because there was in fact delivery of merchandise. We do not believe
it can be seriously and reasonably argued that what took place, as contended by the
petitioner is a case of misdelivery with respect to Aldeguer and at the same time
nondelivery with respect to the PNB who had the bill of lading, because the only thing
to consider in this question is whether Enrique Aldeguer was entitled to get the
merchandise or whether, on the contrary, the PNB is the one entitled thereto. Under
the facts, the defendant petitioner should not have delivered the goods to Aldeguer but
to the Philippine National Bank. Having made the delivery to Aldeguer, the delivery is
a case of misdelivery. If the goods have been delivered, it cannot at the same time be
said that they have not been delivered.
"According to the bill of lading which was issued in the case at bar to the order
of the shipper, the carrier was under a duty not to deliver the merchandise mentioned
in the bill of lading except upon presentation of the bill of lading duly endorsed by the
shipper. (10 C.J., 259) Hence, the defendant-petitioner Tan Pho having delivered the
goods to Enrique Aldeguer without the presentation by the latter of the bill of lading
duly endorsed to him by the shipper, the said defendant made a misdelivery and
violated the bill of lading, because his duty was not only to transport the goods
entrusted to him safely, but to deliver them to the person indicated in the bill of
lading." (Italics supplied)
5. Now, it is well settled in this jurisdiction that when a defendant files a motion to
dismiss, he thereby hypothetically admits the truth of the allegations of fact contained
in the complaint
Thus, Defendant-Appellant having filed a motion to dismiss, it is deemed to
have admitted, hypothetically, paragraphs 6, 7 and 8 of the complaint, and these
allege:
"6. — That, when the said articles arrived in Manila, the defendant authorized
the delivery thereof to Herminio G. Teves, through the issuance of the corresponding
Permit to Deliver Imported Articles, without the knowledge and consent of the plaintiff,
who is the holder in due course of said bill of lading, notwithstanding the fact that the
said Herminio G. Teves could not surrender the corresponding bill of lading;
"7. — That, without any evidence of the fact that Herminio G. Teves is the
holder of the corresponding bill of lading in due course; without the surrender of the
bill of lading; without the knowledge and consent of the plaintiff, as holder thereof in
due course, and in violation of the provision on the bill of lading which requires that
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the articles are only to be delivered to the person who is the holder in due course of
the said bill of lading, or his order, the defendant issued the corresponding `Permit To
Deliver Imported Articles’ in favor of the defendant, without the knowledge and
consent of the plaintiff as holder in due course of said bill of lading, which, originally
was Yau Yue, subsequently, the plaintiff Domingo Ang;
"8. — That, as a result of the issuance by the defendant of said permit,
Herminio G. Teves was able to secure the release of the articles from the Bureau of
Customs, which is not legally possible without the presentation of said permit to the
said Bureau; . . ."
55.
ROLDAN vs. LIM
G.R. No. L-11325. December 7, 1917
ISSUES:
(1) Whether or not the plaintiff failed to comply on the stipulations under Article 366 of
the Code of Commerce.
(2) What is the rule in common carriers in case of damages for failure to deliver goods
(3) What does article 367 of the code of commerce provides?
(4) Whether or not the dismissal of the complaint on the ground that there was an error
in which necessitates the return of the record to the court
(5) What is the object to be attained by the requirement of the submission of claims
FACTS:
Plaintiff Roldan executed a case against the Defendant Lim Ponzo &Co., to
recover damages in the sum of P3,780 for the alleged failure of the defendant company
to live up to its contract for the transportation of 2,244 packages of sugar to Roldan’s
hacienda in Iloilo. Out of the 2,244 packages of sugar, only 1,022 were saved in a
more or less damaged condition.
Nevertheless, at the trial, after the plaintiff offered his pieces of evidence, the
trial court judge dismissed the case due to the alleged failure of the plaintiff to comply
with the provisions laid down under Article 366 of the Code of Commerce thus, bars
the plaintiff on making his claim against the respondents. Art. 366 provides that:
Article 366: Within the twenty-four hours following the receipt of the
merchandise, a claim may be made against the carrier on account of damages or
average found therein on opening the packages, provided that the indication of the
damage or average giving rise the claim cannot be ascertained from the exterior of
said packages, in which case said claim would only be admitted on the receipt of the
packages.
After the periods mentioned have elapsed, or after the transportation charges
have been paid, no claim whatsoever shall be admitted against the carrier with regard
to the condition in which the goods transported were delivered.
RULINGS:
1. NO.
Article 366 of the Code of Commerce is limited on cases of claims for damaged
goods actually turned over by the carrier and received by the consignee, whether those
damages be apparent from the examination of the packages in which the goods are
delivered, or of such a character that the nature and extent of the dame is not
apparent until the packages are opened and the contents are examined. Clearly, it has
no application on the case at hand because the lost goods to be delivered are, actually,
not damaged, but the same were not delivered at all.
On the other hand, with regard to the saved 1,022 packages, the provision of
Article 366 of the code will apply only if the defendant delivered the goods to the
plaintiff. However, it appeared that the saved goods were recovered due to the
plaintiff’s effort of doing so; hence, requisite that the carrier should deliver the goods
to the consignee is missing.
2. Article 366 of the Commercial Code is limited to cases of claims for damages to
goods actually received by the consignee; it has no application in cases wherein the
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goods entrusted to the carrier are not delivered to the consignee by the carrier in
pursuance of the terms of the carriage contract.
3. Article 367 of the Commercial Code is as follows:

"If there should occur doubts disputes between the consignee and the carrier
with regard to the condition of goods transported at the time of their delivery to the
former, the said goods shall be examined by experts appointed by the parties and a
third one, in case of disagreement appointed by the judicial authority the result of the
examination always being reduced to writing: and if the persons interested should not
agree to the report of the experts and could not reach an agreement, said judicial
authority shall have the merchandise deposited in a safe warehouse, and the parties
interested shall make use of their rights in the proper manner."
4. YES.
The court agrees with the plaintiff’s counsel that the dismissal of the complaint
on this ground was error which necessitates the return of the record to the court
below. Article 366 of the Commercial Code is limited to cases of claims for damage to
goods actually turned over by the carrier and received by the consignee, whether those
damages be apparent from an examination of the packages in which the goods are
delivered, or of such a character that the nature and extent of the damage is not
apparent until the packages are opened and the contents examined. Clearly it has no
application in cases wherein the goods entrusted to the carrier are not delivered by the
carrier to the consignee. In such cases there can be no question of a claim for
damages suffered by the goods while in transport, since the claim for damages arises
exclusively out of the failure to make delivery.
5. The object sought to be attained by the requirement of the submission of claims

in pursuance of this article is to compel the consignee of goods entrusted to a carrier
to make prompt demand for settlement of alleged damages suffered by the goods while
in transport, so that the carrier will be enabled to verify all such claims at the time of
delivery or within twenty-four hours thereafter, and if necessary fix responsibility and
secure evidence as to the nature and extent of the alleged damages to the goods while
the matter is still fresh in the minds of the parties.
56.
GATCHALIAN vs. DELIM
G.R. No. L-56487, October 21, 1991
ISSUES:
(1) Whether or not private respondent has successfully proved that he had exercised
extraordinary diligence to prevent the mishap involving his mini-bus
(2) Whether or not there was a valid waiver
(3) Whether or not the respondent was negligent
(4) Whether or not the petitioner is entitled to actual and moral damages
(5) How was Caso Fortuito defined in the case at bar?
FACTS:
Petitioner Reynalda Gatchalian boarded as paying passenger a minibus owned
by respondents. While the bus was running along the highway, a “snapping sound”
was heard, and after a short while, the bus bumped a cement flower pot, turned turtle
and fell into a ditch. The passengers were confined in the hospital, and their bills were
paid by respondent’s spouse on July 14. Before Mrs. Delim left, she had the injured
passengers sign an already prepared affidavit waiving their claims against
respondents. Petitioner was among those who signed. Notwithstanding the said
document, petitioner filed a claim to recover actual and moral damages for loss of
employment opportunities, mental suffering and inferiority complex caused by the
scar on her forehead. Respondents raised in defense force majeure and the waiver
signed by petitioner. The trial court upheld the validity of the waiver and dismissed the
complaint. The appellate court ruled that the waiver was invalid, but also that the
petitioner is not entitled to damages.
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Alexandria R.
RULINGS:
1. YES.
Thus, the question which must be addressed is whether or not private
respondent has successfully proved that he had exercised extraordinary diligence to
prevent the mishap involving his mini-bus. The records before the Court are bereft of
any evidence showing that respondent had exercised the extraordinary diligence
required by law. Curiously, respondent did not even attempt, during the trial before
the court a quo, to prove that he had indeed exercised the requisite extraordinary
diligence. Respondent did try to exculpate himself from liability by alleging that the
mishap was the result of force majeure. But allegation is not proof and here again,
respondent utterly failed to substantiate his defense offorce majeure. To exempt a
common carrier from liability for death or physical injuries to passengers upon the
ground of force majeure, the carrier must clearly show not only that the efficient cause
of the casualty was entirely independent of the human will, but also that it was
impossible to avoid. Any participation by the common carrier in the occurrence of the
injury will defeat the defense of force majeure.
2. We agree with the majority of the Court of Appeals who held that no valid
waiver of her cause of action had been made by petitioner. A waiver, to be valid and
effective, must in the first place be couched in clear and unequivocal terms which
leave no doubt as to the intention of a person to give up a right or benefit which legally
pertains to him. A waiver may not casually be attributed to a person when the terms
thereof do not explicitly and clearly evidence an intent to abandon a right vested in
such person.
The circumstances under which the Joint Affidavit was signed by petitioner
Gatchalian need to be considered. Petitioner testified that she was still reeling from the
effects of the vehicular accident when the purported waiver in the form of the Joint
Affidavit was presented to her for signing; that while reading the same, she
experienced dizziness but that, seeing the other passengers who had also suffered
injuries sign the document, she too signed without bothering to read the Joint
Affidavit in its entirety. Considering these circumstances, there appears substantial
doubt whether petitioner understood fully the import of the Joint Affidavit (prepared
by or at the instance of private respondent) she signed and whether she actually
intended thereby to waive any right of action against private respondent.
Finally, because what is involved here is the liability of a common carrier for
injuries sustained by passengers in respect of whose safety a common carrier must
exercise extraordinary diligence, we must construe any such purported waiver most
strictly against the common carrier. To uphold a supposed waiver of any right to claim
damages by an injured passenger, under circumstances like those exhibited in this
case, would be to dilute and weaken the standard of extraordinary diligence exacted
by the law from common carriers and hence to render that standard unenforceable.
We believe such a purported waiver is offensive to public policy.
3. In case of death or injuries to passengers, a statutory presumption arises that

the common carrier was at fault or had acted negligently "unless it proves that it [had]
observed extraordinary diligence as prescribed in Articles 1733 and 1755." To
overcome this presumption, the common carrier must show to the court that it had
exercised extraordinary diligence to present the injuries. The standard of extraordinary
diligence imposed upon common carriers is considerably more demanding than the
standard of ordinary diligence. A common carrier is bound to carry its passengers
safely "as far as human care and foresight can provide, using the utmost diligence of a
very cautious person, with due regard to all the circumstances".
The records before the Court are bereft of any evidence showing that
respondent had exercised the extraordinary diligence required by law. The obvious
continued failure of respondent to look after the roadworthiness and safety of the bus,
coupled with the driver's refusal or neglect to stop the mini-bus after he had heard
once again the "snapping sound" and the cry of alarm from one of the passengers,
constituted wanton disregard of the physical safety of the passengers, and hence gross
negligence on the part of respondent and his driver.
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4. At the time of the accident, she was no longer employed in a public school. Her
employment as a substitute teacher was occasional and episodic, contingent upon the
availability of vacancies for substitute teachers. She could not be said to have in fact
lost any employment after and by reason of the accident. She may not be awarded
damages on the basis of speculation or conjecture.
Petitioner's claim for the cost of plastic surgery for removal of the scar on her
forehead, is another matter. A person is entitled to the physical integrity of his or her
body; if that integrity is violated or diminished, actual injury is suffered for which
actual or compensatory damages are due and assessable. Petitioner Gatchalian is
entitled to be placed as nearly as possible in the condition that she was before the
mishap. A scar, especially one on the face of the woman, resulting from the infliction
of injury upon her, is a violation of bodily integrity, giving raise to a legitimate claim
for restoration to her conditio ante.
Moral damages may be awarded where gross negligence on the part of the
common carrier is shown. Considering the extent of pain and anxiety which petitioner
must have suffered as a result of her physical injuries including the permanent scar
on her forehead, we believe that the amount of P30,000.00 would be a reasonable
award. Petitioner's claim for P1,000.00 as attorney's fees is in fact even more modest.
5. In the case where fortuitous event or force majeure is the immediate and
proximate cause of the loss, the obligor is exempt from liability non-performance. The
Partidas, the antecedent of Article 1174 of the Civil Code, defines "caso fortuito" as 'an
event that takes place by accident and could not have been foreseen. Examples of this
are destruction of houses, unexpected fire, shipwreck, violence of robber.
In its dissertation on the phrase "caso fortuito" the Enciclopedia Juridica
Española says: 'In legal sense and, consequently, also in relation to contracts, a "caso
fortuito" presents the following essential characteristics: (1) the cause of the
unforeseen and unexpected occurence, or of the failure of the debtor to comply with
his obligation, must be independent of the human will; (2) it must be impossible to
foresee the event which constitutes the "caso fortuito", or if it can be foreseen, it must
be impossible to avoid; (3) the occurrence must be such as to render it impossible for
the debtor to fulfill his obligation in a normal manner; and (4) the obligor must be free
from any participation in the aggravation of the injury resulting to the creditor.
57.
VILLA REY TRANSIT vs. COURT OF APPEALS
G.R. No. L-25499 February 18, 1970
ISSUES:
(1) Whether or not the mishap was due to the result of any unforeseeable fortuitous event
or emergency
(2) What are the number of years to be used as basis of computation
(3) What is the rate at which the losses sustained by respondents should be fixed
(4) Whether or not life expectancy is an essential element in fixing the fixing the amount
recoverable by private respondents
FACTS:
Policronio Quintos, Jr. was riding the petitioner’s bus, when the said bus
frontally hit the rear side of a bullcart filled with hay. The protruding end of the
bamboo pole at the rear of the cart penetrated the windshield of the bus and landed at
Policronio’s face. He died of traumatic shock due to cerebral injuries. Private
respondents are sisters and surviving heirs of the deceased. They brought this action
against Villa Rey Transit for breach of contract of carriage. The trial court found that
the death was caused by the negligence of the bus driver, for whom petitioner was
liable under the contract of carriage with the deceased.
RULINGS:
1. NO.
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The mishap was not the result of any unforeseeable fortuitous event or
emergency but was the direct result of the negligence of the driver of the defendant.
The defendant must, therefore, respond for damages resulting from its breach of
contract for carriage. As the complaint alleged a total damage of only P63,750.00
although as elsewhere shown in this decision the damages for wake and burial
expenses, loss of income, death of the victim, and attorneys fee reach the aggregate of
P79,615.95, this Court finds it just that said damages be assessed at total of only
P63,750.00 as prayed for in plaintiffs' amended complaint.
2. The determination of the indemnity to be awarded to the heirs of a deceased

person has no fixed basis. Much is left to the discretion of the court considering the
moral and material damages involved, and so it has been said that "(t)here can be no
exact or uniform rule for measuring the value of a human life and the measure of
damages cannot be arrived at by precise mathematical calculation, but the amount
recoverable depends on the particular facts and circumstances of each case. The life
expectancy of the deceased or of the beneficiary, whichever is shorter, is an important
factor.' Other factors that are usually considered are: (1) pecuniary loss to plaintiff or
beneficiary; (2) loss of support; (3) loss of service; (4) loss of society; (5) mental
suffering of beneficiaries; and (6) medical and funeral expenses."
Thus, life expectancy is, not only relevant, but, also, an important element in
fixing the amount recoverable by private respondents herein. Although it is not the
sole element determinative of said amount, no cogent reason has been given to
warrant its disregard and the adoption, in the case at bar, of a purely arbitrary
standard, such as a four-year rule. In short, the Court of Appeals has not erred in
basing the computation of petitioner's liability upon the life expectancy of Policronio
Quintos, Jr.
3. With respect to the rate at which the damages shall be computed, petitioner
impugns the decision appealed from upon the ground that the damages awarded
therein will have to be paid now, whereas most of those sought to be indemnified will
be suffered years later. This argument is basically true, and this is, perhaps, one of
the reasons why the Alcantara case points out the absence of a "fixed basis" for the
ascertainment of the damages recoverable in litigations like the one at bar. Just the
same, the force of the said argument of petitioner herein is offset by the fact that,
although payment of the award in the case at bar will have to take place upon the
finality of the decision therein, the liability of petitioner herein had been fixed at the
rate only of P2,184.00 a year, which is the annual salary of Policronio Quintos, Jr. at
the time of his death, as a young "training assistant" in the Bacnotan Cement
Industries, Inc. In other words, unlike the Alcantara case, on which petitioner relies,
the lower courts did not consider, in the present case, Policronio's potentiality and
capacity to increase his future income. Indeed, upon the conclusion of his training
period, he was supposed to have a better job and be promoted from time to time, and,
hence, to earn more, if not considering the growing importance of trade, commerce
and industry and the concomitant rise in the income level of officers and employees
therein much more.
4. NO.
Life expectancy is, not only relevant, but, also, an important element in fixing
the amount recoverable by private respondents herein. Although it is not the sole
element determinative of said amount, no cogent reason has been given to warrant its
disregard and the adoption, in the case at bar, of a purely arbitrary standard, such as
a four-year rule. In short, the Court of Appeals has not erred in basing the
computation of petitioner's liability upon the life expectancy of Policronio Quintos, Jr.
5. We are mainly concerned with the determination of the losses or damages

sustained by the private respondents, as dependents and intestate heirs of the
deceased, and that said damages consist, not of the full amount of his earnings, but of
the support, they received or would have received from him had he not died in
consequence of the negligence of petitioner's agent. In fixing the amount of that
support, We must reckon with the "necessary expenses of his own living", which
should be deducted from his earnings. Thus, it has been consistently held that
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earning capacity, as an element of damages to one's estate for his death by wrongful
act is necessarily his net earning capacity or his capacity to acquire money, "less the
necessary expense for his own living. Stated otherwise, the amount recoverable is not
loss of the entire earning, but rather the loss of that portion of the earnings which the
beneficiary would have received. In other words, only net earnings, not gross earning,
are to be considered that is, the total of the earnings less expenses necessary in the
creation of such earnings or income6 and less living and other incidental expenses.
58.
PEOPLE OF THE PHILIPPINES vs. MATARO
G.R. No. 130378, March 8, 2001
ISSUES:
(2) Whether or not the equipoise rule is applicable in the case at bar?
(3) Whether or not life expectancy formula should be applicable in the case at bar?
(4) Whether or not the recovery of actual damages must be premised upon competent
proof
(5) Whether or not the trial court erred in qualifying the killing as murder.
FACTS:
Accused-appellants were found guilty for the crime of murder, and both were
sentenced to suffer the penalty of reclusion perpetua and to pay the heirs of the
victim.
RULINGS:
1. The Equipoise Rule.
On the "equipoise" rule, the Office of the Solicitor General asserts that positive
and unerring identification made by the witnesses rule out any erroneous
identification, thus the "equipoise" rule need not be applied
2. The appellants question the credibility of Femandez and Guzman. They aver
that during the investigation, a certain Ebalde gave his statements to the police that
the car used by the assailants was a gray Kia Pride. They also point out that the
witnesses of the prosecution did not agree on the number of persons riding the car
which was stopped by Castillo. They likewise raise that during the initial investigation,
the eyewitnesses described Mataro as a man between 35 to 40 years old. Mataro was
only 24 years old at the time of the incident. Finally, they invoke the "equipoise" rule
because their guilt had not been established beyond reasonable doubt.
The Office of the Solicitor General, for its part, asserts that the testimonies of
the witnesses were positive, straightforward and unerring. The appellants were
identified by Femandez in two separate line-ups and during trial. Witness Guzman
likewise identified them during the trial.
3. YES.
The court agrees that the life expectancy formula should be applied. However,
the loss of earning capacity should not be based on the net monthly income of the
deceased. The proper computation should be based on the gross annual income of the
victim minus the necessary and incidental living expenses which the victim would
have incurred if he were alive, estimated at 50%30 of the gross annual income. The
prosecution proved through the Certification of Employment and Compensation31
that the gross annual income (including 13th month pay and bonus) of the deceased
is P65,906.00. Deducting from this the estimated necessary and incidental living
expenses, the net annual income is P32,953.00. Multiplying this by the computed life
expectancy of the victim which is 22 years, the amount of loss of earning capacity
should be P724,966.00.
4. YES.
With respect to actual damages, we have consistently ruled that the recovery of
actual damages must be premised upon competent proof and best evidence obtainable
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by the injured party showing the actual expenses incurred in connection with the
death, wake or burial of the victim. Courts cannot simply assume that damages are
sustained by the injured party, nor can it rely on speculation or guesswork in
determining the fact and amount of damages.
In this case, of the expenses summarized by the injured party, only the one
incurred for funeral services amounting to P25,000.00 is duly evidenced by a
receipt.33 The trial court's award of P1,200.00 for hospital bills, P43,800.00 for
funeral services and P20,000.00 for transportation and representation expenses lacks
sufficient basis and should be deleted.
5. NO.
People v. Teehankee, Jr., 249 SCRA 54 (1995) as follows:
1) the witness' opportunity to view the criminal at the time of the crime;
2) witness' degree of attention at that time;
3) the accuracy of any prior description given by the witness;
4) the level of certainty demonstrated by the witness at the identification;
5) the length of time between the crime and the identification; and
6) the suggestiveness of the identification procedure.
The Court held that in their view, these requirements were met. In the instant
case, there is no question that both witnesses had the opportunity to view the incident
as it unfolded before them with a degree of attention that allowed them to take in the
important details and recall them clearly. Moreover, as repeatedly stressed, appellate
court should accord to the factual findings of trial courts and their evaluation great
weight and respect concerning the credibility of witnesses. The conditions of visibility
being favorable and these witnesses not appearing to be biased, the conclusion of trial
courts regarding the identity of the malefactors should normally be accepted.
The SC also held that the trial court did not err in qualifying the killing as
murder. There was treachery in this case since, as testified to by prosecution witness
Fernandez, the victim had already dismissed the appellants after they talked to him.
The victim was deliberately allowed to enjoy a false sense of security. They shot the
victim when the latter had his hands raised. The SC therefore affirmed the ruling of
the lower court, but made modifications with the costs to be paid by the accused.
59.
PNOC SHIPPING AND TRANSPORT CORPORATION vs. COURT OF APPEALS
G.R. No. 107518, October 8, 1998
ISSUES:
(1) Whether or not price quotations are considered commercial list
(2) Whether or not it can be admissible in evidence
(3) Whether or not the court has jurisdiction over the case
(4) Whether or not he is required to prove the actual amount of loss with reasonable
degree of certainty premised upon competent proof and on the best evidence available.
(5) What is the exceptions to the hearsay rule?
FACTS:
This is a civil case for damages arising from a sea collision incident when
plaintiff's tanker hit respondent's fishing boat, causing the boat to sink.
The lower court and CA ruled in favor of respondent on the basis of
documentary exhibits presented, mainly the price quotations. These price quotations
were issued personally to Del Rosario who requested for them from dealers of
equipment similar to the ones lost at the collision of the two vessels. However, these
are not published in any list, register, periodical or other compilation nor containing
data of everyday professional need and relied upon in the work of the occupation.
RULINGS:
1. NO.
Price quotations are not within the purview of commercial lists as these are not
standard handbooks or periodicals, containing data of everyday professional need and
relied upon in the work of the occupation. These are simply letters responding to the
queries of Del Rosario.
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The price quotations are ordinary private writings which under the Revised
Rules of Court should have been proffered along with the testimony of the authors
thereof. Del Rosario could not have testified on the veracity of the contents of the
writings even though he was the seasoned owner of a fishing fleet because he was not
the one who issued the price quotations.
A document is a commercial list if:
(1) it is a statement of matters of interest to persons engaged in an occupation;
(2) such statement is contained in a list, register, periodical or other published
compilation;
(3) said compilation is published for the use of persons engaged in that occupation, and
(4) it is generally used and relied upon by persons in the same occupation.
2. YES.
To be sure, letters and telegrams are admissible in evidence but these are,
however, subject to the general principles of evidence and to various rules relating to
documentary evidence. Hence, in one case, it was held that a letter from an
automobile dealer offering an allowance for an automobile upon purchase of a new
automobile after repairs had been completed, was not a "price current" or "commercial
list" within the statute which made such items presumptive evidence of the value of
the article specified therein. The letter was not admissible in evidence as a
"commercial list" even though the clerk of the dealer testified that he had written the
letter in due course of business upon instructions of the dealer.
But even on the theory that the Court of Appeals correctly ruled on the
admissibility of those letters or communications when it held that unless "plainly
irrelevant, immaterial or incompetent," evidence should better be admitted rather than
rejected on "doubtful or technical grounds," 44 the same pieces of evidence, however,
should not have been given probative weight. This is a distinction we wish to point
out. Admissibility of evidence refers to the question of whether or not the circumstance
(or evidence) is to considered at all. 45 On the other hand, the probative value of
evidence refers to the question of whether or not it proves an issue. 46 Thus, a letter
may be offered in evidence and admitted as such but its evidentiary weight depends
upon the observance of the rules on evidence. Accordingly, the author of the letter
should be presented as witness to provide the other party to the litigation the
opportunity to question him on the contents of the letter. Being mere hearsay
evidence, failure to present the author of the letter renders its contents suspect. As
earlier stated, hearsay evidence, whether objected to or not, has no probative value.
3. Respondent court held that following the ruling in Sun Insurance Ltd. v.
Asuncion, 22 the additional docket fee that may later on be declared as still owing the
court may be enforced as a lien on the judgment.
In assailing the Court of Appeals' decision, petitioner posits the view that the
award of P6,438,048 as actual damages should have been in light of these
considerations, namely: (1) the trial court did not base such award on the actual value
of the vessel and its equipment at the time of loss in 1977; (2) there was no evidence
on extraordinary inflation that would warrant an adjustment of the replacement cost
of the lost vessel, equipment and cargo; (3) the value of the lost cargo and the prices
quoted in respondent's documentary evidence only amount to P4,336,215.00; (4)
private respondent's failure to adduce evidence to support its claim for unrealized
profit and business opportunities; and (5) private respondent's failure to prove the
extent and actual value of damages sustained as a result of the 1977 collision of the
vessels.
Under Article 2199 of the Civil Code, actual or compensatory damages are those
awarded in satisfaction of, or in recompense for, loss or injury sustained. They
proceed from a sense of natural justice and are designed to repair the wrong that has
been done, to compensate for the injury inflicted and not to impose a penalty. 24 In
actions based on torts or quasi-delicts, actual damages include all the natural and
probable consequences of the act or omission complained of. 25 There are two kinds of
actual or compensatory damages: one is the loss of what a person already possesses
(daño emergente), and the other is the failure to receive as a benefit that which would
have pertained to him (lucro cesante). Thus:
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Where goods are destroyed by the wrongful act of the defendant the plaintiff is
entitled to their value at the time of destruction, that is, normally, the sum of money
which he would have to pay in the market for identical or essentially similar goods,
plus in a proper case damages for the loss of use during the period before
replacement. In other words, in the case of profit-earning chattels, what has to be
assessed is the value of the chattel to its owner as a going concern at the time and
place of the loss, and this means, at least in the case of ships, that regard must be
had to existing and pending engagements, . . .
. . . . If the market value of the ship reflects the fact that it is in any case
virtually certain of profitable employment, then nothing can be added to that value in
respect of charters actually lost, for to do so would be pro tanto to compensate the
plaintiff twice over. On the other hand, if the ship is valued without reference to its
actual future engagements and only in the light of its profit-earning potentiality, then
it may be necessary to add to the value thus assessed the anticipated profit on a
charter or other engagement which it was unable to fulfill. What the court has to
ascertain in each case is the "capitalised value of the vessel as a profit-earning
machine not in the abstract but in view of the actual circumstances," without, of
course, taking into account considerations which were too remote at the time of the
loss. 27 [Emphasis supplied].
4. YES.
As stated at the outset, to enable an injured party to recover actual or
compensatory damages, he is required to prove the actual amount of loss with
reasonable degree of certainty premised upon competent proof and on the best
evidence available. 28 The burden of proof is on the party who would be defeated if no
evidence would be presented on either side. He must establish his case by a
preponderance of evidence which means that the evidence, as a whole, adduced by
one side is superior to that of the other. 29 In other words, damages cannot be
presumed and courts, in making an award must point out specific facts that could
afford a basis for measuring whatever compensatory or actual damages are borne.
5. It is true that one of the exceptions to the hearsay rule pertains to "commercial
lists and the like" under Section 45, Rule 130 of the Revised Rules on Evidence. In this
respect, the Court of Appeals considered private respondent's exhibits as "commercial
lists." It added, however, that these exhibits should be admitted in evidence "until
such time as the Supreme Court categorically rules on the admissibility or
inadmissibility of this class of evidence" because "the reception of these documentary
exhibits (price quotations) as evidence rests on the sound discretion of the trial court."
38 Reference to Section 45, Rule 130, however, would show that the conclusion of the
Court of Appeals on the matter was arbitrarily arrived at. This rule states:
Commercial lists and the like. - Evidence of statements of matters of interest to
persons engaged in an occupation contained in a list, register, periodical, or other
published compilation is admissible as tending to prove the truth of any relevant matter
so stated if that compilation is published for use by persons engaged in that occupation
and is generally used and relied upon by them there.
Under Section 45 of the aforesaid Rule, a document is a commercial list if: (1) it
is a statement of matters of interest to persons engaged in an occupation; (2) such
statement is contained in a list, register, periodical or other published compilation; (3)
said compilation is published for the use of persons engaged in that occupation, and
(4) it is generally used and relied upon by persons in the same occupation.
60.
PHILIPPINE AIRLINES, INCORPORATED vs. COURT OF APPEALS
G.R. No. 123238, September 22, 2008
ISSUES:
(1) Whether or not there is a contract of carriage
(2) Whether or not Philippine Airlines is liable for damages
(3) Whether or not moral damages may be recovered
(4) How was gross negligence defined in the case at bar?
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(5) Whether or not Philippine Airlines exercised due diligence as required for by law
FACTS:
The spouses Buncio purchased from PAL two plane tickets for their 2 minor
children. Since they will travel as unaccompanied minors, PAL required the Buncios
accomplished an indemnity bond as required. PAL agreed to transport the minors from
Manila to San Francisco, and upon arrival in SF, to transport through a connecting
flight to Los Angeles, via United Airways where they will be met by their grandmother
at the LAX.
When the children arrived at SF airport, United Airways refused to take them
aboard because PAL’s personnel in SF could not produce the indemnity bond
submitted by the Buncios, which was lost by PAL’s personnel during the previous
stop-over in Honolulu. Subsequently, Mr. Strigl, Lead Traffic Agent of PAL in SF, took
the children to his residence where they stayed overnight.
When UA’s airplane landed in LAX, Mrs. Regalado, the grandmother, found no
children and could not get any answer as to their whereabouts. Next day, the minors
boarded a Western Airlines plane bound for LA where they were met by Mrs. Regalado.
PAL’s personnel had previously informed her of the late arrival.
The Buncios sent a demand for damages for the gross negligence and
inefficiency of its employees, which went unheeded. Hence, a complaint was filed.
Petitioner denied that the loss of the indemnity bond was caused by the gross
negligence and malevolent conduct of its personnel. Petitioner averred that it always
exercised the diligence of a good father of the family in the selection, supervision and
control of its employees. In addition, the children were personally escorted by Strigl,
and the latter exerted efforts to make the connecting flight of Deanna and Nikolai to
Los Angeles possible. Further, they were not left unattended from the time they were
stranded in San Francisco until they boarded Western Airlines for a connecting flight
to Los Angeles.
The RTC held PAL liable for damages for breach of contract of carriage and
awarded moral and exemplary damages plus attorney’s fees and costs of suit. The CA
affirmed the RTC in toto.
RULINGS:
1. YES.
When an airline issues a ticket to a passenger, confirmed for a particular flight
on a certain date, a contract of carriage arises.
The passenger has every right to expect that he be transported on that flight
and on that date, and it becomes the airline’s obligation to carry him and his luggage
safely to the agreed destination without delay. If the passenger is not so transported or
if in the process of transporting, he dies or is injured, the carrier may be held liable for
a breach of contract of carriage.
2. YES.
The foregoing circumstances reflect petitioner's utter lack of care for and
inattention to the welfare of Deanna and Nikolai as unaccompanied minor passengers.
They also indicate petitioner's failure to exercise even slight care and diligence in
handling the indemnity bond. Clearly, the negligence of petitioner was so gross and
reckless that it amounted to bad faith.
It is worth emphasizing that petitioner, as a common carrier, is bound by law to
exercise extraordinary diligence and utmost care in ensuring for the safety and welfare
of its passengers with due regard for all the circumstances.19 The negligent acts of
petitioner signified more than inadvertence or inattention and thus constituted a
radical departure from the extraordinary standard of care required of common
carriers.
3. YES.
In breach of contract of air carriage, moral damages may be recovered where (1)
the mishap results in the death of a passenger; or (2) where the carrier is guilty of
fraud or bad faith; or (3) where the negligence of the carrier is so gross and reckless as
to virtually amount to bad faith.
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The purpose of awarding moral damages is to enable the injured party to obtain
means, diversion or amusement that will serve to alleviate the moral suffering he has
undergone by reason of defendant's culpable action.26 On the other hand, the aim of
awarding exemplary damages is to deter serious wrongdoings.
4. Gross negligence implies a want or absence of or failure to exercise even slight

care or diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them.
Petitioner was fully aware that the children were travelling as unaccompanied
minors and require special care. They also knew that the indemnity bond was required
for the children to make the connecting flight. Yet, it did not exercise utmost care in
handling the indemnity bond resulting in its loss. This was the proximate loss of the
failure of the minors to make their connecting flight. This manifests that PAL did not
check or verify if the indemnity bond was in its custody before leaving Honolulu.
5. NO.
Petitioner was fully aware that the children were travelling as unaccompanied
minors and require special care. They also knew that the indemnity bond was required
for the children to make the connecting flight. Yet, it did not exercise utmost care in
handling the indemnity bond resulting in its loss. This was the proximate loss of the
failure of the minors to make their connecting flight. This manifests that PAL did not
check or verify if the indemnity bond was in its custody before leaving Honolulu.
The foregoing circumstances reflect petitioner’s utter lack of care for and
inattention to the welfare of Deanna and Nikolai as unaccompanied minor passengers.
They also indicate petitioner’s failure to exercise even slight care and diligence in
handling the indemnity bond. Clearly, the negligence of petitioner was so gross and
reckless that it amounted to bad faith.
61.
EXPERTRAVEL & TOURS, INC., vs. COURT OF APPEALS
G.R. No. 130030 June 25, 1999
ISSUES:
(1) Whether or not moral damages for negligence or quasi-delict that did not result to
physical injury may be awarded to Lo
(2) Whether or not moral damages can be recovered in a clearly unfounded suit
(3) What is the special rule laid down in the case at bar?
(4) What is the rationale behind the special rule?
(5) What are the required conditions for moral damages to be awarded?
FACTS:
Expert travel & Tours, Inc. issued to Ricardo Lo 4 round-trip plane tickets for
Hongkong with hotel accommodations and transfers for P39,677.20
Failing to pay the amount due, Expert filed a complaint for recovery plus
damages.
The Court of Appeals affirmed the decision of the Regional Trial Court, Lo
remitted the Monte de Piedad Check for P42,175.20 to Expert's chairperson Ms. Ma.
Rocio de Vega who in turn issued City Trust Check of P50,000
RULINGS:
1. NO.
An award of moral damages would require certain conditions to be met; to wit:
(1) First, there must be an injury, whether physical, mental or psychological, clearly
sustained by the claimant; (2) second, there must be a culpable act or omission
factually established; (3) third, the wrongful act or omission of the defendant is the
proximate cause of the injury sustained by the claimant; and (4) fourth, the award of
damages is predicated on any of the cases stated in Article 2219. in culpa contractual
or breach of contract, moral damages may be recovered when the defendant acted in
bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton
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disregard of his contractual obligation and, exceptionally, when the act of breach of
contract itself is constitutive of tort resulting in physical injuries
By special rule in Article 1764, in relation to Article 2206, of the Civil Code,
moral damages may also be awarded in case the death of a passenger results from a
breach of carriage
In culpa aquiliana, or quasi-delict and contracts when breached by tort
(a) when an act or omission causes physical injuries, or (b) where the defendant
is guilty of intentional tort
In culpa criminal, moral damages could be lawfully due when the accused is
found guilty of physical injuries, lascivious acts, adultery or concubinage, illegal or
arbitrary detention, illegal arrest, illegal search, or defamation, Malicious prosecution
can also give rise to a claim for moral damages
2. NO.
Although the institution of a clearly unfounded civil suit can at times be a legal
justification for an award of attorney's fees, such filing, however, has almost invariably
been held not to be a ground for an award of moral damages. The rationale for the rule
is that the law could not have meant to impose a penalty on the right to litigate. The
anguish suffered by a person for having been made a defendant in a civil suit would be
no different from the usual worry and anxiety suffered by anyone who is haled to
court, a situation that cannot by itself be a cogent reason for the award of moral
damages. If the rule were otherwise, then moral damages must every time be awarded
in favor of the prevailing defendant against an unsuccessful plaintiff.
3. By special rule in Article 1764, in relation to Article 2206, of the Civil Code,
moral damages may also be awarded in case the death of a passenger results from a
breach of carriage. In culpa aquiliana, or quasi-delict, (a) when an act or omission
causes physical injuries, or (b) where the defendant is guilty of intentional tort,8 moral
damages may aptly be recovered. This rule also applies, as aforestated, to contracts
when breached by tort. In culpa criminal, moral damages could be lawfully due when
the accused is found guilty of physical injuries, lascivious acts, adultery or
concubinage, illegal or arbitrary detention, illegal arrest, illegal search, or defamation.
Malicious prosecution can also give rise to a claim for moral damages.
The term "analogous cases," referred to in Article 2219, following the ejusdem
generis rule, must be held similar to those expressly enumerated by the law.
4. The rationale for the rule is that the law could not have meant to impose a
penalty on the right to litigate. The anguish suffered by a person for having been made
a defendant in a civil suit would be no different from the usual worry and anxiety
suffered by anyone who is haled to court, a situation that cannot by itself be a cogent
reason for the award of moral damages. If the rule were otherwise, then moral
damages must every time be awarded in favor of the prevailing defendant against an
unsuccessful plaintiff
5. An award of moral damages would require certain conditions to be met; to wit:

(1) First, there must be an injury, whether physical, mental or psychological,
clearly sustained by the claimant;
(2) second, there must be a culpable act or omission factually established;
(3) third, the wrongful act or omission of the defendant is the proximate cause
of the injury sustained by the claimant; and
(4) fourth, the award of damages is predicated on any of the cases stated in
Article 2219.6
62.
ZULUETA vs. PAN AMERICAN
G.R. No. 28589, February 29, 1972
ISSUES:
(1) Whether or not damages may be awarded
(2) What is the rationale behind exemplary damages or corrective damages?
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Alexandria R.
(3) Whether the award of P1,000,000 as moral damages was proper and justified by the
circumstances.
(4) Whether or not plaintiff was guilty of contributory negligence
(5) Whether or not the reason why plaintiff went to the beach was to relieve himself, as
testified to by him, or to remain in Wake Island because he had quarreled with his
wife, as contended by PANAM's counsel.
FACTS:
Zulueta and his family were passengers of Pan American World Airways
travelling from Honolulu to Manila. In one stopover, they were advised that they could
disembark for about 30 minutes. However, Zulueta almost missed the flight because
he came late (due to the defective announcing system). He was asked to open his bags
but the employees of the airlines found nothing. Later on, he was asked to go out of
the plane. He was left at Wake Island and was able to return to the Philippines 2 days
after.
RULINGS:
1. YES.
Award for exemplary damages:
It is urged by the defendant that exemplary damages are not recoverable in
quasi-delicts, pursuant to Article 2231 of our Civil Code, except when the defendant
has acted with "gross negligence," and that there is no specific finding that it had so
acted. It is obvious, however, that in off-loading plaintiff at Wake Island, under the
circumstances heretofore adverted to, defendant's agents had acted with malice
aforethought and evident bad faith. If "gross negligence" warrants the award of
exemplary damages, with more reason is its imposition justified when the act
performed is deliberate, malicious and tainted with bad faith.
Award for moral damages:
In fact, Article 2217 of the Civil Code of the Philippines explicitly provides that
"(t)hough incapable of pecuniary computation, moral damages may be recovered if
they are the proximate result of the defendant's wrongful act or omission." Hence, "(n)o
proof pecuniary loss necessary" — pursuant to Article 2216 of the same Code — "in
order that moral ... damages may be adjudicated." And "(t)he assessment of such
damages ... is left to the discretion of the court" - said article adds - "according to the
circumstances of each case."
2. The rationale behind exemplary or corrective damages is, as the name implies,
to provide an example or correction for public good. Defendant having breached its
contracts in bad faith, the court, as stated earlier, may award exemplary damages in
addition to moral damages (Articles 2229, 2232, New Civil Code.)
3. NO.
It has been held that the discretion in fixing moral damages lies in the trial
court. Among the factors courts take into account in assessing moral damages are the
professional, social, political and financial standing of the offended parties on one
hand, and the business and financial position of the offender on the other.
In comparatively recent cases in this jurisdiction, also involving breach of
contract of air carriage, this Court awarded the amount of P25,000, where plaintiff, a
first-class passenger in an Air France plane from Manila to Rome was, in Bangkok,
forced by the manager of the airline company to leave his first class accommodation
after he was already seated because there was a white man who, the manager alleged,
had a "better right" to the seat ;the amount of P200,000, where plaintiffs, upon
confirmation of their reservation in defendant airline's flight from Tokyo to San
Francisco were issued first class tickets, but upon arrival in Tokyo were informed that
there was no accommodation for them in the first class compartment and told they
could not go unless they took the tourist class — in both of which cases the Court
found the airline companies to have acted in bad faith, or in a wanton, reckless and
oppressive manner, justifying likewise the award of exemplary damages.
4. YES.
Page 114
Thiam, Patrice
Alexandria R.
It is next argued that plaintiff was, also, guilty of contributory negligence for
failure to reboard the plane within the 30 minutes announced before the passengers
debarked therefrom.
This might have justified a reduction of the damages, had plaintiff been
unwittingly left by the plane, owing to the negligence of PANAM personnel, or even,
perhaps, wittingly, if he could not be found before the plane's departure.
It does not, and cannot have such justification in the case at bar, plaintiff
having shown up before the plane had taken off, and he having been off-loaded
intentionally and with malice aforethought, for his "belligerent" attitude, according to
Captain Zentner; for having dared — despite his being one of "three monkeys," — the
term used by Captain Zentner to refer to the Zulueta family — to answer him back —
when he (Captain Zentner)5 said: "what in the hell do you think you are ?" — in a way
he had "not been spoken to" in his "whole adult life," in the presence of the passengers
and other PANAM employees; for having responded to a command of either Zentner or
Sitton to open his (plaintiff's) bags, with a categorical refusal and a challenge for
Zentner or Sitton to open the bags without a search warrant therefor, thereby making
manifest the lack of authority of the aforementioned representative of PANAM to issue
said command and exposing him to ridicule before said passengers and employees.
Besides, PANAM's own witness and employee, Wayne Pendleton, testified the
plane could not take off at 4:30, as scheduled, because "we were still waiting for two
(2) local passengers."
5. NO.
The latters contention however, is utterly devoid of merit. To begin with,
plaintiff's testimony about what he did upon reaching the beach is uncontradicted.
Secondly, other portions of his testimony — such as, for instance, that the flight was
somewhat rough, shortly before reaching Wake Island; that there were quite a number
of soldiers in the plane and, later, in the terminal building; that he did not voluntarily
remain in Wake Island, but was "off-loaded" by PANAM's agent therein — are borne
out by the very evidence for the defense. Thirdly, PANAM's efforts to show that plaintiff
had decided to remain in the Island because he had quarreled with Mrs. Zulueta —
which is ridiculous — merely underscores the artificious nature of PANAM's
contention.
63.
JAPAN AIRLINES vs. THE COURT OF APPEALS
G.R. No. 11866, August 7, 1998
ISSUES:
(1) Whether or not JAL has the obligation to shoulder the hotel and meal expenses even if
the delay was caused by force majeure
(2) Whether or not the award of damages was proper
(3) What is the general rule laid down in the case at bar?
(4) Whether or not JAL cannot be held responsible for the delayed arrival in Manila, it was
nevertheless liable for their living expenses during their unexpected stay in Narita
since airlines have the obligation to ensure the comfort and convenience of its
passengers
(5) Whether or not JAL is completely absolved from liability
FACTS:
Private respondents boarded a JAL flight in San Francisco, California bound for
Manila. It included an overnight stopover at Narita, Japan at JAL’s expense. Due to
the Mt. Pinatubo eruption, private respondents’ trip to Manila was cancelled. JAL
rebooked all the Manila-bound passengers and paid for the hotel expenses of their
unexpected overnight stay. The flight of private respondents was again cancelled due
to NAIA’s indefinite closure. JAL informed the respondents that it would no longer
defray their hotel and accommodation expense during their stay in Narita. The
respondents were forced to pay for their accommodations and meal expenses for 5
days.
Page 115
Thiam, Patrice
Alexandria R.
RULINGS:
1. NO.
Accordingly, there is no question that when a party is unable to fulfill his
obligation because of "force majeure," the general rule is that he cannot be held liable
for damages for non-performance. Corollarily, when JAL was prevented from resuming
its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or
damages in the form of hotel and meal expenses the stranded passengers incurred,
cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel expenses of
respondents for their unexpected overnight stay on June 15, 1991.
2. YES.
The award of nominal damages is in order. Nominal damages are adjudicated in
order that a right of a plaintiff, which has been violated or invaded by the defendant,
may be vindicated or recognized and not for the purpose of indemnifying any loss
suffered by him. 12 The court may award nominal damages in every obligation arising
from any source enumerated in article 1157, or in every case where any property right
has been invaded.
3. Accordingly, there is no question that when a party is unable to fulfill his

obligation because of "force majeure," the general rule is that he cannot be held liable
for damages for non-performance.6 Corollarily, when JAL was prevented from
resuming its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever
losses or damages in the form of hotel and meal expenses the stranded passengers
incurred, cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel
expenses of respondents for their unexpected overnight stay on June 15, 1991.
4. NO.
While we sympathize with the private respondents' plight, we are unable to
accept this contention.
We are not unmindful of the fact that in a plethora of cases we have
consistently ruled that a contract to transport passengers is quite different in kind,
and degree from any other contractual relation. It is safe to conclude that it is a
relationship imbued with public interest. Failure on the part of the common carrier to
live up to the exacting standards of care and diligence renders it liable for any
damages that may be sustained by its passengers. However, this is not to say that
common carriers are absolutely responsible for all injuries or damages even if the
same were caused by a fortuitous event. To rule otherwise would render the defense of
"force majeure," as an exception from any liability, illusory and ineffective.
5. NO.
We are not prepared, however, to completely absolve petitioner JAL from any
liability.
It must be noted that private respondents bought tickets from the United States
with Manila as their final destination. While JAL was no longer required to defray
private respondents' living expenses during their stay in Narita on account of the
fortuitous event, JAL had the duty to make the necessary arrangements to transport
private respondents on the first available connecting flight to Manila. Petitioner JAL
reneged on its obligation to look after the comfort and convenience of its passengers
when it declassified private respondents from "transit passengers" to "new passengers"
as a result of which private respondents were obliged to make the necessary
arrangements themselves for the next flight to Manila. Private respondents were
placed on the waiting list from June 20 to June 24.
To assure themselves of a seat on an available flight, they were compelled to
stay in the airport the whole day of June 22, 1991 and it was only at 8:00 p.m. of the
aforesaid date that they were advised that they could be accommodated in said flight
which flew at about 9:00 a.m. the next day.
64.
R TRANSPORT CORPORATION vs. EDUARDO PANTE
G.R. No. 162104, September 15, 2009
Page 116
Thiam, Patrice
Alexandria R.
ISSUES:
(1) Whether or not Petitioner is liable for damages despite Pante not presenting
substantial evidence to support his claim.
(2) Whether or not the CA and TC erred in awarding damages in favour of Pante in the
amount of P22,000 based on a statement issued by the Baliuag Hospital and not
based on the receipt.
(3) Whether or not an award of exemplary damages is proper
(4) Whether or not petitioner exercised extraordinary diligence as provided for by law
(5) Whether or not petitioner is deprived of their fundamental right to due process
FACTS:
R Transport operates a bus line which transports passengers from Cubao,
Quezon City to Gapan, Nueva Ecija. Pante rode a bus from Cubao (P48 fare). Along a
highway in Bulacan, the bus hit a tree and a house due to the reckless driving of
Johnny Mediquia. Pante sustained a “laceration frontal area, with fracture of the right
humerous”. His operation, confinement, and medications caused him P30K. He
became unemployed as Goldilocks refused to re-employ him due to his condition. He
had to undergo a second operation after four years. He spent another P15k. The only
assistance petitioner gave was the amount of P7K to reimburse him for the stainless
steel plate placed in his arm. Other than that, petitioner refused to assist Pante.
Pante sued for damages. Petitioner in its answer denied fault claiming that it
exercised the diligence of a good father of the family in the selection and supervision of
employees, and that the accident was force majeure.
The case went on for 7 years. The delays were due to the multiple
postponements and unexplained absence of petitioner’s counsel. Its rights to cross-
examine and present evidence were eventually forfeited as a consequence.
RULINGS:
1. YES. Petitioner is liable for damages.
Petitioner, as a common carrier, is expected to exercise extraordinary diligence,
and has the duty to transport its passengers safely to their destination.
ARTICLE 1756 OF THE CIVIL CODE: In case of death or injuries to passengers,
common carriers are presumed at fault or negligent unless they are able to prove their
exercise of extraordinary diligence.
ARTICLE 1759: Common carriers are also liable for the negligence of their
employees.
The liability of common carriers does not cease upon proof that they exercised
extraordinary diligence of a good father of the family in the selection and supervision
of employees.
Petitioner cannot claim that it was denied due process which prevented it from
presenting evidence in his defense. Due to the unexplained absences of his counsel,
the hearings had to be constantly postponed, which resulted in a 7-year delay of the
case. It was given the opportunity to present its evidence, but was considered to have
waived its right.
2. YES.
The Court held that this was without merit since in another case, the Court
awarded damages for hospitalization expenses based on the statement of account
issued by the Makati Medical Center.
The Court also affirmed the award of moral damages, citing Spouses Ong vs. CA
where moral damages were given to passengers who suffered physical injuries. It is the
usual practice to award moral damages for physical injuries sustained. Pante here
suffered physical pain, mental anguish and anxiety as a result of the accident.
P50,000 is proper.
3. YES.
An award of exemplary damages is also proper, as the driver was manning the
bus in a reckless, negligent, and imprudent manner. This will provide as an example
or as a correction for the public good.
4. NO.
Page 117
Thiam, Patrice
Alexandria R.
In this case, the testimonial evidence of respondent showed that petitioner,

through its bus driver, failed to observe extraordinary diligence, and was, therefore,
negligent in transporting the passengers of the bus safely to Gapan, Nueva Ecija on
January 27, 1995, since the bus bumped a tree and a house, and caused physical
injuries to respondent. Article 1759 of the Civil Code explicitly states that the common
carrier is liable for the death or injury to passengers through the negligence or willful
acts of its employees, and that such liability does not cease upon proof that the
common carrier exercised all the diligence of a good father of a family in the selection
and supervision of its employees. Hence, even if petitioner was able to prove that it
exercised the diligence of a good father of the family in the selection and supervision of
its bus driver, it is still liable to respondent for the physical injuries he sustained due
to the vehicular accident
5. NO.
Petitioner cannot complain that it was denied due process when the trial court
waived its right to present evidence, because it only had itself to blame for its failure to
attend the hearing scheduled for reception of its evidence on June 19, 2002. The trial
court stated, thus:
It is noteworthy to state that during the course of the proceeding of this case,
defendant (petitioner) and its counsel hardly appeared in court and only made
innumerable motions to reset the hearings to the point that this case x x x dragged
[on] for seven years from its filing up to the time that it has been submitted for
decision. And for the unexplained absence of counsel for defendant in the hearing set
last June 19, 2002 despite repeated resetting, upon motion of the counsel for plaintiff
(respondent), Atty. Ireneo Romano, its right to present its evidence was considered
waived.
65.
G.R. No. 51910, August 10, 1989
ISSUES:
FACTS:
Page 118
Thiam, Patrice
Alexandria R.
RULINGS:
1. YES.
Fairwind.

Page 119
Thiam, Patrice
Alexandria R.

66.
NATIONAL FOOD AUTHORITY vs. COURT OF APPEALS
G.R. No. 96453, August 4, 1999
ISSUES:
(1) Whether or not petitioners are liable for deadfreight
(2) Whether or not petitioners may be held liable for demurrage
(3) Whether or not personal civil liability may attach to the officers of NFA
FACTS:
National Food Authority (NFA), thru its officers, entered into a “Letter of
Agreement for Vessel/Barge Hire with Hongfil for the shipment of 200,000 bags of
corn grains from Cagayan de Oro City to Manila.
The loading of bags of corn grains in the vessel commenced but it took a longer
period of 21 days, 15 hours, and 18 minutes to finish than as was certified by the
arrastre firm as there was a strike staged by the arrastre workers in view of the refusal
of the striking stevedores to attend to their work. The vessel was allowed to depart for
the port of Manila and arrived there, but unfortunately, it took a longer period of 20
days, 14 hours and 33 minutes to finish the unloading than the discharging rate
certified by the Port of Manila, due to the unavailability of a berthing space for the
vessel M/V CHARLIE/DIANE. Only 166,798 bags were unloaded at the Port of Manila.
After the discharging was completed, NFA paid Hongfil the amount of
P1,006,972.11 covering the shipment of corn grains. Thereafter, Hongfil sent its billing
to NFA claiming payment for freight covering the shut-out load or deadfreight as well
as demurrage, allegedly sustained during the loading and unloading of subject
shipment of corn grains. When NFA refused to pay the amount reflected in the billing,
Hongfil brought the present action against NFA.
RULING:
1. YES.
It bears stressing that subject Letter of Agreement is considered a Charter
Party. A charter party is classified into (1) “bareboat” or “demise” charter and (2)
contract of affreightment. Subject contract is one of affreightment, whereby the owner
of the vessel leases part or all of its space to haul goods for others. It is a contract for
special service to be rendered by the owner of the vessel. Under such contract, the
ship retains possession, command, and navigation of the ship, the charterer or
freighter merely having use of the space in the vessel in return for his payment of the
charter hire.
Under the law, the cargo not loaded is considered a deadfreight. It is the
amount paid by or recoverable from a charterer of a ship for the portion of the ship’s
capacity the latter contracted for but failed to occupy. Explicit and succinct is the law
that the liability for deadfreight is on the charterer. (Article 680 of the Code of
Commerce).
2. NO.
Demurrage is the sum fixed in a charter party as a remuneration to the owner
of the ships for the detention of his vessel beyond the number of days allowed by the
charter party for loading or unloading or for sailing. Liability for demurrage, using the
word in its technical sense, exists only when expressly stipulated in the contract.
Page 120
Thiam, Patrice
Alexandria R.
Shipper or charterer is liable for the payment of demurrage claims when he

exceeds the period for loading and unloading as agreed upon or the agreed “laydays”.
The period for such may or may not be stipulated in the contract. A charter party may
either provide for a fixed laydays or contain general or indefinite words such as
“customary quick dispatch” or “as fast as the streamer can load”. In the case at bar,
the charter party provides merely for a general or indefinite words of “customary quick
dispatch”. Such stipulation implies that loading and unloading of the cargo should be
within a reasonable time.
The charterer NFA could not be held liable for demurrage for it appears that
cause of delay was not imputable to either of the parties. The cause of delay during the
loading was the strike staged by the crew of the arrastre operator, and the
unavailability of a berthing space for the vessel during the unloading. Here, the Court
holds that the delay sued upon was still within the “reasonable time” embraced in the
stipulation of “Customary Quick Dispatch”.
Furthermore, considering the subject contract of affreightment contains an
express provision “Demurrage/Dispatch: NONE”, the same left the parties with no
recourse but to apply the literal meaning of such stipulation.
3. NO.
On the issue of whether personal civil liability may attach to the officers of NFA,
the court rules in the negative.
In the case of MAM Realty vs. NLRC, the Court held that a corporation, being a
juridical entity, may act only through its officers, directors and employees. Obligations
incurred or contracted by them, acting as such corporate agents, are not theirs but
the direct accountability of the corporation they represent.
The exceptions wherein personal civil liability may attach to a corporate officer
are:
a. When directors and trustees or, in appropriate cases, the officers of a corporation —
vote for or assent to patently unlawful acts of the corporation; act in bad faith or with
gross negligence in directing the corporate affairs; are guilty of conflict of interest to
the prejudice of the corporation, its stockholders or members, and other persons.
b. When a director or officer has consented to the issuance of watered stocks, or who,
having knowledge thereof, did not forth with file with the corporate secretary his
written objection thereto.
c. When a director, trustee or officer has contractually agreed or stipulated to hold
himself personally and solidarily liable with the corporation.
d. When a director, trustee or officer is made, by specific provision of law, personally
liable for his corporate action.21 (emphasis supplied)
e. The present case under scrutiny does not fall under any of such exceptions. A careful
perusal of the contract litigated upon reveals that the petitioners, as officers of NFA,
did not bind themselves to be personally liable nor did they ink any undertaking that
should NFA fail to pay Hongfil's claims, they would be personally liable. Hongfil has
not cited any provision of law under which the officers of NFA are liable under the
contract entered into.
What is more, there is nothing on record to show that the petitioner-officers
acted in bad faith or were guilty of gross negligence, to warrant personal liability.
Neither the trial court nor the Court of Appeals found of bad faith or gross negligence
on the part of the said officers of NFA.
4. Article 680 of the Code of Commerce provides that a charterer who does not complete
the full cargo he bound himself to ship shall pay the freightage of the amount he fails
to ship, if the captain does not take other freight to complete the load of the vessel, in
which case the first charterer shall pay the difference, should there be any.
5. Article 656 of the Code of Commerce clearly provides that, if in the charter party
the time in which the loading or unloading are to take place is not stated, the usages
of the port where these acts are to take place shall be observed. After the stipulated
customary period has passed, and there is no express provision in the charter party
fixing the indemnity for delay, the Captain shall be entitled to demand demurrage for
the lay days and extra lay days which may have elapsed in loading and unloading.
Page 121
Thiam, Patrice
Alexandria R.
67.
CALTEX PHILIPINES, INC. V. SUPLICIO LINES, INC. ET. AL.
G.R. NO. 131166, September 30, 1999
ISSUES:
(1) Whether or not Caltex is liable
(2) Who is the common carrier in the case at bar
(3) Is the charterer of a sea vessel liable for damages resulting from a collusion between
the chartered vessel and passenger ship
(4) What is the contract entered into by petitioner and Vector
(5) How could a common carrier maintain seaworthy condition of the vessel involved in its
contract and what could constitute if the common carrier failed to maintain the
seaworthiness of the same
FACTS:
MT VECTOR owned and operated by Vector Shipping left Limay, Bataan at
about 8:00pm on December 19, 1987 enroute to Masbate, loaded with petroleum
products shipped by CALTEX. On the other hand, on December 20, 1987 at about
6:30 am passenger ship owned by SUPLICIO LINES MV DONA PAZ left the port of
Tacloban headed forManila with a compliment of 59 crew members including the
master and his officers and passengers totaling 1,493 as indicated in the coastguard
clearance.
At about 10:30 pm of December 20, 1987 the two vessel collided in the open sea
within the vicinity of Dumali Point between MARINDUQUE AND ORIENTAL MINDORO.
All crew members of MV DONA PAZ died, while 2 survivors from MT VECTOR claimed
that they were sleeping at the time of incident.
The MV Dona Paz carried an estimated 4,000 passengers; many were not in the
manifest. Only 24 survived the tragedy. The Bureau of Marine Inquiry (BMI) after
investigation found that MV Vector, it’s registered owner and operator were at fault
allegedly that Caltex chartered MT Vector with gross and evident bad faith knowing
full well that MT Vector was improperly manned, ill-equipped, unseaworthy and a
hazard to safe navigation.
RULING:
1. NO.
The charterer of a vessel has no obligation before transporting its cargo to
ensure that the vessel it chartered complied with all legal requirements. The duty rests
upon the common carrier simply being engaged in “public service”. The civil code
demands diligence which required by the nature of the obligation and that which
corresponds with the circumstances of the persons, time and of the place.
In the case at bar, Caltex and Vector entered into a contract of affreighment,
also known as voyage charter wherein the ship is leased for a single voyage. The
charter party provides for the hire of the VESSEL ONLY, the ship owner to supply the
ship’s store, pay for wages of the master of the crew and defray expenses for the
maintenance of the ship. If the charterer is a contract of affreighment, which leaves
the general owner in possession of the ship as owner for the voyage,
2. MT Vector is a common carrier.

The charter party agreement did not convert the common carrier into a private
carrier. The parties entered into a voyage charter, which retains the character of the
vessel as a common carrier. It is imperative that a public carrier shall remain as such,
voyage charter. It is only when the charter includes both the vessel and its crew, as in
a bareboat or demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in
may, for the moment, be the property of the charterer. A common carrier is a person
or corporation whose regular business is to carry passengers or property for all
Page 122
Thiam, Patrice
Alexandria R.
persons who may choose to employ and to remunerate him. 16 MT Vector fits the
definition of a common carrier under Article 1732 of the Civil Code.
The public must of necessity rely on the care and skill of common carriers in
the vigilance over the goods and safety of the passengers, especially because with the
modern development of science and invention, transportation has become more rapid,
more complicated and somehow more hazardous. For these reasons, a passenger or a
shipper of goods is under no obligation to conduct an inspection of the ship and its
crew, the carrier being obliged by law to impliedly warrant its seaworthiness.
3. The charterer has no liability for damages under Philippine Maritime laws.
Petitioner and Vector entered into a contract of affreightment, also known as a voyage
charter.
voyage, in consideration of the payment of freight. A contract of affreightment may be
either time charter, wherein the leased vessel is leased to the charterer for a fixed
period of time, or voyage charter, wherein the ship is leased for a single voyage. In
both cases, the charter-party provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive voyage, the ship owner to
supply the ship’s store, pay for the wages of the master of the crew, and defray the
expenses for the maintenance of the ship. If the charter is a contract of affreightment,
which leaves the general owner in possession of the ship as owner for the voyage, the
rights and the responsibilities of ownership rest on the owner. The charterer is free
from liability to third persons in respect of the ship.
4. Petitioner and Vector entered into a contract of affreightment, also known as a

voyage charter.
voyage, in consideration of the payment of freight.
A contract of affreightment may be either time charter, wherein the leased
vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein
the ship is leased for a single voyage. In both cases, the charter-party provides for the
hire of the vessel only, either for a determinate period of time or for a single or
consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the
master of the crew, and defray the expenses for the maintenance of the ship.
Under a demise or bareboat charter on the other hand, the charterer mans the
vessel with his own people and becomes, in effect, the owner for the voyage or service
stipulated, subject to liability for damages caused by negligence.
If the charter is a contract of affreightment, which leaves the general owner in
possession of the ship as owner for the voyage, the rights and the responsibilities of
ownership rest on the owner. The charterer is free from liability to third persons in
respect of the ship.
5. Under the Carriage of Goods by Sea Act : Sec. 3. (1) The carrier shall be bound
before and at the beginning of the voyage to exercise due diligence to:
c. Make the ship seaworthy;
d. Properly man, equip, and supply the ship;
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the
ship. For a vessel to be seaworthy, it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew. The failure of a
common carrier to maintain in seaworthy condition the vessel involved in its contract
of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code.
68.
Page 123
Thiam, Patrice
Alexandria R.
G.R. No. 51910, August 10, 1989
ISSUES:
FACTS:
RULINGS:
1. YES.
Fairwind.

Page 124
Thiam, Patrice
Alexandria R.

69.
OCEANEERING CONTRACTORS (Philippines), INC. vs. NESTOR BARRETO,
doing business as NNB Lihgterage
G.R. No. 184215, February 9, 2011
ISSUES:
(1) Whether or not Oceaneering is entitled to the disallowed amount of construction
materials pegged at P4,055,700.00 as compensatory damages
(2) Whether or not there were no valid documents showing the real value of the materials
lost and those actually recovered
(3) Whether or not the court of appeals erred in denying oceaneering's counterclaims for
actual damages amounting to (a) p3,704,700.00 representing the value of the
materials it lost due to the sinking of [barreto's] barge; and (b) p125,000.00
representing the expenses it incurred for salvaging its cargo
(4) Whether or not the court erred in granting Oceaneering's claim for attorney's fees
FACTS:
Nestor Barretto and Oceaneering Contractors (Phils.) Inc. entered into a Time
Charter Agreement for the contract price of P306,000.00. Nestor Barretto owns
Antonieta, a barge licensed and permitted to engage in coastwise trading. The barge
was hired for a renewable period of 30 calendar days for the purpose of transporting
construction materials from Manila to Ayungon,Negros Oriental.
Page 125
Thiam, Patrice
Alexandria R.
Oceaneering hired stevedores who loaded the construction materials on the

barge. However, the barge capsized while it was transporting the construction
materials.
Baretto informed Oceaneering that the mishap was caused by the incompetence
and negligence of Oceaneering personnel in loading the cargo and that Baretto will
proceed with the salvage,refloating and repair of the barge.
Oceaneering demanded return of unused portion of the charter payment which
amounts to P224,400.00 plus expenses incurred in salvaging its construction
materials which amounts to P125,000.00. Barretto reasoned out that its unused
charter payment was withheld for he was seeking reimbursement for the amount of
P836,425 representing expenses in salvaging, refloating and repairing the barge.
Barretto filed a complaint for damages and argued that the accident was due to
the incompetence and negligence of employees hired by Oceaneering and who
attended the loading of the cargo. Oceaneering, in defense, argued that the accident
was caused by the negligence of Barretto’s employees and the dilapidated hull of the
barge which rendered it unseaworthy. The Court dismissed Barretto’s complaint and
Oceaneering’s counterclaims for lack of merit.
On appeal, Oceaneering’s prayer was partially granted holding Barretto liable
for Oceaneering’s lost cargo but the CA disallowed Oceaneering’s counterclaims for the
value of the construction materials pegged at P4,055,700.00 which were lost as a
consequence of the sinking of the barge.
Applying the rule that actual damages should be proven with a reasonable
degree of certainty, the appellate court denied Oceaneering’s claim for the value of its
lost cargo and ordered the refund of the P360,000.00 it paid for the time charter with
indemnity for attorney’s fees in the amount of P30,000.00.
Considering that it was able to salvage nine steel pipes amounting to
P351,000.00, Oceaneering insisted that it should be indemnified the sum of
P3,703,700.00 for the value of the lost cargo.
RULINGS:
1. No to P4,055,700.00 but yes to certain sums as supported by vouchers,
receipts,etc..
The court finds that CA erred in awarding the full amount of P306,000.00 for
what was prayed for refund by Oceaneering through its demand letters was only to the
extent of the unused charter payment in the amount of P224,400.00.
For lack of sufficient showing of bad faith on the part of Barretto, the CA erred
in granting Oceaneering’s claim for attorney’s fees.
The court stated that ‘actual or compensatory damages are those damages
which the injured party is entitled to recover for the wrong done and injuries received
when none were intended.’ Actual damages are awarded for ‘injuries or losses that are
actually sustained and susceptible of measurement’… intended to put the injured
Hence, the amount of loss must be capable of proof or evidence such as but not
limited to sales and delivery receipts, cash and check vouchers and the like. This
means that self-serving statements of account are not sufficient basis for an award of
actual damages.
The Court awarded the value of the lost cargo that was pleaded and prayed for
in the answer and duly supported by official receipts and vouchers.
Wherefore, premises considered, the petition is PARTIALLY GRANTED and the
assailed 12 December 2007 Decision is, accordingly, MODIFIED: (a) to GRANT
Oceaneerings claim for the value of its lost cargo in the sum of P2,226,620.00 with 6%
interest per annum computed from the filing of the complaint and to earn further
interest at the rate of 12% per annum from finality of the decision until full payment;
(b) to REDUCE the refund of the consideration for the Time Charter Agreement from
P306,000.00 to P224,400.00, with 6% interest per annum computed from 12 March
1998, likewise to earn further interest at the rate of 12% per annum from finality of
this decision; and, (c) to DELETE the CAs award of salvaging expenses and attorney’s
fees,for lack of factual and legal basis.
2. YES.
Page 126
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Oceaneering argues that, having determined Barretto's liability for presumed

negligence as a common carrier, the CA erred in disallowing its counterclaims for the
value of the construction materials which were lost as a consequence of the sinking of
the barge. Alongside the testimony elicited from its Operation's Manager, Engr.
Winifredo Oracion, Oceaneering calls attention to the same witness' inventory which
pegged the value of said construction materials at P4,055,700.00, as well as the
various sales receipts, order slips, cash vouchers and invoices which were formally
offered before and admitted in evidence by the RTC. Considering that it was able to
salvage only nine steel pipes amounting to P351,000.00, Oceaneering insists that it
should be indemnified the sum of P3,703,700.00 for the value of the lost cargo, with
legal interest at 12% per annum, from the date of demand until fully paid. In
addition, Oceaneering maintains that Barretto should be held liable to refund the
P306,000.00 it paid as consideration for the Time Charter Agreement and to pay the
P125,000.00 it incurred by way of salvaging expenses as well as its claim for attorney's
fees in the sum of P750,000.00.
In finding Oceaneering's petition impressed with partial merit, uppermost in our
mind is the fact that actual or compensatory damages are those damages which the
injured party is entitled to recover for the wrong done and injuries received when none
were intended.40 Pertaining as they do to such injuries or losses that are actually
sustained and susceptible of measurement,41 they are intended to put the injured
3. YES.
Art. 2199. Except as provided by law or by stipulation, one is entitled to an
recovered.43 In addition to the fact that the amount of loss must be capable of proof,
it must also be actually proven with a reasonable degree of certainty, premised upon
competent proof or the best evidence obtainable.44 The burden of proof of the damage
suffered is, consequently, imposed on the party claiming the same45 who should
adduce the best evidence available in support thereof, like sales and delivery receipts,
cash and check vouchers and other pieces of documentary evidence of the same
nature. In the absence of corroborative evidence, it has been held that self-serving
statements of account are not sufficient basis for an award of actual damages.46
flimsy, remote, speculative, and insubstantial proof,47 courts are, likewise, required to
state the factual bases of the award.48
Applying the just discussed principles to the case at bench, we find that
Oceaneering correctly fault the CA for not granting its claim for actual damages or,
more specifically, the portions thereof which were duly pleaded and adequately proved
before the RTC. While concededly not included in the demand letters dated 12 March
199849 and 13 July 199850Oceaneering served Barretto, the former's counterclaims
for the value of its lost cargo in the sum of P4,055,700.00 and salvaging expenses in
the sum of P125,000.00 were distinctly pleaded and prayed for in the 26 January
1999 answer it filed a quo.51 Rather than the entire P4,055,700.00 worth of
construction materials reflected in the inventory52 which Engr. Oracion claims to
have prepared on 29 November 1997, based on the delivery and official receipts from
Oceaneering's suppliers,53 we are, however, inclined to grant only the following items
which were duly proved by the vouchers and receipts on record, viz.: (a)
P1,720,850.00 worth of spiral welded pipes with coal tar epoxy procured on 22
November 1997;54 (b) P629,640.00 worth of spiral welded steel pipes procured on 28
October 1997;55 (c) P155,500.00 worth of various stainless steel materials procured
on 27 November 1997;56 (d) P66,750.00 worth of gaskets and shackles procured on
20 November 1997;57 and, (e) P4,880.00 worth of anchor bolt procured on 27
November 1997.58
4. YES.
Page 127
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Alexandria R.
For lack of sufficient showing of bad faith on the part of Barretto, we find that
the CA, finally, erred in granting Oceaneering's claim for attorney's fees, albeit in the
much reduced sum of P30,000.00.
In the absence of stipulation, after all, the rule is settled that there can be no
recovery of attorney's fees and expenses of litigation other than judicial costs except in
the instances enumerated under Article 2208 of the Civil Code. Being the exception
rather than the rule, attorney's fees are not awarded every time a party prevails in a
suit, in view of the policy that no premium should be placed on the right to litigate.
Even when a claimant is compelled to litigate with third persons or to incur expenses
to protect his rights, still attorney's fees may not be awarded where, as here, no
sufficient showing of bad faith can be reflected in the party's persistence in a case
other than an erroneous conviction of the righteousness of his cause.
5. Art. 2199. Except as provided by law or by stipulation, one is entitled to an

recovered.
In addition to the fact that the amount of loss must be capable of proof, it must
also be actually proven with a reasonable degree of certainty, premised upon
competent proof or the best evidence obtainable.
The burden of proof of the damage suffered is, consequently, imposed on the
party claiming the same who should adduce the best evidence available in support
thereof, like sales and delivery receipts, cash and check vouchers and other pieces of
documentary evidence of the same nature.
In the absence of corroborative evidence, it has been held that self-serving
statements of account are not sufficient basis for an award of actual damages.
flimsy, remote, speculative, and insubstantial proof, courts are, likewise, required to
state the factual bases of the award.
70.
CORPORATION
G.R. No. 150403, January 25, 2007
ISSUES:
transport
FACTS:
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RULINGS:
1. YES, There is no dispute that petitioner was a common carrier.
2. YES.
3. It is clear that it was a contract of carriage that petitioner signed with MCCII.
4. NO.
5. NO.
force majeure.
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71.
CHUA YEK HONG vs. INTERMEDIATE APPELLATE COURT
G.R. No. L-74811, September 30, 1988
ISSUES:
(1) Whether or not the doctrine of limited liability under Article 587 of the Code of
Commerce is applicable in the case at bar
(2) What are the exceptions of the limited liability rule?
(3) What is the rule with regards to the doctrine of limited liability?
(4) How was Shipagent defined in the case at bar?
(5) what is the rationale with regards to the offset against hazards and perils of the sea
and to encourage ship building.
FACTS:
Petitioner contracted with the herein private respondent to deliver 1,000 sacks
of copra, valued at P101,227.40, on board the vessel M/V Luzviminda I owned by the
latter. However it did not reach its destination, the vessel capsized and sank with all
its cargo.
Petitioner instituted a complaint against private respondent for breach of
contract incurring damages.
Private respondent’s defense is that even assuming that the alleged cargo was
truly loaded aboard their vessel, their liability had been extinguished by reason of the
total loss of said vessel.
RTC rendered judgment in favor of Chua Yek Hong however CA reversed the
decision by applying Article 587 of the Code of Commerce and the doctrine in Yangco
vs. Lasema (73 Phil. 330 [1941]) and held that private respondents' liability, as ship
owners, for the loss of the cargo is merely co-extensive with their interest in the vessel
such that a total loss thereof results in its extinction.
RULINGS:
1. YES.
If the ship owner or agent may in any way be held civilly liable at all for injury
to or death of passengers arising from the negligence of the captain in cases of
collisions or shipwrecks, his liability is merely co-extensive with his interest in the
vessel such that a total loss thereof results in its extinction. (Yangco vs. Laserna, et
al., supra).
The limited liability rule, however, is not without exceptions, namely: (1) where
the injury or death to a passenger is due either to the fault of the ship owner, or to the
concurring negligence of the ship owner and the captain (Manila Steamship Co., Inc.
vs. Abdulhaman supra); (2) where the vessel is insured; and (3) in workmen's
compensation claims Abueg vs. San Diego, supra). In this case, there is nothing in the
records to show that the loss of the cargo was due to the fault of the private
respondent as shipowners, or to their concurrent negligence with the captain of the
vessel.
2. The limited liability rule, however, is not without exceptions, namely:

(1) where the injury or death to a passenger is due either to the fault of the
shipowner, or to the concurring negligence of the shipowner and the captain (Manila
Steamship Co., Inc. v. Abdulhaman, supra);
(2) where the vessel is insured; and
(3) in workmen’s compensation claims (Abueg v. San Diego, supra).
In this case, there is nothing in the records to show that the loss of the cargo
was due to the fault of the private respondents as shipowners, or to their concurrent
negligence with the captain of the vessel.
3. Under Article 587, this direct liability is moderated and limited by the
shipagent’s or shipowner’s right of abandonment of the vessel and earned freight. This
expresses the universal principle of limited liability under maritime law. The most
fundamental effect of abandonment is the cessation of the responsibility of the
shipagent/owner (Switzerland General Insurance Co., Ltd. v. Ramirez, L-48264,
February 21, 1980, 96 SCRA 297). It has thus been held that by necessary
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Thiam, Patrice
Alexandria R.
implication, the shipagent’s or shipowner’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" (Yangco v.
Laserna, supra).
In other words, the shipowner’s or agent’s liability is merely co-extensive with
his interest in the vessel such that a total loss thereof results in its extinction. "No
vessel, no liability" expresses in a nutshell the limited liability rule.
The total destruction of the vessel extinguishes maritime liens as there is no
longer any res to which it can attach (Govt. Insular Maritime Co. v. The Insular
Maritime, 45 Phil. 805, 807 [1924]).
4. The term "shipagent" as used in the foregoing provision is broad enough to

include the shipowner (Standard Oil Co. v. Lopez Castelo, 42 Phil. 256 [1921]).
Pursuant to said provision, therefore, both the shipowner and shipagent are civilly and
directly liable for the indemnities in favor of third persons, which may arise from the
conduct of the captain in the care of goods transported, as well as for the safety of
passengers transported (Yangco v. Laserna, supra; Manila Steamship Co., Inc. v.
Abdulhaman, Et Al., 100 Phil. 32 [1956]).
5. The rationale therefor has been explained as follows: "The real and hypothecary
nature of the liability of the shipowner or agent embodied in the provisions of the
Maritime Law, Book III, Code of Commerce, had its origin in the prevailing conditions
of the maritime trade and sea voyages during the medieval ages, attended by
innumerable hazards and perils. To offset against these adverse conditions and to
encourage shipbuilding and maritime commerce, it was deemed necessary to confine
the liability of the owner or agent arising from the operation of a ship to the vessel,
equipment, and freight, or insurance, if any, so that if the shipowner or agent
abandoned the ship, equipment, and freight, his liability was extinguished." (Abueg v.
San Diego, 77 Phil. 730 [1946]).
72.
MACONDRAY & CO., INC., vs. PROVIDENT INSURANCE CORPORATION
G.R. No.
ISSUES:
(1) Whether or not Macondray is an agent
(2) Whether or not Macondray is liable for any loss sustained by any party from the vessel
owned by defendant trade & transport.
(4) How was shipagent defined in the case at bar?
(5) What are the liabilities of a shipagent?
FACTS:
CANPOTEX SHIPPING SERVICES LIMITED INC (CANPOTEX), shipped and
loaded on board the vessel M/V Trade Carrier, 5000 metric tons of Standard Grade
Muriate of Potash in bulk for transportation to and delivery at the port of Sangi,
Toledo City, Cebu, in favor of ATLAS FERTILIZER CORPORATION (ATLAS). Subject
shipments were insured with PROVIDENT against all risks.
When the shipment arrived, ATLAS discovered that the shipment sustained
losses. Provident paid for losses. Formal claims was then filed with TRADE &
TRANSPORT and MACONDRAY but the same refused and failed to settle the same.
MACONDRAY denied liability over the losses for having no absolute relation
with defendant TRADE AND TRANSPORT, the alleged operator of the vessel who
transported the subject shipment; that accordingly, MACONDRAY is the local
representative of the CANPOTEX; the charterer of M/V TRADE CARRIER and not party
to this case; that it has no control over the acts of the captain and crew of the Carrier
and cannot be held responsible for any damage arising from the fault or negligence of
said captain and crew; that upon arrival at the port of Sangi, Toledo City, Cebu, the
M/V Trade Carrier discharged the full amount of shipment.
Page 131
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RULINGS:
1. NO.
Although MACONDRAY is not an agent of TRADE & TRANSPORT, it can still be
the ship agent of the vessel M/V Trade Carrier. Article 586 of the Code of Commerce
states that a ship agent is the person entrusted with provisioning or representing the
vessel in the port in which it may be found.
The trial court and the CA found evidence that petitioner was appointed as local
agent of the vessel, represented such vessel in the Port of Manila and was the ship
agent.
2. YES.
Hence, whether acting as agent of the owner of the vessel or as agent of the
charterer, petitioner will be considered as the ship agent and may be held liable as
such, as long as the latter is the one that provisions or represents the vessel.
As ship agent, it may be held civilly liable in certain instances. The Code of
Commerce provides:
Article 586. The shipowner and the ship agent shall be civilly liable for the acts
of the captain and for the obligations contracted by the latter to repair, equip, and
provision the vessel, provided the creditor proves that the amount claimed was
invested for the benefit of the same.
Article 587. The ship agent shall also be civilly liable for the indemnities in favor
of third persons which may arise from the conduct of the captain in the care of the
goods which he loaded on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the freight it may have earned
during the voyage
3. "It is well-settled that when a party is represented by counsel, notice should be

made upon the counsel of record at his given address to which notices of all kinds
emanating from the court should be sent in the absence of a proper and adequate
notice to the court of a change of address."
4. Article 586 of the Code of Commerce states that a ship agent is "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 owner10 of the vessel or as agent of the
charterer, petitioner will be considered as the ship agent and may be held liable as
such, as long as the latter is the one that provisions or represents the vessel.
5. As ship agent, it may be held civilly liable in certain instances. The Code of
Commerce provides:
"Article 586. The shipowner and the ship agent shall be civilly liable for the acts
of the captain and for the obligations contracted by the latter to repair, equip, and
provision the vessel, provided the creditor proves that the amount claimed was
invested for the benefit of the same."
"Article 587. The ship agent shall also be civilly liable for the indemnities in
favor of third persons which may arise from the conduct of the captain in the care of
the goods which he loaded on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the freight it may have earned
during the voyage."
73.
CENTENNIAL TRANSMARINE, INC. vs. DELA CRUZ
G.R. NO. 180719, August 22, 2008
ISSUES:
(1) Whether or not the position of chief officer of an ocean going vessel is a managerial
position or one of trust and confidence
(2) Whether or not entries in the official logbook of a vessel may be used as evidence
(3) Whether or not a document purporting to be a copy of a logbook entry has been duly
established to be authentic and not spurious.
Page 132
Thiam, Patrice
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(4) Whether or not technical rules on evidence is applicable in labor proceedings with
regards to technical proceedings
(5) What is the rule in case of termination of overseas employment
FACTS:
Petitioner Centennial Transmarine, Inc., for and in behalf of its foreign
principal, petitioner Centennial Maritime Services, Corp., hired respondent Dela Cruz
as Chief Officer of the oil tanker vessel "MT Aquidneck," owned by petitioner B+H
Equimar, Singapore, Pte. Ltd., for a period of nine months.
Respondent boarded "MT Aquidneck" and performed his functions as Chief
Officer. However, respondent was relieved of his duties and repatriated to the
Philippines. Failing to get a satisfactory explanation from petitioners for his relief,
respondent filed a complaint for illegal dismissal with prayer for payment of his
salaries for the unexpired portion of contract, moral and exemplary damages and
attorney's.
Respondent alleged that while the vessel was docked in Lake Charles in the
United States, another Chief Officer boarded the vessel. He inquired from the master
of the vessel, Captain Kowalewski, why he had a reliever, however the latter disclaimed
any knowledge. At the same time, he showed respondent an electronic mail (e-mail)
from petitioner B+H Equimar Singapore, Pte. Ltd. stating that there was an incoming
Chief Officer who was to take over the operations upon boarding.
Captain Kowalewski gave respondent his flight schedule. He was subsequently
repatriated. Upon arrival in Manila, respondent inquired from Mr. Eduardo Jabla,
President of petitioner Centennial Transmarine, Inc., why he was relieved. However,
Jabla could only surmise that his relief was possibly due to the arguments he had
with Capt. P. Bajaj, a company superintendent who came on board while the vessel
was berthed in Los Angeles, regarding deck operations and deck work, and
documentation and safety procedures in the cargo control room.
On the other hand, petitioner alleged that respondent was relieved of his
functions as Chief Officer due to his inefficiency and lack of job knowledge. Capt.
Kowalewski allegedly informed them of respondent's lack of experience in tanker
operations which exposed the vessel and its crew to danger and caused additional
expenses. Petitioners allegedly advised respondent to take a refresher course in order
to facilitate his deployment to another vessel. However, instead of taking a refresher
course, respondent filed a case for illegal dismissal.
Labor Arbiter Francisco A. Robles rendered a Decision dismissing respondent's
complaint. He found that respondent was validly dismissed because he committed
acts in violation of his duties as Chief Officer, amounting to breach of trust and
confidence. He noted that Capt. Kowalewski wrote in the official log book of the vessel
that respondent failed to follow entry procedures in loading oil tanks while the vessel
was navigating to Aruba; that the Safety Officer of the vessel also submitted a report
on the violations committed by respondent regarding safety rules on entry procedures;
that respondent admitted his inadequacy or lack of knowledge in tanker operations;
and that respondent was properly apprised of his violations and was given ample
opportunity to be heard.
RULINGS:
1. Petitioners allege loss of trust and confidence due to incompetence as the
ground for respondent's dismissal. Loss of trust and confidence is premised on the
fact that the employee holds a position whose functions may only be performed by
someone who has the confidence of management. Such employee may be managerial
or rank-and-file, but the nature of his position determines the requirements for a valid
dismissal.
With respect to a managerial employee, the mere existence of a basis for
believing that such employee has breached the trust of his employer would suffice for
his dismissal. Proof beyond reasonable doubt is not required, only substantial
evidence which must establish clearly and convincingly the facts on which the loss of
confidence rests.
2. YES.
Page 133
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Alexandria R.
A ship's log/logbook is the official record of a ship's voyage which its captain is
obligated by law to keep wherein he records the decisions he has adopted, a summary
of the performance of the vessel, and other daily events. A logbook is a respectable
record that can be relied upon when the entries therein are presented in evidence.
3. NO.
In the instant case, respondent has consistently assailed the genuineness of the
purported entry and the authenticity of such copy. He alleged that before his
repatriation, there was no entry in the ship's official logbook regarding any incident
that might have caused his relief; that Captain Kowalewski's signature in such
purported entry was forged. In support of his allegations, respondent submitted three
official documents bearing the signature of Capt. Sczepan Kowalewski which is
different from the one appearing in Annex E.
Thus, it was incumbent upon petitioners to prove the authenticity of Annex E,
which they failed to do. Likewise, the purported report of Capt. Kowalewski dated
September 1, 2000 (Annex D),23 and the statements of Safety Officer Khaldun Nacem
Faridi and Chief Officer Josip Milin (Annexes G24 and H25 ) also cannot be given
weight for lack of authentication.
4. Although technical rules of evidence do not strictly apply to labor proceedings,

however, in the instant case, authentication of the above-mentioned documents is
necessary because their genuineness is being assailed, and since petitioners offered no
corroborating evidence. These documents and their contents have to be duly identified
and authenticated lest an injustice would result from a blind adoption of such
contents.26 Thus, the unauthenticated documents relied upon by petitioners are mere
self-serving statements of their own officers and were correctly disregarded by the
Court of Appeals.
5. In case of termination of overseas employment without just, valid or authorized

cause as defined by law or contract, the worker shall be entitled to the full
reimbursement of his placement fee with interest at twelve percent (12%) per annum,
x x x.
74.
ABOITIZ SHIPPING CORPORATION vs. GENERAL ACCIDENT FIRE AND LIFE
ASSURANCE CORPORATION
G.R. No. 100446, January 21, 1993
ISSUES:
(1) What is the real and hypothecary nature of maritime law?
(2) Whether or not the doctrine of limited liability rule is applicable in the case at bar
(3) What are the rights of vessel owner or agent akin to rights of shareholders to limited
liability under corporation law
(4) Whether or not there is a need for collation of all claims preparatory to settlement out
of insurance proceeds on vessel
(5) Whether or not respondent court erred in granting execution of the full judgment
FACTS:
Petitioner is a corporation engaged in the business of maritime trade as a
carrier. As such, it owned and operated the M/V P/ ABOITIZ, a common carrier that
sank on voyage from Hong Kong to Manila. Private respondent GAFLAC is a foreign
insurance company pursuing its remedy as a subrogee of several cargo consignees
whose respective cargo sank with the said vessel and for which it has priory paid. The
sinking of vessel gave rise to filling of suit to recover the lost cargo either by shippers,
their successors-in-interest, or the cargo insurers like GAFLAC as subrogees. The
sinking was initially investigated by the Board of Marine Inquiry, which found that
such sinking was due to fortuitous event.
Page 134
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Alexandria R.
RULINGS:
1. The real and hypothecary nature of maritime law simply means that the liability
of the carrier in connection with losses related to maritime contracts is confined to the
vessel, which is hypothecated for such obligations or which stands as the guaranty for
their settlement. It has its origin by reason of the conditions and risks attending
maritime trade in its earliest years when such trade was replete with innumerable and
unknown hazards since vessels had to go through largely uncharted waters to ply
their trade. It was designed to offset such adverse conditions and to encourage people
and entities to venture into maritime commerce despite the risks and the prohibitive
cost of shipbuilding.
Thus, the liability of the vessel owner and agent arising from the operation of
such vessel were confined to the vessel itself, its equipment, freight, and insurance, if
any, which limitation served to induce capitalists into effectively wagering their
resources against the consideration of the large profits attainable in the trade. It might
be noteworthy to add in passing that despite the modernization of the shipping
industry and the development of high-technology safety devices designed to reduce the
risks therein, the limitation has not only persisted, but is even practically absolute in
well-developed maritime countries such as the United States and England where it
covers almost all maritime casualties. Philippine maritime law is of Anglo-American
extraction, and is governed by adherence to both international maritime conventions
and generally accepted practices relative to maritime trade and travel.
2. In this jurisdiction, on the other hand, its application has been well-nigh
constricted by the very statute from which it originates. The Limited Liability Rule in
the Philippines is taken up in Book III of the Code of Commerce, particularly in
Articles 587, 590, and 837, hereunder quoted in toto: "Art. 587. The ship agent shall
also be civilly liable for the indemnities in favor of third persons which may arise from
the conduct of the captain in the care of the goods which he loaded on the vessel; but
he may exempt himself therefrom by abandoning the vessel with all her equipment
and the freight it may have earned during the voyage. "Art. 590. The co-owners of a
vessel shall be civilly liable in the proportion of their interests in the common fund for
the results of the acts of the captain referred to in Art. 587. "Each co-owner may
exempt himself from this liability by the abandonment, before a notary, of the part of
the vessel belonging to him" "Art. 837.
The civil liability incurred by shipowners in the case prescribed in this section
(on collisions), shall be understood as limited to the value of the vessel with all its
appurtenances and freightage served during the voyage." Taken together with related
articles, the foregoing cover only liability for injuries to third parties (Art. 587), acts of
the captain (Art. 590) and collisions (Art. 837). In view of the foregoing, this Court
shall not take the application of such limited liability rule, which is a matter of near
absolute application in other jurisdictions, so lightly as to merely "imply" its
inapplicability, because as could be seen, the reasons for its being are still apparently
much in existence and highly regarded. We now come to its applicability in the instant
case. In the few instances when the matter was considered by this Court, we have
been consistent in this jurisdiction in holding that the only time the Limited Liability
Rule does not apply is when there is an actual finding of negligence on the part of the
vessel owner or agent (Yango v. Laserna, 73 Phil. 330 [1941]; Manila Steamship Co.,
Inc. v. Abdulhanan, 101 Phil. 32 [1957]; Heirs of Amparo delos Santos v. Court of
Appeals, 186 SCRA 649 [1967]) . . .
We must stress that the matter of the Limited Liability Rule as discussed was
never in issue in all prior cases, including those before the RTCs and the Court of
Appeals. As discussed earlier, the "limited liability" in issue before the trial courts
referred to the package limitation clauses in the bills of lading and not the limited
liability doctrine arising from the real and hypothecary nature of maritime trade. The
latter rule was never made a matter of defense in any of the cases a quo, as properly it
could not have been made so since it was not relevant in said cases. The only time it
could come into play is when any of the cases involving the mishap were to be
executed, as in this case. Then, and only then, could the matter have been raised, as it
has now been brought before the Court.
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Alexandria R.
3. The rights of a vessel owner or agent under the Limited Liability Rule are akin
to those of the rights of shareholders to limited liability under our corporation law.
Both are privileges granted by statute, and while not absolute, must be swept aside
only in the established existence of the most compelling of reasons. In the absence of
such reasons, this Court chooses to exercise prudence and shall not sweep such
rights aside on mere whim or surmise, for even in the existence of cause to do so, such
incursion is definitely punitive in nature and must never be taken lightly. More to the
point, the rights of parties to claim against an agent or owner of a vessel may be
compared to those of creditors against an insolvent corporation whose assets are not
enough to satisfy the totality of claims as against it. While each individual creditor
may, and in fact shall, be allowed to prove the actual amounts of their respective
claims, this does not mean that they shall all be allowed to recover fully thus favoring
those who filed and proved their claims sooner to the prejudice of those who come
later. In such an instance, such creditors too would not also be able to gain access to
the assets of the individual shareholders, but must limit their recovery to what is left
in the name of the corporation.
4. YES.
In the instant case, there is, therefore, a need to collate all claims preparatory
to their satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz and its
pending freightage at the time of its loss. No claimant can be given precedence over the
others by the simple expedience of having filed or completed its action earlier than the
rest. Thus, execution of judgment in earlier completed cases, even those already final
and executory, must be stayed pending completion of all cases occasioned by the
subject sinking. Then and only then can all such claims be simultaneously settled,
either completely or pro-rata should the insurance proceeds and freightage be not
enough to satisfy all claims . . . In fairness to the claimants, and as a matter of equity,
the total proceeds of the insurance and pending freightage should now be deposited in
trust.
Moreover, petitioner should institute the necessary limitation and distribution
action before the proper admiralty court within 15 days from the finality of this
decision, and thereafter deposit with it the proceeds from the insurance company and
pending freightage in order to safeguard the same pending final resolution of all
incidents, for final pro-rating and settlement thereof.
5. NO.
This Court has always been consistent in its stand that the very purpose for its
existence is to see to the accomplishment of the ends of justice. Consistent with this
view, a number of decisions have originated herefrom, the tenor of which is that no
procedural consideration is sacrosanct if such shall result in the subverting of
substantial justice. The right to an execution after finality of a decision is certainly no
exception to this. Thus, in Cabrias v. Adil (135 SCRA 355 [1985]), this Court ruled
that:chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
". . . It is a truism that every court has the power ‘to control, in the furtherance
of justice, the conduct of its ministerial officers, and of all other persons in any
manner connected with a case before it, in every manner appertaining thereto.’ It has
also been said that:chanrob1es virtual 1aw library
‘. . . every court having jurisdiction to render a particular judgment has
inherent power to enforce it, and to exercise equitable control over such enforcement.
The court has authority to inquire whether its judgment has been executed, and will
remove obstructions to the enforcement thereof. Such authority extends not only to
such orders and such writs as may be necessary to carry out the judgment into effect
and render it binding and operative, but also to such orders and such writs as may be
necessary to prevent an improper enforcement of the judgment. If a judgment is
sought to be perverted and made a medium of consummating a wrong the court on
proper application can prevent it.’"
75.
G.R. No. L-74811, September 30, 1988
Page 136
Thiam, Patrice
Alexandria R.
ISSUES:
FACTS:
its cargo.
RULINGS:
1. YES.
al., supra).
vessel.

Page 137
Thiam, Patrice
Alexandria R.
Laserna, supra).
Maritime, 45 Phil. 805, 807 [1924]).

San Diego, 77 Phil. 730 [1946]).
76.
LUZON STEVEDORING CORPORATION vs. COURT OF APPEALS
G.R. No. L-58897, December 3, 1987
ISSUES:
(1) Whether or not in order to claim limited liability under Article 837 of the Code of
Commerce, it is necessary that the owner abandon the vessel
(3) Whether or not the shipagent was liable
(4) Whether or not shipagents are liable for indemnification
(5) What is the exception with regards to the limited liability rule?
FACTS:
A maritime collision occurred between the tanker CAVITE owned by LSCO and
MV Fernando Escano (a passenger ship) owned by Escano, as a result the passenger
ship sunk. An action in admiralty was filed by Escano against Luzon. The trial court
held that LSCO Cavite was solely to blame for the collision and held that Luzon’s claim
that its liability should be limited under Article 837 of the Code of Commerce has not
been established. The Court of Appeals affirmed the trial court. The SC also affirmed
the CA. Upon two motions for reconsideration, the Supreme Court gave course to the
petition.
RULINGS:
1. YES.
Abandonment is necessary to claim the limited liability wherein it shall be
limited to the value of the vessel with all the appurtenances and freightage earned in
the voyage. However, if the injury was due to the ship owner’s fault, the ship owner
may not avail of his right to avail of limited liability by abandoning the vessel.
The real nature of the liability of the ship owner or agent is embodied in the
Code of Commerce. Articles 587, 590 and 837 are intended to limit the liability of the
ship owner, provided that the owner or agent abandons the vessel. Although Article
837 does not specifically provide that in case of collision there should be
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Thiam, Patrice
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abandonment, to enjoy such limited liability, said article is a mere amplification of the
provisions of Articles 587 and 590 which makes it a mere superfluity.
In this case, the Court held that the petitioner is a t fault and since he did not
abandon the vessel, he cannot invoke the benefit of Article 837 to limit his liability to
the value of the vessel, all appurtenances and freightage earned during the voyage.
2. The Doctrine of Limited Liability.

The real and hypothecary nature of the liability of the shipowner or agent
embodied in the provisions of the Maritime Law, Book III, Code of Commerce, had its
origin in the prevailing conditions of the maritime trade and sea voyages during the
medieval ages, attended by innumerable hazards and perils. To offset against these
adverse conditions and to encourage shipbuilding and maritime commerce it was
deemed necessary to confine the liability of the owner or agent arising from the
operation of a ship to the vessel, equipment, and freight, or insurance, if any, so that if
the shipowner or agent abandoned the ship, equipment and freight, his liability was
extinguished.
But the provisions of the Code of Commerce invoked by appellant have no room
in the application of the Workmen’s Compensation Act which seeks to improve, and
aims at the amelioration of, the condition of laborers and employees. It is not the
liability for the damage or loss of the cargo or injury to, or death of, a passenger by or
through the misconduct of the captain or master of the ship; nor the liability for the
loss of the ship as a result of collision; nor the responsibility for wages of the crew, but
a liability created by a statute to compensate employees and laborers in cases of injury
received by or inflicted upon them, while engaged in the performance of their work or
employment, or the heirs and dependents of such laborers and employees in the event
of death caused by their employment. Such compensation has nothing to do with the
provisions of the Code of Commerce regarding maritime commerce. It is an item in the
cost of production which must be included in the budget of any well-managed
industry.
3. YES.
"In the light of all the foregoing, we therefore hold that if the shipowner or agent
may in any way be held civilly liable at all for injury to or death of passengers arising
from the negligence of the captain in cases of collisions or shipwrecks, his liability is
merely co-extensive with his interest in the vessel such that a total loss thereof results
in its extinction. In arriving at this conclusion, we have not been unmindful of the fact
that the ill-fated steamship Negros, as a vessel engaged in interisland trade, is a
common carrier (De Villata v. Stanely, 32 Phil. 541), and that the relationship between
the petitioner and the passengers who died in the mishap rests on a contract of
carriage. But assuming that petitioner is liable for a breach of contract of carriage, the
exclusively ‘real and hypothecary nature’ of maritime law operates to limit such
liability to the value of the vessel, or to the insurance thereon, if any. In the instant
case it does not appear that the vessel was insured.
"In fact, it is a general principle, well established maritime law and custom, that
shipowners and ship agents are civilly liable for the acts of the captain (Code of
Commerce, Article 586) and for the indemnities due the third persons (Article 587); so
that injured parties may immediately look for reimbursement to the owner of the ship,
it being universally recognized that the ship master or captain is primarily the
representative of the owner (Standard Oil Co. v. Lopez Castelo, 42 Phil. 256, 260). This
direct liability, moderated and limited by the owner’s right of abandonment of the
vessel and earned freight /Article 587) has been declared to exist not only in case of
breached contracts, but also in cases of tortious negligence (Yu Biao Sontua v. Osorio,
43 Phil. 511; 515)
4. YES.
We accordingly hold that the defendant is liable for the indemnification to which
the plaintiff is entitled by reason of the collision, but he is not required to pay such
indemnification for the reason that the obligation thus incurred has been extinguished
on account of the loss of the thing bound for the payment thereof, and in this respect
the judgment of the court below is affirmed except in so far as it requires the plaintiff
to pay the costs of this action, which is not exactly proper. No special order is made as
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Thiam, Patrice
Alexandria R.
to costs of this appeal. After the expiration of twenty days let judgment be entered in
accordance herewith and ten days thereafter the record be remanded to the Court of
First Instance for execution. So ordered." 7
From the foregoing the rule is that in the case of collision, abandonment of the
vessel is necessary in order to limit the liability of the shipowner or the agent to the
value of the vessel, its appurtenances and freightage earned in the voyage in
accordance with Article 837 of the Code of Commerce. The only instance where such
abandonment is dispensed with is when the vessel was entirely lost. In such case, the
obligation is thereby extinguished.
5. The exception to this rule in Article 837 is when the vessel is totally lost in
which case there is no vessel to abandon, thus abandonment is not required. Because
of such loss, the liability of the owner or agent is extinguished. However, they are still
personally liable for claims under the Workmen’s Compensation Act and for repairs on
the vessel prior to its loss.
In case of illegal or tortious acts of the captain, the liability of the owner and
agent is subsidiary. In such cases, the owner or agent may avail of Article 837 by
abandoning the vessel. But if the injury is caused by the owner’s fault as where he
engages the services of an inexperienced captain or engineer, he cannot avail of the
provisions of Article 837 by abandoning the vessel. He is personally liable for such
damages.
77.
G.R. No. L-74811, September 30, 1988
ISSUES:
FACTS:
its cargo.
RULINGS:
1. YES.
al., supra).
Page 140
Thiam, Patrice
Alexandria R.
vessel.

Laserna, supra).
Maritime, 45 Phil. 805, 807 [1924]).

San Diego, 77 Phil. 730 [1946]).
78.
PHILIPPINE AMERICAN GENERAL INSURANCE CO. vs. COURT OF APPEALS
G.R. No. 116940, June 11, 1997
ISSUES:
(1) Whether or not the vessel was seaworthy
(2) Whether or not limited liability rule should apply
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Alexandria R.
(3) Whether or not Philamgen was properly subrogated to the rights against Felman.
(5) What is the doctrine of subrogation as explained in the case at bar?
FACTS:
Coca-cola loaded on board MV Asilda, owned and operated by Felman, 7,500
cases of 1-liter Coca-Cola soft drink bottles to be transported to Zamboanga City to
Cebu. The shipment was insured with Philamgen.
The vessel sank in Zamboanga del Norte. cocacola filed a claim with respondent
Felman for recovery of damages. Felman denied thus prompted cocacola to file an
insurance claim with Philamgen. Philamgen later on claimed its right of subrogation
against Felman which disclaimed any liability for the loss.
Philamgen alleged that the sinking and loss were due to the vessel's
unseaworthiness, that the vessel was improperly manned and its officers were grossly
negligent. Felman filed a motion to dismiss saying that there is no right of subrogation
in favor of Philamgen was transmitted by the shipper.
RTC dismissed the complaint of Philamgen. CA set aside the dismissal and
remanded the case to the lower court for trial on the merits. Felman filed a petition for
certiorari but was denied.
RTC rendered judgment in favor of Felman. it ruled that the vessel was
seaworthy when it left the port of Zamboanga as evidenced by the certificate issued by
the Phil. Coast Guard and the ship owner’s surveyor. Thus, the loss is due to a
fortuitous event, in which, no liability should attach unless there is stipulation or
negligence.
On appeal, CA rendered judgment finding the vessel unseaworthy for the cargo
for being top-heavy and the cocacola bottles were also improperly stored on deck.
Nonetheless, the CA denied the claim of Philamgen, saying that Philamgen was not
properly subrogated to the rights and interests of the shipper plus the filing of notice
of abandonment had absolved the ship owner from liability under the limited liability
rule.
RULINGS:
1. NO.
The vessel was unseaworthy. The proximate cause thru the findings of the Elite
Adjusters, Inc., is the vessel's being top-heavy. Evidence shows that days after the
sinking coca-cola bottles were found near the vicinity of the sinking which would
mean that the bottles were in fact stowed on deck which the vessel was not designed
to carry substantial amount of cargo on deck. The inordinate loading of cargo deck
resulted in the decrease of the vessel's metacentric height thus making it unstable.
2. NO.
Art. 587 of the Code of Commerce is not applicable, the agent is liable for the
negligent acts of the captain in the care of the goods. This liability however can be
limited through abandonment of the vessel, its equipment and freightage. Nonetheless,
there are exceptions wherein the ship agent could still be held answerable despite the
abandonment, as where the loss or injury was due to the fault of the ship owner and
the captain. The international rule is that the right of abandonment of vessels, as legal
limitation of liability, does not apply to cases where the injury was occasioned by the
fault of the ship owner. Felman was negligent, it cannot therefore escape liability.
3. NO.
On the matter of subrogation, it is provided that;
Art. 2207. If the plaintiff's property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the wrong
or breach of contract complained of, the insurance company shall be subrogated to
the rights of the insured against the wrongdoer or the person who has violated the
contract. If the 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.
Pan Malayan Insurance Corp. vs CA: The right of subrogation is not dependent
upon, nor does it grow out of any privity of contract or upon payment by the insurance
Page 142
Thiam, Patrice
Alexandria R.
company of the insurance claim. It accrues simply upon payment by the insurance
company of the insurance claim.
Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines,
Inc., gave the former the right to bring an action as subrogee against FELMAN. Having
failed to rebut the presumption of fault, the liability of FELMAN for the loss of the
7,500 cases of 1-liter Coca-Cola soft drink bottles is inevitable.
4. It is generally held that in every marine insurance policy the assured impliedly
warrants to the assurer that the vessel is seaworthy and such warranty is as much a
term of the contract as if expressly written on the face of the policy.
Thus Sec. 113 of the Insurance Code provides that "(i)n every marine insurance
upon a ship or freight, or freightage, or upon anything which is the subject of marine
insurance, a warranty is implied that the ship is seaworthy."
Under Sec. 114, a ship is "seaworthy when reasonably fit to perform the service,
and to encounter the ordinary perils of the voyage, contemplated by the parties to the
policy."
Thus it becomes the obligation of the cargo owner to look for a reliable common
carrier which keeps its vessels in seaworthy condition. He may have no control over
the vessel but he has full control in the selection of the common carrier that will
transport his goods. He also has full discretion in the choice of assurer that will
underwrite a particular venture.
5. The doctrine of subrogation has its roots in equity. It is designed to promote

and to accomplish justice and is the mode which equity adopts to compel the ultimate
payment of a debt by one who in justice, equity and good conscience ought to pay. 19
Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc.,
gave the former the right to bring an action as subrogee against FELMAN.
79.
DELA TORRE vs. COURT OF APPEALS
G.R. No. 160088, July 13, 2011
ISSUES:
(1) Whether or not the Limited Liability Rule is applicable
(2) What are the liabilities of the charterer and the sub-charterer
(4) What is the rationale with regards to formally impleading a party
(5) How was the limited liability rule defines in the case at bar?
FACTS:
Crisostomo G. Concepcion (Concepcion) owned LCT-Josephine, a vessel
registered with the Philippine Coast Guard. Concepcion and the Philippine Trigon
Shipyard Corporation (PTSC), represented by Roland, entered into a "Contract of
Agreement," wherein the latter would charter LCT-Josephine. PTSC/Roland sub-
chartered LCT-Josephine to Trigon Shipping Lines (TSL), a single proprietorship
owned by Roland’s father, Agustin de la Torre (Agustin). TSL, this time represented by
Roland per Agustin’s Special Power of Attorney, sub-chartered LCT-Josephine to
Ramon Larrazabal (Larrazabal) for the transport of cargo consisting of sand and gravel
to Leyte. The LCT-Josephine with its cargo of sand and gravel arrived at Philpos,
Isabel, Leyte.
The vessel was beached near the NDC Wharf. With the vessel’s ramp already
lowered, the unloading of the vessel’s cargo began with the use of Larrazabal’s
payloader. While the payloader was on the deck of the LCT-Josephine scooping a load
of the cargo, the vessel’s ramp started to move downward, the vessel tilted and sea
water rushed in. Shortly thereafter, LCT-Josephine sank. Concepcion demanded that
PTSC/ Roland refloat LCT-Josephine. The latter assured Concepcion that negotiations
were underway for the refloating of his vessel.
Unfortunately, this did not materialize. For this reason, Concepcion was
constrained to institute a complaint for "Sum of Money and Damages" against PTSC
and Roland before the RTC. PTSC and Roland filed their answer together with a third-
Page 143
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Alexandria R.
party complaint against Agustin. Agustin, in turn, filed his answer plus a fourth-party
complaint against Larrazabal.
The latter filed his answer and counterclaim but was subsequently declared in
default by the RTC. Eventually, the fourth-party complaint against Larrazabal was
dismissed when the RTC rendered its decision in favor of Concepcion. The appellate
court, in agreement with the findings of the RTC, affirmed its decision in toto.
RULINGS:
1. NO.
Article 837 specifically applies to cases involving collision which is a necessary
consequence of the right to abandon the vessel given to the shipowner or ship agent
under the first provision - Article 587.
Similarly, Article 590 is a reiteration of Article 587, only this time the situation
is that the vessel is co-owned by several persons. Obviously, the forerunner of the
Limited Liability Rule under the Code of Commerce is Article 587.
Now, the latter is quite clear on which indemnities may be confined or restricted
to the value of the vessel pursuant to the said Rule, and these are the - "indemnities in
favor of third persons which may arise from the conduct of the captain in the care of
the goods which he loaded on the vessel."
Thus, what is contemplated is the liability to third persons who may have dealt
with the shipowner, the agent or even the charterer in case of demise or bareboat
charter.
2. In the present case, the charterer and the sub-charterer through their
respective contracts of agreement/charter parties, obtained the use and service of the
entire LCT-Josephine. The vessel was likewise manned by the charterer and later by
the sub-charterer's people. With the complete and exclusive relinquishment of
possession, command and navigation of the vessel, the charterer and later the sub-
charterer became the vessel's owner pro hac vice. Now, and in the absence of any
showing that the vessel or any part thereof was commercially offered for use to the
public, the above agreements/charter parties are that of a private carriage where the
rights of the contracting parties are primarily defined and governed by the stipulations
in their contract.
Although certain statutory rights and obligations of charter parties are found in
the Code of Commerce, these provisions as correctly pointed out by the RTC, are not
applicable in the present case. Indeed, none of the provisions found in the Code of
Commerce deals with the specific rights and obligations between the real shipowner
and the charterer obtaining in this case. Necessarily, the Court looks to the New Civil
Code to supply the deficiency. Thus, the RTC and the CA were both correct in
applying the statutory provisions of the New Civil Code in order to define the
respective rights and obligations of the opposing parties.
3. The charterer does not completely and absolutely step into the shoes of the shipowner
or even the ship agent because there remains conflicting rights between the former
and the real shipowner as derived from their charter agreement. The Court again
quotes Chief Justice Arellano:
Their (the charterer's) possession was, therefore, the uncertain title of lease, not
a possession of the owner, such as is that of the agent, who is fully subrogated to the
place of the owner in regard to the dominion, possession, free administration, and
navigation of the vessel.
Therefore, even if the contract is for a bareboat or demise charter where
possession, free administration and even navigation are temporarily surrendered to
the charterer, dominion over the vessel remains with the shipowner. Ergo, the
charterer or the sub-charterer, whose rights cannot rise above that of the former, can
never set up the Limited Liability Rule against the very owner of the vessel. Borrowing
the words of Chief Justice Artemio V. Panganiban, "Indeed, where the reason for the
rule ceases, the rule itself does not apply."
4. In the case at bar, it has been explained that the purpose of formally
impleading a party is to assure him a day in court, once the protective mantle of due
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Alexandria R.
process of law has in fact been accorded a litigant, whatever the imperfection in form,
the real litigant may be held liable as a party.
5. `No vessel, no liability,' expresses in a nutshell the limited liability rule. The
shipowner's or agent's liability is merely coextensive with his interest in the vessel
such that a total loss thereof results in its extinction. The total destruction of the
vessel extinguishes maritime liens because there is no longer any res to which it can
attach. This doctrine is based on the real and hypothecary nature of maritime law
which has its origin in the prevailing conditions of the maritime trade and sea voyages
during the medieval ages, attended by innumerable hazards and perils. To offset
against these adverse conditions and to encourage shipbuilding and maritime
commerce, it was deemed necessary to confine the liability of the owner or agent
arising from the operation of a ship to the vessel, equipment, and freight, or
insurance, if any.
In view of the foregoing, Concepcion as the real shipowner is the one who is
supposed to be supported and encouraged to pursue maritime commerce. Thus, it
would be absurd to apply the Limited Liability Rule against him who, in the first place,
should be the one benefitting from the said rule.
80.
R.V. MARVAN FREIGHT, INC. vs. COURT OF APPEALS
G.R. NO. 128064, March 4, 2004
ISSUES:
(1) Whether or not the trial court had jurisdiction to review and declare ineffective the
declaration of the District Collector of Customs in the abandonment proceedings that
the subject shipment was abandoned cargo and that, thenceforth, the government
ipso facto became the owner thereof
(2) Whether or not MARZAN is liable for the loss of the goods
(3) Whether or not private respondent had cause of action against the insurer Philfire
(4) Whether or not at the time of the fire plaintiffs goods were already "abandoned goods"
FACTS:
Petitioner RV Marzan Freight, Inc., owned and operated a customs-bonded
warehouse, which, along with the goods stored therein, was covered by a Philfire
insurance policy. On April 12, 1989, raw materials consigned to private respondent
Shiela’s Manufacturing, Inc., arrived in the Philippines from Keelung, Taiwan. The
Bureau of Customs treated the raw materials as subject to ordinary import taxes and
were not immediately released to Shiela’s Manufacturing.
Later, the District Collector of Customs initiated abandonment proceedings over
the cargo and notice was posted. No separate notice was however sent to Shiela’s
Manufacturing because its address was unknown. After the aforestated proceedings
achieved finality but before inventory and sale at public auction, part of the warehouse
containing the shipment was burned. Philfire paid to Marzan the amount of
P12,000,000, for which the latter was issued a receipt.
Shiela’s Manufacturing is now demanding payment of the value of the goods
from Marzan, who, however, rejected the demand. Thus, on Dec. 26, 1991, or after the
lapse of more than 2 years from the arrival of the cargo in the Philippines, Shiela’s
Manufacturing filed a complaint for damages with the RTC of Pasig City against
Marzan.
RULINGS:
1. NO
The Supreme Court upheld the contention of Marzan.
Irrefragably, the RTC had jurisdiction over the nature of the private
respondent’s action, which was one for the collection of the value of the cargo gutted
by fire, while under the custody and control of the petitioner preparatory to its sale at
public auction by the BOC.
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The jurisdiction of the court or other tribunal is determined by the relevant

allegations of the complaint and the character of the relief sought, irrespective of
whether or not the plaintiff is entitled to recover upon all or some of the claims
accorded therein. The jurisdiction of the trial court does not depend upon the defenses
in the answer or in a motion to dismiss.
2. NO.
The trial court rejected the petitioners claim that it could not be held liable for
the private respondents loss because the fire that destroyed the subject cargo was an
"act of God."
According to the trial court, this is precisely one of the reasons why a bonded
warehouse is required by law to insure the goods received and stored against fire;
otherwise, persons dealing with a bonded warehouse would not be afforded due
protection.
According to the court, the policy procured by the petitioner inures equally and
proportionately to the benefit of all the owners of the property insured, even if the
owner of the goods did not request or know of the insurance. Citing Section 1902 of
the Tariff and Customs Code, the trial court pointed out that the petitioners bonded
warehouse is considered as an extension of the Bureau of Customs only insofar as it
continues with the storage and safekeeping of goods transferred to it by the latter.
3. NONE.
The trial court ruled that the private respondent had no cause of action against
the insurer Philfire, as it was not a party to the insurance contract between the
petitioner and Philfire. Since the terms of the insurance contract do not confer a
benefit upon a third person as required by Article 1311 of the Civil Code, the private
respondent had no right to the insurance proceeds.
4. If the government owned the cargo before it was gutted by fire, then the private
respondent had no cause of action against the petitioner. But the resolution of the
issue is riveted to and intertwined with the resolution of the issue of whether the RTC
is vested with jurisdiction to review and nullify a declaration made by the District
Collector of Customs that the shipment was abandoned cargo and, thus, ipso facto
belonged to the government. The resolution of both issues involved the application of
Section 1801 and Section 1802 of the Tariff and Customs Code, which read:
SEC. 1801. Abandonment, Kinds and Effects of. Abandonment is expressed
when it is made direct to the Collector by the interested party in writing, and is
implied when, from the action or omission of the interested party to file the import
entry within five (5) days or an extension thereof from the discharge of the vessel or
aircraft, or having filed such entry, the interested party fails to claim his importation
within five (5) days thereafter or within an extension of not more than five (5) days
shall be deemed an implied abandonment. An implied abandonment shall not be
effective until the article shall be declared by the Collector to have been abandoned
after notice thereof is given to the interested party as in seizure cases.
Any person who abandons an article or who fails to claim his importation as
provided for in the preceding paragraph shall be deemed to have renounced all his
interests and property rights therein.
SEC. 1802. Abandonment of Imported Articles.- The owner or importer of any
articles may, within ten days after filing of the import entry, abandon to the
Government all or a part of the articles included in an invoice, and, thereupon, he
shall be relieved from the payment of duties, taxes and all other charges and expenses
due thereon: Provided, That the portion so abandoned is not less than ten per cent of
the total invoice and is not less than one package, except in cases of articles imported
for personal or family use. The articles so abandoned shall be delivered by the owner
or importer at such place within the port of arrival as the Collector shall designate,
and upon his failure to so comply, the owner or importer shall be liable for all
expenses that may be incurred in connection with the disposition of the articles.
5. The rule that Regional Trial Courts have no review powers over such
proceedings is anchored upon the policy of placing no unnecessary hindrance on the
governments drive, not only to prevent smuggling and other frauds upon Customs, but
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Thiam, Patrice
Alexandria R.
more importantly, to render effective and efficient the collection of import and export
duties due the State, which enables the government to carry out the functions it has
been instituted to perform.
Even if the seizure by the Collector of Customs were illegal, which has yet to be
proven, we have said that such act does not deprive the Bureau of Customs of
jurisdiction thereon.
80.
FAR EASTERN SHIPPING COMPANY vs. COURT OF APPEALS
G.R. No. 130068, October 1, 1998
ISSUES:
(1) Whether or not the pilot of a commercial vessel, under compulsory pilotage, solely
liable for the damage caused by the vessel to the pier, at the port of destination, for his
negligence?;
(2) Whether or not the owner of the vessel would be liable likewise if the damage is caused
by the concurrent negligence of the master of the vessel and the pilot under a
compulsory pilotage
(4) Whether or not the members of a pilots' association are in legal effect a copartnership
(5) Whether or not the pilot is negligent
FACTS:
M/V PAVLODAR, owned and operated by the Far Eastern Shipping Company
(FESC), arrived at the Port of Manila and was assigned Berth 4 of the Manila
International Port, as its berthing space. Gavino, who was assigned by the Appellant
Manila Pilots’ Association to conduct the docking maneuvers for the safe berthing,
boarded the vessel at the quarantine anchorage and stationed himself in the bridge,
with the master of the vessel, Victor Kavankov, beside him. After a briefing of Gavino
by Kavankov of the particulars of the vessel and its cargo, the vessel lifted anchor from
the quarantine anchorage and proceeded to the Manila International Port. The sea was
calm and the wind was ideal for docking maneuvers. When the vessel reached the
landmark, one-half mile from the pier, Gavino ordered the engine stopped. When the
vessel was already about 2,000 feet from the pier, Gavino ordered the anchor dropped.
Kavankov relayed the orders to the crew of the vessel on the bow. The left anchor, with
two (2) shackles, were dropped.
However, the anchor did not take hold as expected. The speed of the vessel did
not slacken. A commotion ensued between the crew members. After Gavino noticed
that the anchor did not take hold, he ordered the engines half-astern. Abellana, who
was then on the pier apron, noticed that the vessel was approaching the pier fast.
Kavankov likewise noticed that the anchor did not take hold. Gavino thereafter gave
the “full-astern” code. Before the right anchor and additional shackles could be
dropped, the bow of the vessel rammed into the apron of the pier causing considerable
damage to the pier as well as the vessel.
RULINGS:
1. Generally speaking, the pilot supersedes the master for the time being in the
command and navigation of the ship, and his orders must be obeyed in all matters
connected with her navigation. He becomes the master pro hac vice and should give all
directions as to speed, course, stopping and reversing anchoring, towing and the like.
And when a licensed pilot is employed in a place where pilotage is compulsory, it is his
duty to insist on having effective control of the vessel or to decline to act as pilot.
Under certain systems of foreign law, the pilot does not take entire charge of the vessel
but is deemed merely the adviser of the master, who retains command and control of
the navigation even in localities where pilotage is compulsory. It is quite common for
states and localities to provide for compulsory pilotage, and safety laws have been
enacted requiring vessels approaching their ports, with certain exceptions, to take on
board pilots duly licensed under local law.
The purpose of these laws is to create a body of seamen thoroughly acquainted
with the harbor, to pilot vessels seeking to enter or depart, and thus protect life and
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property from the dangers of navigation. Upon assuming such office as a compulsory
pilot, Capt. Gavino is held to the universally accepted high standards of care and
diligence required of a pilot, whereby he assumes to have skill and knowledge in
respect to navigation in the particular waters over which his license extends superior
to and more to be trusted than that of the master. He is not held to the highest
possible degree of skill and care but must have and exercise the ordinary skill and
care demanded by the circumstances, and usually shown by an expert in his
profession. Under extraordinary circumstances, a pilot must exercise extraordinary
care. In this case, Capt. Gavino failed to measure up to such strict standard of care
and diligence required of pilots in the performance of their duties. As the pilot, he
should have made sure that his directions were promptly and strictly followed.
2. The negligence on the part of Capt. Gavino is evident; but Capt. Kabancov is no
less responsible for the allision.
The master is still in command of the vessel notwithstanding the presence of a
pilot. A perusal of Capt. Kabankov’s testimony makes it apparent that he was remiss
in the discharge of his duties as master of the ship, leaving the entire docking
procedure up to the pilot, instead of maintaining watchful vigilance over this risky
maneuver. The owners of a vessel are not personally liable for the negligent acts of a
compulsory pilot, but by admiralty law, the fault or negligence of a compulsory pilot is
imputable to the vessel and it may be held liable therefor in rem. Where, however, by
the provisions of the statute the pilot is compulsory only in the sense that his fee must
be paid, and is not in compulsory charge of the vessel, there is no exemption from
liability. Even though the pilot is compulsory, if his negligence was not the sole cause
of the injury, but the negligence of the master or crew contributed thereto, the owners
are liable. But the liability of the ship in rem does not release the pilot from the
consequences of his own negligence. The master is not entirely absolved of
responsibility with respect to navigation when a compulsory pilot is in charge. Except
insofar as their liability is limited or exempted by statute, the vessel or her owners are
liable for all damages caused by the negligence or other wrongs of the owners or those
in charge of the vessel.
As a general rule, the owners or those in possession and control of a vessel and
the vessel are liable for all natural and proximate damages caused to persons or
property by reason of her negligent management or navigation.
3. The well established rule is that pilot associations are immune to vicarious
liability for the tort of their members. They are not the employer of their members and
exercise no control over them once they take the helm of the vessel. They are also not
partnerships because the members do not function as agents for the association or for
each other. Pilots' associations are also not liable for negligently assuring the
competence of their members because as professional associations they made no
guarantee of the professional conduct of their members to the general public.
Where under local statutes and regulations, pilot associations lack the
necessary legal incidents of responsibility, they have been held not liable for damages
caused by the default of a member pilot.
Whether or not the members of a pilots' association are in legal effect a
copartnership depends wholly on the powers and duties of the members in relation to
one another under the provisions of the governing statutes and regulations. The
relation of a pilot to his association is not that of a servant to the master, but of an
associate assisting and participating in a common purpose. Ultimately, the rights and
liabilities between a pilots' association and an individual member depend largely upon
the constitution, articles or by-laws of the association, subject to appropriate
government regulations.
4. Whether or not the members of a pilots' association are in legal effect a

copartnership depends wholly on the powers and duties of the members in relation to
one another under the provisions of the governing statutes and regulations. The
relation of a pilot to his association is not that of a servant to the master, but of an
associate assisting and participating in a common purpose. Ultimately, the rights and
liabilities between a pilots' association and an individual member depend largely upon
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the constitution, articles or by-laws of the association, subject to appropriate

government regulations.
No reliance can be placed by MPA on the cited American rulings as to immunity
from liability of a pilots' association in ljght of existing positive regulation under
Philippine law. The Court of Appeals properly applied the clear and unequivocal
provisions of Customs Administrative Order No. 15-65. In doing so, it was just being
consistent with its finding of the non-existence of employer-employee relationship
between MPA and Capt. Gavino which precludes the application of Article 2180 of the
Civil Code.
5. YES.
The pilot in the case at bar having deviated from the usual and ordinary course
followed by navigators in passing through the strait in question, without a substantial
reason, was guilty of negligence, and that negligence having been the proximate cause
of the damages, he is liable for such damages as usually and naturally flow therefrom.
...
. . . (T)he defendant should have known of the existence and location of the rock
upon which the vessel struck while under his control and management. . . . .
Consistent with the pronouncements in these two earlier cases, but on a
slightly different tack, the Court in Yap Tico & Co. exonerated the pilot from liability
for the accident where the orders of the pilot in the handling of the ship were
disregarded by the officers and crew of the ship. According to the Court, a pilot is ". . .
responsible for a full knowledge of the channel and the navigation only so far as he
can accomplish it through the officers and crew of the ship, and I don't see chat he
can be held responsible for damage when the evidence shows, as it does in this case,
that the officers and crew of the ship failed to obey his orders." Nonetheless, it is
possible for a compulsory pilot and the master of the vessel to be concurrently
negligent and thus share the blame for the resulting damage as joint tortfeasors, 98
but only under the circumstances obtaining in and demonstrated by the instant
petitions.
It may be said, as a general rule, that negligence in order to render a person
liable need not be the sole cause of an injury. It is sufficient that his negligence,
concurring with one or more efficient causes other than piaintiff's, is the proximate
cause of the injury. Accordingly, where several causes combine to produce injuries, a
person is not relieved from liability because he is responsible for only one of them, it
being sufficient that the negligence of the person charged with injury is an efficient
cause without which the injury would not have resulted to as great an extent, and that
such cause is not attributable to the person injured. It is no defense to one of the
concurrent tortfeasors that the injury would not have resulted from his negligence
alone, without the negligence or wrongful acts of the other concurrent rortfeasor. 99
Where several causes producing an injury are concurrent and each is an efficient
cause without which the injury would not have happened, the injury may be
attributed to all or any of the causes and recovery may be had against any or all of the
responsible persons although under the circumstances of the case, it may appear that
one of them was more culpable, and that the duty owed by them to the injured person
was not the same. No actor's negligence ceases to be a proximate cause merely
because it does not exceed the negligence of other actors. Each wrongdoer is
responsible for the entire result and is liable as though his acts were the sole cause of
the injury.
82.
NATIONAL DEVELOPMENT COMPANY vs. COURT OF APPEALS
G.R. No. L49469, August 19, 1988
ISSUES:
(1) Whether or not the provisions of the Carriage of Goods by Sea Act is applicable
(2) Whether or not the bill of lading has prescribed
(4) Whether or not NDC is liable
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(5) Which laws govern loss or destruction of goods due to collision of vessels outside
Philippine waters
FACTS:
NDC as the first preferred mortgagee of three ocean going vessels including one
with the name ‘Dona Nati’ appointed MCP as its agent to manage and operate said
vessel for and in its behalf and account. Thus, the E. Philipp Corporation of New York
loaded on board the vessel “Dona Nati” at San Francisco, California, a total of 1,200
bales of American raw cotton consigned to the order of Manila Banking Corporation,
Manila and the People’s Bank and Trust Company acting for and in behalf of the Pan
Asiatic Commercial Company, Inc., who represents Riverside Mills Corporation. Also
loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa,
Ltd., consigned to the order of Manila Banking Corporation consisting of 200 cartons
of sodium lauryl sulfate and 10 cases of aluminum foil.
En route to Manila the vessel Dofia Nati figured in a collision at Ise Bay, Japan
with a Japanese vessel ‘SS Yasushima Maru’ as a result of which 550 bales of
aforesaid cargo of American raw cotton were lost and/or destroyed. The damaged and
lost cargoes were paid by the insurer to the Riverside Mills Corporation as holder of
the negotiable bills of lading duly endorsed.
Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui
Kaisa Ltd., consigned to the order of Manila Banking Corporation, Manila, acting for
Guilcon, Manila. The total loss was paid by the insurer to Guilcon as holder of the
duly endorsed bill of lading. Hence, plaintiff filed this complaint to recover said
amount from the NDC and MCP as owner and ship agent respectively, of the said
‘Dofia Nati’ vessel.
RULINGS:
1. YES.
On the issue of prescription, the trial court correctly found that the bills of
lading issued allow trans-shipment of the cargo, which simply means that the date of
arrival of the ship Dona Nati on April 18,1964 was merely tentative to give allowances
for such contingencies that said vessel might not arrive on schedule at Manila and
therefore, would necessitate the trans-shipment of cargo, resulting in consequent
delay of their arrival. In fact, because of the collision, the cargo which was supposed to
arrive in Manila on April 18, 1964 arrived only on June 12, 13, 18, 20 and July 10, 13
and 15, 1964. Hence, had the cargoes in question been saved, they could have arrived
in Manila on the above-mentioned dates. Accordingly, the complaint in the instant
case was filed on April 22, 1965, that is, long before the lapse of one (1) year from the
date the lost or damaged cargo "should have been delivered" in the light of Section 3,
sub-paragraph (6) of the Carriage of Goods by Sea Act
2. YES.
The main thrust of NDC's argument is to the effect that the Carriage of Goods
by Sea Act should apply to the case at bar and not the Civil Code or the Code of
Commerce. Under Section 4 (2) of said Act, the carrier is not responsible for the loss or
damage resulting from the "act, neglect or default of the master, mariner, pilot or the
servants of the carrier in the navigation or in the management of the ship." Thus, NDC
insists that based on the findings of the trial court which were adopted by the Court of
Appeals, both pilots of the colliding vessels were at fault and negligent, NDC would
have been relieved of liability under the Carriage of Goods by Sea Act. Instead, Article
287 of the Code of Commerce was applied and both NDC and MCP were ordered to
reimburse the insurance company for the amount the latter paid to the consignee as
earlier stated.
In the case at bar, it has been established that the goods in question are
transported from San Francisco, California and Tokyo, Japan to the Philippines and
that they were lost or due to a collision which was found to have been caused by the
negligence or fault of both captains of the colliding vessels. Under the above ruling, it
is evident that the laws of the Philippines will apply, and it is immaterial that the
collision actually occurred in foreign waters, such as Ise Bay, Japan.
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3. Under Article 1733 of the Civil Code, common carriers from the nature of their
business and for reasons of public policy are bound to observe extraordinary diligence
them according to all circumstances of each case. Accordingly, under Article 1735 of
the same Code, in all other than those mentioned is Article 1734 thereof, the common
carrier shall be presumed to have been at fault or to have acted negigently, unless it
proves that it has observed the extraordinary diligence required by law.
4. YES.
It is well settled that both the owner and agent of the offending vessel are liable
for the damage done where both are impleaded (Philippine Shipping Co. v. Garcia
Vergara, 96 Phil. 281 [1906]); that in case of collision, both the owner and the agent
are civilly responsible for the acts of the captain (Yueng Sheng Exchange and Trading
Co. v. Urrutia & Co., supra citing Article 586 of the Code of Commerce; Standard Oil Co.
of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the
liability of the naviero in the sense of charterer or agent, is not expressly provided in
Article 826 of the Code of Commerce, it is clearly deducible from the general doctrine
of jurisprudence under the Civil Code but more specially as regards contractual
obligations in Article 586 of the Code of Commerce. Moreover, the Court held that both
the owner and agent (Naviero) should be declared jointly and severally liable, since the
obligation which is the subject of the action had its origin in a tortious act and did not
arise from contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]).
Consequently, the agent, even though he may not be the owner of the vessel, is
liable to the shippers and owners of the cargo transported by it, for losses and
damages occasioned to such cargo, without prejudice, however, to his rights against
the owner of the ship, to the extent of the value of the vessel, its equipment, and the
freight (Behn Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]).
As to the extent of their liability, MCP insists that their liability should be
limited to P200.00 per package or per bale of raw cotton as stated in paragraph 17 of
the bills of lading. Also the MCP argues that the law on averages should be applied in
determining their liability.
MCP's contention is devoid of merit. The declared value of the goods was stated
in the bills of lading and corroborated no less by invoices offered as evidence ' during
the trial. Besides, common carriers, in the language of the court in Juan Ysmael &
Co., Inc. v. Barrette et al., (51 Phil. 90 [1927]) "cannot limit its liability for injury to a
loss of goods where such injury or loss was caused by its own negligence." Negligence
of the captains of the colliding vessel being the cause of the collision, and the cargoes
not being jettisoned to save some of the cargoes and the vessel, the trial court and the
Court of Appeals acted correctly in not applying the law on averages (Articles 806 to
818, Code of Commerce)
5. This issue has already been laid to rest by this Court in Eastern Shipping Lines
Inc. v. IAC where it was held under similar circumstance “that the law of the country
to which the goods are to be transported governs the liability of the common carrier in
case of their loss, destruction or deterioration” (Article 1753, Civil Code). Thus, the
rule was specifically laid down that for cargoes transported from Japan to the
Philippines, the liability of the carrier is governed primarily by the Civil Code and in all
matters not regulated by said Code, the rights and obligations of common carrier shall
be governed by the Code of commerce and by laws (Article 1766, Civil Code). Hence,
the Carriage of Goods by Sea Act, a special law, is merely suppletory to the provision
of the Civil Code.
It is immaterial that the collision actually occurred in foreign waters, such as
Ise Bay, Japan. It appears, however, that collision falls among matters not specifically
regulated by the Civil Code, so that no reversible error can be found in respondent
courses application to the case at bar of Articles 826 to 839, Book Three of the Code of
Commerce, which deal exclusively with collision of vessels.
83.
SEA-LAND SERVICE, INC. vs. INTERMEDIATE APELLATE COURT
G.R. No. 75118, August 31, 1987
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ISSUES:
(1) Whether or not the “package limitation clause,” a stipulation limiting the liability of
the carrier for loss and damage to the shipment to the amount fixed in the bill of
lading, is valid and binding against the shipper and the consignee in view of the
shipper’s failure to declare the actual value of the shipment.
(2) Whether or not COGSA is applicable in the case at bar
(3) Whether or not the consignee of seaborne freight is bound by stipulations in the
covering bill of lading limiting to a fixed amount the liability of the carrier for loss or
damage to the cargo where its value is not declared in the bill
(4) What is the Carriage of Goods by Sea Act?
(5) What provisions of the COGSA authorizes transshipment of the goods at any point in
the voyage
FACTS:
On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land), a foreign
shipping and forwarding company licensed to do business in the Philippines, received
from Seaborne Trading Company in Oakland, California a shipment consigned to Sen
Hiap Hing the business name used by Paulino Cue in the wholesale and retail trade
which he operated out of an establishment located on Borromeo and Plaridel Streets,
Cebu City. The shipper did not declare the value of the shipmen and no value was
indicated in the bill of lading. The bill described the shipment only as “8 CTNS on 2
SKIDS-FILES.”
The shipment arrived in Manila on February 12, 1981, and there discharged
into the custody of the arrastre contractor and the customs and port authorities.
Sometime between February 13 and 16, 1981, after the shipment had been
transferred near Warehouse 3 at Pier 3 in South Harbor, Manila, awaiting trans-
shipment to Cebu, it was stolen by pilferers and has never been recovered. On March
10, 1981, Paulino Cue, the consignee, made formal claim upon Sea-Land for the value
of the lost shipment allegedly amounting to P179,643.48. Sea-Land offered to settle for
US$4,000.00, or its then Philippine peso equivalent of P30,600.00, asserting that said
amount represented its maximum liability for the loss of the shipment under the
package limitation clausein the covering bill of lading. Cue rejected the offer and
thereafter brought suit for damages against Sea-Land in the then Court of First
Instance of Cebu.
The trial court rendered judgment in favor of Cue, sentencing Sea-Land to pay
him P186,048.00 representing the Philippine currency value of the lost cargo,
P55,814.00 for unrealized profit with one (1%) percent monthly interest from the filing
of the complaint until fully paid, P25,000.00 for attorney’s fees and P2,000.00 as
litigation expenses. The Intermediate Appellate Court affirmed said decision.
RULINGS:
1. YES.
There is nothing in the Civil Code which absolutely prohibits agreements
between shipper and carrier limiting the latter’s liability for loss of or damage to cargo
shipped under contracts of carriage. The Civil Code in fact has agreements of such
character in contemplation in providing, in its Articles 1749 and 1750, that:
ART. 1749 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, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been fairly and freely agreed
upon.
Here, the just and reasonable character of the questioned stipulation is implicit
from the fact that the shipper or owner is given the option under Article 1749 of
avoiding accrual of liability limitation by simply declaring the nature and value of the
shipment in the bill of lading. Also, the shipper here did not complain of having been
“rushed,” imposed upon or deceived in any significant way into agreeing to ship the
cargo under a bill of lading carrying such a stipulation; therefore, there is no ground
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Alexandria R.
to assume that its agreement to the said stipulation was not freely and fairly sought
and given.
Furthermore, since the liability of a common carrier for loss of or damage to
goods transported by it under a contract of carriage is governed by the laws of the
country of destination and the goods in question were shipped from the United States
to the Philippines, the liability of petitioner Sea-Land to the respondent consignee
while governed primarily by the Civil Code may suppletorily be governed, in all matters
not determined thereby, by the Code of Commerce and special laws. One of these
suppletory special laws is the Carriage of Goods by Sea Act (COGSA) and Sec. 4(5) of
the said act provides that:
“Neither the carrier nor the ship shall in any event be or become liable for any
loss or damage to or in connection with the transportation of goods in an amount
exceeding $500 per package lawful money of the United States, or in case of goods not
shipped in packages, per customary freight unit, or the equivalent of that sum in other
currency, unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading. This declaration, if
embodied in the bill of lading, shall be prima facie evidence, but shall not be
conclusive on the carrier.
By agreement between the carrier, master, or agent of the carrier, and the
shipper another maximum amount than that mentioned in this paragraph may be
fixed: Provided That such maximum shall not be less than the figure above named. In
no event shall the carrier be liable for more than the amount of damage actually
sustained.”
Therefore, there can be no doubt or equivocation about the validity and
enforceability of freely-agreed-upon stipulations in a contract of carriage or bill of
lading limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and inserts it into said contract or bill. This pro position,
moreover, rests upon an almost uniform weight of authority.
2. YES.
This Court has also ruled that the Carriage of Goods by Sea Act is applicable up
to the final port of destination and that the fact that transshipment was made on an
interisland vessel did not remove the contract of carriage of goods from the operation
of said Act.
3. YES.
Private respondent, by making claim for loss on the basis of the bill of lading, to
all intents and purposes accepted said bill. Having done so, he —
". . . becomes bound by all stipulations contained therein whether on the front
or the back thereof. Respondent cannot elude its provisions simply because they
prejudice him and take advantage of those that are beneficial. Secondly, the fact that
respondent shipped his goods on board the ship of petitioner and paid the
corresponding freight thereon shows that he impliedly accepted the bill of lading which
was issued in connection with the shipment in question, and so it may be said that
the same is finding upon him as if it had been actually signed by him or by any other
person in his behalf. . . . .
4. Since the liability of a common carrier for loss of or damage to goods

transported by it under a contract of carriage is governed by the laws of the country of
destination and the goods in question were shipped from the United States to the
Philippines, the liability of petitioner Sea-Land to the respondent consignee while
governed primarily by the Civil Code may suppletorily be governed, in all matters not
determined thereby, by the Code of Commerce and special laws. One of these
suppletory special laws is the Carriage of Goods by Sea Act (COGSA) and Sec. 4(5) of
the said act provides that:
“Neither the carrier nor the ship shall in any event be or become liable for any
loss or damage to or in connection with the transportation of goods in an amount
exceeding $500 per package lawful money of the United States, or in case of goods not
shipped in packages, per customary freight unit, or the equivalent of that sum in other
currency, unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading. This declaration, if
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Thiam, Patrice
Alexandria R.
embodied in the bill of lading, shall be prima facie evidence, but shall not be
conclusive on the carrier.
By agreement between the carrier, master, or agent of the carrier, and the
shipper another maximum amount than that mentioned in this paragraph may be
fixed: Provided That such maximum shall not be less than the figure above named. In
no event shall the carrier be liable for more than the amount of damage actually
sustained.”
5. "13. THROUGH CARGO AND TRANSSHIPMENT. The carrier or master, in the

exercise of its or his discretion and although transshipment or forwarding of the goods
may not have been contemplated or provided for herein, may at port of discharge or
any other place whatsoever transship or forward the goods or any part thereof by any
means at the risk and expense of the goods and at any time, whether before or after
loading on the ship named herein and by any route, whether within or outside the
scope of the voyage or beyond the port of discharge or destination of the goods and
without notice to the shipper or consignee. The carrier or master may delay such
transshipping or forwarding for any reason, including but not limited to awaiting a
vessel or other means of transportation whether by the carrier or others."
84.
PHILIPPINE FIRST INSURANCE CO., INC. vs. WALLEM PHILS. SHIPPING, INC.
G.R. No. 165647, March 26, 2009
ISSUES:
(1) Whether or not the Court of Appeals erred in not holding that as a common carrier,
the carriers duties extend to the obligation to safely discharge the cargo from the
vessel;
(2) Whether or not the carrier should be held liable for the cost of the damaged shipment;
(3) Whether or not Wallems failure to answer the extra judicial demand by petitioner for
the cost of the lost/damaged shipment is an implied admission of the formers liability
for said goods;
(4) Whether or not the courts below erred in giving credence to the testimony of Mr.
Talens.
FACTS:
October 1995, Anhui Chemicals Import and Export Corp. loaded on board M/S
Offshore Master a shipment consisting of sodium sulphate anhydrous, complete and
in good order for transportation to and delivery at the port of Manila for consignee,
covered by a clean bill of lading.
On October 16, 1995, the shipment arrived in port of manila and was
discharged which caused various degrees of spillage and losses as evidence by the
turn over survey of the arrastre operator. Asia Star Freight delivered the shipments
from pier to the consignees in Quezon City, during the unloading, it was found by the
consignee that the shipment was damaged and in bad condition.
April 29, 1996, the consignee filed a claim with Wallem for the value of the
damaged shipment, to no avail. Since the shipment was insured with Phil. First
Insurance against all risks in the amount of P2,470,213.50. The consignee filed a
claim against the First Insurance. First insurance after examining the turn-over
survey, the bad order certificate and other documents paid the consignee but later on
sent a demand letter to Wallem for the recovery of the amount paid to the consignee
(in exercise of its right of subrogation). Wallem did not respond to the claim.
First Insurance then instituted an action before RTC for damages against
Wallem. RTC held the shipping company and the arrastre operator solidarily liable
since both are charged with the obligation to deliver the goods in good order condition.
The CA reversed and set aside the RTC's decision. CA says that there is no solidary
liability between the carrier and the arrastre because it was clearly established that
the damage and losses of the shipment were attributed to the mishandling by the
arrastre operator in the discharge of the shipment.
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RULINGS:
1. YES.
The vessel is a common carrier, and thus the determination of the existence or
absence of liability will be gauged on the degree of diligence required of a common
carrier.
2. NO.
The Carrier shall not be liable of loss of or damage to the goods before loading
and after discharging from the vessel, howsoever such loss or damage arises.
On the other hand, the functions of an arrastre operator involve the handling of
cargo deposited on the wharf or between the establishment of the consignee or shipper
and the ship's tackle. Being the custodian of the goods discharged from a vessel, an
arrastre operator's duty is to take good care of the goods and to turn them over to the
party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work so its
drivers/operators or employees should observe the standards and measures necessary
to prevent losses and damage to shipments under its custody.
In Fireman's Fund Insurance Co. v. Metro Port Service, Inc. the Court explained
the relationship and responsibility of an arrastre operator to a consignee of a cargo, to
quote:
The legal relationship between the consignee and the arrastre operator is akin
to that of a depositor and warehouseman. The relationship between the consignee and
the common carrier is similar to that of the consignee and the arrastre operator. Since
it is the duty of the ARRASTRE to take good care of the goods that are in its custody
and to deliver them in good condition to the consignee, such responsibility also
devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore
charged with and obligated to deliver the goods in good condition to the consignee.
(Emphasis supplied) (Citations omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping Lines,
Inc. v. Court of Appeals36 with the clarification that the arrastre operator and the
carrier are not always and necessarily solidarily liable as the facts of a case may vary
the rule.
3. The damage of the shipment was documented by the turn over survey and
request for bad order survey, with these documents, petitioner insist that the
shipment incurred damages while still in the care and responsibility of Wallem before
it was turned over to the arrastre operator. However, RTC found the testimony of Mr.
Talens (cargo surveyor) that the loss was caused by the mishandling of the arrastre
operator. This mishandling was affirmed by the CA which was the basis for declaring
the arrastre operator solely liable for the damage.
It is established that damage or losses were incurred by the shipment during
the unloading. As common carrier, they are bound to observe extraordinary diligence
in the vigilance over the goods transported by them. Subject to certain exceptions
enumerated under Article 1734 of the Civil Code, common carriers are responsible for
the loss, destruction, or deterioration of the goods. The extraordinary responsibility of
the common carrier lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the consignee, or to the person
who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce provides that the ship
captain is liable for the cargo from the time it is turned over to him at the dock or
afloat alongside the vessel at the port of loading, until he delivers it on the shore or on
the discharging wharf at the port of unloading, unless agreed otherwise.
COGSA provides that under every contract of carriage of goods by sea, the
carrier in relation to the loading, handling, stowage, carriage, custody, care, and
discharge of such goods, shall be subject to the responsibilities and liabilities and
entitled to the rights and immunities set forth in the Act. Section 3 (2) thereof then
states that among the carriers responsibilities are to properly and carefully load,
handle, stow, carry, keep, care for, and discharge the goods carried.
On the other hand, the functions of an arrastre operator involve the handling of
cargo deposited on the wharf or between the establishment of the consignee or shipper
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and the ship's tackle. Being the custodian of the goods discharged from a vessel, an
arrastre operator's duty is to take good care of the goods and to turn them over to the
party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work so its
to prevent losses and damage to shipments under its custody. Thus, in this case the
appellate court is correct insofar as it ruled that an arrastre operator and a carrier
may not be held solidarily liable at all times. But the precise question is which entity
had custody of the shipment during its unloading from the vessel?
The records are replete with evidence which show that the damage to the bags
happened before and after their discharge and it was caused by the stevedores of the
arrastre operator who were then under the supervision of Wallem.
It is settled in maritime law jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier. In the instant case, the damage or
losses were incurred during the discharge of the shipment while under the supervision
of the carrier. Consequently, the carrier is liable for the damage or losses caused to
the shipment. As the cost of the actual damage to the subject shipment has long been
settled, the trial courts finding of actual damages in the amount of P397,879.69 has to
be sustained.
4. NO.
The general rule in assessing credibility of witnesses is well-settled:
x x x the trial court's evaluation as to the credibility of witnesses is viewed as correct
and entitled to the highest respect because it is more competent to so conclude,
having had the opportunity to observe the witnesses' demeanor and deportment on the
stand, and the manner in which they gave their testimonies. The trial judge therefore
can better determine if such witnesses were telling the truth, being in the ideal
position to weigh conflicting testimonies. Therefore, unless the trial judge plainly
overlooked certain facts of substance and value which, if considered, might affect the
result of the case, his assessment on credibility must be respected.
Contrary to petitioner's stance on the third issue, Wallem's failure to respond to
its demand letter does not constitute an implied admission of liability. To borrow the
words of Mr. Justice Oliver Wendell Holmes, thus:
A man cannot make evidence for himself by writing a letter containing the statements
that he wishes to prove. He does not make the letter evidence by sending it to the
party against whom he wishes to prove the facts [stated therein]. He no more can
impose a duty to answer a charge than he can impose a duty to pay by sending goods.
Therefore a failure to answer such adverse assertions in the absence of further
circumstances making an answer requisite or natural has no effect as an admission.
5. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods
transported by them.26 Subject to certain exceptions enumerated under Article
173427 of the Civil Code, common carriers are responsible for the loss, destruction, or
deterioration of the goods. The extraordinary responsibility of the common carrier lasts
by the carrier for transportation until the same are delivered, actually or
receive them.28
the discharging wharf at the port of unloading, unless agreed otherwise. In Standard
Oil Co. of New York v. Lopez Castelo,29 the Court interpreted the ship captain's
liability as ultimately that of the shipowner by regarding the captain as the
representative of the ship owner.
Lastly, Section 2 of the COGSA provides that under every contract of carriage of
goods by sea, the carrier in relation to the loading, handling, stowage, carriage,
custody, care, and discharge of such goods, shall be subject to the responsibilities and
liabilities and entitled to the rights and immunities set forth in the Act.30 Section 3 (2)
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thereof then states that among the carriers' responsibilities are to properly and
carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
85.
INSURANCE COMPANY of NORTH AMERICA vs. ASIAN TERMINALS INC.
G.R. No. 180784, February 15, 2012
ISSUES:
(1) Whether or not the trial court committed an error in dismissing the complaint of the
petitioner based on the one-year prescriptive period for filing a suit under the COGSA
to an arrastre operator?
(2) Whether or not the Petitioner is entitled to recover actual damages against the
Respondent?
(4) Whether or not the one-year prescriptive period for filing a suit under the COGSA
applies to respondent arrastre operator
(5) What provisions of the COGSA was applicable in the case at bar?
FACTS:
Macro-Lito Corporation, through M/V “DIMI P” vessel, 185 packages of
electrolytic tin free steel, complete and in good condition. The goods are covered by a
bill of lading, had a declared value of $169,850.35 and was insured with the Insuracne
Company of North America (Petitioner) against all risk. The carrying vessel arrived at
the port of Manila and when the shipment was discharged therefrom, it was noted that
7 of the packages were damaged and in bad condition.
The shipment was then turned over to the custody of Asian Terminals. Inc.
(Respondent) for storage and safekeeping pending its withrawal by the consignee. Prior
to the withrawal of the shipment, a joint inspection of the said cargo was conducted.
The examination report showed that an additional 5 packages were found to be
damaged and in bad order. The consignee, San Miguel Corporation filed separate
claims against both the Petioner and the Respondent for the damage caused to the
packages.
The Petitioner then paid San Miguel Corporation the amound of PhP
431,592.14 which is based on a report of its independent adjuster and then formally
demanded reparation against the Respondent for the amount it paid San Miguel
Corporation.
For the failure of the Respondent to satisfy the demand of the Petitioner, the
Petitioner filed for an action for damages with the RTC of Makati.
The trial court found that indeed, the shipment suffered additional damage
under the custody of the Respondent prior to the turn over of the said shipment to
San Miguel.
As to the extent of liability, Respondent invoked the Contract for Cargo
Handling Services executed between the Philippine Ports Authority and the
Respondent. Under the contract, the Respondent’s liability for damage to cargoes in its
custody is limited to PhP5,000 for each package, unless the value of the cargo
shipment is otherwise specified or manifested in writing together with the declared Bill
of Lading. The trial Court found that the shipper and consignee with the said
requirements.
However, the trial court dismissed the complaint on the ground that the
Petitioner’s claim was barred by the statute of limitations. It held that the Carriage of
Goods by Sea Act (COGSA), embodied in Commonwealth Act No. 65 is applicable. The
trial court held that under the said law, the shipper has the right to bring a suit within
one year after the delivery of the goods or the date when the goods should have been
delivered, in respect of loss or damage thereto.
RULINGS:
1. YES.
The term “carriage of goods” covers the period from the time when the goods are
loaded to the time when they are discharged from the ship. Thus, it can be inferred
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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.
2. YES, but only PhP164,428.76.

The Petitioner, who filed the present action for the 5 packages that were
damaged while in the custody of the respondent was not fortright in its claim, as it
knew that the damages it sought, based on the report of its adjuster covered 9
packages. Based on the report, only four of the nine packages were damaged in the
custody of the Respondent.
The Petitioner can be granted only the amount of damages that is due to it.
3. Relating the doctrine of Fireman's Fund to the case at bar, the record shows
that delivery to the warehouse of consignee Monterey Farms Corporation of the 5,974
bags of soybean meal, had been completed by respondent Razon (arrastre operator) on
9 July 1974.
On that same day, a bad order examination of the goods delivered was
requested by the consignee and was, in fact, conducted by respondent Razon's own
inspector, in the presence of representatives of both the Bureau of Customs and the
consignee. The ensuing bad order examination report — what the trial court
considered a "certificate of loss” — confirmed that out of the 5,974 bags of soybean
meal loaded on board the M/S "Zamboanga" and shipped to Manila, 173 bags had
been damaged in transitu while an additional 111 bags had been damaged after the
entire shipment had been discharged from the vessel and placed in the custody of
respondent Razon. Hence, as early as 9 July 1974 (the date of last delivery to the
consignee's warehouse), respondent Razon had been able to verify and ascertain for
itself not only the existence of its liability to the consignee but, more significantly, the
exact amount thereof - i.e., P5,746.61, representing the value of 111 bags of soybean
meal. We note further that such verification and ascertainment of liability on the part
of respondent Razon, had been accomplished "within thirty (30) days from the date of
delivery of last package to the consignee, broker or importer" as well as "within fifteen
(15) days from the date of issuance by the Contractor [respondent Razon] of a
certificate of loss, damage or injury or certificate of non-delivery" — the periods
prescribed under Article VI, Section 1 of the Management Contract here involved,
within which a request for certificate of loss and a formal claim, respectively, must be
filed by the consignee or his agent. Evidently, therefore, the rule laid down by the
Court in Fireman's Fund finds appropriate application in the case at bar.
4. YES.
The Carriage of Goods by Sea Act (COGSA), Public Act No. 521 of the 74th US
Congress, was accepted to be made applicable to all contracts for the carriage of goods
by sea to and from Philippine ports in foreign trade by virtue of CA No. 65.
The carrier and the ship may put up the defense of prescription if the action for
damages is not brought within one year after the delivery of the goods or the date
when the goods should have been delivered. It has been held that not only the
shipper, but also the consignee or legal holder of the bill may invoke the prescriptive
period.
However, 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.
5. The Carriage of Goods by Sea Act (COGSA), Public Act No. 521 of the 74th US
Congress, was accepted to be made applicable to all contracts for the carriage of goods
by sea to and from Philippine ports in foreign trade by virtue of CA No. 65.
Section 1 of CA No. 65 states:
Section 1. That the provisions of Public Act Numbered Five hundred and
twenty-one of the Seventy-fourth Congress of the United States, approved on April
sixteenth, nineteen hundred and thirty-six, be accepted, as it is hereby accepted to be
made applicable to all contracts for the carriage of goods by sea to and from Philippine
ports in foreign trade: Provided, That nothing in the Act shall be construed as
repealing any existing provision of the Code of Commerce which is now in force, or as
limiting its application.
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Section 1, Title I of CA No. 65 defines the relevant terms in Carriage of Goods by

Sea, thus:
Section 1. When used in this Act –
(a) The term "carrier" includes the owner or the charterer who enters into a contract of
carriage with a shipper.
(b) The term "contract of carriage" applies only to contracts of carriage covered by a bill
of lading or any similar document of title, insofar as such document relates to the
carriage of goods by sea, including any bill of lading or any similar document as
aforesaid issued under or pursuant to a charter party from the moment at which such
bill of lading or similar document of title regulates the relations between a carrier and
a holder of the same.
(c) The term "goods" includes goods, wares, merchandise, and articles of every kind
whatsoever, except live animals and cargo which by the contract of carriage is stated
as being carried on deck and is so carried.
(d) The term "ship" means any vessel used for the carriage of goods by sea.
(e) The term "carriage of goods" covers the period from the time when the goods are
loaded to the time when they are discharged from the ship.[25]
It is noted that the term “carriage of goods” covers the period from the time
when the goods are loaded to the time when they are discharged from the ship; thus, it
can be inferred 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 prescriptive period for filing an action for the loss or damage of the goods
under the COGSA is found in paragraph (6), Section 3, thus:
6) Unless notice of loss or damage and the general nature of such loss or
damage be given in writing to the carrier or his agent at the port of discharge before or
at the time of the removal of the goods into the custody of the person entitled to
delivery thereof under the contract of carriage, such removal shall be prima facie
evidence of the delivery by the carrier of the goods as described in the bill of lading. If
the loss or damage is not apparent, the notice must be given within three days of the
delivery.
Said notice of loss or damage maybe endorsed upon the receipt for the goods
given by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time
of their receipt been the subject of joint survey or inspection.
86.
ANG vs. AMERICAN STEAMSHIP AGENCIES, INC.
G.R. No. L-22491. January 27, 1967
ISSUES:
(2) How was Loss or Damage defined in the case at bar?
(3) Whether or not the goods can be deemed loss in the case at bar
FACTS:
Yau Yae comerical Bank LTD of Hongkong represented by Yau Yae agreed to
sell 140 packsges of galvanized steel dursink sheets to one Herminio G Teves. Said
agreement was subject to the terms and arrangements.
Pursuant to said terms and arrangements, Yau Yae through Tokyo boeki LTD of
Tokyo Japan, shipped the articles at Yakata, Japan and later to Manila which was
processed by American Staemship Agencies INC. in which under a shipping agreement
or bill of lading it consigned to order of the shipper with Mr Teves.
The article arrived in manila, and under the bill of lading of the arrival of the
goods and requested payments of the demand draft representing the purchased price
of the article, however, Mr Teves did not pay the demand draft to Hongkong and
Shanghai bank where it was to be processed the payments. Prompting the bank to
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make corresponding protest and the bank likewise returned the bill of lading and
demand draft to Yau Yae which later endorsed the bill of lading to Domingo Ang.
Meanwhile, despite his non-payments of the purchase price of the articles.
Teves was able to obtain a bank guaranty in favor of American Steamship agencies
INC. as carriers agent to the effect that he would surrender the negotiable bill of lading
duly endorsed by Yau Yae on the strength of this guaranty. Teves succeded in
securing a permit to deliver imported goods from the carriers agent, which he
presented to Bureau of customs which in turn release to him the articles covered by
the bill of lading.
Subsequently, Domingo Ang claimed for the articles from the American
steamship agencies Inc. by presenting the indorsed bill of lading, but he was informed
by the latter that the articled he claimed was already delivered to Mr. Teves.
RULINGS:
1. YES.
recovered."
2. The court ruled that, the word” loss or damage “as speaks to the provision in
this case was not transpired because only the misdelivery of goods occurred to the
defendant, and upon admitted by the defendant in motion to dismissed that the
articles belongs for Mr. Ang has been misdelivered to Mr. Teves.
Therefore it clearly shows that the defendant violates the provision of civil code
of the Philppines particular in Article 1144, which provides; the following actions must
be brought within ten (10) years from the time the right of the action accrues,
paragraph (1) upon a written contract and Article 1146, the following action must be
instituted within four(4) years, paragraph (2) quasi delict, wherein it supplies the
deficiency provided in article 18 of the same code. To read” in matters which are
governed by the code of commerce and special laws, their deficiency shall be supplied
by the provision of this code.”
Wherefore, suits predicated not upon loss or damage but misdelivery of
goodsthat so, the defendant was not held liable for carriage of goods by sea act and
the court hereby reversed the dismissal order afterwards remanded to the lower court
for further proceedings.
3. From the allegations of the complaint, therefore, the goods cannot be deemed
"lost." They were delivered to Herminio G. Teves, so that there can only be either
delivery, if Teves really was entitled to receive them or misdelivery, if he was not so
entitled. It is not for Us now to resolve whether or not delivery of the goods to Teves
was proper, that is, whether or not there was rightful delivery or misdelivery.
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Dalamal, 67 Phil. 555, 557-558:
5. Now, it is well settled in this jurisdiction that when a defendant files a motion to
dismiss, he thereby hypothetically admits the truth of the allegations of fact contained
in the complaint
Thus, Defendant-Appellant having filed a motion to dismiss, it is deemed to
have admitted, hypothetically, paragraphs 6, 7 and 8 of the complaint, and these
allege:
"6. — That, when the said articles arrived in Manila, the defendant authorized
the delivery thereof to Herminio G. Teves, through the issuance of the corresponding
Permit to Deliver Imported Articles, without the knowledge and consent of the plaintiff,
who is the holder in due course of said bill of lading, notwithstanding the fact that the
said Herminio G. Teves could not surrender the corresponding bill of lading;
"7. — That, without any evidence of the fact that Herminio G. Teves is the
holder of the corresponding bill of lading in due course; without the surrender of the
bill of lading; without the knowledge and consent of the plaintiff, as holder thereof in
due course, and in violation of the provision on the bill of lading which requires that
the articles are only to be delivered to the person who is the holder in due course of
the said bill of lading, or his order, the defendant issued the corresponding `Permit To
Deliver Imported Articles’ in favor of the defendant, without the knowledge and
consent of the plaintiff as holder in due course of said bill of lading, which, originally
was Yau Yue, subsequently, the plaintiff Domingo Ang;
"8. — That, as a result of the issuance by the defendant of said permit,
Herminio G. Teves was able to secure the release of the articles from the Bureau of
Customs, which is not legally possible without the presentation of said permit to the
said Bureau; . . ."
87.
MITSUI O.S.K. LINES LTD vs. COURT OF APPEALS
G.R. No. 119571, March 11, 1998
ISSUES:
(1) Whether or not private respondent’s action for “loss or damage” to goods shipped,
within the meaning of the Carriage of Goods by Sea Act (COGSA)
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(2) Whether or not there is deterioration nor disappearance nor destruction of goods
caused by the carrier's breach of contract.
(3) What is the concept laid down in the case at bar?
(4) What provisions of the COGSA was laid down in the case at bar?
(5) Whether or not an action for the value of goods which had been delivered to a party
other than the consignee is for "loss or damage" within the meaning of §3(6) of the
COGSA
FACTS:
Petitioner Mitsui O.S.K. Lines Ltd. Is a foreign corporation represented in the
Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage
through Meister Transport, Inc., an international freight forwarder, with private
respondent Lavine Loungewear Manufacturing Corporation to transport goods of the
latter from initial loading. Petitioner’s vessel loaded private respondent’s container van
for carriage at the said port of origin.
However, in Kaoshiung, Taiwan the goods were not transshipped immediately,
with the result that the shipment arrived in Le Harve only. The consignee allegedly
paid only half the value of the said goods on the ground that they did not arrive in
France until the “off season” in that country. The remaining half was allegedly charged
to the account of private respondent which in turn demanded payment from petitioner
through its agent.
RULINGS:
1. NO.
The suit is not for “loss or damage” to goods contemplated in Section 3,
Pararaph 6, the question of prescription of action is governed not by the COGSA but
by Article 1144 of the Civil Code and as applied to Section 3(6), Paragraph 4 of the
Carriage of Goods by Sea Act, “loss” contemplated merely a situation where no delivery
at all was made by the shipper of the goods because the same had perished, gone out
of commerce, or disappeared in such a way that their existence is unknown or they
cannot be recovered.
There would be some merit in appellant’s insistence that the damages suffered
by him as a result of the delay in the shipment of his cargo are not covered by the
prescriptive provision of the Carriage of Goods by Sea Act above referred to, if such
damages were due, not to the deterioration and decay of the gods while in transit but
to other causes independent of the condition of the cargo upon arrival, like drop in
their market value.
2. NONE.
In the case at bar, there is neither deterioration nor disappearance nor
destruction of goods caused by the carrier's breach of contract. Whatever reduction
there may have been in the value of the goods is not due to their deterioration or
disappearance because they had been damaged in transit.
Petitioner contends that although we agree that there are places in the section
(Article III) in which the phrase need have no broader meaning than loss or physical
damage to the goods, we disagree with the conclusion that it must so be limited
wherever it is used. We take it that the phrase has a uniform meaning, not merely in
Section 3, but throughout the Act; and there are a number of places in which the
restricted interpretation suggested would be inappropriate. For example Section 4(2)
[Article IV(2) (sic) exempts exempts (sic) the carrier, the ship (sic), from liability "loss or
damage" (sic) resulting from certain courses beyond their control.
3. Conformably with this concept of what constitutes "loss" or "damage," this

Court held in another case that the deterioration of goods due to delay in their
transportation constitutes "loss" or "damage" within the meaning of Section 3(6), so
that as suit was not brought within one year the action was barred:
Whatever damage or injury is suffered by the goods while in transit would result
in loss or damage to either the shipper or the consignee. As long as it is claimed,
therefore, as it is done here, that the losses or damages suffered by the shipper or
consignee were due to the arrival of the goods in damaged or deteriorated condition,
the action is still basically one for damage to the goods, and must be filed within the
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period of one year from delivery or receipt, under the above-quoted provision of the
Carriage of Goods by Sea Act.
But the Court allowed that —
There would be some merit in appellant's insistence that the damages suffered
damages were due, not to the deterioration and decay of the goods while in transit, but
to other causes independent of the condition of the cargo upon arrival, like a drop in
their market value. . . .
The rationale behind limiting the said definitions to such parameters is not
hard to find or fathom. As this Court held in Ang:
Said one-year period of limitation is designed to meet the exigencies of maritime
hazards. In a case where the goods shipped were neither lost nor damaged in transit
but were, on the contrary, delivered in port to someone who claimed to be entitled
thereto, the situation is different, and the special need for the short period of
limitation in cases of loss or damage caused by maritime perils does not obtain.
4. Section 3, Paragraph 6 of the Carriage of Goods by Sea Act.

Section 3 provides:
(6) Unless notice of loss or damage and the general nature of such loss or
damage be given in writing to the carrier or his agent at the port of discharge or at the
time of the removal of the goods into the custody of the person entitled to delivery
thereof under the contract of carriage, such removal shall be prima facie evidence of
the delivery by the carrier of the goods as described in the bill of lading. If the loss or
damage is not apparent, the notice must be given within three days of the delivery.
Said notice of loss or damage may be endorsed upon the receipt for the goods
In any event the carrier and the ship shall be discharged from all liability in
respect of loss or damage unless suit is brought within one year after delivery of the
goods or the date when the goods should have been delivered: Provided, that, if a
notice of loss or damage, either apparent or concealed, is not given as provided for in
this section, that fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when the goods should have
been delivered.
In the case of any actual or apprehended loss or damage, the carrier and the
receiver shall give all reasonable facilities to each other for inspecting and tallying the
goods.
5. NO.
It was held that there was no loss because the goods had simply been
misdelivered. "Loss" refers to the deterioration or disappearance of goods.
As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the
Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery
88.
G.R. No. 143133, June 5, 2002
ISSUES:
carrier
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FACTS:
RULINGS:
1. NO.
them.
5. an order or act of competent public authority.
2. YES.
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period.
3. YES.
4. NO.
goods.
5. NO.
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89.
WALLEM PHILIPPINES SHIPPING, INC., vs. S.R. FARMS, INC.,
G.R. No. 161849, July 9, 2010
ISSUES:
(1) Whether or not the claim against petitioner was timely filed
(3) What is the rule in case of any actual or apprehended loss or damage
(4) What provision of the Carriage of Goods by Sea Act applies in the case at bar?
(5) Whether or not respondent waived its right of action when it did not give a written
notice of loss to the petitioner within three (3) days from discharge of the subject
shipment as provided in section 3 (6) of the cogsa.
FACTS:
Continental Enterprises, Ltd. Loaded on board the vessel M/V “Hui Yang,” a
shipment of Indian Soya Bean Meal weighing 1,100 metric tons, for transportation and
delivery from India to Manila, with SR Farms as consignee. The vessel is owned and
operated by Conti-Feed, with petitioner Wallem as its ship agent.
The said vessel, M/V “Hui Yang” arrived at the port of Manila and was
discharged and transferred into the custody of the receiving barges. Upon checking
the cargo, a shortage in the shipment of 80.467 metric tons was found. Petitioner then
filed a Complaint for damages against Conti-Feed and on June 7, 1993, respondent
filed an Amended Complaint impleading herein petitioner as defendant.
Petitioner denied the allegations of respondent claiming, among others, that
respondent’s claim is already barred by laches and/or prescription. RTC dismissed the
petition.
RULINGS:
1. NO.
Under Section 3 (6) of the COGSA, notice of loss or damages must be filed
within three days of delivery. Admittedly, respondent did not comply with this
provision. Under the same provision, however, a failure to file a notice of claim within
three days will not bar recovery if a suit is nonetheless filed within one year from
delivery of the goods or from the date when the goods should have been delivered.
There is no dispute that the vessel carrying the shipment arrived at the Port of
Manila on April 11, 1992 and that the cargo was completely discharged therefrom on
April 15, 1992. However, respondent erred in arguing that the complaint for damages,
insofar as the petitioner is concerned, was filed on March 11, 1993.
In the instant case, petitioner was only impleaded in the amended Complaint of
June 7, 1993, or one (1) year, one (1) month and twenty-three (23) days from April 15,
1992, the date when the subject cargo was fully unloaded from the vessel. The filing of
an amended pleading does not retroact to the date of the filing of the original; the
statute of limitation runs until the submission of the amendment.
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2. The settled rule is that the filing of an amended pleading does not retroact to
the date of the filing of the original; hence, the statute of limitation runs until the
submission of the amendment. It is true that, as an exception, this Court has held
that an amendment which merely supplements and amplifies facts originally alleged in
the complaint relates back to the date of the commencement of the action and is not
barred by the statute of limitations which expired after the service of the original
complaint. The exception, however, would not apply to the party impleaded for the first
time in the amended complaint.
The rule on the non-applicability of the curative and retroactive effect of an
amended complaint, insofar as newly impleaded defendants are concerned, has been
established as early as in the case of Aetna Insurance Co. v. Luzon Stevedoring
Corporation.
In the said case, the defendant Barber Lines Far East Service was impleaded
for the first time in the amended complaint which was filed after the one-year period of
prescription. The order of the lower court dismissing the amended complaint against
the said defendant on ground of prescription was affirmed by this Court.
3. In the case of any actual or apprehended loss or damage, the carrier and the
goods.
Petitioner claims that pursuant to the above-cited provision, respondent should
have filed its Notice of Loss within three days from delivery. It asserts that the cargo
was fully discharged from the vessel on April 15, 1992, but that respondent failed to
file any written notice of claim. Petitioner also avers that, pursuant to the same
provision of the COGSA, respondent's claim had already prescribed because the
complaint for damages was filed more than one year after the shipment was
discharged.
4. Section 3 (6) of which provides:

Unless notice of loss or damage and the general nature of such loss or damage
be given in writing to the carrier or his agent at the port of discharge or at the time of
the removal of the goods into the custody of the person entitled to delivery thereof
under the contract of carriage, such removal shall be prima facie evidence of the
delivery by the carrier of the goods as described in the bill of lading. If the loss or
damage is not apparent, the notice must be given within three days of delivery.
5. NO.
Under the same provision, however, a failure to file a notice of claim within
three days will not bar recovery if a suit is nonetheless filed within one year from
delivery of the goods or from the date when the goods should have been delivered.
In Loadstar Shipping Co., Inc. v. Court of Appeals,19cralaw the Court ruled
that a claim is not barred by prescription as long as the one-year period has not
lapsed. Thus, in the words of the ponente, Chief Justice Hilario G. Davide Jr.
Inasmuch as neither the Civil Code nor the Code of Commerce states a specific
prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA) -- which
sustained during transit -- may be applied suppletorily to the case at bar.
90.
ASIAN TERMINALS INC. vs. PHILAM INSURANCE CO.
G.R. No. 181262, July 24, 2013
ISSUES:
(1) Whether or not the provision of COGSA is applicable in the case at bar?
(2) Whether or not Philam may claim against Westwind and ATI as a subrogee
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(3) Whether or not who between Westwind and ATI should be liable for the damages
(4) Whether or not petitioner ATI may claim that the contents of Steel Case No. 03-245-
42K/1 were damaged while in the custody of petitioner Westwind
(5) Whether or not the CA erred in imposing an interest rate of 12% on the award of
damages
FACTS:
Nichimen Corporation shipped to Universal Motors Corporation 219 packages
containing 120 units of brand new Nissan Pickup Truck Double Cab 4×2 model,
without engine, tires and batteries, on board the vessel S/S Calayan Iris from Japan
to Manila. The shipment, which had a declared value of US$81,368 or P29,400,000,
was insured with Philam against all risks under the marine Policy no. 708-8006717-4.
The carrying vessel arrived at the port of manila on April 20, 1995, and when
the shipment was unloaded by the staff of ATI, it was found that the package marked
as 03-245-42K/1 was in bad order. The Turn Over Survey of bad order cargoes dated
April 21, 1995 identified two packages, labelled 03-245-42K/1 and 03/237/7CK/2, as
being dented and broken. Thereafter, the cargoes were stored for temporary
safekeeping inside CFS Warehouse in Pier No. 5.
The shipment was withdrawn by R.F. Revilla Customs Brokerage, Inc., the
authorized broker of Universal Motors, and delivered to the latter’s warehouse in
Mandaluyong City. Upon the request of Universal Motors, a bad order survey was
conducted on the cargoes and it was found that one Frame Axle Sub without LWR was
deeply dented on the buffle plate while six Frame Assembly with Bush were deformed
and misaligned. Owing to the extent of the damage to said cargoes, Universal Motors
declared them a total loss.
Universal Motors filed a formal claim for damages in the amount of
P643,963.84 against Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. When
Universal Motors’ demands remained unheeded, it sought reparation from and was
compensated in the sum of P633,957.15 by Philam. Accordingly, Universal Motors
issued a Subrogation Receipt dated November 15, 1995 in favor of Philam.
Philam, as subrogee of Universal Motors, filed a Complaint for damages against
Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. before the Regional Trial
Court of Makati City. The trial court rendered judgment in favour of Philam which
ruling was affirmed by the Court of Appeals modifying the amount to be paid by
Westwind and ATI.
RULINGS:
1. YES.
The prescriptive period for filing an action for the loss or damage of the goods
under the COGSA is found in paragraph (6), Section 3, thus:
(6) Unless notice of loss or damage and the general nature of such loss or damage be
given in writing to the carrier or his agent at the port of discharge before or at the time
of the removal of the goods into the custody of the person entitled to delivery thereof
under the contract of carriage, such removal shall be prima facie evidence of the
delivery by the carrier of the goods as described in the bill of lading. If the loss or
Said notice of loss or damage maybe endorsed upon the receipt for the goods
The notice in writing need not be given if the state of the goods has at the time of their
receipt been the subject of joint survey or inspection.
goods or the date when the goods should have been delivered: Provided, That if a
been delivered.
Moreover, paragraph (6), Section 3 of the COGSA clearly states that failure to
comply with the notice requirement shall not affect or prejudice the right of the
shipper to bring suit within one year after delivery of the goods. Petitioner Philam, as
subrogee of Universal Motors, filed the Complaint for damages on January 18, 1996,
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just eight months after all the packages were delivered to its possession on May 17,
1995. Evidently, petitioner Philam’s action against petitioners Westwind and ATI was
seasonably filed.
2. YES.
The Court holds that petitioner Philam has adequately established the basis of
its claim against petitioners ATI and Westwind. Philam, as insurer, was subrogated to
the rights of the consignee, Universal Motors Corporation, pursuant to the
Subrogation receipt executed by the latter in favour of the former. The right of
subrogation accrues simply upon payment by the insurance company of the insurance
claim.
Petitioner Philam’s action finds support in Article 2207 of the Civil Code which
provides that if the plaintiff’s property has been insured, and he has received
the rights of the insured against the wrongdoer or the person who has violated the
contract.
In Malayan Insurance Co., Inc. vs. Alberto, the Court explained the effect of
payment by the insurer of the insurance claim in this wise:
We have held that payment by the insurer to the insured operates as an
equitable assignment to the insurer of all the remedies that the insured may have
against the third party whose negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out of, any privity of contract. It
accrues simply upon payment by the insurance company of the insurance claim. The
doctrine of subrogation has its roots in equity. It is designed to promote and
accomplish justice; and is the mode that equity adopts to compel the ultimate
payment of a debt by one who, in justice, equity, and good conscience, ought to pay.
3. Both of them.
While it is not our duty to review, examine and evaluate or weigh all over again
the probative value of the evidence presented, the Court may nonetheless resolve
questions of fact when the case falls under any of the following exceptions:
(1) when the findings are grounded entirely on speculation, surmises, or conjectures;
(2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when
there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in
making its findings the Court of Appeals went beyond the issues of the case, or its
findings are contrary to the admissions of both the appellant and the appellee; (7)
when the findings are contrary to those of the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9) when the
facts set forth in the petition as well as in the petitioner’s main and reply briefs are not
disputed by the respondent; and (10) when the findings of fact are premised on the
supposed absence of evidence and contradicted by the evidence on record.
In the cases at bar, the fifth and seventh exceptions apply. While the CA
affirmed the joint liability of ATI and Westwind, it held them liable only for the value of
one unit of Frame Axle Sub without Lower inside Case No. 03-245-42K/1.
4. YES.
Common carriers, from the nature of their business and for reasons of public
transported by them. Subject to certain exceptions enumerated under Article 173449
of the Civil Code, common carriers are responsible for the loss, destruction, or
receive them.50
The court a quo, however, found both petitioners Westwind and ATI, jointly and
severally, liable for the damage to the cargo. It observed that while the staff of ATI
undertook the physical unloading of the cargoes from the carrying vessel, Westwind’s
duty officer exercised full supervision and control over the entire process. The
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appellate court affirmed the solidary liability of Westwind and ATI, but only for the
damage to one Frame Axle Sub without Lower.
5. YES.
The Court agree with petitioner Westwind that the CA erred in imposing an
interest rate of 12% on the award of damages.
Under Article 2209 of the Civil Code, when an obligation not constituting a loan
or forbearance of money is breached, an interest on the amount of damages awarded
may be imposed at the discretion of the court at the rate of 6% per annum.64 In the
similar case of Belgian Overseas Chartering and Shipping NV v. Philippine First
Insurance Co., lnc.,65 the Court reduced the rate of interest on the damages awarded
to the carrier therein to 6% from the time of the filing of the complaint until the finality
of the decision.
91.
UNION CARBIDE PHILIPPINES vs. MANILA RAIL ROAD CO.,
G.R. No. L-27798, June 15, 1977
ISSUES:
(1) Whether or not the right to file the action already prescribed
(2) How was delivery defined in the case at bar?
(3) Whether or not provision of the COGSA adheres to the common-law rule
(4) What provisions of the COGSA provides for the responsibilities and liabilities of agent
or shipowner
(5) What provisions in the Tarifff and Customs Code which allows the delivery of imported
merchandise to the arrastre operator
FACTS:
One thousand bags of synthetic resins were delivered to Manila Port Service,
customs arrastre, of which 25 bags were in bad condition before they even landed.
When the shipment reached the consignee Union Carbide, aside from the 25 damaged
bags which were then pilfered, some were also missing, while in the custody of the
customs arrastre. So the consignee filed an admiralty case under the Sea Act against
the carrier for the recovery of the amount for the 25 damaged bags and an arrastre
case for the 25 pilfered bags and for the missing ones. The TC dismissed the complaint
on the ground of prescription (1 yr) relying on the Sea Act.
RULINGS:
1. YES.
“Delivery” as contemplated in the Sea Act means delivery to the customs
arrastre operator. In this case, the action was filed beyond the one year period within
which a carrier can be held liable in case of loss or damage of the goods.
goods or the date when the goods should have been delivered:
Provided, That if a notice of loss or damage, either apparent or concealed, is not
given as provided for in this section, that fact shall not affect or prejudice the right of
the shipper to bring suit within one year after the delivery of the goods or the date
when the goods should have been delivered.
In the case of any actual or apprehended loss or damage the carrier and the
goods.
2. The carrier contends that delivery means discharge from the vessel into the
custody of the customs arrastre operator because under sections 1201 and 1206 of
the Tariff and Customs Code merchandise cannot be directly delivered by the carrier
to the consignee but should first pass through the customhouse at a port of entry for
the collection of customs duties.
The carrier cites the following provisions of the bill of lading to support its
contention:
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9. Delivery. The Carrier retains the option of delivery at all times from ship's
side or from craft, hulk, custom house, warehouse, wharf or quay at the risk of the
shippers, consignees or owners of the goods, and all expenses incurred by delivery
otherwise than from ship's side shall be borne by the shippers, consignee or owners of
the goods.
11. Discharge of Goods. The goods may be discharge without notice, as soon as
the ship is ready to unload, continuously day and night, Sundays and holidays
included, on to wharf or quay or into warehouse, or into hulk, lazaretto or craft or on
any other place and be stored there at the risk and expense of the shippers,
consignees or owners of the goods, any custom of the port to the contrary
notwithstanding. In any case, the Carrier's liability is to cease as soon as the goods are
lifted from ship's deck or leave the ship's tackle, any custom of the port to the contrary
notwithstanding. Consignees to pay charges for sorting and stocking the goods on
wharf or in shed.
3. YES.
Apparently, section 3(6) adheres to the common-law rule that the duty imposed
water carriers was merely to transport from wharf to wharf and that the carrier was
not bound to deliver the goods at the warehouse of the consignee (Tan Hi vs. United
States, 94 Fed. Supp. 432,435).
In the Tan Hi case, it was held that a requirement of Philippine law that all
cargo unloaded at Manila be delivered to the consignee through the arrastre operator
acting as customs' agent was not unreasonable. The common-law requirements as to
the proper delivery of goods by water carrier apply only when customs regulations at
the port of destination do not otherwise provide. The delivery must be in accordance
with the usages of the port in order that such delivery would discharge the carrier of
responsibility. (Notes 50 and 51, 80 C.J.S. 922; 58 C. J. 372 note 24. See 70 Am. Jur
2nd 613, note 19).
4. The Carriage of Goods by Sea Act provides RESPONSIBILITIES AND

LIABILITIES
SEC. 3. xxx xxx xxx
damage be given in writing to the carrier or hi agent at the port of discharge before or
at the time of the removal of the goods into the custody of the person entitled to
delivery thereof under the contract of carriage, such removal shall be prima facie
evidence of the delivery by the carrier of the goods as described in the bill of lading. If
the loss or damage is not apparent, the notice must be given within three days of the
delivery.
In any event the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or the
date when the goods should have been delivered:
Provided, That if a notice of loss or damage, either apparent or concealed, is not
given as provided for in this section, that fact shall not affect or prejudice the right of
the shipper to bring suit within one year after the delivery of the goods or the date
when the goods should have been delivered.
5. SEC. 1213. Receiving Handling Custody and Delivery of Articles. - The Bureau
of Customs shall have "elusive supervision and control over the receiving, handling,
custody and delivery of articles on the wharves and piers at all ports of entry and in
the exercise of its functions it is hereby authorized to acquire, take over, operate and
superintend such plants and facilities as may be necessary for the receiving, handling,
custody and delivery of articles, and the convenience and comfort of passengers and
the handling of baggage, as well as to acquire fire protection equipment for use in the
piers:
Provided, That whenever in his judgment the receiving, handling, custody and
delivery of articles can be carried on by private parties with greater efficiency, the
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Commissioner may, after public bidding and subject to the approval of the department
head, contract with any private party for the service of receiving, handling, custody
and delivery of articles, and in such event, the contract may include the sale or lease
of government-owned equipment and facilities used in such service.
92.
ANG vs. COMPANIA MARITAMA
G.R. No. L-30805, December 26, 1984
ISSUES:
(2) What is the provision in the COGSA which is applicable in the case at bar?
(3) Whether or not the action has prescribed in the four-year period of prescription for
quasi-delicts prescribed in article 1146 (2) of the Civil Code or ten years for violation of
a written contract as provided for in article 1144 (1) of the same
FACTS:
Ang, as the assignee of a bill of lading held by Yau Yue Commercial Bank, Ltd.
of Hongkong, sued Compañia Maritima, Maritime Company of the Philippines and C.L.
Diokno. He prayed that the defendants be ordered to pay him solidarily the sum of
US$130,539.68 with interest plus attorney’s fees and damages.
Ang alleged that Yau Yue Commercial Bank agreed to sell to Herminio G. Teves
under certain conditions 559 packages of galvanized steel, Durzinc sheets. The
merchandise was loaded at Yawata, Japan in the M/S Luzon, a vessel owned and
operated by the defendants, to be transported to Manila and consigned "to order" of
the shipper, Tokyo Boeki, Ltd., which indorsed the bill of lading issued by Compañia
Maritima to the order of Yau Yue Commercial Bank.
Ang further alleged that the defendants, by means of a permit to deliver
imported articles, authorized the delivery of the cargo to Teves who obtained delivery
from the Bureau of Customs without the surrender of the bill of lading and in violation
of the terms thereof. Teves dishonored the draft drawn by Yau Yue against him.
The Hongkong and Shanghai Banking Corporation made the corresponding
protest for the draft’s dishonor and returned the bill of lading to Yau Yue. The bill of
lading was indorsed to Ang.
RULINGS:
1. In the American Steamship Agencies cases, it was held that the action of Ang is
based on misdelivery of the cargo which should be distinguished from loss thereof. The
one-year period provided for in Section 3 (6) of the Carriage of Goods by Sea Act refers
to loss of the cargo. What is applicable is the four-year period of prescription for quasi-
delicts prescribed in Article 1146 (2) of the Civil Code or ten years for violation of a
written contract as provided for in Article 1144 (1) of the same Code.

Section 3 provides:
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been delivered.
goods.
3. What is applicable is the four-year period of prescription for quasi-delicts

prescribed in article 1146 (2) of the Civil Code or ten years for violation of a written
contract as provided for in article 1144 (1) of the same Code.
As Ang filed the action less than three years from the date of the alleged
misdelivery of the cargo, it has not yet prescribed. Ang, as indorsee of the bill of
lading, is a real party in interest with a cause of action for damages.
4. YES.
recovered."
Dalamal, 67 Phil. 555, 557-558:
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93.
DOLE PHILIPPINES, INC., vs. MARITIME COMPANY OF THE PHILIPPINES,
G.R. No. L-61352 February 27, 1987
ISSUES:
(1) Whether or not Article 1155 of the Civil Code applies in lieu of the COGSA.
(2) Whether or not the provisions of the Civil Code are suppletory of deficiencies in the
Code of Commerce and special laws
(3) Whether or not the court erred in not considering the action of plaintiff-appellant
suspended by the extrajudicial demand which took place, according to defendant's
own motion to dismiss on August 22, 1952.
(4) Whether or not Section 3 of the COGSA is applicable in the case at bar
(5) Whether or not the action has prescribed?
FACTS:
The cargo subject of the instant case was discharged in Dadiangas unto the
custody of the consignee, Dole Philippines. The corresponding claim for the damages
sustained by the cargo was filed by the plaintiff with the defendant, Maritime
Company on May 4, 1972.
The plaintiff filed a complaint in the CFI Manila embodying 3 causes of action
involving 3 separate and different shipments. The third cause of action therein
involved the cargo now subject of this present litigation.
Judge Serafin Cuevas issued an Order dismissing the first two causes of action.
The third cause of action which covered the cargo subject of this case now was
likewise dismissed but without prejudice as it was not covered by the settlement.
Because of the dismissal of the complaint with respect to the third cause of action,
DOLE instituted this present complaint on January 6, 1975.
Maritime filed an answer pleading inter alia the affirmative defense of
prescription under the provisions of the Carriage of Goods by Sea Act. The Trial Court
granted the motion, scheduling the preliminary hearing on April 27, 1977. The record
before the Court does not show whether or not that hearing was held, but under date
of May 6, 1977, Maritime filed a formal motion to dismiss invoking once more the
ground of prescription.
The Trial Court, after due consideration, resolved the matter in favor of
Maritime and dismissed the complaint.
RULINGS:
1. NO.
Article 1155 of the Civil Code provides that the prescription of actions is
interrupted by the making of an extrajudicial written demand by the creditor
Section 3, paragraph 6 of the COGSA provides that:
the carrier and the ship shall be discharged from all liability in respect of loss or
damage unless suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered; Provided, That, if a notice of loss or
damage, either apparent or conceded, is not given as provided for in this section, that
fact shall not affect or prejudice the right of the shipper to bring suit within one year
after the delivery of the goods or the date when.the goods should have been delivered.
2. YES.
Dole argues that since the provisions of the Civil Code are, by express mandate
of said Code, suppletory of deficiencies in the Code of Commerce and special laws in
matters governed by the latter and there being a patent deficiency with respect to the
tolling of the prescriptive period provided for in the Carriage of Goods by Sea Act,
prescription under said Act is subject to the provisions of Article 1155 of the Civil
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Code on tolling. Since Dole's claim for loss or damage was filed on May 4, 1972
amounted to a written extrajudicial demand which would toll or interrupt prescription
under Article 1155, it operated to toll prescription also in actions under the Carriage
of Goods by Sea Act.
These arguments might merit weightier consideration were it not for the fact
that the question has already received a definitive answer, adverse to the position
taken by Dole, in The Yek Tong Lin Fire & Marine Insurance Co., Ltd. vs. American
President Lines, Inc.
3. Dole argues that it was error for the court not to have considered the action of
plaintiff-appellant suspended by the extrajudicial demand which took place, according
to defendant's own motion to dismiss on August 22, 1952.
Court noticed that while plaintiff avoids stating any date when the goods arrived
in Manila, it relies upon the allegation made in the motion to dismiss that a protest
was filed on August 22, 1952 — which goes to show that plaintiff-appellant's counsel
has not been laying the facts squarely before the court for the consideration of the
merits of the case. We have already decided that in a case governed by the Carriage of
Goods by Sea Act, the general provisions of the Code of Civil Procedure on prescription
should not be made to apply. (Chua Kuy vs. Everett Steamship Corp., G.R. No. L-
5554, May 27, 1953.) We hold that in such a case the general provisions of the new
Civil Code (Art. 1155) cannot be made to apply, as such application would have the
effect of extending the one-year period of prescription fixed in the law. It is desirable
that matters affecting transportation of goods by sea be decided in as short a time as
possible; the application of the provisions of Article 1155 of the new Civil Code would
unnecessarily extend the period and permit delays in the settlement of questions
affecting transportation, contrary to the clear intent and purpose of the law.
Under Dole's theory, when its claim was received by Maritime, the one-year
prescriptive period was interrupted and began to run anew from May 4, 1972,
affording Dole another period of one year counted from that date within which to
institute action on its claim for damage. Unfortunately, Dole let the new period lapse
without filing action. It instituted Civil Case No. 91043 only on June 11, 1973, more
than one month after that period has expired and its right of action had prescribed.
4. YES.
The prescription of actions is interrupted by the making of an extrajudicial
written demand by the creditor is applicable to actions brought under the Carriage of
Goods by Sea Act which, in its Section 3, paragraph 6, provides that:
*** the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or the
date when the goods should have been delivered; Provided, That, if a notice of loss or
damage, either apparent or conceded, is not given as provided for in this section, that
fact shall not affect or prejudice the right of the shipper to bring suit within one year
after the delivery of the goods or the date when the goods should have been delivered.
5. Dole concedes that its action is subject to the one-year period of limitation
prescribe in the above-cited provision. The substance of its argument is that since the
provisions of the Civil Code are, by express mandate of said Code, suppletory of
deficiencies in the Code of Commerce and special laws in matters governed by the
latter, 13 and there being "*** a patent deficiency *** with respect to the tolling of the
prescriptive period ***" provided for in the Carriage of Goods by Sea Act, 14
prescription under said Act is subject to the provisions of Article 1155 of the Civil
Code on tolling and because Dole's claim for loss or damage made on May 4, 1972
amounted to a written extrajudicial demand which would toll or interrupt prescription
under Article 1155, it operated to toll prescription also in actions under the Carriage
of Goods by Sea Act. To much the same effect is the further argument based on Article
1176 of the Civil Code which provides that the rights and obligations of common
carriers shag be governed by the Code of Commerce and by special laws in all matters
not regulated by the Civil Code.
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94.
LOADSTAR SHIPPING CO., INC., vs. COURT OF APPEALS
G.R. No. 131621, September 28, 1999
ISSUES:
(1) Whether or not M/V Cherokee was a private carrier so as to exempt it from the
provisions covering Common Carrier
(2) Whether or not LOADSTAR observed due and/or ordinary diligence in these premises
(3) Whether or not loadstar is liable
(5) Whether or not the " limited liability " theory is applicable in the case at bar
FACTS:
On November 19, 1984, loadstar received on board its M/V “Cherokee” bales of
lawanit hardwood, tilewood and Apitong Bolidenized for shipment, of which the goods
were insured for the with the Manila Insurance Company against various risks
including “Total Loss by Total Loss of the Vessel”. The vessel sank off at Limasawa
Island along with its cargo. As a result of the total loss of its shipment, the consignee
made a claim with loadstar which, however, ignored the same. As the insurer, MIC
paid to the insured in full settlement of its claim, and the latter executed a
subrogation receipt therefor. MIC thereafter filed a complaint against loadstar alleging
that the sinking of the vessel was due to fault and negligence of loadstar and its
employees.
In its answer, Loadstar denied any liability for the loss of the shipper’s goods
and claimed that the sinking of its vessel was due to force majeure. The court a quo
rendered judgment in favor of MIC, prompting loadstar to elevate the matter to the
Court of Appeals, which however, agreed with the trial court and affirmed its decision
in toto. On appeal, loadstar maintained that the vessel was a private carrier because it
was not issued a Certificate of Public Convenience, it did not have a regular trip or
schedule nor a fixed route, and there was only “one shipper, one consignee for a
special cargo”.
RULINGS:
1. YES. Loadstar is a common carrier.
The Court held that LOADSTAR is a common carrier. It is not necessary that
the carrier be issued a certificate of public convenience, and this public character is
not altered by the fact that the carriage of the goods in question was periodic,
occasional, episodic or unscheduled. Further, the bare fact that the vessel was
carrying a particular type of cargo for one shipper, which appears to be purely co-
incidental; it is no reason enough to convert the vessel from a common to a private
carrier, especially where, as in this case, it was shown that the vessel was also
carrying passengers.
Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to the “general public,”
i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population.
2. YES.
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful
voyage on 19 November 1984, the vessel was allegedly dry docked at Keppel
Philippines Shipyard and was duly inspected by the maritime safety engineers of the
Philippine Coast Guard, who certified that the ship was fit to undertake a voyage. Its
crew at the time was experienced, licensed and unquestionably competent. With all
these precautions, there could be no other conclusion except that LOADSTAR
exercised the diligence of a good father of a family in ensuring the vessel's
seaworthiness.
3. YES.
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LOADSTAR further claims that it was not responsible for the loss of the cargo,
such loss being due to force majeure. It points out that when the vessel left Nasipit,
Agusan del Norte, on 19 November 1984, the weather was fine until the next day when
the vessel sank due to strong waves. MCI's witness, Gracelia Tapel, fully established
the existence of two typhoons, "WELFRING" and "YOLING," inside the Philippine area
of responsibility. In fact, on 20 November 1984, signal no. 1 was declared over Eastern
Visayas, which includes Limasawa Island. Tapel also testified that the convergence of
winds brought about by these two typhoons strengthened wind velocity in the area,
naturally producing strong waves and winds, in turn, causing the vessel to list and
eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement
limiting its liability, such as what transpired in this case, is valid. Since the cargo was
being shipped at "owner's risk," LOADSTAR was not liable for any loss or damage to
the same. Therefore, the Court of Appeals erred in holding that the provisions of the
bills of lading apply only to the shipper and the carrier, and not to the insurer of the
goods, which conclusion runs counter to the Supreme Court's ruling in the case of St.
Paul Fire & Marine Co. v. Macondray & Co., Inc., 9 and National Union Fire Insurance
Company of Pittsburgh v. Stolt-Nielsen Phils., Inc. 10
4. YES.
LOADSTAR avers that MIC's claim had already prescribed, the case having been
instituted beyond the period stated in the bills of lading for instituting the same —
suits based upon claims arising from shortage, damage, or non-delivery of shipment
shall be instituted within sixty days from the accrual of the right of action. The vessel
sank on 20 November 1984; yet, the case for recovery was filed only on 4 February
1985.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding
that the loss of the cargo was due to force majeure, because the same concurred with
LOADSTAR's fault or negligence.
5. NO.
The " limited liability " theory is not applicable in the case at bar because
LOADSTAR was at fault or negligent, and because it failed to maintain a seaworthy
vessel. Authorizing the voyage notwithstanding its knowledge of a typhoon is
tantamount to negligence.
Neither do we agree with LOADSTAR's argument that the "limited liability"
theory should be applied in this case. The doctrine of limited liability does not apply
where there was negligence on the part of the vessel owner or agent. 17 LOADSTAR
was at fault or negligent in not maintaining a seaworthy vessel and in having allowed
its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not
sink because of any storm that may be deemed as force majeure, inasmuch as the
wind condition in the performance of its duties, LOADSTAR cannot hide behind the
"limited liability" doctrine to escape responsibility for the loss of the vessel and its
cargo.
95.
MAYER STEEL PIPE CORPORATION vs. COURT OF APPEALS
G.R. No. 124050, June 19, 1997
ISSUES:
(1) Whether or not Section 3(6) of the Carriage of Goods by Sea also applies to insurer
(2) Whether or not respondent Court of Appeals erred in holding that petitioners' cause of
action had already prescribed on the mistaken application of the Carriage of Goods by
Sea Act and the doctrine of Filipino Merchants Co., Inc. v. Alejandro (145 SCRA 42)
(3) What is the doctrine laid down in the case of Filipino Merchants Co., Inc. v. Alejandro
(4) How was Section 3 (6) of the COGSA defined in the case at bar?
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FACTS:
Hongkong Government Supplies Department (Hongkong) contracted Mayer
Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and
fittings. Mayer shipped the pipes and fittings to Hongkong as evidenced by Invoice
Nos. MSPC-1014, MSPC-1015, MSPC-1025, MSPC-1020, MSPC-1017 and MSPC-1022
Prior to the shipping, Mayer insured the pipes and fittings against all risks with South
Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter)
South Sea:Invoice Nos. MSPC-1014, 1015 and 1025 for US$212,772.09
Charter: Invoice Nos. 1020, 1017 and 1022 for US$149,470.00
Mayer and Hongkong jointly appointed Industrial Inspection (International) Inc. as
third-party inspector to examine whether the pipes and fittings are manufactured in
accordance with the specifications in the contract Industrial Inspection certified all the
pipes and fittings to be in good order condition before they were loaded in the vessel
When the goods reached Hongkong, it was discovered that a substantial portion
thereof was damaged Mayer and Hongkong a claim against private respondents for
indemnity under the insurance contract Charter paid petitioner Hongkong the amount
of HK$64,904.75 demanded payment of the balance of HK$299,345.30 which was
refused
RULINGS:
1. NO. Petition is granted. CA reversed. RTC reinstated
Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the
ship shall be discharged from all liability for loss or damage to the goods if no suit is
filed within one year after delivery of the goods or the date when they should have
been delivered. Under this provision, only the carrier's liability is extinguished if no
suit is brought within one year. But the liability of the insurer is not extinguished
because the insurer's liability is based not on the contract of carriage but on the
contract of insurance - governed by the Insurance Code
An insurance contract is a contract whereby one party, for a consideration
known as the premium, agrees to indemnify another for loss or damage which he may
suffer from a specified peril "all risks" insurance policy covers all kinds of loss other
than those due to willful and fraudulent act of the insured prescribes in ten years, in
accordance with Article 1144 of the New Civil Code
2. NO.
The Filipino Merchants case is different from the case at bar. In Filipino
Merchants, it was the insurer which filed a claim against the carrier for
reimbursement of the amount it paid to the shipper. In the case at bar, it was the
shipper which filed a claim against the insurer. The basis of the shipper's claim is the
"all risks" insurance policies issued by private respondents to petitioner Mayer.
The ruling in Filipino Merchants should apply only to suits against the carrier
filed either by the shipper, the consignee or the insurer. When the court said in
Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the
insurer, it meant that the insurer, like the shipper, may no longer file a claim against
the carrier beyond the one-year period provided in the law. But it does not mean that
the shipper may no longer file a claim against the insurer because the basis of the
insurer's liability is the insurance contract. An insurance contract is a contract
whereby one party, for a consideration known as the premium, agrees to indemnify
another for loss or damage which he may suffer from a specified peril.11 An "all risks"
insurance policy covers all kinds of loss other than those due to willful and fraudulent
act of the insured.12 Thus, when private respondents issued the "all risks" policies to
petitioner Mayer, they bound themselves to indemnify the latter in case of loss or
damage to the goods insured. Such obligation prescribes in ten years, in accordance
with Article 1144 of the New Civil Code.
3. The ruling in Filipino Merchants should apply only to suits against the carrier
filed either by the shipper, the consignee or the insurer. When the court said in
Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the
insurer, it meant that the insurer, like the shipper, may no longer file a claim against
the carrier beyond the one-year period provided in the law. But it does not mean that
the shipper may no longer file a claim against the insurer because the basis of the
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insurer's liability is the insurance contract. An insurance contract is a contract

whereby one party, for a consideration known as the premium, agrees to indemnify
another for loss or damage which he may suffer from a specified peril.11 An "all risks"
insurance policy covers all kinds of loss other than those due to willful and fraudulent
act of the insured.12 Thus, when private respondents issued the "all risks" policies to
petitioner Mayer, they bound themselves to indemnify the latter in case of loss or
damage to the goods insured. Such obligation prescribes in ten years, in accordance
with Article 1144 of the New Civil Code.
4. Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the
ship shall be discharged from all liability for loss or damage to the goods if no suit is
filed within one year after delivery of the goods or the date when they should have
been delivered. Under this provision, only the carrier's liability is extinguished if no
suit is brought within one year. But the liability of the insurer is not extinguished
because the insurer's liability is based not on the contract of carriage but on the
contract of insurance. A close reading of the law reveals that the Carriage of Goods by
Sea Act governs the relationship between the carrier on the one hand and the shipper,
the consignee and/or the insurer on the other hand. It defines the obligations of the
carrier under the contract of carriage. It does not, however, affect the relationship
between the shipper and the insurer. The latter case is governed by the Insurance
Code.
5. Our ruling in Filipino Merchants Insurance Co., Inc. v. Alejandro8 and the
other cases9 cited therein does not support respondent court's view that the insurer's
liability prescribes after one year if no action for indemnity is filed against the carrier
or the insurer. In that case, the shipper filed a complaint against the insurer for
recovery of a sum of money as indemnity for the loss and damage sustained by the
insured goods. The insurer, in turn, filed a third-party complaint against the carrier
for reimbursement of the amount it paid to the shipper. The insurer filed the third-
party complaint on January 9, 1978, more than one year after delivery of the goods on
December 17, 1977. The court held that the Insurer was already barred from filing a
claim against the carrier because under the Carriage of Goods by Sea Act, the suit
against the carrier must be filed within one year after delivery of the goods or the date
when the goods should have been delivered. The court said that "the coverage of the
Act includes the insurer of the goods."
96.
MITSUI O.S.K. LINES LTD vs. COURT OF APPEALS
G.R. No. 119571, March 11, 1998
ISSUES:
(1) Whether or not private respondent’s action for “loss or damage” to goods shipped,
within the meaning of the Carriage of Goods by Sea Act (COGSA)
(2) Whether or not there is deterioration nor disappearance nor destruction of goods
caused by the carrier's breach of contract.
(3) What is the concept laid down in the case at bar?
(4) What provisions of the COGSA was laid down in the case at bar?
(5) Whether or not an action for the value of goods which had been delivered to a party
other than the consignee is for "loss or damage" within the meaning of §3(6) of the
COGSA
FACTS:
Petitioner Mitsui O.S.K. Lines Ltd. Is a foreign corporation represented in the
Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage
through Meister Transport, Inc., an international freight forwarder, with private
respondent Lavine Loungewear Manufacturing Corporation to transport goods of the
latter from initial loading. Petitioner’s vessel loaded private respondent’s container van
for carriage at the said port of origin.
However, in Kaoshiung, Taiwan the goods were not transshipped immediately,
with the result that the shipment arrived in Le Harve only. The consignee allegedly
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paid only half the value of the said goods on the ground that they did not arrive in
France until the “off season” in that country. The remaining half was allegedly charged
to the account of private respondent which in turn demanded payment from petitioner
through its agent.
RULINGS:
1. NO.
The suit is not for “loss or damage” to goods contemplated in Section 3,
Pararaph 6, the question of prescription of action is governed not by the COGSA but
by Article 1144 of the Civil Code and as applied to Section 3(6), Paragraph 4 of the
Carriage of Goods by Sea Act, “loss” contemplated merely a situation where no delivery
There would be some merit in appellant’s insistence that the damages suffered
damages were due, not to the deterioration and decay of the gods while in transit but
to other causes independent of the condition of the cargo upon arrival, like drop in
their market value.
2. NONE.
In the case at bar, there is neither deterioration nor disappearance nor
destruction of goods caused by the carrier's breach of contract. Whatever reduction
there may have been in the value of the goods is not due to their deterioration or
disappearance because they had been damaged in transit.
Petitioner contends that although we agree that there are places in the section
(Article III) in which the phrase need have no broader meaning than loss or physical
damage to the goods, we disagree with the conclusion that it must so be limited
wherever it is used. We take it that the phrase has a uniform meaning, not merely in
Section 3, but throughout the Act; and there are a number of places in which the
restricted interpretation suggested would be inappropriate. For example Section 4(2)
[Article IV(2) (sic) exempts exempts (sic) the carrier, the ship (sic), from liability "loss or
damage" (sic) resulting from certain courses beyond their control.
3. Conformably with this concept of what constitutes "loss" or "damage," this

Court held in another case that the deterioration of goods due to delay in their
transportation constitutes "loss" or "damage" within the meaning of Section 3(6), so
that as suit was not brought within one year the action was barred:
Whatever damage or injury is suffered by the goods while in transit would result
in loss or damage to either the shipper or the consignee. As long as it is claimed,
therefore, as it is done here, that the losses or damages suffered by the shipper or
consignee were due to the arrival of the goods in damaged or deteriorated condition,
the action is still basically one for damage to the goods, and must be filed within the
period of one year from delivery or receipt, under the above-quoted provision of the
Carriage of Goods by Sea Act.
But the Court allowed that —
There would be some merit in appellant's insistence that the damages suffered
damages were due, not to the deterioration and decay of the goods while in transit, but
to other causes independent of the condition of the cargo upon arrival, like a drop in
their market value. . . .
The rationale behind limiting the said definitions to such parameters is not
hard to find or fathom. As this Court held in Ang:
Said one-year period of limitation is designed to meet the exigencies of maritime
hazards. In a case where the goods shipped were neither lost nor damaged in transit
but were, on the contrary, delivered in port to someone who claimed to be entitled
thereto, the situation is different, and the special need for the short period of
limitation in cases of loss or damage caused by maritime perils does not obtain.
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Alexandria R.

Section 3 provides:
been delivered.
goods.
5. NO.
It was held that there was no loss because the goods had simply been
misdelivered. "Loss" refers to the deterioration or disappearance of goods.
As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the
Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery
97.
NEW WORLD INTERNATIONAL DEVELOPMENT CORPORATION vs. NYK-FILJAPAN
SHIPPING CORPORATION
GR No. 171468, August 24, 2011
ISSUES:
1. Whether or not the the one-year COGSA prescriptive period for marine claims applies
to petitioner New World’s prosecution of its claim against Seaboard, its insurer?
2. Whether or not Seaboard already incurred delay when it failed to settle petitioner New
Worlds claim?
3. Whether or not petitioner is entitled to the claim based from the insurance policy
including interests in the delay of the release of such claim?
4. Whether or not the release from liability of DMT, Advatech, LEP, LEP Profit, Marina,
and Serbros who were at one time or another involved in handling the shipment,
proper?
5. Whether or not the Seaboard’s request from petitioner New World for an itemized list is
a reasonable imposition and did not violate the insurance contract between them?
FACTS:
Petitioner New World International Development (Phils.), Inc. (New World)
bought from DMT Corporation (DMT) through its agent, Advatech Industries, Inc.
(Advatech) three emergency generator sets worth US$721,500.00. DMT shipped the
generator sets by truck from Wisconsin, United States, to LEP Profit International, Inc.
(LEP Profit) in Chicago, Illinois. From there, the shipment went by train to Oakland,
California, where it was loaded on S/S California Luna V59, owned and operated by
NYK Fil-Japan Shipping Corporation (NYK) for delivery to petitioner New World in
Manila.
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NYK issued a bill of lading, declaring that it received the goods in good
condition. NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX
Ruby V/72 that it also owned and operated. On its journey to Manila, however, ACX
Ruby encountered typhoon Kadiang whose captain filed a sea protest on arrival at the
Manila South Harbor on October 5, 1993 respecting the loss and damage that the
goods on board his vessel suffered. Marina Port Services, Inc. (Marina), the Manila
South Harbor arrastre or cargo-handling operator, received the shipment on October
7, 1993. Upon inspection of the three container vans separately carrying the generator
sets, two vans bore signs of external damage while the third van appeared unscathed.
The shipment remained at Pier 3s Container Yard under Marinas care pending
clearance from the Bureau of Customs. Eventually, on October 20, 1993 customs
authorities allowed petitioners customs broker, Serbros Carrier Corporation (Serbros),
to withdraw the shipment and deliver the same to petitioner New Worlds job site in
Makati City. An examination of the three generator sets in the presence of petitioner
New Worlds representatives, Federal Builders (the project contractor) and surveyors of
petitioner New Worlds insurer, SeaboardEastern Insurance Company (Seaboard),
revealed that all three sets suffered extensive damage and could no longer be repaired.
For these reasons, New World demanded recompense for its loss from respondents
NYK, DMT, Advatech, LEP Profit, LEP International Philippines, Inc. (LEP), Marina,
and Serbros. While LEP and NYK acknowledged receipt of the demand, both denied
liability for the loss.
RULINGS:
1. Section 3(6) of the COGSA provides that the carrier and the ship shall be
discharged from all liability in case of loss or damage unless the suit is brought within
one year after delivery of the goods or the date when the goods should have been
delivered. But whose fault was it that the suit against NYK, the common carrier, was
not brought to court on time? The last day for filing such a suit fell on October 7,
1994. Ultimately, the fault for the delayed court suit could be brought to Seaboard’s
doorstep.
2. YES.
Notably, Seaboard already incurred delay when it failed to settle petitioner New
Worlds claim as Section 243 required. Under Section 244, a prima facie evidence of
unreasonable delay in payment of the claim is created by the failure of the insurer to
pay the claim within the time fixed in Section 243. Consequently, Seaboard should
pay interest on the proceeds of the policy for the duration of the delay until the claim
is fully satisfied at the rate of twice the ceiling prescribed by the Monetary Board. The
term ceiling prescribed by the Monetary Board means the legal rate of interest of 12%
per annum provided in Central Bank Circular 416, pursuant to Presidential Decree
116. Section 244 of the Insurance Code also provides for an award of attorneys fees
and other expenses incurred by the assured due to the unreasonable withholding of
payment of his claim.
3. YES.
The marine open policy that Seaboard issued to New World was an all-risk
policy. Such a policy insured against all causes of conceivable loss or damage except
when otherwise excluded or when the loss or damage was due to fraud or intentional
misconduct committed by the insured. The policy covered all losses during the voyage
whether or not arising from a marine peril. Here, the policy enumerated certain
exceptions like unsuitable packaging, inherent vice, delay in voyage, or vessels
unseaworthiness, among others. But Seaboard had been unable to show that
petitioner New Worlds loss or damage fell within some or one of the enumerated
exceptions. Seaboard cannot pretend that the above documents are inadequate since
they were precisely the documents listed in its insurance policy. Being a contract of
adhesion, an insurance policy is construed strongly against the insurer who prepared
it. The Court cannot read a requirement in the policy that was not there.
4. YES.
The issue regarding which of the parties to a dispute incurred negligence is
factual and is not a proper subject of a petition for review on certiorari. And petitioner
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New World has been unable to make out an exception to this rule. Consequently, the
Court will not disturb the finding of the RTC, affirmed by the CA, that the generator
sets were totally damaged during the typhoon which beset the vessel’s voyage from
Hong Kong to Manila and that it was her negligence in continuing with that journey
despite the adverse condition which caused petitioner New World’s loss. That the loss
was occasioned by a typhoon, an exempting cause under Article 1734 of the Civil
Code, does not automatically relieve the common carrier of liability. The latter (NYK
common carrier) had the burden of proving that the typhoon was the proximate and
only cause of loss and that it exercised due diligence to prevent or minimize such loss
before, during, and after the disastrous typhoon. As found by the RTC and the CA,
NYK failed to discharge this burden.
5. NO.
The Court does not regard as substantial the question of reasonableness of
Seaboard’s additional requirement of an itemized listing of the damage that the
generator sets suffered. The record shows that petitioner New World complied with the
documentary requirements evidencing damage to its generator sets. The marine open
policy that Seaboard issued to New World was an all-risk policy. Such a policy insured
against all causes of conceivable loss or damage except when otherwise excluded or
when the loss or damage was due to fraud or intentional misconduct committed by the
insured. The policy covered all losses during the voyage whether or not arising from a
marine peril. Here, the policy enumerated certain exceptions like unsuitable
packaging, inherent vice, delay in voyage, or vessels unseaworthiness, among others.
98.
EASTERN SHIPPING LINES, INC. vs. INTERMEDIATE APPELLATE COURT
G.R. No. L-69044, May 29, 1987
ISSUES:
1. Which law should govern — the Civil Code provisions on Common carriers or the
Carriage of Goods by Sea Act?
2. Who has the burden of proof to show negligence of the carrier? 3. what is the extent of
the carrier’s liability?
3. What is the extent of the carrier’s liability?
4. Whether or not a claim for damage sustained on a shipment of goods can be a solidary
or joint and several, liability of the common carrier?
5. Whether or not a claim for damage sustained on a shipment of goods can be a solidary
or joint and several, liability of the arrastre operator?
FACTS:
On December 4, 1981, two fiber drums of riboflavin were shipped from
Yokohama, Japan for delivery vessel “SS EASTERN COMET” owned bydefendant
Eastern Shipping Lines under a bill of lading. The shipment was insured under
plaintiffs Marine Insurance Policy. Upon arrival of the shipmentin Manila on December
12, 1981, it was discharged unto the custody ofdefendant Metro Port Service, Inc. The
latter excepted to one drum, said to be in bad order, which damage was unknown to
plaintiff. On January 7, 1982 defendant Allied Brokerage Corporation receivedthe
shipment from defendant Metro Port Service, Inc., one drum opened andwithout seal.
On January 8 and 14, 1982, defendant Allied Brokerage Corporation made deliveries
of the shipment to the consignees warehouse.
The latter excepted to one drum which contained spillages, while the rest ofthe
contents was adulterated/fake. Plaintiff contended that due to the losses/damage
sustained by saiddrum, the consignee suffered losses totaling P19, 032.95, due to the
fault andnegligence of defendants. Claims were presented against defendantswhofailed
and refused to pay the same. As a consequence of the lossessustained, plaintiff was
compelled to pay the consignee P19, 032.95 undertheaforestated marine insurance
policy, so that it became subrogated to allthe rights of action of said consignee against
defendants.
RULINGS:
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1. The law of the country to which the goods are to be transported governs the
liability of the common carrier in case of their loss, destruction or deterioration. As the
cargoes were transported from Japan to the Philippines, the liability of Petitioner
Carrier is governed primarily by the Civil Code. However, in all matters not regulated
by said Code, the rights and obligations of common carrier shall be governed by the
Code of Commerce and by special laws. Thus, the Carriage of Goods by Sea Act, a
special law, is suppletory to the provisions of the Civil Code.
2. Article 1735 of the Civil Code provides that all cases than those mention in
Article 1734, the common carrier shall be presumed to have been at fault or to have
acted negligently, unless it proves that it has observed the extraordinary diligence
required by law. The burden is upon Eastern Shipping Lines to prove that it has
exercised the extraordinary diligence required by law.
3. NO.
Stipulation in the Bills of Lading limiting the carrier’s liability for the loss or
destruction of the goods; no declaration of a higher value of the goods; Hence, Eastern
Shipping Lines’ liability should not exceed US $500 per package (as provided in 4(5) of
the COGSA), or its peso equivalent, at the time of payment of the value of the goods
lost, but in no case more than the amount of damage actually sustained.
4. YES.
The common carriers duty to observe the requisite diligence in the shipment of
goods lasts from the time the articles are surrendered to or unconditionally placed in
the possession of, and received by, the carrier for transportation until delivered to, or
until the lapse of a reasonable time for their acceptance by, the person entitled to
receive them (Arts. 1736-1738,Civil Code). When the goods shipped either are lost or
arrive in damaged condition, a presumption arises against the carrier of its failure to
observe that diligence, and there need not be an express finding of negligence to hold
it liable (Art. 1735, Civil Code). There are, of course, exceptional cases when such
presumption of fault is not observed but these cases, enumerated in Article 1734 of
the Civil Code, are exclusive, not one of which can be applied to this case. Both the
arrastre and the carrier are therefore charged with the obligation to deliver the goods
in good condition to the consignee. A factual finding of both the Supreme Court and
the appellate court was that there was sufficient evidence that the shipment sustained
damage while in the successive possession of appellants. Accordingly, the liability
imposed on Eastern Shipping Lines, Inc., the sole petitioner in this case, is inevitable
regardless of whether there are other solidarily liable with it.
5. YES.
As to the question of charging both the carrier and the arrastre operator with
the obligation of properly delivering the goods to the consignee, the legal relationship
between the consignee and the arrastre operator is akin to that of a depositor and
warehouseman while the relationship between the consignee and the common carrier
is similar to that of the consignee and the arrastre operator. Both the arrastre and the
carrier are therefore charged with the obligation to deliver the goods in good condition
to the consignee. A factual finding of both the Supreme Court and the appellate court
was that there was sufficient evidence that the shipment sustained damage while in
the successive possession of appellants. Accordingly, the liability imposed on Eastern
Shipping Lines, Inc.,the sole petitioner in this case, is inevitable regardless of whether
there are other solidarily liable with it.
99.
G.R. No. 143133, June 5, 2002
ISSUES:
carrier
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Alexandria R.

FACTS:
RULINGS:
1. NO.
them.
10.an order or act of competent public authority.
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2. YES.
period.
3. YES.
4. NO.
goods.
5. NO.
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100.
PHILAM INSURANCE COMPANY VS. HEUNG AH SHIPPING CORPORATION AND
WALLEM SHIPPING INC.,
G.R. No. 1877l and G.R. No. 187812, July 23, 2014
ISSUES:
1. Whether or not HEUNG-A remained responsible as the carrier, hence, answerable for
the damages incurred by the goods received for transportation?
2. Whether or not DONGNAMA, HEUNG-A remained responsible as the carrier?
3. Whether the shipment sustained damage while in the possession and custody of
HEUNG-A, and if so, whether HEUNG-A’s liability can be limited to US$500 per
package pursuant to the COGSA?
4. Whether or not NOVARTIS/PHILAM failed to file a timely claim against HEUNG-A
and/or WALLEM?
5. Whether or not PROTOP is solidarily liable with HEUNG-A for the lost/damaged
shipment in view of the bill of lading the former issued to NOVARTIS?
FACTS:
Novartis Consumer Health Philippines, Inc. (NOVARTIS) imported from Jinsuk
Trading Co. Ltd., (JINSUK) in South Korea, 19 pallets of 200 rolls of Ovaltine Power 18
Glaminated plastic packaging material. In order to ship the goods to the Philippines,
JINSUK engaged the services of Protop Shipping Corporation (PROTOP), a freight
forwarder likewise based in South Korea, to forward the goods to their consignee,
NOVARTIS.
Based on Bill of Lading issued by PROTOP, the cargo was on freight prepaid
basis and on "shipper’s load and count" which means that the "container [was] packed
with cargo by one shipper where the quantity, description and condition of the cargo is
the sole responsibility of the shipper." Likewise stated in the bill of lading is the name
Sagawa Express Phils., Inc., (SAGAWA) designated as the entity in the Philippines
which will obtain the delivery contract. PROTOP shipped the cargo through Dongnama
Shipping Co. Ltd. (DONGNAMA) which in turn loaded the same on M/V Heung-A
Bangkok V-019 owned and operated by Heung-A Shipping Corporation, (HEUNG-A).
Wallem Philippines Shipping, Inc. (WALLEM) is the ship agent of HEUNG-A in the
Philippines. NOVARTIS insured the shipment with Philam Insurance Company, Inc.
(PHILAM, now Chartis Philippines Insurance, Inc.) under All Risk Marine Open
Insurance Policy against all loss, damage, liability, or expense before, during transit
and even after the discharge of the shipment from the carrying vessel until its
complete delivery to the consignee’s premises.
The shipment reached NOVARTIS’ premises and was thereupon inspected by
the company’s Senior Laboratory Technician. Caparoso found the container van locked
with its load intact. After opening the same, she inspected its contents and discovered
that the boxes of the shipment were wet and damp. Caparoso rejected the entire
shipment. All 17 pallets of the 184 cartons/rolls contained in the sea van were found
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wet/water damaged. NOVARTIS demanded indemnification for the lost/damaged

shipment from PROTOP, SAGAWA, ATI and STEPHANIE but was denied. Insurance
claims were, thus, filed with PHILAM which paid the insured value of the shipment.
PHILAM sent a demand letter to WALLEM for reimbursement of the insurance claims
paid to NOVARTIS. When WALLEM ignored the demand, PHILAM impleaded it as
additional defendant in an Amended Complaint. PROTOP, SAGAWA, ATI, STEPHANIE,
WALLEM and HEUNG-A denied liability for the lost/damaged shipment. RTC ruled
that the damage to the shipment occurred onboard the vessel while in transit from
Korea to the Philippines.
The RTC discounted the slot charter agreement between HEUNG-A and
DONGNAMA, and held that it did not bind the consignee who was not a party thereto.
The RTC further observed that HEUNG-A failed to present evidence showing
that it exercised the diligence required of a common carrier in ensuring the safety of
the shipment. CA agreed with the RTC that PROTOP, HEUNG-A and WALLEM are
liable for the damaged shipment. The fact that HEUNG-A was not a party to the bill of
lading did not negate the existence of a contract of carriage between HEUNG-A and/or
WALLEM and NOVARTIS. A bill of lading is not indispensable for the creation of a
contract of carriage. By agreeing to transport the goods contained in the sea van
provided by DONGNAMA, HEUNG-A impliedly entered into a contract of carriage with
NOVARTIS with whom the goods were consigned. Hence, it assumed the obligations of
a common carrier to observe extraordinary diligence in the vigilance over the goods
transported by it. Further the Slot Charter Agreement did not change HEUNG-A’s
character as a common carrier.
RULINGS:
1. YES.
A charter party has been defined as a contract by which an entire ship, orsome
principal part thereof, is let by the owner to another person for a specified time or use;
a contract of affreightment by which the owner of a ship or other vessel lets the whole
or a part of her to a merchant or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of freight. A charter party has two
types. First, it could be a contract of affreightment whereby the use of shipping space
on vessels is leased in part or as a whole, to carry goods for others. The charter-party
provides for the hire of vessel only, either for a determinate period of time (time
charter) or for a single or consecutive voyage (voyage charter). The ship owner supplies
the ship’s stores, pay for the wages of the master and the crew, and defray the
expenses for the maintenance of the ship. The voyage remains under the responsibility
of the carrier and it is answerable for the loss of goods received for transportation. The
charterer is free from liability to third persons in respect of the ship. Second, charter
by demise or bareboat charter under which the whole vessel is let to the charterer with
a transfer to him of its entire command and possession and consequent control over
its navigation, including the master and the crew, who are his servants. The charterer
mans the vessel with his own people and becomes, in effect, the owner for the voyage
or service stipulated and hence liable for damages or loss sustained by the goods
transported.
2. YES.
Despite its contract of affreightment with DONGNAMA, HEUNG-A remained
responsible as the carrier, hence, answerable for the damages incurred by the goods
received for transportation. "Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary diligence and vigilance
with respect to the safety of the goods and the passengers they transport. Thus,
common carriers are required to render service with the greatest skill and foresight
and ‘to use all reasonable means to ascertain the nature and characteristics of the
goods tendered for shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires.’" Common carriers, as a general
such diligence."
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3. YES.
It must be stressed that the question on whether the subject shipment
sustained damaged while in the possession and custody of HEUNG-A is a factual
matter which has already been determined by the RTC and the CA. The courts a quo
were uniform in finding that the goods inside the container van were damaged by sea
water while in transit on board HEUNG-A’s vessel. Being a factual question, it is not
reviewable in the herein petition filed under Rule 45 of the Rules of Court. It is not the
Court’s duty to evaluate and weigh the evidence all over again as such function is
conceded to be within the expertise of the trial court whose findings, when supported
by substantial evidence on record and affirmed by the CA, are regarded with respect, if
not binding effect, by this Court.
4. NO.
The consignee, NOVARTIS, received the subject shipment on January 5, 2001.
PHILAM, as the subrogee of NOVARTIS, filed a claim against PROTOP on June 4,
2001, against WALLEM on October 12, 2001 and against HEUNG-A on December 11,
2001, or all within the one-year prescriptive period. Verily then, despite NOVARTIS’
failure to comply with the three-day notice requirement, its subrogee PHILAM is not
barred from seeking reimbursement from PROTOP, HEUNG-A and WALLEM because
the demands for payment were timely filed.
5. YES.
PROTOP is solidarily liable with HEUNG-A for the lost/damaged shipment in
view of the bill of lading the former issued to NOVARTIS. “A bill of lading is a written
acknowledgement of the receipt of goods and an agreement to transport and to deliver
them at a specified place to a person named or on his or her order. It operates both as
a receipt and as a contract. It is a receipt for the goods shipped and a contract to
transport and deliver the same as therein stipulated.”43 PROTOP breached its
contract with NOVARTIS when it failed to deliver the goods in the same quantity,
quality and description as stated in Bill of Lading No. PROTAS 200387.
101.
BRITISH AIRWAYS VS. COURT OF APPEALS
G.R. No. 121824, January 29, 1998
ISSUES:
1. Whether or not the agent is responsible for any negligence in the performance of its
function and liable for damages which the principal may suffer by reason of its
negligent act.
2. Whether or not defendant BA is sole liable for compulsory damages and attorney’s fee
3. Whether or not in a contract of air carriage a declaration by the passenger is needed to
recover a greater amount?
4. Whether or not the award of the damages was without basis since Mahtani failed to
declare a higher valuation w/ respect to his luggage?
5. Whether or not a contract of air transportation exist?
FACTS:
On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. He
asked Mr. Gumar to prepare his travel plans. Mr. Gumar purchased a ticket from
British Airways (BA). Since BA had no direct flights from Manila to Bombay, Mahtani
had to take a flight to Hongkong via PAL, and upon arrival in Hongkong he had to take
a connecting flight to Bombay on board BA. Before departure, Mahtani checked in at
PAL counter his two pieces of luggage containing his clothings and personal effects,
confident that upon reaching Hongkong, the same would be transferred to the BA
flight bound for Bombay. When Mahtani arrived in Bombay he discovered that his
luggage was missing and that upon inquiry from the BA representatives, he was told
that the same might have been diverted to London. After waiting for 1 week, BA finally
advised him to file a claim by accomplishing the "Property Irregularity Report.
In the Philippines, on June 11, 1990 Mahtani filed his complaint for damages
and attorney's fees5 against BA and Mr. Gumar before the RTC.L alleging that the
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reason for the non-transfer of the luggage was due to the latter's late arrival in
Hongkong, thus leaving hardly any time for the proper transfer of Mahtani's luggage to
the BA aircraft bound for Bombay.
The RTC rendered its decision in favor of Mahtani. BA is ordered to pay Mahtani
P7,000 for the value of the 2 suitcases: $400 for the value of the contents of the
luggage; P50,000 for moral and exemplary damages and 20% for attorney’s fees and
cost of the action. This decision was affirmed by CA.
RULINGS:
1. The contract of transportation was exclusively between Mahtani and BA. The
latter merely endorsing the Manila to Hong Kong log of the former’s journey to PAL, as
its subcontractor or agent. Conditions of contacts was one of continuous air
transportation from Manila to Bombay. The Court of Appeals should have been
cognizant of the well-settled rule that an agent is also responsible for any negligence in
the performance of its function and is liable for damages which the principal may
suffer by reason of its negligent act. Since the instant petition was based on breach of
contract of carriage, Mahtani can only sue BA and not PAL, since the latter was not a
party in the contract.
2. YES.
It is a well-settled rule that an agent is also responsible for any negligence in
suffer by reason of its negligent act.
In that case, we recognized that a carrier (PAL), acting as an agent of another
carrier, is also liable for its own negligent acts or omission in the performance of its
duties.
3. YES.
American jurisprudence provides that an air carrier is not liable for the loss of
baggage in an amount in excess of the limits specified in the tariff which was filed with
the proper authorities, such tariff being binding on the passenger regardless of the
passenger’s lack of knowledge thereof or assent thereto. This doctrine is recognized in
this jurisdiction. The inescapable conclusion that BA had waived the defense of limited
liability when it allowed Mahtani to testify as to the actual damages he incurred due to
misplacement of his luggage, without any objection. It is a well-settled doctrine that
where the proponent offers evidence deemed by counsel of the adverse party to be
inadmissible for any reason, the latter has the right to object. However, such right is a
mere privilege which can be waived. Necessarily, the objection must be made at the
earliest opportunity, in case of silence when there is opportunity to speak may operate
as a waiver of objections.
4. NO.
The nature of an airline's contract of carriage partakes of two types, namely: a
contract to deliver a cargo or merchandise to its destination and a contract to
transport passengers to their destination. A business intended to serve the traveling
public primarily, it is imbued with public interest, hence, the law governing common
carriers imposes an exacting standard. 14 Neglect or malfeasance by the carrier's
employees could predictably furnish bases for an action for damages. Admittedly, in a
contract of air carriage a declaration by the passenger of a higher value is needed to
recover a greater amount. Article 22(1) of the Warsaw Convention. However, , we have
held that benefits of limited liability are subject to waiver such as when the air carrier
failed to raise timely objections during the trial when questions and answers regarding
the actual claims and damages sustained by the passenger were asked.
5. YES.
The contract of air transportation was exclusively between Mahtani and BA, the
latter merely endorsing the Manila to Hongkong leg of the former's journey to PAL, as
its subcontractor or agent. In fact, the fourth paragraph of the "Conditions of
Contracts" of the ticket32 issued by BA to Mahtani confirms that the contract was one
of continuous air transportation from Manila to Bombay. Carriage to be performed
hereunder by several successive carriers is regarded as a single operation. Prescinding
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from the above discussion, it is undisputed that PAL, in transporting Mahtani from
Manila to Hongkong acted as the agent of BA.
102
COLLIN A. MORRIS vs. COURT OF APPEALS
G.R. No. 127957, February 21, 2001
ISSUES:
1. Whether or not SAS is liable for damages for breach of contract of carriage?
2. Whether or not respondent's denial of petitioners' boarding on SAS Flight 893 was
attended by bad faith or malice?
3. Whether or not petitioners complaint for damages against respondent for breach of
contract of air carriage be granted?
4. Whether or not respondent's employee could be faulted for not entertaining petitioners'
tickets and travel documents for processing?
5. Whether or not the award of exemplary damages has no factual basis?
FACTS:
On February 14, 1978, petitioners filed with the Regional Trial Court, Makati
branch 143 an action for damages for breach of contract of air carriage against
respondent airline because they were bumped off from SAS Flight SK 893, Manila-
Tokyo, on February 14, 1978, despite a confirmed booking in the first class section of
the flight. Petitioners Collin A. Morris and Thomas P. Whittier were American citizens;
the vice-president for technical service and the director for quality assurance,
respectively, of Sterling Asia, a foreign corporation with regional headquarters at No.
8741 Paseo de Roxas, Makati City.
Respondent Scandinavian Airline System (SAS for brevity) is and at times
material hereto has been engaged in the commercial air transport of passengers
globally. Petitioner Morris and co-petitioner Whittier had a series of business meetings
with Japanese businessmen in Japan from February 14 to February 22, 1978. They
requested their travel agent, Staats Travel Service. Inc. to book them as first class
passengers in SAS. At the airport, they were informed that there were no more seats
on the plane for which reason they could not be accommodated on the flight. Staats
Travel Service called and confirmed their booking. Thereafter, petitioner Morris and
Whittier returned to respondent's check-in counter anticipating that they would be
allowed to check-in. However, the check-in counter was closed.
When they informed Ms. Ponce, in charge at the check-in counter that
arrangements had been made with respondents office, she ignored them. Even
respondent's supervisor, Raul Basa, ignored them and refused to answer their
question why they could not be accomodated in the flight despite their confirmed
booking. Ms. Erlinda Ponce, SAS employee on duty at the check-in counter on
February 14, 1978 testified that they were not accommodated on the flight because
they checked-in after the flight manifest had been closed forty (40) minutes prior to
the plane's departure. Their names were crossed out and the symbols "NOSH",
meaning NO SHOW, written after their names.
The "NO SHOW" notation could mean either that the booked passengers of his
travel documents were not at the counter at the time of the closing of the flight
manifest.
RULINGS:
1. NO.
To begin with, it must be emphasized that a contract to transport passengers is
quite different kind and degree from any other contractual relations, and this is
because relation, which an air carrier sustains with the public. Its business is mainly
with the traveling public. It invites people business is mainly with the traveling public.
It invites people to avail [themselves] of the comforts and advantages it offers.
The contract of air carriage, therefore, generates a relation attended with a
pubic duty. Neglect or malfeasance of the carrier's employees naturally could give
ground for an action for damages.
In the instant case, assuming arguendo that breach of contract of carriage may
be attributed to respondent, petitioners' travails were directly traceable to their failure
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to check-in on time, which lewd to respondent's refusal to accommodate them on the

flight.
2. NO.
Respondent's denial of petitioners' boarding on SAS Flight 893 was not
attended by bad faith or malice. To the contrary, facts revealed that they were not
allowed to board the plane due to their failure to check-in on time. Petitioner Morris
admitted that they were at the check-in counter at around 3:10, exactly the same time
the flight manifest was closed, but still too late to be accommodated on the plane.
Respondent's supervisor, Raul C. Basa, testified that he met petitioners at about 3:20
in the afternoon after receiving a radio call from the ground staff regarding petitioners'
complaints. Clearly did not arrive on time for check-in.
3. NO.
In the instant case, assuming arguendo that breach of contract of carriage may
be attributed to respondent, petitioners' travails were directly traceable to their failure
to check-in on time, which lewd to respondent's refusal to accommodate them on the
flight.
"The rule is that moral damages are recoverable in a damage suit predicated
upon a breach of contract of carriage only where (a) the mishap result in the death of a
passenger and (b) it is proved that the carrier was guilty of fraud and bad faith even if
death does not result. For having arrived at the airport after the closure of the flight
manifest, respondent's employee could not be faulted for not entertaining petitioners'
tickets and travel documents for processing, as the checking in of passengers for SAS
Flight SK 893 was finished, there was no fraud or bad faith as would justify the
court's award or normal damages. As we find petitioners not entitled to moral
damages, "an award of exemplary damages is likewise baseless." "Where the award of
moral and exemplary damages is eliminated, so must the award for attorney's fees be
deleted."
4. NO.
For having arrived at the airport after the closure of the flight manifest,
respondent's employee could not be faulted for not entertaining petitioners' tickets and
travel documents for processing, as the checking in of passengers for SAS Flight SK
893 was finished, there was no fraud or bad faith as would justify the court's award or
normal damages. "Bad faith does not simply connote bad judgement or negligence, it
imports a dishonest purpose or some moral obliquity and conscious doing of a wrong,
a breach of known duty through some motive or interest or ill will that partakes of the
nature of fraud."
In the instant case, respondent's denial of petitioners' boarding on SAS Flight
893 was not attended by bad faith or malice.
5. NO.
"The rule is that moral damages are recoverable in a damage suit predicated
upon a breach of contract of carriage only where (a) the mishap result in the death of a
passenger and (b) it is proved that the carrier was guilty of fraud and bad faith even if
death does not result."
103
PHILIPPINE AIRLINES, INC. vs. RAMOS
G.R. No. 92740, March 23, 1992
ISSUES:
1. Whether or not the absence of any controverting evidence, documentary evidence
presented to corroborate the testimonies of PAL's witnesses were prima facie evidence
of the truth of their allegations?
2. Whether or not the private respondents were late in checking-in for their flight from
Naga City to Manila?
3. Whether or not the determination of a question of fact depends largely on the
credibility of witnesses?
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4. Whether or not the hearsay rule will apply in the case at bar?
5. What is Section 1, Rule 131 of the Rules of Court as stipulated in the case at bar?
FACTS:
Private respondents were supposed to fly from Naga to Manila with PAL. It was
alleged that, in violation of the condition on their ticket to check in at least 30 minutes
before the published departure time, they were late so PAL gave their seats to
waitlisted passengers.
As a result, respondents filed a complaint for breach of contract against PAL for
kicking them off. SC reversed both the lower courts and ruled in favor of PAL, as the
evidence on record belied the claims of the private respondents and supported the
defense of PAL, with the latter’s testimonial evidence corroborated by its documentary
evidence having more weight over the former’s bare testimonial evidence.
RULINGS:
1. YES.
In absence of any controverting evidence, documentary evidence presented to
corroborate the testimonies of PAL's witnesses were prima facie evidence of the truth
of their allegations. The tickets (with the notation “late 4:02”) and the passenger
manifest (which showed that the late passengers before the private respondents were
also not accommodated) were entries made in the regular course of business which
the private respondents failed to overcome with substantial and convincing evidence
other than their testimonies. Differences in the private respondents’ allegations also
belied their claims in light of the petitioner’s evidence. In their complaint, they claimed
that no one was at the counter until 30 minutes before the published departure time
and that the employee who finally attended to them marked them late. However, in
their testimonies, they contended that there were two different PAL personnel who
attended to them at the check-in counter.
2. YES.
Private respondents knew the check-in rule, prominently printed on the tickets.
The station manager had the discretion to allow late passengers to board on the
condition that the flight was not fully booked and there were seats available. They
could not, however, be accommodated because the flight was fully booked owing to the
Peñafrancia Festival and a number of morning flights were cancelled, resulting in a
number of waitlisted passengers. Edmundo Araquel, the check-in clerk at the time,
testified that two other confirmed passengers were late and denied accommodation
before private respondents arrived at the counter. The latter did not present evidence
to controvert this testimony. It was also unlikely that no one was present at the
counter was supposed to be opened at 3:25pm when they knew they had to deal with
passengers unable to board the cancelled morning flights. Each party in a case is
required to prove his affirmative allegations. In civil cases, the degree of evidence
required of a party in order to support his claim is preponderance of evidence or that
evidence adduced by one party which is more conclusive and credible than that of the
other party.
3. YES.
As a rule, the determination of a question of fact depends largely on the
credibility of witnesses unless some documentary evidence is available which clearly
substantiates the issue and whose genuineness and probative value is not disputed.
4. NO.
The hearsay rule will not apply in this case as statements, acts or conduct
accompanying or so nearly connected with the main transaction as to form a part of it,
and which illustrate, elucidate, qualify or characterize the act, are admissible as part
of the res gestae (32 C.J.S., S. 411, 30-31). Based on these circumstances, We are
inclined to believe the version of PAL. When the private respondents purchased their
tickets, they were instantaneously bound by the conditions of the contract of carriage
particularly the check-in time requirement. The terms of the contract are clear. Their
failure to come on time for check-in should not militate against PAL. Their non-
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accommodation on that flight was the result of their own action or inaction and the
ensuing cancellation of their tickets by PAL is only proper.
5. Section 1, Rule 131 of the Rules of Court, each party in a case is required to
prove his affirmative allegations. In civil cases, the degree of evidence required of a
party in order to support his claim is preponderance of evidence or that evidence
adduced by one party which is more conclusive and credible than that of the other
party.
104
SARREAL, SR. vs. JAPAN AIRLINES CO. LTD.,
G.R. NO. 75308. MARCH 23, 1992
ISSUES:
1. Whether or not JAL through the lady employee at Narita Airport had endorsed
petitioner's ticket to Thai International?
2. Whether or not JAL is liable?
3. Whether or not JAL can be faulted for the petitioner's omission or negligence?
4. Whether or not the stub that the lady employee put on the petitioner's ticket showed
confirmation?
5. Whether or not JAL undertook the obligation to carry petitioner to his destination?
FACTS:
Lope Sarreal, Sr. purchased in Bangkok from Japan Air Lines (JAL) a ticket,
having various foreign destinations from Bangkok and back to Bangkok. As he was in
Los Angleles, USA with his business representative Atty. Pol Tiglao, and Luis Espada,
the boxing manager of World Flyweight Boxing Champion Hilario Zapata where they
were negotiating a possible boxing match. Sarreal, Sr. then flew from Los Angeles to
Tokyo. At the Narita Airport Office, the Sarreal, Sr. inquired if there was a JAL flight
from Bangkok to Manila on July 2, 1980. The JAL lady employee looked into her
scheduled book put a stamp on the petitioner's ticket and told him not to worry
because she has endorsed his JAL ticket to Thai International leaving Bangkok on
July 2, 1980 for Manila. Relying on the assurance of the lady employee, the petitioner
then proceeded to Bangkok. However, in the morning of July 2, 1980, when the
petitioner was about to board the said Thai International, he was not allowed to board
the said plane through it had available seats because he was told that his ticket was
not endorseable. Since the petitioner failed to reach Manila by July 2, 1980, Espada
cancelled his transaction with the petitioner and decided to have the champion fight in
Japan instead. Had the petitioner been able to reach Manila on July 2, 1980, he could
have earned a lot. This led the petitioner to file an action for damages with the
Regional Trail Court (RTC ), Pasay City against private respondent JAL premised on
the breach of contract of carriage. The RTC of Pasay City rendered a decision against
JAL which was reversed on appeal.
RULINGS:
1. NO.
The evidence on record, reveals that the ticket bears no endorsement at all nor
an assurance that petitioner would get a seat in Thai International flight from
Bangkok to Manila on July 2. The ticket purchased by the petitioner was a discounted
one and as testified by the JAL Traffic Supervisor, it was not endorseable. We agree
with the respondent court that the assurance made by the lady employee to the
petitioner was merely the latter's chances of getting a seat in Thai International flight
from Bangkok to Manila considering that from the data gathered by said lady
employee, Thai International on the average runs about half full on its flight from
Bangkok to Manila. It was from this reliable information that petitioner decided to
make the side trip to Bangkok. There was no assurance from the lady employee nor
from Thai International that the petitioner's ticket would be honored by the airline.
2. YES.
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JAL was held liable for breaching the contract of carriage entered into when it
issued the ticket to the petitioner. JAL undertook the obligation to carry petitioner to
his destination. The trial court ruled that since on July 2, 1980, JAL had no flight
schedule from Bangkok to Manila, the request made by the lady employee of JAL to
Thai International to accommodate petitioner in the latter's flight No. 620 on July 2,
1980 for Bangkok to Manila and the undisputed assurance by the said lady employee
that petitioner would have a seat in that flight became definitely part of that contract
of carriage.
3. NO.
It is standard procedure for any passenger with a two day stop over in a foreign
city to confirm the validity of his ticket and the availability of a seat on his next flight
out of that city. Unfortunately, the petitioner failed to take these standard precautions.
JAL cannot now be faulted for the petitioner's omission or negligence.
4. The stub that the lady employee put on the petitioner's ticket showed among
other coded items, under the column "status" the letters "RQ" — which was
understood to mean "Request". Clearly, this does not mean a confirmation but only a
request. JAL Traffic Supervisor explained that it would have been different if what was
written on the stub were the letters "ok" in which case the petitioner would have been
assured of a seat on said flight. But in this case, the petitioner was more of a wait-
listed passenger than a regularly booked passenger.
5. YES.
JAL undertook the obligation to carry petitioner to his destination. The trial
court ruled that since on July 2, 1980, JAL had no flight schedule from Bangkok to
Manila, the request made by the lady employee of JAL to Thai International to
accommodate petitioner in the latter's flight No. 620 on July 2, 1980 for Bangkok to
Manila and the undisputed assurance by the said lady employee that petitioner would
have a seat in that flight became definitely part of that contract of carriage.
105.
PAN AMERICAN WORLD AIRWAYS, INC. vs. INTERMEDIATE APPELLATE
COURT
G.R. No. 68988, June 21, 1990
ISSUES:
1. Whether or not PAN AM breach of the contract was the substantial cause in bringing
about the harm or injury to the plaintiff?
2. Whether or not the IAC erred as a matter of law in affirming the CFI's award of actual
damages beyond the limitation of liability set forth in the Warsaw Convention and the
contract of carriage?
3. Whether or not the basic legal principles have been correctly applied by both the Trial
Court and the Intermediate Appellate Court?
4. What is Article 2220 of the Civil Code as stipulated in the case at bar?
5. Whether or not the observations of the Trial Court are erroneous?
FACTS:
Plaintiff Rene V. Pangan, pres. and gen. mngr. of the plaintiffs Sotang Bastos
and Archer Production while in San Francisco, Califonia and Primo Quesada of Prime
Films, San Francisco, California, entered into an agreement where the former, for US
$2,500.00 per picture, bound himself to supply the latter with 3 films. ('Ang Mabait,
Masungit at ang Pangit,' 'Big Happening with Chikiting and Iking,' and 'Kambal
Dragon' for exhibition in the United States.) It was also agreed that plaintiffs would
provide the promotional and advertising materials. On his way home to the
Philippines, Pangan visited Guam where he contacted Leo Slutchnick of the Hafa Adai
Organization. Pangan entered into a verbal agreement with Slutchnick for the
exhibition of 2 of the films at the Hafa Adai Theater in Guam for P7,000.00 per
picture. Pangan also provided the promotional and advertising materials for the films.
Due to the above agreements, Pangan caused the preparation of the requisite
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promotional handbills and still pictures for which he paid P12,900.00. Likewise in
preparation for his trip abroad to comply with his contracts, Pangan purchased 14
clutch bags, 4 capiz lamps and 4 barong tagalog, total value of P4,400.00. Pangan
obtained from defendant Pan Am's Manila Office (through Your Travel Guide) an
economy class airplane ticket for Manila to Guam on defendant's Flight (No. 842) upon
payment of the regular fare. The Your Travel Guide is a tour and travel office owned
and managed by plaintiffs witness Mila de la Rama. 2 hours before departure time
Pangan was at the defendant's ticket counter at the Manila International Airport and
presented his ticket and checked in his 2 luggages, for which he was given baggage
claim tickets. The 2 luggages had the promotional & advertising materials, clutch
bags, barong tagalog and his personal belongings. Subsequently, Pangan was
informed that his name was not in the manifest and so he could not take Flight (No.
842) in the economy class. Since there was no space in the economy class, Pangan
took the first class because he wanted to be on time in Guam to comply with his
commitment with an additional sum of $112.00. When Pangan arrived in Guam, his 2
luggages did not arrive with his flight, as a consequence of which his agreements with
Slutchnick and Quesada for the exhibition of the films in Guam and in the United
States were cancelled. He then filed a written claim for his missing luggages. Upon
arrival in the Philippines, Pangan contacted his lawyer, who made the necessary
representations to protest as to the treatment which he received from the employees of
the defendant and the loss of his two luggages. Defendant Pan Am assured Pangan
that his grievances would be investigated and given its immediate consideration. 13.
The present complaint was filed by the plaintiff due to Pan Am’s failure to
communicate with Pangan. CFI: Pan Am liable. (actual damages with interest, attys
fees, and costs of suit. IAC: Affirmed.
RULINGS:
1. YES.
The Court believes and so holds that there is sufficient evidence of gross and
reckless negligence amounting to bad faith on the part of defendant. If defendant was
not sure that it could transport plaintiff and his luggage to Los Angeles, it should not
have accepted plaintiff who was a waitlisted passenger. It is not a valid excuse on its
part to claim that plaintiff checked in at the last minute and that there was
insufficient time to load his bag in the plane.
In fact, that makes the position of defendant even more untenable, because in
accepting and holding on to plaintiff as its passenger, probably to fill in cancelled
bookings, although it knew or must have known that the bag of plaintiff might not be
loaded on time, it was guilty of conduct amounting to bad faith. ... Accepting last
minute passengers and their baggage with no definite assurance that the carrier can
comply with its obligation due to lack of time amounts to "negligence so gross and
reckless as to amount to malice or bad faith.
2. YES.
Petitioner's liability for the lost baggage is limited to $20.00 per kilo or $600.00,
as stipulated at the back of the ticket. The airline ticket contains the following
conditions: NOTICE: If the passenger's journey involves an ultimate destination or
stop in a country other than the country of departure the Warsaw Convention may be
applicable and the Convention governs and in most cases limits the liability of carriers
for death or personal injury and in respect of loss of or damage to baggage. See also
notice headed "Advice to International Passengers on Limitation of Liability.
The Court is unable to uphold the IAC's disregard the ruling in Mendoza that
petitioner is liable for damages based on the finding that "[tlhe undisputed fact is that
the contracts of the plaintiffs for the exhibition of the films in Guam and California
were cancelled because of the loss of the 2 luggages in question." The evidence reveals
that the proximate cause of the cancellation of the contracts was Pangan's failure to
deliver the promotional and advertising materials on the dates agreed upon.
For this petitioner cannot be held liable. Pangan had not declared the value of
the 2 luggages he had checked in and paid additional charges. Neither was petitioner
privy to respondents' contracts nor was its attention called to the condition therein
requiring delivery of the promotional and advertising materials on or before a certain
date.
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3. YES.
In the present case, men of reasonable perceptions will not disagree with the
conclusion that plaintiff suffered mental anguish, anxiety and shock when he found
that his luggage did not travel with him. What traveller would not suffer from such
feelings if he found himself in a foreign land without any article of clothing other than
what he had on? The injury thus suffered by plaintiff is one that would arise generally,
in the special circumstances of this case; it follows as a matter of course. PAN AM
breach of the contract was the substantial cause in bringing about the harm or injury
to the plaintiff.
4. Article 2220 of the Civil Code says that moral damages may be awarded in
"breaches of contract where the defendant acted fraudulently or in bad faith." So,
proof of infringement of an agreement by a party, standing alone, will not justify an
award of moral damages. 10There must, in addition, as the law points out, be
competent evidence of fraud of bad faith by that party. 11 If the plaintiff, for instance,
fails to take the witness stand and testify as to his social humiliation, wounded
feelings, anxiety, etc., moral damages cannot be recovered. 12 The rule applies, of
course, to common carriers.
5. NO.
Also a propos and also not otherwise shown to be erroneous are the
observations of the Trial Court on this precise point: ... (A) PAN AM employee in
Honolulu, instead of helping him (Ongsiako) search for his bag, arrogantly threatened
to "bump him off" in Honolulu should he persist in looking for his bag. This happened
in the presence of several people, thereby subjecting plaintiff to indignity,
embarrassment and humiliation, which aggravated his health-his blood pressure, in
this case.
It is difficult enough to be in a foreign country, worse if one's belongings are
missing, and worst, if instead of being helped, he is shouted at and threatened to be
"bumped off" as in this case. This must have been a very distressing and painful
experience to plaintiff which justifies a finding of bad faith and an award for moral
damages in his favor. Considering the financial standing of plaintiff who heads a
corporation with a paid-up capital of 2-1/2 Millon Pesos and the anguish, anxiety,
wounded feelings, shame and humiliation which he suffered as heretofore discussed,
the Court assesses moral damages in his favor in the amount of P350,000.00.
106.
BRITISH AIRWAYS vs. COURT OF APPEALS
G.R. No. 121824, January 29, 1998
ISSUES:
(1) Whether or not the agent is responsible for any negligence in the performance of its
function and liable for damages which the principal may suffer by reason of its
negligent act.
(2) Whether or not defendant BA is sole liable for compulsory damages and attorney’s fee
(3) Whether or not in a contract of air carriage a declaration by the passenger is needed to
recover a greater amount?
(4) Whether or not the award of the damages was without basis since Mahtani failed to
declare a higher valuation w/ respect to his luggage?
(5) Whether or not a contract of air transportation exist?
FACTS:
On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. He
asked Mr. Gumar to prepare his travel plans. Mr. Gumar purchased a ticket from
British Airways (BA). Since BA had no direct flights from Manila to Bombay, Mahtani
had to take a flight to Hongkong via PAL, and upon arrival in Hongkong he had to take
a connecting flight to Bombay on board BA. Before departure, Mahtani checked in at
PAL counter his two pieces of luggage containing his clothings and personal effects,
confident that upon reaching Hongkong, the same would be transferred to the BA
flight bound for Bombay. When Mahtani arrived in Bombay he discovered that his
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luggage was missing and that upon inquiry from the BA representatives, he was told
that the same might have been diverted to London. After waiting for 1 week, BA finally
advised him to file a claim by accomplishing the "Property Irregularity Report.
In the Philippines, on June 11, 1990 Mahtani filed his complaint for damages
and attorney's fees5 against BA and Mr. Gumar before the RTC.L alleging that the
reason for the non-transfer of the luggage was due to the latter's late arrival in
Hongkong, thus leaving hardly any time for the proper transfer of Mahtani's luggage to
the BA aircraft bound for Bombay.
The RTC rendered its decision in favor of Mahtani. BA is ordered to pay Mahtani
P7,000 for the value of the 2 suitcases: $400 for the value of the contents of the
luggage; P50,000 for moral and exemplary damages and 20% for attorney’s fees and
cost of the action. This decision was affirmed by CA.
RULINGS:
1. The contract of transportation was exclusively between Mahtani and BA. The
latter merely endorsing the Manila to Hong Kong log of the former’s journey to PAL, as
its subcontractor or agent. Conditions of contacts was one of continuous air
transportation from Manila to Bombay. The Court of Appeals should have been
cognizant of the well-settled rule that an agent is also responsible for any negligence in
suffer by reason of its negligent act. Since the instant petition was based on breach of
contract of carriage, Mahtani can only sue BA and not PAL, since the latter was not a
party in the contract.
2. YES.
It is a well-settled rule that an agent is also responsible for any negligence in
suffer by reason of its negligent act.
In that case, we recognized that a carrier (PAL), acting as an agent of another
carrier, is also liable for its own negligent acts or omission in the performance of its
duties.
3. YES.
American jurisprudence provides that an air carrier is not liable for the loss of
baggage in an amount in excess of the limits specified in the tariff which was filed with
the proper authorities, such tariff being binding on the passenger regardless of the
passenger’s lack of knowledge thereof or assent thereto. This doctrine is recognized in
this jurisdiction. The inescapable conclusion that BA had waived the defense of limited
liability when it allowed Mahtani to testify as to the actual damages he incurred due to
misplacement of his luggage, without any objection. It is a well-settled doctrine that
where the proponent offers evidence deemed by counsel of the adverse party to be
inadmissible for any reason, the latter has the right to object. However, such right is a
mere privilege which can be waived. Necessarily, the objection must be made at the
earliest opportunity, in case of silence when there is opportunity to speak may operate
as a waiver of objections.
4. NO.
The nature of an airline's contract of carriage partakes of two types, namely: a
contract to deliver a cargo or merchandise to its destination and a contract to
transport passengers to their destination. A business intended to serve the traveling
public primarily, it is imbued with public interest, hence, the law governing common
carriers imposes an exacting standard. 14 Neglect or malfeasance by the carrier's
employees could predictably furnish bases for an action for damages. Admittedly, in a
contract of air carriage a declaration by the passenger of a higher value is needed to
recover a greater amount. Article 22(1) of the Warsaw Convention. However, , we have
held that benefits of limited liability are subject to waiver such as when the air carrier
failed to raise timely objections during the trial when questions and answers regarding
the actual claims and damages sustained by the passenger were asked.
5. YES.
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The contract of air transportation was exclusively between Mahtani and BA, the
latter merely endorsing the Manila to Hongkong leg of the former's journey to PAL, as
its subcontractor or agent. In fact, the fourth paragraph of the "Conditions of
Contracts" of the ticket32 issued by BA to Mahtani confirms that the contract was one
of continuous air transportation from Manila to Bombay. Carriage to be performed
hereunder by several successive carriers is regarded as a single operation. Prescinding
from the above discussion, it is undisputed that PAL, in transporting Mahtani from
Manila to Hongkong acted as the agent of BA.
107.
PHILIPPINE AIRLINES INC. vs. HON. ADRIANO SAVILLO, ET. AL.
G.R. NO. 149547, JULY 4, 2008
ISSUES:
(1) Whether or not the Court of Appeals erred in not applying the provisions of the
Warsaw Convention despite the fact that Griño’s cause of action arose from a breach
of contract for international air transport.
(2) Whether or not the Court of Appeals erred in not giving due course to the petition as
respondent judge committed grave abuse of discretion amounting to lack of
jurisdiction in denying PAL’s motion to dismiss.
(3) Whether or not the Court of Appeals erred in not holding that the complaint filed by
Griño beyond the two (2)-year period provided under the Warsaw convention is already
barred by prescription.
(4) Whether or not the Warsaw Convention apply?
(5) Was there a distinction between the prescriptive periods of Warsaw Convention from
the Civil Code on torts?
FACTS:
Private respondent and several companions decided to purchase their
respective passenger tickets from PAL with the following points of passage: MANILA-
SINGAPORE-JAKARTA-SINGAPORE-MANILA. Private respondent and his companions
were made to understand by PAL that its plane would take them from Manila to
Singapore, while Singapore Airlines would take them from Singapore to Jakarta.
Private respondent and his companions took the PAL flight to Singapore and
arrived at about 6:00 o’clock in the evening. Upon their arrival, they proceeded to the
Singapore Airlines office to check-in for their flight to Jakarta scheduled at 8:00
o’clock in the same evening. Singapore Airlines rejected the tickets of private
respondent and his group because they were not endorsed by PAL. It was explained to
private respondent and his group that if Singapore Airlines honored the tickets
without PAL’s endorsement, PAL would not pay Singapore Airlines for their passage.
Private respondent tried to contact PAL’s office at the airport, only to find out that it
was closed.
Stranded at the airport in Singapore and left with no recourse, private
respondent was in panic and at a loss where to go; and was subjected to humiliation,
embarrassment, mental anguish, serious anxiety, fear and distress. Eventually,
private respondent and his companions were forced to purchase tickets from Garuda
Airlines and board its last flight bound for Jakarta. When they arrived in Jakarta at
about 12:00 o’clock midnight, the party who was supposed to fetch them from the
airport had already left and they had to arrange for their transportation to the hotel at
a very late hour. After the series of nerve-wracking experiences, private respondent
became ill and was unable to participate in the tournament.
Upon his return to the Philippines, private respondent brought the matter to
the attention of PAL. He sent a demand letter to PAL and another to Singapore
Airlines.
However, both airlines disowned liability and blamed each other for the fiasco.
Private respondent filed a Complaint for Damages before the RTC seeking
compensation for moral damages in the amount of P1,000,000.00 and attorney’s fees.
RULINGS:
1. NO.
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The Warsaw Convention does not “exclusively regulate” the relationship

between passenger and carrier on an international flight. In United Airlines v. Uy, this
Court distinguished between the (1) damage to the passager’s baggage and (2)
humiliation he suffered at the hands of the airline’s employees. The first cause of
action was covered by the Warsaw Convention which prescribes in two years, while the
second was covered by the provisions of the Civil Code on Torts, which prescribes in
four years.
In the case at hand, Singapore Airlines barred private respondent from
boarding the Singapore Airlines flight because PAL allegedly failed to endorse the
tickets of private respondent and his companions, despites PAL’s assurance to
respondent that Singapore Airlines had already confirmed their passage. While this
fact still needs to be heard and established by adequate proof before the RTC, an
action based on these allegations will not fall under the Warsaw Convention, since the
purported negligence on the part of PAL did not occur during the performance of the
contract of carriage but days before the scheduled flight. Thus, the present action
cannot be dismissed based on the statute of limitations provided under Article 29 of
the Warsaw Convention.
2. NO.
In determining whether PAL’s Motion to Dismiss should have been granted by
the trial court, it must be ascertained if all the claims made by the private respondent
in his Complaint are covered by the Warsaw Convention, which effectively bars all
claims made outside the two-year prescription period provided under Article 29
thereof. If the Warsaw Convention covers all of private respondent’s claims, then Civil
Case No. 23773 has already prescribed and should therefore be dismissed. On the
other hand, if some, if not all, of respondent’s claims are outside the coverage of the
Warsaw Convention, the RTC may still proceed to hear the case.
The Warsaw Convention applies to "all international transportation of persons,
baggage or goods performed by any aircraft for hire." It seeks to accommodate or
balance the interests of passengers seeking recovery for personal injuries and the
interests of air carriers seeking to limit potential liability. It employs a scheme of strict
liability favoring passengers and imposing damage caps to benefit air carriers.16 The
cardinal purpose of the Warsaw Convention is to provide uniformity of rules governing
claims arising from international air travel; thus, it precludes a passenger from
maintaining an action for personal injury damages under local law when his or her
claim does not satisfy the conditions of liability under the Convention.17
Article 19 of the Warsaw Convention provides for liability on the part of a carrier
for "damages occasioned by delay in the transportation by air of passengers, baggage
or goods." Article 24 excludes other remedies by further providing that "(1) in the cases
covered by articles 18 and 19, any action for damages, however founded, can only be
brought subject to the conditions and limits set out in this convention." Therefore, 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.
3. NO.
Had the present case merely consisted of claims incidental to the airlines’ delay
in transporting their passengers, the private respondent’s Complaint would have been
time-barred under Article 29 of the Warsaw Convention. However, the present case
involves a special species of injury resulting from the failure of PAL and/or Singapore
Airlines to transport private respondent from Singapore to Jakarta – the profound
distress, fear, anxiety and humiliation that private respondent experienced when,
despite PAL’s earlier assurance that Singapore Airlines confirmed his passage, he was
prevented from boarding the plane and he faced the daunting possibility that he would
be stranded in Singapore Airport because the PAL office was already closed.
These claims are covered by the Civil Code provisions on tort, and not within
the purview of the Warsaw Convention. Hence, the applicable prescription period is
that provided under Article 1146 of the Civil Code:
Art. 1146. The following actions must be instituted within four years:
(1) Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict.
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Private respondent’s Complaint was filed with the RTC on 15 August 1997,
which was less than four years since PAL received his extrajudicial demand on 25
January 1994. Thus, private respondent’s claims have not yet prescribed and PAL’s
Motion to Dismiss must be denied.
4. The Warsaw Convention applies to "all international transportation of persons,

baggage or goods performed by any aircraft for hire." It seeks to accommodate or
balance the interests of passengers seeking recovery for personal injuries and the
interests of air carriers seeking to limit potential liability. It employs a scheme of strict
liability favoring passengers and imposing damage caps to benefit air carriers. The
cardinal purpose of the Warsaw Convention is to provide uniformity of rules governing
claims arising from international air travel; thus, it precludes a passenger from
maintaining an action for personal injury damages under local law when his or her
claim does not satisfy the conditions of liability under the Convention.
5. YES.
There is distinction between the two. The Warsaw Convention prescribes in two
years. The provisions of the Civil Code on torts, on the other hand, prescribes in four
years.
108.
KLM ROYAL DUTCH AIRLINES vs. COURT OF APPEAL
65 SCRA 237 (1975)
ISSUES:
(1) Whether or not KLM is liable for breach of contract of carriage?
(2) Whether or not KLM should not be held accountable for the tortious conduct of Aer
Lingus because of the provision printed on the respondents' tickets expressly limiting
the KLM's liability for damages only to occurrences on its own lines.
(3) What does Article 25 of the Warsaw Convention provide?
(4) Whether or not the contract of air transportation was exclusively between the
respondents and the KLM?
(5) Whether or not there is breach of guarantee and if there be any, when does it exist and
how was the same aggravated?
FACTS:
Sometime in March 1965 spouses Mendoza, the respondents, approached Mr.
Reyes, the branch manager of Philippine Travel Bureau, for consultation about a world
tour which they were intending to make with their daughter and niece. Three
segments of the trip, the longest, was via KLM. Respondents decided that one of the
routes they will take was a Barcelona-Lourdes route with knowledge that only one
airline, Aer Lingus, served it. Reyes made the necessary reservations. To this, KLM
secured seat reservations for the Mendoza’s and their companions from the carriers
which would ferry them throughout their trip, which the exception of Aer Lingus.
When the Mendoza’s left the Philippines, they were issued KLM tickets for the entire
trip. However, their coupon for Aer Lingus was marked “on request”.
When they were in Germany, they went to the KLM office and obtained a
confirmation from Aer Lingus. At the airport in Barcelona, the Mendozas and their
companions checked in for their flight to Lourdes. However, although their daughter
and niece were allowed to take the flight, the spouses Mendozas were off loaded on
orders of the Aer Lingus manager, who brusquely shoved them aside and shouted at
them. So the spouses Mendozas took a train ride to Lourdes instead.
Thus, they filed a complaint for damages against KLM for breach of contract of
carriage. The trial court decided in favor of the Mendozas. On appeal, the CA affirmed
the decision. Hence, KLM brings this petition to the Supreme Court. KLM cites Art 30
of the Warsaw Convention, which states: the passenger or his representatives can take
action only against the carrier who performed the transportation during which the
accident or delay occurred. Also, KLM avers that the front cover of each ticket reads:
that liability of the carrier for damages shall be limited to occurrences on its own line.
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RULING:
1. The applicability of Art. 30 of the Warsaw Convention cannot be sustained. The
article presupposes the occurrence of delay or accident. What manifest here is that the
Aer Lingus refused to transport the spouses Mendozas to their planned and contracted
destination.
As the airline which issued the tickets, KLM was chargeable with the duty and
responsibility of specifically informing the spouses of the conditions prescribed in their
tickets or to ascertain that the spouses read them before they accepted their passage
tickets.
The Supreme Court held that KLM cannot be merely assumed as a ticket-
issuing agent for other airlines and limit its liability to untoward occurrences on its
own line.
The court found, that the passage tickets provide that the carriage to be
performed therein by several successive carriers is to be regarded as a “single
operation”.
2. NO.
The argument that the KLM should not be held accountable for the tortious
conduct of Aer Lingus because of the provision printed on the respondents' tickets
expressly limiting the KLM's liability for damages only to occurrences on its own lines
is unacceptable. As noted by the Court of Appeals that condition was printed in letters
so small that one would have to use a magnifying glass to read the words. Under the
circumstances, it would be unfair and inequitable to charge the respondents with
automatic knowledge or notice of the said condition so as to preclude any doubt that it
was fairly and freely agreed upon by the respondents when they accepted the passage
tickets issued to them by the KLM.
As the airline which issued those tickets with the knowledge that the
respondents would be flown on the various legs of their journey by different air
carriers, the KLM was chargeable with the duty and responsibility of specifically
informing the respondents of conditions prescribed in their tickets or, in the very least,
to ascertain that the respondents read them before they accepted their passage
tickets. A thorough search of the record, however, inexplicably fails to show that any
effort was exerted by the KLM officials or employees to discharge in a proper manner
this responsibility to the respondents.
Consequently, we hold that the respondents cannot be bound by the provision
in question by which KLM unilaterally assumed the role of a mere ticket-issuing agent
for other airlines and limited its liability only to untoward occurrences on its own
lines.
3. ART. 25. (1) The carrier shall not be entitled to avail himself of the provisions of
this convention which exclude or limit his liability, if the damage is caused by his
willful misconduct or by such default on his part as, in accordance with the law of the
court to which the case is submitted, is considered to be equivalent to willful
misconduct.
(2) Similarly, the carrier shall not be entitled to avail himself of the said provisions, if the
damage is caused under the same circumstances by any agent of the carrier acting
within the scope of his employment.
4. YES.
The contract of air transportation was exclusively between the respondents and
the KLM, the latter merely endorsing its performance to other carriers, like Aer Lingus,
as its subcontractors or agents, as evidenced by the passage tickets themselves which
on their face disclose that they are KLM tickets. Moreover, the respondents dealt only
with KLM through the travel agency.
The respondents dealt exclusively with the KLM which issued them tickets for
their entire trip and which in effect guaranteed to them that they would have sure
space in Aer Lingus flight 861. The respondents, under that assurance of the
internationally prestigious KLM, naturally had the right to expect that their tickets
would be honored by Aer Lingus to which, in the legal sense, the KLM had indorsed
and in effect guaranteed the performance of its principal engagement to carry out the
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respondents' scheduled itinerary previously and mutually agreed upon between the
parties.
5. YES.
The breach of that guarantee was aggravated by the discourteous and highly
arbitrary conduct of an official of the Aer Lingus which the KLM had engaged to
transport the respondents on the Barcelona-Lourdes segment of their itinerary. It is
but just and in full accord with the policy expressly embodied in our civil law which
enjoins courts to be more vigilant for the protection of a contracting party who
occupies an inferior position with respect to the other contracting party, that the KLM
should be held responsible for the abuse, injury and embarrassment suffered by the
respondents at the hands of a supercilious boor of the Aer Lingus.
109.
ALITALIA vs. ITERMEDIATE APPELLATE COURT
G.R. NO. 71929, DECEMBER 4, 1990
ISSUES:
(1) Whether or not Dr. Pablo is entitled to nominal damages.
(2) Whether the Warsaw Convention should be applied to limit Alitalia’s liability.
(3) Whether or not breach of contract of carriage existed between the contracting parties
despite the fact that the luggage was returned to her without appreciable damage but
tardily?
(4) Under what circumstances provided for in by the Warsaw Convention the carrier may
be deemed liable for damages?
(5) Under what following manners the Convention may purports to limit the liability of the
carriers?
FACTS:
Respondent Dr. Felipa Pablo, an associate professor in the University of the
Philippines and a research grantee of the Philippine Atomic Energy Agency, was
invited to take part at a meeting of the Department of Research and Isotopes in Italy in
view of her specialized knowledge in “foreign substances in food and the agriculture
environment”. She would be the second speaker on the first day of the meeting.
Dr. Pablo booked passage on petitioner Alitalia. She arrived in Milan on the day
before the meeting, but was told that her luggage was delayed and was in a succeeding
flight from Rome to Milan. The luggage included her materials for the presentation.
The succeeding flights did not carry her luggage. Desperate, she went to Rome to try to
locate the luggage herself, but to no avail. She returned to Manila without attending
the meeting. She demanded reparation for the damages. She rejected Alitalia’s offer of
free airline tickets and commenced an action for damages. As it turned out, the
luggage was actually forwarded to Ispra, but only a day after the scheduled
appearance. It was returned to her after 11 months.
The trial court ruled in favor of Dr. Pablo, and this was affirmed by the Court of
Appeals.
RULINGS:
1. YES.
She is not, of course, entitled to be compensated for loss or damage to her
luggage. She is however entitled to nominal damages which, as the law says, is
adjudicated in order that a right of the plaintiff, which has been violated or invaded by
the defendant, may be vindicated and recognized, and not for the purpose of
indemnifying the plaintiff that for any loss suffered and this Court agrees that the
respondent Court of Appeals correctly set the amount thereof at PhP 40,000.00.
The Court also agrees that respondent Court of Appeals correctly awarded
attorney’s fees to Dr. Pablo and the amount of PhP 5,000.00 set by it is reasonable in
the premises. The law authorizes recovery of attorney’s fees inter alia where, as here,
the defendant’s act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest or where the court deems it just
and equitable.
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2. Under the Warsaw Convention, an air carrier is made liable for damages for: a.
The death, wounding or other bodily injury of a passenger if the accident causing it
took place on board the aircraft or the course of its operations of embarking or
disembarking; b. The destruction or loss of, or damage to, any registered luggage or
goods, if the occurrence causing it took place during the carriage by air; and c. Delay
in the transportation by air of passengers, luggage or goods.
The convention however denies to the carrier availment of the provisions which
exclude or limit his liability, if the damage is caused by his wilful misconduct, or by
such default on his part as is considered to be equivalent to wilful misconduct. The
Convention does not thus operate as an exclusive enumeration of the instances of an
airline's liability, or as an absolute limit of the extent of that liability. It should be
deemed a limit of liability only in those cases where the cause of the death or injury to
person, or destruction, loss or damage to property or delay in its transport is not
attributable to or attended by any wilful misconduct, bad faith, recklessness, or
otherwise improper conduct on the part of any official or employee for which the
carrier is responsible, and there is otherwise no special or extraordinary form of
resulting injury.
In the case at bar, no bad faith or otherwise improper conduct may be ascribed
to the employees of petitioner airline; and Dr. Pablo's luggage was eventually returned
to her, belatedly, it is true, but without appreciable damage. The fact is, nevertheless,
that some species of injury was caused to Dr. Pablo because petitioner ALITALIA
misplaced her baggage and failed to deliver it to her at the time appointed - a breach of
its contract of carriage. Certainly, the compensation for the injury suffered by Dr.
Pablo cannot under the circumstances be restricted to that prescribed by the Warsaw
Convention for delay in the transport of baggage.
3. YES.
In the case at bar, no bad faith or otherwise improper conduct may be ascribed
to the employees of petitioner airline; and Dr. Pablo's luggage was eventually returned
to her, belatedly, it is true, but without appreciable damage. The fact is, nevertheless,
that some special species of injury was caused to Dr. Pablo because petitioner
ALITALIA misplaced her baggage and failed to deliver it to her at the time appointed —
a breach of its contract of carriage, to be sure — with the result that she was unable
to read the paper and make the scientific presentation (consisting of slides,
autoradiograms or films, tables and tabulations) that she had painstakingly labored
over, at the prestigious international conference, to attend which she had traveled
hundreds of miles, to her chagrin and embarrassment and the disappointment and
annoyance of the organizers. She felt, not unreasonably, that the invitation for her to
participate at the conference, extended by the Joint FAO/IAEA Division of Atomic
Energy in Food and Agriculture of the United Nations, was a singular honor not only
to herself, but to the University of the Philippines and the country as well, an
opportunity to make some sort of impression among her colleagues in that field of
scientific activity. The opportunity to claim this honor or distinction was irretrievably
lost to her because of Alitalia's breach of its contract.
4. Under the Warsaw Convention, an air carrier is made liable for damages for: 1)
the death, wounding or other bodily injury of a passenger if the accident causing it
took place on board the aircraft or in the course of its operations of embarking or
disembarking; 2) the destruction or loss of, or damage to, any registered luggage or
goods, if the occurrence causing it took place during the carriage by air;" and 3) delay
in the transportation by air of passengers, luggage or goods.
In these cases, it is provided in the Convention that the "action for damages,
however, founded, can only be brought subject to conditions and limits set out"
therein.
5. The Convention also purports to limit the liability of the carriers in the following
manner:
1. In the carriage of passengers the liability of the carrier for each passenger is
limited to the sum of 250,000 francs. Nevertheless, by special contract, the carrier and
the passenger may agree to a higher limit of liability.
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2. a) In the carriage of registered baggage and of cargo, the liability of the carrier
is limited to a sum of 250 francs per kilogram, unless 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. In that case the carrier will be liable to pay a sum not exceeding
the declared sum, unless he proves that sum is greater than the actual value to the
consignor at delivery.
b) In the case of loss, damage or delay of part of registered baggage or cargo, or
of any object contained therein, the weight to be taken into consideration in
determining the amount to which the carrier's liability is limited shall be only the total
weight of the package or packages concerned. Nevertheless, when the loss, damage or
delay of a part of the registered baggage or cargo, or of an object contained therein,
affects the value of other packages covered by the same baggage check or the same air
way bill, the total weight of such package or packages shall also be taken into
consideration in determining the limit of liability.
3. As regards objects of which the passenger takes charge himself the liability of
the carrier is limited to 5000 francs per passenger.
4. The limits prescribed shall not prevent the court from awarding, in
accordance with its own law, in addition, the whole or part of the court costs and of
the other expenses of litigation incurred by the plaintiff. The foregoing provision shall
not apply if the amount of the damages awarded, excluding court costs and other
expenses of the litigation, does not exceed the sum which the carrier has offered in
writing to the plaintiff within a period of six months from the date of the occurrence
causing the damage, or before the commencement of the action, if that is later.
The Warsaw Convention however denies to the carrier availment "of the
provisions which exclude or limit his liability, if the damage is caused by his wilful
misconduct or by such default on his part as, in accordance with the law of the court
seized of the case, is considered to be equivalent to wilful misconduct," or "if the
damage is (similarly) caused by any agent of the carrier acting within the scope of his
employment." The Hague Protocol amended the Warsaw Convention by removing the
provision that if the airline took all necessary steps to avoid the damage, it could
exculpate itself completely, and declaring the stated limits of liability not applicable
"if it is proved that the damage resulted from an act or omission of the carrier, its
servants or agents, done with intent to cause damage or recklessly and with
knowledge that damage would probably result." The same deletion was effected by the
Montreal Agreement of 1966, with the result that a passenger could recover unlimited
damages upon proof of wilful misconduct.
110.
LHUILLIER vs. BRITISH AIRWAYS
G.R. NO. 171092, MARCH 15, 2010
ISSUES:
(1) Whether or not Philippine courts have jurisdiction over a tortious conduct committed
against a Filipino citizen and resident by an airline personnel of a foreign carrier.
(2) Whether respondent air carrier of passengers, in filing its motion to dismiss based on
lack of jurisdiction over the subject matter of the case and over its person may be
deemed as having in fact and in law submitted itself to the jurisdiction of the lower
court, especially so, when the very lawyer arguing for it is himself the resident agent of
the carrier.
(3) What does the Article 1 of the Warsaw Convention provide?
(4) Whether or not Article 28(1) of the Warsaw Convention is jurisdictional in character?
(5) Under Article 28(1) of the Warsaw Convention, where can the plaintiff may bring the
action for damages.
FACTS:
Petitioner Lhuillier took respondent British Airways’s flight 548 from London,
United Kingdom to Rome, Italy. Once on board, she allegedly requested Julian
Halliday, one of the respondent’s flight attendants, to assist her in placing her hand-
carried luggage in the overhead bin. However, Halliday allegedly refused to help and
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assist her, and even sarcastically remarked that “If I were to help all 300 passengers in
this flight, I would have a broken back!” Petitioner further alleged that when the plane
was about to land in Rome, Italy, another flight attendant, Nickolas Kerrigan, singled
her out from among all the passengers in the business class section to lecture on
plane safely. Allegedly, Kerrigan made her appear to the other passengers to be
ignorant, uneducated, stupid, and in need of lecturing on the safety rules and
regulations of the plane. Upon arrival in Rome, petitioner complained to respondent’s
ground manager and demanded an apology.
However, the latter declared that the flight stewards were “only doing their job;”
prompting petitioner to file herein complaint for damages. On April 28, 2015,
petitioner filed a Complaint for damages against respondent before the RTC of Makati
City. Respondent filed a Motion to Dismiss on the ground of lack of jurisdiction over
the case and over the person of the respondent. Respondent allegedly that only the
courts of London, United Kingdom or Rome, Italy, have jurisdiction over the complaint
for damages pursuant to the Warsaw Convention, Article 28 (1) of which provides that:
“An action for damages must be brought at the option of the plaintiff, either before the
court of domicile of the carrier or his principal place of business, or where he has a
place of business through which the contract has been made, or before the court of
the place of destination.” Petitioner argues that her cause of action arose not from the
contract of carriage, but from the tortious conduct committed by airline personnel of
respondent in violation of the provisions of the Civil Code on Human Relations.
Since her cause of action was not predicated on the contract of carriage,
petitioner asserts that she has the option to pursue this case in this jurisdiction
pursuant to Philippine laws. As such, the same can only be filled before the courts of
London, United Kingdom or Rome, Italy.
RULING:
1. NO.
In this case, it is not disputed that respondent is a British corporation
domiciled in London, United Kingdom with London as its principal place of business.
Hence, under the first and second jurisdictional rules, the petitioner may bring her
case before the courts of London in the United Kingdom. In the passenger ticket and
baggage check presented by both the petitioner and respondent, it appears that he
ticket was issued in Rome, Italy. Consequently, under the third jurisdictional rule, the
petitioner has the option to bring her case before the courts of Rome in Italy. Finally,
both the petitioner and respondent aver that the place of destination is Rome, Italy,
which is properly designated given the routing presented in the said passenger ticket
and baggage check. Accordingly, petitioner may bring her action before the courts of
Rome, Italy. We thus find that the RTC of Makati correctly ruled that is does not have
jurisdiction over the case filed by the petitioner.
2. In this case, the special appearance of the counsel of respondent in filing the
Motion to Dismiss and other pleadings before the trial court cannot be deemed to be
voluntary submission to the jurisdiction of the said trial court. We hence disagree with
the contention of the petitioner and rule that there was no voluntary appearance
before the trial court that could constitute estoppel or a waiver of respondent’s
objection to jurisdiction over its person.
3. Article 1 of the Warsaw Convention provides:

(1) This 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.
(2.) For the purposes of this Convention the expression "international carriage" means
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 transhipment, are situated either within the territories of two High Contracting
Parties, or 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 this Convention.
A carriage without such an agreed stopping place between territories subject to the
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sovereignty, suzerainty, mandate or authority of the same High Contracting Party is

not deemed to be international for the purposes of this Convention.
4. YES.
It further held that Article 28(1) of the Warsaw Convention is jurisdictional in
character. Thus:
A number of reasons tends to support the characterization of Article 28(1) as a
jurisdiction and not a venue provision. First, the wording of Article 32, which indicates
the places where the action for damages "must" be brought, underscores the
mandatory nature of Article 28(1). Second, this characterization is consistent with one
of the objectives of the Convention, which is to "regulate in a uniform manner the
conditions of international transportation by air." Third, the Convention does not
contain any provision prescribing rules of jurisdiction other than Article 28(1), which
means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to
Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive
enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the
will of the parties regardless of the time when the damage occurred.
5. Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for
damages before:
(1) the court where the carrier is domiciled;
(2) the court where the carrier has its principal place of business;
(3) the court where the carrier has an establishment by which the contract has
been made; or
(4) the court of the place of destination.
111.
LUFTHANSA GERMAN AIRLINES vs. COURT OF APPEALS
G.R. No. 83612, November 24, 1994
ISSUE:
(1) Whether or not there was a breach of obligation by the defendant in failing to
transport the plaintiff from Manila to Blantyre, Malawi, Africa
(2) Whether or not there was a contract of carriage
(3) Whether or not provisions of the warsaw convention is applicable in the case at bar
(4) Whether or not Antiporda does not have any cause of action
(5) What are the liabilities of Lufthansa?
FACTS:
Tirso V. Antiporda, Sr. was, contracted by Sycip, Gorres, Velayo & Co. (SGV) to
be the institutional financial specialist for the agricultural credit institution project of
the Investment and Development Bank of Malawi in Africa. For the engagement,
Antiporda would be provided one round-trip economy ticket from Manila to Blantyre
and back with a maximum travel time of four days per round-trip. On September 17,
1984, Lufthansa, through SGV, issued the ticket for Antiporda's confirmed flights to
Malawi, Africa. The ticket particularized his itinerary: Manila -Bombay- Nairobi-
Lilongwe -
Blantyre.
Thus Antiporda took the Lufthansa flight to Singapore from where he proceeded
to Bombay on board the same airline. He arrived in Bombay ascheduled and waited at
the transit area of the airport for his connecting flight to Nairobi which was, per
schedule given him by Lufthansa, to leave Bombay. Lufthansa, informed Antiporda
that his seat in Air Kenya Flight 203 to Nairobi had been given to a very important
person of Bombay who was attending a religious function in Nairobi. Antiporda
protested but Air Kenya Flight 203 left for Nairobi without him on board. Stranded in
Bombay, Antiporda was booked for Nairobi via Addis Ababa only on September 27,
1984. He finally arrived in Blantyre at 9:00 o'clock in the evening of September 28,
1984, more than a couple of days late for his appointment with people from the
institution he was to work with in Malawi.
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Consequently, ,Antiporda's counsel wrote the general manager of Lufthansa in

Manila demanding P1,000,000 in damages for the airline's "malicious, wanton,
disregard of the contract of carriage." Apparently getting no positive action from
Lufthansa, on January 21, 1985, Antiporda filed with the RTC of Quezon City a
complaint against Lufthansa.
Lufthansa argued that it cannot be held liable for the acts committed by Air
Kenya on the basis of the following:
a. it merely acted as a ticket-issuing agent in behalf of Air Kenya; consequently the
contract of carriage entered into is between respondent Antiporda and Air Kenya, to
the exclusion of petitioner Lufthansa;
b. under sections (1) and (2) Article 30 of the Warsaw Convention, an airline carrier is
liable only to untoward occurrences on its own line;
c. the award of moral and exemplary damages in addition to attorney's fees by the trial
court is without basis in fact and in law.
RULINGS:
1. YES.
The breach of the guarantee was aggravated by the discourteous and highly
arbitrary conduct of Gerard Matias, an official of Lufthansa in Bombay. Bumped off
from his connecting flight to Nairobi and stranded in the Bombay Airport for 32 hours,
when plaintiff insisted on taking his scheduled flight to Nairobi, Gerard Matias got
angry and threw the ticket and passport on plaintiff's lap and was ordered to go to the
basement with his heavy luggages for no reason at all. It was a difficult task for the
plaintiff to carry three luggages and yet Gerard Matias did not even offer to help him.
Plaintiff requested accommodation but Matias ignored it and just left. Not even
Lufthansa office in Bombay, after learning plaintiff's being stranded in Bombay and
his accommodation problem, provided any relief to plaintiff's sordid situation.
Plaintiff has to stay in the transit area and could not sleep for fear that his
luggages might be lost. Everytime he went to the toilet, he had to drag with him his
luggages. He tried to eat the high-seasoned food available at the airport but developed
stomach trouble. It was indeed a pathetic sight that the plaintiff, an official of the
Central Bank, a multi-awarded institutional expert, tasked to perform consultancy
work in a World Bank funded agricultural bank project in Malawi instead found
himself stranded in a foreign land where nobody was expected to help him in his
predicament except the defendant, who displayed utter lack of concern of its obligation
to the plaintiff and left plaintiff alone in his misery at the Bombay airport.
2. YES.
This case is one of a contract of carriage. And the ticket issued by the defendant
to the plaintiff is the written agreement between the parties herein. From the ticket,
therefore, it is indubitably clear that it was the duty and responsibility of the
defendant Lufthansa to transport the plaintiff from Manila to Blantyre, on a trip of five
legs.
3. NO.
The appellate court also ruled that Lufthansa cannot rely on Sections (1) and
(2), Article 30 of the Warsaw Convention because the provisions thereof are not
applicable under the circumstances of the case.
Sections (1) and (2), Article 30 of the Warsaw Convention provide:
(1) In the case of transportation to be performed by various successive carriers
and falling within the definition set out in the third paragraph of Article I, each carrier
who accepts passengers, baggage, or goods shall be subject to the rules set out in the
convention, and shall be deemed to be one of the contracting parties to the contract of
transportation insofar as the contract deals with that part of the transportation which
is performed under his supervision.
(2) In the case of transportation of this nature, the passenger or his
representative can take action only against the carrier who performed the
transportation during which the accident or the delay occurred, save in the case
where, by express agreement, the first carrier has assumed liability for the whole
journey.
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4. NONE.
Antiporda's cause of action is not premised on the occurrence of an accident or
delay as contemplated under Section 2 of said Article but on Air Kenya's refusal to
transport him in order to accommodate another. The provision does not contemplate
the instance of "bumping-off" but merely of simple delay,it cannot provide a handy
excuse for Lufthansa as to exculpate it from any liability to Antiporda.
5. In light of the stipulations expressly specified in the ticket defining the true
nature of its contract of carriage with Antiporda, Lufthansa cannot claim that its
liability thereon ceased at Bombay Airport and thence, shifted to the various carriers
that assumed the actual task of transporting said private respondent
The court rejected Lufthansa's theory that from the time another carrier was
engaged to transport Antiporda on another segment of his trip, it merely acted as a
ticket-issuing agent in behalf of said carrier. In the very nature of their contract,
Lufthansa is clearly the principal in the contract of carriage with Antiporda and
remains to be so, regardless of those instances when actual carriage was to be
performed by various carriers. The issuance of a confirmed Lufthansa ticket in favor of
Antiporda covering his entire five-leg trip abroad successive carriers concretely attests
to this. This also serves as proof that Lufthansa, in effect guaranteed that the
successive carriers, such as Air Kenya would honor his ticket; assure him of a space
therein and transport him on a particular segment of his trip. This ruling finds
corroboration in the Supreme Court decision in KLM ,
112.
PHILIPPINE AIRLINES, INC. vs. COURT OF APPEALS
G.R. No. 119706, March 14, 1996
ISSUES:
(1) Whether or not the air waybill should be strictly construed against petitioner.
(2) Whether or not PAL acted in bad faith justifying the grant for damages
(3) Whether or not petitioner acted in bad faith in denying private respondent's claim
(4) Whether or not the limited liability rule is applicable in the case at bar?
(5) Whether or not the awarding of damages is proper
FACTS:
Plaintiff, Gilda C. Mejia, shipped thru defendant, Philippine Airlines, one (1)
unit microwave oven, from San Francisco, U.S.A. to Manila, Philippines. Upon arrival,
however, of said article in Manila, Philippines, plaintiff discovered that its front glass
door was broken and the damage rendered it unserviceable. Demands both oral and
written were made by plaintiff against the defendant for the reimbursement of the
value of the damaged microwave oven, and transportation charges paid by plaintiff to
defendant company.
Plaintiff filed the instant action for damages against defendant in the lower
court. Defendant Airlines alleged inter alia, by way of special and affirmative defenses,
that the court has no jurisdiction over the case; that plaintiff has no valid cause of
action against defendant since it acted only in good faith and in compliance with the
requirements of the law, regulations, conventions and contractual commitments; and
that defendant had always exercised the required diligence in the selection, hiring and
supervision of its employees.
Petitioner airlines argues that the legal principle enunciated in Fieldmen’s
Insurance does not apply to the present case because the provisions of the contract
involved here are neither ambiguous nor obscure.
The trial court justified its award of actual, moral and exemplary damages, and
attorney’s fees in favor of private respondent that since the plaintiff’s baggage
destination was the Philippines, Philippine law governs the liability of the defendant
for damages for the microwave oven. And that, plaintiff has established that defendant
acted in bad faith when it denied the former’s claim on the ground that the formal
claim was filed beyond the period as provided in the Air Waybill when actually,
Concepcion Diño
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The court finds that the petitioner acted in bad faith in denying private
respondent’s claim, which was affirmed by the Court of Appeals. Hence this appeal for
Certiorari.
RULINGS:
1. NO.
SC held that there can be no further question as to the validity of the terms of
the air waybill, even if the same constitutes a contract of adhesion. Whether or not the
provisions thereof particularly on the limited liability of the carrier are binding on
private respondent in this instance must be determined from the facts and
circumstances involved vis-a-vis the nature of the provisions sought to be enforced,
taking care that equity and fair play should characterize the transaction under review.
However, it should be borne in mind that a contract of adhesion may be struck down
as void and unenforceable, for being subversive of public policy, only when the weaker
party is imposed upon in dealing with the dominant bargaining party and is reduced
to the alternative of taking it or leaving it, completely deprived of the opportunity to
bargain on equal footing.
Just because we have said that Condition No. 5 of the airway bill is binding
upon the parties to and fully operative in this transaction, it does not mean, and let
this serve as fair warning to respondent carriers, that they can at all times whimsically
seek refuge from liability in the exculpatory sanctuary of said Condition No. 5. We find
nothing objectionable about the lower court’s reliance upon the Fieldmen’s Insurance
case, the principles wherein squarely apply to the present petition. The parallelism
between the aforementioned case and this one is readily apparent for, just as in the
instant case, it is the binding effect of the provisions in a contract of adhesion (an
insurance policy in Fieldmen’s Insurance) that is put to test.
2. YES.
It will be noted that petitioner never denied that the damage to the microwave
oven was sustained while the same was in its custody. The possibility that said
damage was due to causes beyond the control of PAL has effectively been ruled out
since the entire process in handling of the cargo was done almost exclusively by, and
with the intervention or, at the very least, under the direct supervision of a responsible
PAL personnel.
The acceptance in due course by PAL of private respondent’s cargo as packed
and its advice against the need for declaration of its actual value operated as an
assurance to private respondent that in fact there was no need for such a declaration.
Petitioner can hardly be faulted for relying on the representations of PAL’s own
personnel.
There was glaringly no attempt what so ever on the part of petitioner to explain
the cause of the damage to the oven which constitutes gross carelessness or
negligence which by itself justifies the present award of damages. The unprofessional
indifference of PAL’s personnel despite full and actual knowledge of the damage to
private respondent’s cargo, just to be exculpated from liability on pure technicality and
bureaucratic subterfuge, smacks of willful misconduct and insensitivity to a
passenger’s plight tantamount to bad faith and renders unquestionable petitioner’s
liability for damages.
3. YES.
there was glaringly no attempt whatsoever on the part of petitioner to explain
the cause of the damage to the oven.
The unexplained cause of damage to private respondent's cargo constitutes
gross carelessness or negligence which by itself justifies the present award of
damages.
The equally unexplained and inordinate delay in acting on the claim upon
referral thereof to the claims officer, Atty. Paco, and the noncommittal responses to
private respondent's entreaties for settlement of her claim for damages belies
petitioner's pretension that there was no bad faith on its part.
This unprofessional indifference of PAL's personnel despite full and actual
knowledge of the damage to private respondent's cargo, just to be exculpated from
liability on pure technicality and bureaucratic subterfuge, smacks of willful
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misconduct and insensitivity to a passenger's plight tantamount to bad faith and

renders unquestionable petitioner's liability for damages. In sum, there is no reason to
disturb the findings of the trial court in this case, especially with its full affirmance by
respondent Court of Appeals.
4. NO.
Respondent appellate court did not err in ruling that the provision on limited
liability is not applicable in this case. We, however, note in passing that while the facts
and circumstances of this case do not call for the direct application of the provisions of
the Warsaw Convention, it should be stressed that, indeed, recognition of the Warsaw
Convention does not preclude the operation of the Civil Code and other pertinent laws
in the determination of the extent of liability of the common carrier.
The Warsaw Convention, being a treaty to which the Philippines is a signatory,
is as much a part of Philippine law as the Civil Code, Code of Commerce and other
municipal special laws. The provisions therein contained, specifically on the limitation
of carrier's liability, are operative in the Philippines but only in appropriate situations
5. YES.
As to the last assigned error, a perusal of the facts and law of the case reveals
that the lower court's award of moral and exemplary damages, attorney's fees and
costs of suit to plaintiff-appellee is in accordance with current laws and jurisprudence
on the matter. Indeed, aside from the fact that defendant-appellant acted in bad faith
in breaching the contract and in denying plaintiff's valid claim for damages, plaintiff-
appellee underwent profound distress, sleepless nights, and anxiety upon knowledge
of her damaged microwave oven in possession of defendant-appellant, entitling her to
the award of moral and exemplary damages (Cathay Pacific Airways, Ltd. vs. C.A.,
supra; Arts. 2219 & 2221, New Civil Code), and certainly plaintiff-appellant's unjust
refusal to comply with her valid demand for payment, thereby also entitling her to
reasonable attorney's fees [Art. 2208 (2) and (11), id.].
It will be noted that petitioner never denied that the damage to the microwave
oven was sustained while the same was in its custody. The possibility that said
damage was due to causes beyond the control of PAL has effectively been ruled out
since the entire process in handling of the cargo — from the unloading thereof from
the plane, the towing and transfer to the PAL warehouse, the transfer to the Customs
examination area, and its release thereafter to the shipper — was done almost
exclusively by, and with the intervention or, at the very least, under the direct
supervision of a responsible PAL personnel
113.
SABENA WORLD AIRLINES vs. COURT OF APPEALS
G.R. No. 104685, March 14, 1996
ISSUES:
(1) Whether or not the private respondent is at fault on the loss of the luggage by
negligence.
(2) Whether or not the airline is liable for the lost luggage
(3) Whether or not the airline can invoke the doctrine laid down in the case at bar
(5) What are the exceptions to the foregoing extraordinary responsibility of the common
carrier
FACTS:
Plaintiff (MA. PAULA SAN AGUSTIN) was a passenger on defendant airline
(SABENA BELGIAN WORLD AIRLINES) from Casablanca to Brussels, Belgium on her
way back to Manila. Her luggage with valuables was left on board Flight SN 284. Upon
arrival she submitted documents to support her baggage claim but luggage remained
to be missing. A formal complaint was filed by the plaintiff with the manger of the
airline.
Plaintiff was furnished copies of telexes with an information that the Brussel’s
Office of defendant found the luggage and that they have broken the locks for
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identification (Exhibit ‘B’). Plaintiff was assured by the defendant that it has notified
its Manila Office that the luggage will be shipped to Manila on October 27, 1987. But
unfortunately plaintiff was informed that the luggage was lost for the second time. At
the time of fiing of complaint the luggage is still missing.
Plaintiff demanded from the defendant the money value of the luggage and its
contents or its exchange value, but defendant refused to settle the claim, asserting
that the loss of the luggage was due to plaintiff’s sole if not contributory negligence;
non-declaration of valuable items in her checked-in luggage at the flight counter when
she checked in.
Trial court favored the plaintiff and ordered the Sabena Belgian World Airlines
to pay private respondent Ma. Paula San Agustin.
RULINGS:
1. Fault or negligence consists in the omission of that diligence which is
demanded by the nature of an obligation and corresponds with the circumstances of
the person, of the time, and of the place. When the source of an obligation is derived
from a contract, the mere breach or non-fulfillment of the prestation gives rise to the
presumption of fault on the part of the obligor. This rule is not different in the case of
common carriers in the carriage of goods which, indeed, are bound to observe not just
the due diligence of a good father of a family but that of “extraordinary” care in the
vigilance over the goods.
It remained undisputed that private respondent’s luggage was lost while it was
in the custody of petitioner. When it was found missing the respondent, promptly
processed all the necessary document but to no avail. The “loss of said baggage not
only once by twice,” said the appellate court, “underscores the wanton negligence and
lack of care” on the part of the carrier.
Under domestic law and jurisprudence (the Philippines being the country of
destination), the attendance of gross negligence (given the equivalent of fraud or bad
faith) holds the common carrier liable for all damages which can be reasonably
attributed, although unforeseen, to the non-performance of the obligation, including
moral and exemplary damages.
2. YES.
Fault or negligence consists in the omission of that diligence which is
presumption of fault on the part of the obligor. This rule is not different in the case of
the due diligence of a good father of a family but that of “extraordinary” care in the
vigilance over the goods.
The only exceptions to the foregoing extraordinary responsibility of the common
carrier is when the loss, destruction, or deterioration of the goods is due to any of the
following causes:
(5) Order or act of competent public authority.’
Not one of the above excepted causes obtains in this case.
3. NO.
The airline cannot invoke the tort doctrine of proximate cause because the
private respondent’s luggage was lost while it was in the custody of petitioner. The
“loss of said baggage not only once by twice,” said the appellate court, “underscores
the wanton negligence and lack of care” on the part of the carrier. The above findings
foreclose whatever rights petitioner might have had to the possible limitation of
liabilities enjoyed by international air carriers under the Warsaw Convention.
4. Fault or negligence consists in the omission of that diligence which is

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presumption of fault on the part of the obligor. This rule is no different in the case of
the due diligence of a good father of a family but that of "extraordinary" care in the
vigilance over the goods. The appellate court has aptly observed:
. . . Art. 1733 of the [Civil] Code provides that from the very nature of their
business and by reasons of public policy, common carriers are bound to observe
extraordinary diligence in the vigilance over the goods transported by them. This
extraordinary responsibility, according to Art. 1736, lasts from the time the goods are
unconditionally placed in the possession of and received by the carrier until they are
delivered actually or constructively to the consignee or person who has the right to
receive them. Art. 1737 states that the common carrier's duty to observe extraordinary
diligence in the vigilance over the goods transported by them remains in full force and
effect even when they are temporarily unloaded or stored in transit. And Art. 1735
establishes the presumption that if the goods are lost, destroyed or deteriorated,
common carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they had observed extraordinary diligence as required in Article
1733.
5. The only exceptions to the foregoing extraordinary responsibility of the common

carrier is when the loss, destruction, or deterioration of the goods is due to any of the
following causes:
114.
TIU vs. ARRIESGADO
G.R. No. 138060, September 1, 2004
ISSUES:
(1) Whether or not petitioner Las Pinas was negligent in driving the III-fate bus
(2) Whether or not petitioner Tiu failed to overcome the presumption of negligence against
him as one engaged in the business of common carriage
(3) Whether or not respondents Pedrano and Condor were likewise negligent
(4) Whether or not the doctrine of last clear chance is applicable in the case at bar
(5) What are the liabilities of PPSII as insurer?
FACTS:
At about 10:00 p.m. of March 15, 1987, the cargo truck marked "Condor Hollow
Blocks and General Merchandise" bearing plate number GBP-675 was loaded with
firewood in Bogo, Cebu and left for Cebu City. Upon reaching Sitio Aggies, Poblacion,
Compostela, Cebu, just as the truck passed over a bridge, one of its rear tires
exploded. The driver, Sergio Pedrano, then parked along the right side of the national
highway and removed the damaged tire to have it vulcanized at a nearby shop, about
700 meters away. Pedrano left his helper, Jose Mitante, Jr. to keep watch over the
stalled vehicle, and instructed the latter to place a spare tire six fathoms away behind
the stalled truck to serve as a warning for oncoming vehicles. The trucks tail lights
were also left on. It was about 12:00 a.m., March 16, 1987.
At about 4:45 a.m., D Rough Riders passenger bus with plate number PBP-724
driven by Virgilio Te Laspiñas was cruising along the national highway of Sitio Aggies,
Poblacion, Compostela, Cebu. The passenger bus was also bound for Cebu City, and
had come from Maya, Daanbantayan, Cebu. Among its passengers were the Spouses
Pedro A. Arriesgado and Felisa Pepito Arriesgado, who were seated at the right side of
the bus, about three (3) or four (4) places from the front seat.
As the bus was approaching the bridge, Laspiñas saw the stalled truck, which
was then about 25 meters away. He applied the breaks and tried to swerve to the left
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to avoid hitting the truck. But it was too late; the bus rammed into the trucks left rear.
The impact damaged the right side of the bus and left several passengers injured.
Pedro Arriesgado lost consciousness and suffered a fracture in his right colles. His
wife, Felisa, was brought to the Danao City Hospital. She was later transferred to the
Southern Island Medical Center where she died shortly thereafter.
Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of
carriage, damages and attorneys fees before the Regional Trial Court of Cebu City,
Branch 20, against the petitioners, D Rough Riders bus operator William Tiu and his
driver, Virgilio Te Laspiñas on May 27, 1987. The respondent alleged that the
passenger bus in question was cruising at a fast and high speed along the national
road, and that petitioner Laspiñas did not take precautionary measures to avoid the
accident.
The petitioners, for their part, filed a Third-Party Complaint against the
following: respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII), petitioner
Tiu’s insurer; respondent Benjamin Condor, the registered owner of the cargo truck;
and respondent Sergio Pedrano, the driver of the truck. They alleged that petitioner
Laspiñas was negotiating the uphill climb along the national highway of Sitio Aggies,
Poblacion, Compostela, in a moderate and normal speed. It was further alleged that
the truck was parked in a slanted manner, its rear portion almost in the middle of the
highway, and that no early warning device was displayed. Petitioner Laspiñas
promptly applied the brakes and swerved to the left to avoid hitting the truck head-on,
but despite his efforts to avoid damage to property and physical injuries on the
passengers, the right side portion of the bus hit the cargo truck’s left rear.
RULINGS:
1. YES.
Indeed, petitioner Laspiñas' negligence in driving the bus is apparent in the
records. By his own admission, he had just passed a bridge and was traversing the
highway of Compostela, Cebu at a speed of 40 to 50 kilometers per hour before the
collision occurred. The maximum speed allowed by law on a bridge is only 30
kilometers per hour.29 And, as correctly pointed out by the trial court, petitioner
Laspiñas also violated Section 35 of the Land Transportation and Traffic Code,
Republic Act No. 4136, as amended:
Sec. 35. Restriction as to speed. - (a) Any person driving a motor vehicle on a
highway shall drive the same at a careful and prudent speed, not greater nor less than
is reasonable and proper, having due regard for the traffic, the width of the highway,
and or any other condition then and there existing; and no person shall drive any
motor vehicle upon a highway at such speed as to endanger the life, limb and property
of any person, nor at a speed greater than will permit him to bring the vehicle to a stop
within the assured clear distance ahead.30
Under Article 2185 of the Civil Code, a person driving a vehicle is presumed
negligent if at the time of the mishap, he was violating any traffic regulation.
2. NO.
Respondent Arriesgado and his deceased wife contracted with petitioner Tiu, as
owner and operator of D' Rough Riders bus service, for transportation from Maya,
Daanbantayan, Cebu, to Cebu City for the price of P18.00.35 It is undisputed that the
respondent and his wife were not safely transported to the destination agreed upon. In
actions for breach of contract, only the existence of such contract, and the fact that
the obligor, in this case the common carrier, failed to transport his passenger safely to
his destination are the matters that need to be proved.36 This is because under the
said contract of carriage, the petitioners assumed the express obligation to transport
the respondent and his wife to their destination safely and to observe extraordinary
diligence with due regard for all circumstances.37 Any injury suffered by the
passengers in the course thereof is immediately attributable to the negligence of the
carrier.38 Upon the happening of the accident, the presumption of negligence at once
arises, and it becomes the duty of a common carrier to prove that he observed
extraordinary diligence in the care of his passengers.39 It must be stressed that in
requiring the highest possible degree of diligence from common carriers and in
creating a presumption of negligence against them, the law compels them to curb the
recklessness of their drivers.40
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While evidence may be submitted to overcome such presumption of negligence,

it must be shown that the carrier observed the required extraordinary diligence, which
means that the carrier must show the utmost diligence of very cautious persons as far
as human care and foresight can provide, or that the accident was caused by
fortuitous event.
As correctly found by the trial court, petitioner Tiu failed to conclusively rebut
such presumption. The negligence of petitioner Laspiñas as driver of the passenger
bus is, thus, binding against petitioner Tiu, as the owner of the passenger bus
engaged as a common carrier.
3. NO.
Both the trial and the appellate courts failed to consider that respondent
Pedrano was also negligent in leaving the truck parked askew without any warning
lights or reflector devices to alert oncoming vehicles, and that such failure created the
presumption of negligence on the part of his employer, respondent Condor, in
supervising his employees properly and adequately.
As ruled in Poblete v. Fabros:
It is such a firmly established principle, as to have virtually formed part of the
law itself, that the negligence of the employee gives rise to the presumption of
negligence on the part of the employer. This is the presumed negligence in the
selection and supervision of employee. The theory of presumed negligence, in contrast
with the American doctrine of respondeat superior, where the negligence of the
employee is conclusively presumed to be the negligence of the employer, is clearly
deducible from the last paragraph of Article 2180 of the Civil Code which provides that
the responsibility therein mentioned shall cease if the employers prove that they
observed all the diligence of a good father of a family to prevent damages. '48
The petitioners were correct in invoking respondent Pedrano's failure to observe
Article IV, Section 34(g) of the Rep. Act No. 4136, which provides:
(g) Lights when parked or disabled. - Appropriate parking lights or flares visible
one hundred meters away shall be displayed at a corner of the vehicle whenever such
vehicle is parked on highways or in places that are not well-lighted or is placed in
such manner as to endanger passing traffic.
The manner in which the truck was parked clearly endangered oncoming traffic
on both sides, considering that the tire blowout which stalled the truck in the first
place occurred in the wee hours of the morning. The Court can only now surmise that
the unfortunate incident could have been averted had respondent Condor, the owner
of the truck, equipped the said vehicle with lights, flares, or, at the very least, an early
warning device.49 Hence, we cannot subscribe to respondents Condor and Pedrano's
claim that they should be absolved from liability because, as found by the trial and
appellate courts, the proximate cause of the collision was the fast speed at which
petitioner Laspiñas drove the bus. To accept this proposition would be to come too
close to wiping out the fundamental principle of law that a man must respond for the
foreseeable consequences of his own negligent act or omission. Indeed, our law on
quasi-delicts seeks to reduce the risks and burdens of living in society and to allocate
them among its members. To accept this proposition would be to weaken the very
bonds of society.
4. NO. The doctrine of last clear chance is inapplicable in the case at bar.
The doctrine of last clear chance applies only in a suit between the owners and
drivers of two colliding vehicles. It does not arise where a passenger demands
responsibility from the carrier to enforce its contractual obligations, for it would be
inequitable to exempt the negligent driver and its owner on the ground that the other
driver was likewise guilty of negligence. The common law notion of last clear chance
permitted courts to grant recovery to a plaintiff who has 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 of 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.
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5. Obviously, the insurer could be held liable only up to the extent of what was
provided for by the contract of insurance, in accordance with the Compulsory Motor
Vehicle Liabilities Insurance (CMVLI) law.
At the time of the incident, the schedule of indemnities for death and bodily
injuries, professional fees and other charges payable under a CMVLI coverage was
provided for under the Insurance Memorandum Circular (IMC) No. 5-78 which was
approved. As therein provided, the maximum indemnity for death was twelve
thousand (P12,000.00) pesos per victim. The schedules for medical expenses were also
provided by said IMC, specifically in paragraphs (C) to (G).
115.
VILLANUEVA vs. DOMINGO
G.R. NO. 144274, September 20, 2004
ISSUES:
(1) Whether or not the registered owner of a vehicle may be allowed to prove in court that
he is no longer the owner of the same so as to avoid liability in an accident involving
the vehicle
(2) What is the purpose of said non-allowance?
(3) What is the remedy of the registered owner if in reality the ownership of the vehicle
has indeed been transferred to someone else with respect to the amount he paid to an
injured/damaged plaintiff
(4) Whether or not the defense, that the driver who caused the accident is not an
authorized driver, is meritorious
(5) What is the main purpose of vehicle registration?
FACTS:
Petitioner pointed out that he should have been allowed to prove that he has
already transferred the ownership of the vehicle caught in the accident to escape
responsibility. The Court explained the law’s rationale in not allowing such attempt to
prove transfer of ownership in a case such as this.
The court explained that a registered owner, though liable, has recourse as
against the person to whom ownership has been transferred to if this fact is true.
Petitioner, in far-fetched attempt to escape liability argued that since the driver
who caused the accident was not an authorized driver, he as the registered owner of
the vehicle cannot be held liable for the accident.
The court went on to explain the rationale of the law on the importance of
vehicle registration.
RULINGS:
1. NO.
The Supreme Court held that, if this were allowed, it would be very difficult to
pinpoint who is really the owner against who claims should be directed at.
2. The purpose of the said non allowance, as held by the Supreme Court, is to not
make illusory the objective of the law which is to make easier for victims who to file
their claim against.
3. The Supreme Court held that the remedy of the registered owner in case he
really transferred the vehicle to another person who is otherwise liable in reality of the
accident, is against the latter
4. NO.
The Supreme Court held that this would, again, if given countenance, would
make the purpose of the law, which is the fastest and most convenient administration
of the justice illusory.
5. The main purpose of vehicle registration is the easy identification of the owner
who can be held liable for any accident, damages, or injury caused by the vehicle.
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Easy identification prevents inconvenience and prejudice to a third party ijured

by one who is unknown or unidentified.
116.
PCI LEASING AND FINANCE, INC., vs. UCPB GENERAL INSURANCE CO., INC.
G.R. No. 162267, July 4, 2008
ISSUES:
(1) Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-delict
may be held liable, jointly and severally, with the driver thereof, for the damages
caused to third parties.
(2) Whether petitioner, as a financing company, is absolved from liability by the
enactment of Republic Act (R.A.) No. 8556, or the Financing Company Act of 1998.
(4) What are the remedies given to the petitioner?
FACTS:
A Mitsubishi Lancer car owned by UCPB, insured with UCPB General Insurance
Co., was traversing the Laurel Highway, Barangay Balintawak, LipaCity. It was driven
by Flaviano Isaac with Conrado Geronimo (Asst. Manager of said bank), was hit and
bumped by an 18-wheeler Fuso Tanker Truck, owned by defendants-appellants PCI
Leasing & Finance, Inc. allegedly leased to and operated by defendant-appellant
Superior Gas & Equitable Co., Inc. (SUGECO) and driven by its employee, defendant
appellant Renato Gonzaga.
The impact caused heavy damage to the Mitsubishi Lancer car resulting in an
explosion of the rear part of the car. The driver and passenger suffered physical
injuries. However, the driver defendant-appellant Gonzaga continued on its way to its
destination and did not bother to bring his victims to the hospital. As the 18-wheeler
truck is registered under the name of PCI Leasing, repeated demands were made by
plaintiff-appellee for the payment of the aforesaid amounts.
However, no payment was made. PCI Leasing and Finance, Inc., (petitioner)
interposed the defense that it could not be held liable for the collision, since the driver,
Gonzaga, was not its employee, but that of its co-defendant SUGECO. In fact, it was
SUGECO, that was the actual operator of the truck, pursuant to a Contract of Lease
signed by petitioner and SUGECO.
Petitioner, however, admitted that it was the owner of the truck in question.
RTC rendered judgment in favour of UCPB General Insurance and ordered PCI Leasing
and Gonzaga, to pay jointly and severally the former. CA affirmed with the lower
court’s decision.
RULINGS:
1. YES.
The principle of holding the registered owner of a vehicle liable for quasi-delicts
resulting from its use is well-established in jurisprudence. As explained in the case
ofErezo v. Jepte, thus:
Registration is required not to make said registration the operative act by which
ownership in vehicles is transferred, as in land registration cases, because the
administrative proceeding of registration does not bear any essential relation to the
contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil.
888), but to permit the use and operation of the vehicle upon any public highway
(section 5 [a], Act No. 3992, as amended.)
The main aim of motor vehicle registration is to identify the owner so that if any
accident happens, or that any damage or injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed on a definite individual, the registered
owner. Instances are numerous where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles without positive identification of
the owner or drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
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registration is primarily ordained, in the interest of the determination of persons

responsible for damages or injuries caused on public highways.
2. NO.
The new law, R.A. No. 8556, notwithstanding developments in foreign
jurisdictions, do not supersede or repeal the law on compulsory motor vehicle
registration. No part of the law expressly repeals Section 5(a) and (e) of R.A. No. 4136,
as amended, otherwise known as the Land Transportation and Traffic Code.
Thus, the rule remains the same: a sale, lease, or financial lease, for that
matter, that is not registered with the Land Transportation Office, still does not bind
third persons who are aggrieved in tortious incidents, for the latter need only to rely
on the public registration of a motor vehicle as conclusive evidence of ownership. A
lease such as the one involved in the instant case is an encumbrance in contemplation
of law, which needs to be registered in order for it to bind third parties.
Under this policy, the evil sought to be avoided is the exacerbation of the
suffering of victims of tragic vehicular accidents in not being able to identify a guilty
party. A contrary ruling will not serve the ends of justice. The failure to register a
lease, sale, transfer or encumbrance, should not benefit the parties responsible, to the
prejudice of innocent victims
3. The rule remains the same: a sale, lease, or financial lease, for that matter, that
is not registered with the Land Transportation Office, still does not bind third persons
who are aggrieved in tortious incidents, for the latter need only to rely on the public
registration of a motor vehicle as conclusive evidence of ownership.30 A lease such as
the one involved in the instant case is an encumbrance in contemplation of law, which
needs to be registered in order for it to bind third parties.31 Under this policy, the evil
sought to be avoided is the exacerbation of the suffering of victims of tragic vehicular
accidents in not being able to identify a guilty party. A contrary ruling will not serve
the ends of justice. The failure to register a lease, sale, transfer or encumbrance,
should not benefit the parties responsible, to the prejudice of innocent victims.
The non-registration of the lease contract between petitioner and its lessee
precludes the former from enjoying the benefits under Section 12 of R.A. No. 8556.
4. This ruling may appear too severe and unpalatable to leasing and financing
companies, but the Court believes that petitioner and other companies so situated are
not entirely left without recourse. They may resort to third-party complaints against
their lessees or whoever are the actual operators of their vehicles. In the case at bar,
there is, in fact, a provision in the lease contract between petitioner and SUGECO to
the effect that the latter shall indemnify and hold the former free and harmless from
any "liabilities, damages, suits, claims or judgments" arising from the latter's use of
the motor vehicle.32 Whether petitioner would act against SUGECO based on this
provision is its own option.
The burden of registration of the lease contract is minuscule compared to the
chaos that may result if registered owners or operators of vehicles are freed from such
responsibility. Petitioner pays the price for its failure to obey the law on compulsory
registration of motor vehicles for registration is a pre-requisite for any person to even
enjoy the privilege of putting a vehicle on public roads.
5. Principle is that the registered owner of a motor vehicle is primarily and directly
responsible for the consequences of its operation, including the negligence of the
driver, with respect to the public and all third persons.
In contemplation of law, the registered owner of a motor vehicle is the employer
of its driver, with the actual operator and employer, such as a lessee, being considered
as merely the owner's agent.18 This being the case, even if a sale has been executed
before a tortious incident, the sale, if unregistered, has no effect as to the right of the
public and third persons to recover from the registered owner. The public has the right
to conclusively presume that the registered owner is the real owner, and may sue
accordingly.
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117.
MERCADO AG. CADIENTE vs. BITHUEL MACAS
G.R. NO. 161946, November 14, 2008
ISSUES:
(1) Was there - contributory negligence on the part of the injured party
(2) Whether the petitioner and third-party defendant jalipa are jointly and severally liable
to the victim
(3) What is the concept of contributory negligence as defined in the case at bar?
(5) What is the policy behind vehicle registration
FACTS:
Eyewitness Rosalinda Palero testified that on July 19, 1994, at about 4:00 p.m.,
at the intersection of Buhangin and San Vicente Streets in Davao City, 15-year old
high school student Bithuel Macas, herein respondent, was standing on the shoulder
of the road. She was about two and a half meters away from the respondent when he
was bumped and run over by a Ford Fiera, driven by Chona C. Cimafranca. Rosalinda
and another unidentified person immediately came to the respondent's rescue and told
Cimafranca to take the victim to the hospital. Cimafranca rushed the respondent to
the Davao Medical Center.
Dr. Hilario Diaz, the orthopedic surgeon who attended to the respondent,
testified that the respondent suffered severe muscular and major vessel injuries, as
well as open bone fractures in both thighs and other parts of his legs. In order to save
his life, the surgeon had to amputate both legs up to the groins.
Cimafranca had since absconded and disappeared. Records showed that the
Ford Fiera was registered in the name of herein petitioner, Atty. Medardo Ag. Cadiente.
However, Cadiente claimed that when the accident happened, he was no longer the
owner of the Ford Fiera. He alleged that he sold the vehicle to Engr. Rogelio Jalipa on
March 28, 1994,5 and turned over the Certificate of Registration and Official Receipt
to Jalipa, with the understanding that the latter would be the one to cause the
transfer of the registration.
The victim's father, Samuel Macas, filed a complaint6 for torts and damages
against Cimafranca and Cadiente before the RTC of Davao City, Branch 10. Cadiente
later filed a third-party complaint7 against Jalipa.
In answer, Jalipa claimed that he was no longer the owner of the Ford Fiera at
the time of the accident. He alleged that he sold the vehicle to Abraham Abubakar on
June 20, 1994.8 He thus filed a fourth-party complaint9 against Abubakar.
RULINGS:
1. YES.
In this case, records show that when the accident happened, the victim was
standing on the shoulder, which was the uncemented portion of the highway. As noted
by the trial court, the shoulder was intended for pedestrian use alone. Only stationary
vehicles, such as those loading or unloading passengers may use the shoulder.
Running vehicles are not supposed to pass through the said uncemented portion of
the highway. However, the Ford Fiera in this case, without so much as slowing down,
took off from the cemented part of the highway, inexplicably swerved to the shoulder,
and recklessly bumped and ran over an innocent victim. The victim was just where he
should be when the unfortunate event transpired.
2. YES.
That the registered owner of any vehicle, even if he had already sold it to
someone else, is primarily responsible to the public for whatever damage or injury the
vehicle may cause. We explained,
'Were a registered owner allowed to evade responsibility by proving who the
supposed transferee or owner is, it would be easy for him, by collusion with others or
otherwise, to escape said responsibility and transfer the same to an indefinite person,
or to one who possesses no property with which to respond financially for the damage
or injury done. A victim of recklessness on the public highways is usually without
means to discover or identify the person actually causing the injury or damage. He has
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Alexandria R.
no means other than by a recourse to the registration in the Motor Vehicles Office to
determine who is the owner. The protection that the law aims to extend to him would
become illusory were the registered owner given the opportunity to escape liability by
disproving his ownership.
3. The underlying precept on contributory negligence is that a plaintiff who is
partly responsible for his own injury should not be entitled to recover damages in full,
but must proportionately bear the consequences of his own negligence. The defendant
is thus held liable only for the damages actually caused by his negligence.
4. Article 2179 of the Civil Code provides:

When the plaintiff's own negligence was the immediate and proximate cause of
his injury, he cannot recover damages. But if his negligence was only contributory, the
immediate and proximate cause of the injury being the defendant's lack of due care,
the plaintiff may recover damages, but the courts shall mitigate the damages to be
awarded.
5. In the case of Villanueva v. Domingo,20 we said that the policy behind vehicle
registration is the easy identification of the owner who can be held responsible in case
of accident, damage or injury caused by the vehicle. This is so as not to inconvenience
or prejudice a third party injured by one whose identity cannot be secured.
118.
MARIANO C. MENDOZA AND ELVIRA LIM vs. SPOUSES LEONORA AND GABRIEL
GOMEZ
G.R. No. 160110, June 18, 2014
ISSUES:
(1) Whether or not Mendoza’s negligence was duly proven
(3) Who may be held liable?
(4) What is the purpose of vehicle registration?
(5) Whether or not the award for damages is proper
FACTS:
An Isuzu Elf truck (Isuzu truck) owned by respondent Leonora J. Gomez
(Leonora)and driven by Antenojenes Perez (Perez), was hit by a Mayamy Transportation
bus (Mayamy bus) registered under the name of petitioner Elvira Lim (Lim) and driven
by petitioner Mariano C. Mendoza (Mendoza).
Owing to the incident, an Information for reckless imprudence resulting in
damage to property and multiple physical injuries was filed against Mendoza.9
Mendoza, however, eluded arrest, thus, respondents filed a separate complaint for
damages against Mendoza and Lim, seeking actual damages, compensation for lost
income, moral damages, exemplary damages, attorney’s fees and costs of the suit.
According to PO1 Melchor F. Rosales (PO1 Rosales), investigating officer of the
case, at around 5:30 a.m., the Isuzu truck, coming from Katipunan Road and heading
towards E. Rodriguez, Sr. Avenue, was travelling along the downward portion of Boni
Serrano Avenue when, upon reaching the corner of Riviera Street, fronting St. Ignatius
Village, its left front portion was hit by the Mayamy bus.11 According to PO1 Rosales,
the Mayamy bus, while traversing the opposite lane, intruded on the lane occupied by
the Isuzu truck.
PO1 Rosales also reported that Mendoza tried to escape by speeding away, but
he was apprehended in Katipunan Road corner C. P. Garcia Avenue by one Traffic
Enforcer Galante and a security guard of St. Ignatius Village.
As a result of the incident, Perez, as well as the helpers on board the Isuzu
truck, namely Melchor V. Anla (Anla), Romeo J. Banca (Banca), and Jimmy Repisada
(Repisada), sustained injuries necessitating medical treatment amounting to
P11,267.35, which amount was shouldered by respondents. Moreover, the Isuzu truck
sustained extensive damages on its cowl, chassis, lights and steering wheel,
amounting to P142,757.40.14
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RULINGS:
1. YES.
Mendoza was negligent in driving the subject Mayamy bus, as demonstrated by
the fact that, at the time of the collision, the bus intruded on the lane intended for the
Isuzu truck. Having encroached on the opposite lane, Mendoza was clearly in violation
of traffic laws. Article 2185 of the Civil Code provides that unless there is proof to the
contrary, it is presumed that a person driving a motor vehicle has been negligent if at
the time of the mishap, he was violating any traffic regulation. In the case at bar,
Mendoza’s violation of traffic laws was the proximate cause of the harm.
Proximate cause is defined as that cause, which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces the injury, and
without which the result would not have occurred. And more comprehensively, the
proximate legal cause is that acting first and producing the injury, either immediately
or by setting other events in motion, all constituting a natural and continuous chain of
events, each having a close causal connection with its immediate predecessor, the
final event in the chain immediately effecting the injury as a natural and probable
result of the cause which first acted, under such circumstances that the person
responsible for the first event should, as an ordinary prudent and intelligent person,
have reasonable ground to expect at the moment of his act or default that an injury to
some person might probably result therefrom
2. Under such doctrine, a person who has not committed the act or omission
which caused damage or injury to another may nevertheless be held civilly liable to
the latter either directly or subsidiarily under certain circumstances.25 In our
jurisdiction, vicarious liability or imputed negligence is embodied in Article 2180 of the
Civil Code and the basis for damages in the action under said article is the direct and
primary negligence of the employer in the selection or supervision, or both, of his
employee
3. According to Manresa, liability for personal acts and omissions is founded on

that indisputable principle of justice recognized by all legislations that when a person
by his act or omission causes damage or prejudice to another, a juridical relation is
created by virtue of which the injured person acquires a right to be indemnified and
the person causing the damage is charged with the corresponding duty of repairing
the damage. The reason for this is found in the obvious truth that man should
subordinate his acts to the precepts of prudence and if he fails to observe them and
causes damage to another, he must repair the damage. His negligence having caused
the damage, Mendoza is certainly liable to repair said damage
In Filcar Transport Services v. Espinas, we held that the registered owner is
deemed the employer of the negligent driver, and is thus vicariously liable under
Article 2176, in relation to Article 2180, of the Civil Code. Citing Equitable Leasing
Corporation v. Suyom, the Court ruled that in so far as third persons are concerned,
the registered owner of the motor vehicle is the employer of the negligent driver, and
the actual employer is considered merely as an agent of such owner. Thus, whether
there is an employer-employee relationship between the registered owner and the
driver is irrelevant in determining the liability of the registered owner who the law
holds primarily and directly responsible for any accident, injury or death caused by
the operation of the vehicle in the streets and highways.
4. One of the principal purposes of motor vehicles legislation is identification of

the vehicle and of the operator, in case of accident; and another is that the knowledge
that means of detection are always available may act as a deterrent from lax
observance of the law and of the rules of conservative and safe operation. Whatever
purpose there may be in these statutes, it is subordinate at the last to the primary
purpose of rendering it certain that the violator of the law or of the rules of safety shall
not escape because of lack of means to discover him.” The purpose of the statute is
thwarted, and the displayed number becomes a “snare and delusion,” if courts will
entertain such defenses as that put forward by appellee in this case. No responsible
person or corporation could be held liable for the most outrageous acts of negligence,
if they should be allowed to place a “middleman” between them and the public, and
escape liability by the manner in which they recompense their servants.
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5. In the case at bar, although the award of exemplary damages is unliquidated in

the sense that petitioners cannot know for sure, before judgment, the exact amount
that they are required to pay to respondents, the award of actual or compensatory
damages, however, such as the truck repairs and medical expenses, is arguably
liquidated in that they can be measured against a reasonably certain standard.55
Moreover, justice would seem to require that the delay in paying for past losses which
can be made reasonably certain should be compensated through an award of interest.
119.
INTERNATIONAL CONTAINER TERMINAL SERVICES, INC., vs. PRUDENTIAL
GUARANTEE & ASSURANCE CO., INC.,
G.R. No. 134514. December 8, 1999
ISSUES:
(1) Whether or not ICTSI was negligent in its duty to exercise due diligence over the
shipment?
(2) Whether or not the consignee failed to file a formal claim within the period stated on
the dorsal side of the arrastre and wharfage receipt
(4) What is the rule with regards to the Arrastre Operator?
(5) What is the relationship between the Arrastre Operator and the consignee?
FACTS:
Mother vessel Tao He loaded and received on board in San Francisco,
California, a shipment of five lots of canned foodstuff complete and in good order and
condition for transport to Manila in favor of Duel Food Enterprises (consignee) under
“shipper’s load and count”.
The shipment arrived at the port of Manila and discharged by the vessel MS Wei
He in favor of ICTSI for safekeeping. The brokerage withdrew the shipment and
delivered the same to the consignee. An inspection there revealed that 161 cartoons
were missing valued at P85,984.40. Consignee learned of such shortage on June 4,
1990. It filed claim for loss on October 2, 1990. Claim for indemnification of the loss
having been denied by ICTSI and the brokerage, consignee sought payment from
Prudential (insurer) under the marine cargo policy.
The appellate court found ICTSI negligent in its duty to exercise due diligence
over the shipment. It also ruled that the filing of a claim depended on the issuance of a
certificate of loss by ICTSI based on the liability clause printed on the back of the
arrastre and wharfage receipt. Since ICTSI did not issue such a certificate despite
being informed of the shortage, the 15-day period given to the consignee for filing a
formal claim never began. Prudential, therefore can hold the ICTSI liable for the
shortage.
RULINGS:
1. NO.
The consigned goods were shipped under “shipper’s load and count”. 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. Protection against pilferage
of the shipment was the consignee’s lookout. 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. The arrastre operator was expected to deliver to the consignee only the
container received from the carrier.
The legal relationship between the arrastre and consignee is akin to that
between a warehouseman and a depositor. As to both the nature of the functions and
the place of their performance, arrastre operator’s services are clearly not maritime in
character.
2. YES.
Page 222
Thiam, Patrice
Alexandria R.
In order to hold the arrastre operator liable for lost or damaged goods, the
claimant should file with the operator a claim for the value of said goods “within the
15-day period from the date of discharge of the last package from the carrying vessel.”
The filing within the period is in the nature of a prescriptive period for bringing an
action and is a condition precedent to holding the arrastre operator liable. In an
endeavor to promote fairness, equity and justness, however, a long line of cases has
held that the 15-day period for filing claims should be counted from the date the
consignee learns of the loss, damage or misdelivery of goods.
In the case at bar, the consignee had all the time to make a formal claim from
the day it discovered the shortage in the shipment, which was June 4, 1990, as shown
by the records. By the time the claim for the loss was filed on October 2, 1990, four
months had already elapsed from the date of delivery. In any event, within 15 days
from the time the loss was discovered, the consignee could have filed a provisional
claim, which would have constituted substantial compliance with the rule. Its failure
to do so relieved the arrastre operator of any liability for the non-delivery of the goods.
The rationale between the time limit is that, without it, a consignee could too easily
concoct or fabricate claims and deprive the arrastre operator of the best opportunity to
prove immediately their veracity.
3. The lack of a bad order survey does not toll the prescriptive period for filing a
claim for loss, because the consignee can always file a provisional claim within 15
days from the time it discovers the loss or damage. Such a claim would place the
arrastre operator on notice that the shipment sustained damage or loss, even if the
exact amount thereof could not be specified at the moment. In this manner, the
arrastre operator can immediately verify its culpability and liability. A provisional
claim seasonably filed is sufficient compliance with the liability clause.
4. When cargo is placed on a vessel at the "shipper’s load and count," the arrastre
operator is required only to deliver to the consignee the container van received from
the shipper, not to verify or to compare the contents thereof with those declared by the
shipper. A claim for reimbursement for the loss, damage or misdelivery of goods must
be filed within 15 days from the date the consignee learns of such problem(s).
5. The legal relationship between an arrastre operator and a consignee is akin to

that between a warehouseman and a depositor. As to both the nature of the functions
and the place of their performance, an arrastre operator’s services are clearly not
maritime in character.
In a claim for loss filed by a consignee, the burden of proof to show compliance
with the obligation to deliver the goods to the appropriate party devolves upon the
arrastre operator. Since the safekeeping of the goods rests within its knowledge, it
must prove that the losses were not due to its negligence or that of its employees.
120.
WESTWIND SHIPPING CORPORATION vs. UCPB GENERAL INSURANCE, CO.
G.R. No. 200289, November 25, 2013
ISSUES:
(1) Whether or not Orient Freight International, Inc. is a common carrier
(2) Whether or not Orient Freight International, Inc. is liable?
(3) What is the function of an Arrastre Operator?
(4) What is the legal relationship between an Arrastre Operator and a Carrier?
(5) What are the liabilities of an Arrastre Operator?
FACTS:
Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 metal
containers/skids of tin-free steel for delivery to the consignee, San Miguel Corporation
(SMC). The shipment, covered by Bill of Lading No. KBMA-1074,4 was loaded and
received clean on board M/V Golden Harvest Voyage No. 66, a vessel owned and
operated by Westwind Shipping Corporation (Westwind).
Page 223
Thiam, Patrice
Alexandria R.
SMC insured the cargoes against all risks with UCPB General Insurance Co.,
Inc. (UCPB) for US Dollars: One Hundred Eighty-Four Thousand Seven Hundred
Ninety-Eight and Ninety-Seven Centavos (US$184,798.97), which, at the time, was
equivalent to Philippine Pesos: Six Million Two Hundred Nine Thousand Two Hundred
Forty-Five and Twenty-Eight Centavos (P6,209,245.28).
The shipment arrived in Manila, Philippines and was discharged in the custody
of the arrastre operator, Asian Terminals, Inc. (ATI), formerly Marina Port Services,
Inc.5 During the unloading operation, however, six containers/skids worth Philippine
Pesos: One Hundred Seventeen Thousand Ninety-Three and Twelve Centavos
(P117,093.12) sustained dents and punctures from the forklift used by the stevedores
of Ocean Terminal Services, Inc. (OTSI) in centering and shuttling the
containers/skids. As a consequence, the local ship agent of the vessel, Baliwag
Shipping Agency, Inc., issued two Bad Order Cargo.
Orient Freight International, Inc. (OFII), the customs broker of SMC, withdrew
from ATI the 197 containers/skids, including the six in damaged condition, and
delivered the same at SMC’s warehouse in Calamba, Laguna through J.B. Limcaoco
Trucking (JBL). It was discovered upon discharge that additional nine
containers/skids valued at Philippine Pesos: One Hundred Seventy-Five Thousand Six
Hundred Thirty-Nine and Sixty-Eight Centavos (P175,639.68) were also damaged due
to the forklift operations; thus, making the total number of 15 containers/skids in bad
order.
RULINGS:
1. YES.
The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping,
Inc.12 applies, as it settled the query on which between a common carrier and an
arrastre operator should be responsible for damage or loss incurred by the shipment
during its unloading.
Common carriers, from the nature of their business and for reasons of public
transported by them. Subject to certain exceptions enumerated under Article 1734 of
the Civil Code, common carriers are responsible for the loss, destruction, or
receive them.
the discharging wharf at the port of unloading, unless agreed otherwise. In Standard
Oil Co. of New York v. Lopez Castelo, the Court interpreted the ship captain’s liability
as ultimately that of the shipowner by regarding the captain as the representative of
the shipowner.
Lastly, Section 2 of the COGSA provides that under every contract of carriage of
goods by sea, the carrier in relation to the loading, handling, stowage, carriage,
custody, care, and discharge of such goods, shall be subject to the responsibilities and
liabilities and entitled to the rights and immunities set forth in the Act. Section 3 (2)
thereof then states that among the carriers’ responsibilities are to properly and
carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
2. The functions of an arrastre operator involve the handling of cargo deposited on

the wharf or between the establishment of the consignee or shipper and the ship’s
tackle. Being the custodian of the goods discharged from a vessel, an arrastre
operator’s duty is to take good care of the goods and to turn them over to the party
entitled to their possession.
Handling cargo is mainly the arrastre operator’s principal work so its
to prevent losses and damage to shipments under its custody.
Page 224
Thiam, Patrice
Alexandria R.
3. In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the Court
explained the relationship and responsibility of an arrastre operator to a consignee of
a cargo, to quote:
“The legal relationship between the consignee and the arrastre operator is akin
to that of a depositor and warehouseman. The relationship between the consignee and
the common carrier is similar to that of the consignee and the arrastre operator. Since
it is the duty of the ARRASTRE to take good care of the goods that are in its custody
and to deliver them in good condition to the consignee, such responsibility also
devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore
charged with and obligated to deliver the goods in good condition to the consignee.”
(Emphasis supplied) (Citations omitted)
4. The aforementioned Section 3 (2) of the COGSA states that among the carriers’
responsibilities are to properly and carefully load, care for and discharge the goods
carried. The bill of lading covering the subject shipment likewise stipulates that the
carrier’s liability for loss or damage to the goods ceases after its discharge from the
vessel. Article 619 of the Code of Commerce holds a ship captain liable for the cargo
from the time it is turned over to him until its delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V Farland,
it was ruled that like the duty of seaworthiness, the duty of care of the cargo is non-
delegable, and the carrier is accordingly responsible for the acts of the master, the
crew, the stevedore, and his other agents. It has also been held that it is ordinarily the
duty of the master of a vessel to unload the cargo and place it in readiness for delivery
to the consignee, and there is an implied obligation that this shall be accomplished
with sound machinery, competent hands, and in such manner that no unnecessary
injury shall be done thereto. And the fact that a consignee is required to furnish
persons to assist in unloading a shipment may not relieve the carrier of its duty as to
such unloading.
x x x It is settled in maritime law jurisprudence that cargoes while being
unloaded generally remain under the custody of the carrier x x x.
5. YES.
That OFII is a common carrier is buttressed by the testimony of its own witness,
Mr. Loveric Panganiban Cueto, that part of the services it offers to clients is cargo
forwarding, which includes the delivery of the shipment to the consignee. Thus, for
undertaking the transport of cargoes from ATI to SMC’s warehouse in Calamba,
Laguna, OFII is considered a common carrier. As long as a person or corporation holds
itself to the public for the purpose of transporting goods as a business, it is already
considered a common carrier regardless of whether it owns the vehicle to be used or
has to actually hire one.
As a common carrier, OFII is mandated to observe, under Article 1733 of the
Civil Code, extraordinary diligence in the vigilance over the goods it transports
according to the peculiar circumstances of each case. In the event that the goods are
lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted
negligently, unless it proves that it observed extraordinary diligence.
In the case at bar, it was established that, except for the six containers/skids
already damaged, OFII received the cargoes from ATI in good order and condition; and
that upon its delivery to SMC, additional nine containers/skids were found to be in
bad order, as noted in the Delivery Receipts issued by OFII and as indicated in the
Report of Cares Marine & Cargo Surveyors. Instead of merely excusing itself from
liability by putting the blame to ATI and SMC, it is incumbent upon OFII to prove that
it actively took care of the goods by exercising extraordinary diligence in the carriage
thereof. It failed to do so. Hence, its presumed negligence under Article 1735 of the
Civil Code remains unrebutted.
121.
ASIAN TERMINALS INC. vs. FIRST LEPANTO-TAISHO INSURANCE CORPORATION
G.R. No. 85964
Page 225
Thiam, Patrice
Alexandria R.
ISSUES:
(1) Whether or not the non-presentation of an insurance contract will bar a subrogee from
collecting reimbursement
(2) Whether or not ATI can invoke prescription
(3) Whether or not Lepanto is liable to pay damages
(4) Whether or not ATI failed to prove that it exercised due care and diligence while the
shipment was under its custody, control and possession as arrastre operator.
(5) How was subrogation defined in the case at bar?
FACTS:
A shipment of 3,000 bags of sodium tripolyphosphate arrived in Manila through
COSCO and was discharged into the possession and custody of ATI, a domestic
corporation engaged in arrastre business. The shipment remained for quite some time
at ATI’s storage area until it was withdrawn by broker, PROVEN, on for delivery to the
consignee. Upon receipt of the shipment, it was found out that the delivered goods
incurred shortages and spillage for a loss/damage valued at P166,772.41.
GASI sought recompense from COSCO, thru its Philippine agent SMITH BELL,
ATI and PROVEN but was denied. Hence, it pursued indemnification from the
shipment’s insurer, FIRST LEPANTO. As subrogee, FIRST LEPANTO demanded from
COSCO, its shipping agency in the Philippines, SMITH BELL, PROVEN and ATI,
reimbursement of the amount it paid to GASI. ATI and PROVEN denied liability for the
lost/damaged shipment and claimed that it exercised due diligence and care in
handling the same.
MTC dismissed the case. On appeal, the Regional Trial Court (RTC) reversed the
MTC’s findings. ATI sought recourse with the CA challenging the RTC’s finding
that FIRST LEPANTO was validly subrogated to the rights of GASI with respect to the
lost/damaged shipment.
ATI argued that there was no valid subrogation because FIRSTLEPANTO failed
to present a valid, existing and enforceable Marine Open Policy or insurance contract.
ATI reasoned that the Certificate of Insurance or Marine Cover Note submitted by
FIRST LEPANTO as evidence is not the same as an actual insurance contract.
RULINGS:
1. NO.
Non-presentation of the insurance contract is not fatal to FIRST LEPANTO’s
cause of action for reimbursement as subrogee. Subrogation is the substitution of one
person in the place of another with reference to a lawful claim or right, so that he who
is substituted succeeds to the rights of the other in relation to a debt or claim,
including its remedies or securities.
In the case at bar, the Supreme Court observed that it is conspicuous from the
records that ATI put in issue the submission of the insurance contract for the first
time before the CA. Despite opportunity to study FIRST LEPANTO’s complaint before
the MeTC, ATI failed to allege in its answer the necessity of the insurance contract.
Neither was the same considered during pre-trial as one of the decisive matters in the
case. Further, ATI never challenged the relevancy or materiality of the Certificate of
Insurance presented by FIRST LEPANTO as evidence during trial as proof of its right
to be subrogated in the consignee’s stead. Since it was not agreed during the pre-trial
proceedings that FIRST LEPANTO will have to prove its subrogation rights by
presenting a copy of the insurance contract, ATI is barred from pleading the absence
of such contract in its appeal. It is imperative for the parties to disclose during pre-
trial all issues they intend to raise during the trial because, they are bound by the
delimitation of such issues. The determination of issues during the pre-trial
conference bars the consideration of other questions, whether during trial or on
appeal.
2. NO.
Although the formal claim was filed beyond the 15-day period from the issuance
of the examination report on the request for bad order survey, the purpose of the time
limitations for the filing of claims had already been fully satisfied by the request of the
consignee’s broker for a bad order survey and by the examination report of the
arrastre operator on the result thereof, as the arrastre operator had become aware of
Page 226
Thiam, Patrice
Alexandria R.
and had verified the facts giving rise to its liability. Hence, the arrastre operator
suffered no prejudice by the lack of strict compliance with the 15-day limitation to file
the formal complaint.
In the present case, ATI was notified of the loss/damage to the subject
shipment as early as August 9, 1996 thru a Request for Bad Order Survey60 jointly
prepared by the consignee’s broker, PROVEN, and the representatives of ATI. For
having submitted a provisional claim, GASI is thus deemed to have substantially
complied with the notice requirement to the arrastre operator notwithstanding that a
formal claim was sent to the latter only on September 27, 1996. ATI was not deprived
the best opportunity to probe immediately the veracity of such claims. Verily then,
GASI, thru its subrogee FIRST LEPANTO, is not barred by filing the herein action in
court.
3. YES.
ATI is liable to pay FIRST LEPANTO the amount of the P165,772.40
representing the insurance indemnity paid by the latter to GASI. Pursuant to Nacar v.
Gallery Frames,62 the said amount shall earn a legal interest at the rate of six percent
(6%) per annum from the date of finality of this judgment until its full satisfaction.
As correctly imposed by the RTC and the CA, ten percent (10%) of the judgment
award is reasonable as and for attorney’s fees considering the length of time that has
passed in prosecuting the claim
4. YES.
ATI failed to discharge its burden of proof. Instead, it insisted on shifting the
blame to COSCO on the basis of the Request for Bad Order Survey dated August 9,
1996 purportedly showing that when ATI received the shipment, one jumbo bag
thereof was already in damaged condition.
In fact, what the document established is that when the loss/damage was
discovered, the shipment has been in ATI’s custody for at least two weeks. This
circumstance, coupled with the undisputed declaration of PROVEN’s witnesses that
while the shipment was in ATI’s custody, it was left in an open area exposed to the
elements, thieves and vandals,36 all generate the conclusion that ATI failed to exercise
due care and diligence while the subject shipment was under its custody, control and
possession as arrastre operator.
To prove the exercise of diligence in handling the subject cargoes, an arrastre
operator must do more than merely show the possibility that some other party could
be responsible for the loss or the damage.37 It must prove that it used all reasonable
means to handle and store the shipment with due care and diligence including
safeguarding it from weather elements, thieves or vandals.
5. NO.
“Subrogation is the substitution of one person in the place of another with
reference to a lawful claim or right, so that he who is substituted succeeds to the
rights of the other in relation to a debt or claim, including its remedies or securities.”
The right of subrogation springs from Article 2207 of the Civil Code which
Art. 2207. If the plaintiff’s property has been insured, and he has received
the rights of the insured against the wrong-doer or the person who has violated the
contract. If the 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.
As a general rule, the marine insurance policy needs to be presented in
evidence before the insurer may recover the insured value of the lost/damaged cargo
in the exercise of its subrogatory right. In Malayan Insurance Co., Inc. v. Regis
Brokerage Corp., the Court stated that the presentation of the contract constitutive of
the insurance relationship between the consignee and insurer is critical because it is
the legal basis of the latter’s right to subrogation.
122.
Page 227
Thiam, Patrice
Alexandria R.
KILUSANG MAYO UNO LABOR CENTER vs. GARCIA

G.R. No. 115381, December 23, 1994
ISSUES:
(1) Whether or not KMU has legal standing to maintain the suit
(2) whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the Government
(3) What is public convenience or necessity as defined in the case at bar?
(4) Whether or not the new rates of the Philippine Railway Co. will be just and reasonable.
(5) What is a Certificate of Public Conveyance?
FACTS:
Petition for certiorari was filed by labour group KIilusang Mayo Uno to assail
the constitutionality and validity of certain memoranda, circulars and / or orders from
Department of Transportation and Communications in relation to increase in public
transportation fares. Respondent contend that petitioner has no legal standing to sue
and that it is within DOTC and LTFRB’s authority to set a fare range scheme.
RULINGS:
1. YES.
The rule requires that a party must show a personal stake in the outcome of the
case or an injury to himself that can be redressed by a favorable decision so as to
warrant an invocation of the court’s jurisdiction and to justify the exercise of the
court’s remedial powers in his behalf.
Petitioner, whose members had suffered and continue to suffer grave and
irreparable injury and damage from the implementation of the questioned memoranda,
circulars and/or orders, has shown that it has a clear legal right that was violated and
continues to be violated with the enforcement of the challenged memoranda, circulars
and/or orders. KMU members, who avail of the use of buses, trains and jeepneys
everyday, are directly affected by the burdensome cost of arbitrary increase in
passenger fares.
They are part of the millions of commuters who comprise the riding public.
Certainly, their rights must be protected, not neglected nor ignored.
2. YES.
In the case at bench, petitioner, whose members had suffered and continue to
suffer grave and irreparable injury and damage from the implementation of the
questioned memoranda, circulars and/or orders, has shown that it has a clear legal
right that was violated and continues to be violated with the enforcement of the
challenged memoranda, circulars and/or orders. KMU members, who avail of the use
of buses, trains and jeepneys everyday, are directly affected by the burdensome cost of
arbitrary increase in passenger fares. They are part of the millions of commuters who
comprise the riding public. Certainly, their rights must be protected, not neglected nor
ignored.
3. By its terms, public convenience or necessity generally means something fitting

or suited to the public need. 16 As one of the basic requirements for the grant of a
CPC, public convenience and necessity exists when the proposed facility or service
meets a reasonable want of the public and supply a need which the existing facilities
do not adequately supply. The existence or non-existence of public convenience and
necessity is therefore a question of fact that must be established by evidence, real
and/or testimonial; empirical data; statistics and such other means necessary, in a
public hearing conducted for that purpose. The object and purpose of such procedure,
among other things, is to look out for, and protect, the interests of both the public and
the existing transport operators
4. NO.
In the case at bench, the authority given by the LTFRB to the provincial bus
operators to set a fare range over and above the authorized existing fare, is illegal and
invalid as it is tantamount to an undue delegation of legislative authority. Potestas
delegata non delegari potest. What has been delegated cannot be delegated. This
Page 228
Thiam, Patrice
Alexandria R.
doctrine is based on the ethical principle that such a delegated power constitutes not
only a right but a duty to be performed by the delegate through the instrumentality of
his own judgment and not through the intervening mind of another. 10 A further
delegation of such power would indeed constitute a negation of the duty in violation of
the trust reposed in the delegate mandated to discharge it directly. 11 The policy of
allowing the provincial bus operators to change and increase their fares at will would
result not only to a chaotic situation but to an anarchic state of affairs. This would
leave the riding public at the mercy of transport operators who may increase fares
every hour, every day, every month or every year, whenever it pleases them or
whenever they deem it "necessary" to do so. In Panay Autobus Co. v. Philippine
Railway Co., 12 where respondent Philippine Railway Co. was granted by the Public
Service Commission the authority to change its freight rates at will, this Court
categorically declared that:
In our opinion, the Public Service Commission was not authorized by law to
delegate to the Philippine Railway Co. the power of altering its freight rates whenever it
should find it necessary to do so in order to meet the competition of road trucks and
autobuses, or to change its freight rates at will, or to regard its present rates as
maximum rates, and to fix lower rates whenever in the opinion of the Philippine
Railway Co. it would be to its advantage to do so.
5. A certificate of public convenience (CPC) is an authorization granted by the

LTFRB for the operation of land transportation services for public use as required by
law. Pursuant to Section 16(a) of the Public Service Act, as amended, the following
requirements must be met before a CPC may be granted, to wit: (i) the applicant must
be a citizen of the Philippines, or a corporation or co-partnership, association or joint-
stock company constituted and organized under the laws of the Philippines, at least
60 per centum of its stock or paid-up capital must belong entirely to citizens of the
Philippines; (ii) the applicant must be financially capable of undertaking the proposed
service and meeting the responsibilities incident to its operation; and (iii) the applicant
must prove that the operation of the public service proposed and the authorization to
do business will promote the public interest in a proper and suitable manner. It is
understood that there must be proper notice and hearing before the PSC can exercise
its power to issue a CPC.
Page 229
Thiam, Patrice
Alexandria R.

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TRANSPORTATION LAW CASE DIGEST

G.R. No. 150403, January 25, 2007

declaration and proper shipping documents as required by law is bereft of merit. It

R&B Insurance, thereafter, filed a complaint for damages against both

2. When the Court speaks of extraordinary diligence, it is that extreme measure of

2. UTI is liable as a common carrier.

3. The elements of a "fortuitous event" are:

5. Article 1732. Common carriers are persons, corporations, firms or associations

Consequently, the public policy embodied therein is not contravened by stipulations in a

3. Stevedores hired by National Steel Corp.

4. Rusting was caused by contact with rain and seawater.

There is greater reason for holding petitioner to be a common carrier because

4. The character of the goods or defects in the packing or in the containers;

4. The test to determine a common carrier is "whether the given undertaking is a

2. YES. But only at the time of the voyage.

3. NO. No presumption applies to private carriers.

4. A "charter-party" is defined as a contract by which an entire ship, or some

4. Under American jurisprudence, a common carrier undertaking to carry a

2. The nature of the business of a common carrier as a public employment is such

5. Sections 2, 3 and 4 of Act No. 98 of the Philippine Commision and, until,

"Section. 3. No common carrier engaged in the carriage of passengers or property

3. It is a long standing jurisprudential rule that a bill of lading operates both as a

4. Article 1764 of the Civil Code expressly provides:

ART. 1764. Damages in cases comprised in this Section shall be awarded in

5. In case of interruption of a vessels voyage and the consequent delay in that

4. In Central Shipping Company, Inc. v. Insurance Company of North America,6

2. The Court of Appeals reversed the decision of the trial court.

respondent's employees, and therefore involving no issue of negligence in its duty to

3. Celyrosa Express, a common carrier, through its driver, respondent De Borja,

(4) What is the doctrine laid down in the case at bar?

Art. 1763. A common carrier is responsible for injuries suffered by a passenger

2. There can be no controversy that as far as the father is concerned, when he

3. In case of accident due to a carrier’s negligence, the heirs of a deceased

While evidence may be submitted to overcome such presumption of negligence,

(4) Whether or not was due to a caso fortuito?

3. Upon the facts stated, the defendant's liability is contractual.

The foundation of defendant’s liability is its contract of carriage with plaintiff,

5. As a general rule it is logical that in case of extra-contractual culpa, a suing

2. UTI is liable as a common carrier.

5. The limited-liability clause has constantly been sustained by the Court in

Transhipment is not dependent upon the ownership of the transporting ships or

discharging receipt, cannot be construed as sufficient compliance with the said

2. Considering that a prompt demand was necessary to foreclose the possibility of

3. A bill of lading is in the nature of a contract of adhesion, defined as one where

2. A bareboat or demise charter is a demise of a vessel, much as a lease of an

5. A voyage charter, or trip charter, is simply a contract of affreightment, that is, a

2. MT Vector is a common carrier.

4. Petitioner and Vector entered into a contract of affreightment, also known as a

a. Make the ship seaworthy;

2. A bareboat or demise charter is a demise of a vessel, much as a lease of an

5. A voyage charter, or trip charter, is simply a contract of affreightment, that is, a

5. Art. 2199. Except as provided by law or by stipulation, one is entitled to an

Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis

Article 1903 of the Civil Code is not applicable to obligations arising ex

5. As a general rule it is logical that in case of extra-contractual culpa, a suing

5. The Court of Appeal’s ruling is based on section 5 of Rule 12 of the former

5. “Electronic record" means data that is recorded or stored on any medium in or

Eagle Express, in its Memorandum dated February 7, 2007, asserts that it

3. The fundamental reason or purpose of such a stipulation is not to relieve the

UCPB obviously made a gross misrepresentation to the Court when it claimed

3. Article 367 of the Commercial Code is as follows:

5. The object sought to be attained by the requirement of the submission of claims

3. In case of death or injuries to passengers, a statutory presumption arises that