TRANSPORTATION AND PUBLIC SERVICE LAW

(FOR CLASSROOM DISCUSSION ONLY. NOT FOR SALE OR DISTRIBUTION.)

University of San Jose-Recoletos School of Law

Atty. Gerald R. Yu, J.D., CPA, REB, LIA, CDR PCGA CGAS 218 CV

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 TOPICS

General Concepts
Obligations of the Parties
Extraordinary Diligence
Bill of Lading and other
Formalities
Actions and Damages in
Case of Breach

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WHAT IS A CONTRACT
OF TRANSPORTATION?

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 Passengers

Cargo

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Passengers and Cargo

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Private Carrier

Common Carrier

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WHO ARE THE PARTIES IN A
CARRIAGE OF PASSENGERS?

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• PASSENGER - one who travels in a public
conveyance by virtue of contract, express or implied,
with the carrier as to the payment of fare or
that which is accepted as an equivalent thereof (Nueca
v. Manila Railroad Co., G.R. No. 31731-R, 30 January 1968)

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• COMMON CARRIER - one that holds itself
out as ready to engage in the transportation
of goods for hire as a public employment and not
as a casual occupation. (De Guzman v. CA, G.R. No.
L-47822, 22 December 1988)

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 WHO ARE THE PARTIES
IN CARRIAGE OF GOODS?

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 IS CONSIGNEE A PARTY TO
THE CONTRACT OF CARRIAGE?

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 ANSWER
• In sum, a consignee, although not a signatory to the
contract of carriage between the shipper and the
carrier, becomes party to the contract by reason of
either: (a) the relationship of agency between the
consignee and the shipper/consignor ; (b) the
unequivocal acceptance of the bill of lading delivered
to the consignee, with full knowledge of its contents;
or (c) availment of the stipulation pour autrui.*
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 PROBLEM:
One of the passenger buses owned by Ceres Liners Corp.
(CLC), plying its usual route, gured in a collision with another
bus owned by Rough Riders Bus Corp. (RRB) Among those
injured inside the CLC bus were: Dennis, a stow away; Barry, a
pickpocket then in the act of robbing his seat mate when the
collision occurred; Collen, the bus driver’s mistress who usually
accompanied the driver on his trips for free; and Yvone, holder
of free riding pass she won in a raf e held by CLC.

Will a suit for breach of contract of carriage led by Dennis,

Barry, Collen, and Yvone against CLC prosper? Explain.

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WHEN IS A CONTRACT OF
CARRIAGE PERFECTED?

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 BRITISH AIRWAYS V. COURT
OF APPEALS, GR NO. 92288 (9
FEBRUARY 1993), 218 SCRA 699.

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 PERFECTION OF CONTRACT:
CARRIAGE OF PASSENGERS,
IN GENERAL
• CONTRACT TO CARRY (1st Type) - an agreement to
carry the passenger at some future date. CONSENSUAL
IN NATURE hence, PERFECTED BY MERE CONSENT.

• CONTRACT OF CARRIAGE or OF COMMON

CARRIAGE (2nd Type) - A REAL CONTRACT for not
until the facilities of the carrier are actually used can the
carrier be said to have already assumed the obligation as
a carrier.
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 PERFECTION OF CONTRACT:
CARRIAGE OF GOODS,
IN GENERAL
• CONTRACT TO CARRY (1st Type) – an agreement to carry
and transport goods at some future date. CONSENSUAL IN
NATURE hence, PERFECTED BY MERE CONSENT.

• CONTRACT OF CARRIAGE OR OF COMMON CARRIAGE

(2nd Type) - By the act of delivery of the goods, that is, when
the goods are unconditionally placed in the possession and
control of the carrier, and upon their receipt by the carrier for
transportation, the contract of carriage is perfected.

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SPECIFIC MODES OF
PERFECTION

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 AIRCRAFTS
• CONTRACT TO CARRY

subject matter consideration

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 AIRCRAFTS
• CONTRACT OF CARRIAGE

Korean Airlines Co., Ltd., v. CA (G.R. No. 114061 3 August 1994 citing: Zulueta vs. Pan American World Airways Inc., 43
SCRA 397; Pan American orld Airways vs. IAC, 153 SCRA 521; Air France vs. Carrascoso, 18 SCRA 155.)

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• BUSES, JEEPNEYS, and STREET CARS

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• TRAINS

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 CONCEPT OF COMMON
CARRIAGE ANALOGOUS TO
PUBLIC SERVICE
• The concept of common carrier under ARTICLE 1732 CCP 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.

• PUBLIC SERVICE includes: “every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire or compensation,
with general or limited clientele, whether permanent, occasional or
accidental and done for general business purposes.

• Any common carrier, railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or without xed route.
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• Whatever may be its classi cation, freight or carrier
service of any class, express service, steamboat, 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 communications systems, wire or wireless
broadcasting stations and other similar public services.

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TEST TO DETERMINE WHETHER A PARTY IS
A COMMON CARRIER OF GOODS:
• He must be engaged in the business of carrying goods for others as a public employment,
and must hold himself out as ready to engage in the transportation of goods for person
generally as a business and not as a casual occupation;

• He must undertake to carry goods of the kind to which his business is con ned;

• He must undertake to carry by the method by which his business is conducted and over his
established roads;

• The transportation must be for hire. [First Philippine Industrial Corp. v. CA, G.R. 125948,
Dec. 29, 1998];

• Provided it has space, for all who opt to avail themselves of its transportation service for a
fee [National Steel Corp. v. CA, G.R. No. 112287, Dec. 12, 1997, quoting Mendoza v. PAL, 90
Phil. 836].

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 BASIC RULES
• Still a common carrier:

• Even if it carries persons, goods, or both only as an ancillary activity;

• Even if it offers transportation services on an occasional, episodic or unscheduled basis;

• Even if it offers services or solicits business only from a narrow segment of the general population;

• Even if he did not secure a Certi cate of Public Convenience;

• Even if means is not through motor vehicle;

• Even if it has no xed and publicly known route, maintains no terminals, and issues no tickets;

• Even if it is not engaged in the business of public transportation;

• Even if the operator does not own the vehicle or vessel that he or she operates or has to actually hire one;

• Even if the operator sub-contracts the carriage of goods to another entity.

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DE GUZMAN V. COURT OF
APPEALS (168 SCRA 612)
• Art. 1732 makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an 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.

• Therefore, a party who ‘back-hauled’ goods for other merchants from Manila to Pangasinan,
even when such activity was only periodical or occasional and was not its principal line of
business would be subject to the responsibilities and obligations of a common carrier.

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SPS. CRUZ V. SUN HOLIDAYS, INC.,
G.R. NO. 186312, 25 NOV. 2013.

• The operator of a beach resort that accepts

clients by virtue of a tour package contracts that
included transportation to and from the Resort
and the point of departure in Batangas is
considered a common carrier.

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IS A CUSTOMS BROKER
A COMMON CARRIER?
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 ANSWER:
• 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 CC 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 suf ces that petitioner undertakes to
deliver the goods for pecuniary consideration. (Schmitz Transport & Brokerage
Corporation v. Transport Ventures, Inc., G.R. No. 150255, 22 April 2005)

• The transportation of goods is an integral part of a customs broker, it is also a common

carrier. For to declare otherwise would be to deprive those with whom it contracts the
protection which the law affords them notwithstanding the fact that the obligation to
carry goods for its customers is part and parcel of its business. (Calvo v. UCPB
General Insurance Co. Inc., 379 SCRA 510, 2002)

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 LIMITED CLIENTELE
NOT A DEFENSE
• Facts: Petitioner entered into a contract with SMC for
the transfer of paper and kraft board from the port area
to SMC’s warehouse.

• Held: She is still a common carrier although she does not

indiscriminately hold her services out to the public but
offers the same to select parties with whom she may
contract in the conduct of her business. [Virgines Calvo v.
UCPB General Insurance Co., G.R. 148496, Mar. 19, 2002]
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 PHIL. AMERICAN GENERAL INSURANCE
COMPANY, ET.AL. V. PKS SHIPPING COMPANY,
G.R. NO. 149038, 09 APRIL 2003.

• Facts: Respondent shipping company transported the 75,000

bags of cement to Petitioner in its barge. The bags of cement
perished after its barge sank while being towed by a tug boat.

• Held: Respondent is a common carrier because it was

engaged in the business of carrying goods for others for a fee.
The regularity of its activities in the 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 or entered into with the patrons of the carrier.
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 NO FIXED ROUTE, NO TERMINAL,
NO TICKET ISSUED NOT A DEFENSE

• Facts: Petitioner is involved in the business of carrying

goods through its barges. It has no xed and publicly
known route, maintains no terminals, and issues no tickets.

• Held: Petitioner is still a common carrier because its

principal business is that of lighterage and drayage and it
offers its barges to the public for carrying or transporting
by water for compensation. [Asia Lighterage and Shipping,
Inc. v. CA, G.R. 147246, Aug. 19, 2003]
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MEANS OF TRANSPORTATION,
NOT MATERIAL
• Issue: Are pipeline operators common
carriers as to subject them to business
taxes on common carriers?

• Held: Yes. The 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. In
fact, in the US, oil pipe line operators are
considered common carriers. Also under
the Petroleum Act of the Philippines
(RA 387). (First Philippine Industrial
Corp. v. CA, GR No. 147246, 19 August
2003).

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 ARE DISTRIBUTORS OF
ELECTRICITY COMMON
CARRIERS?
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 ANSWER
• Republic Act No. 9136 (An Act Ordaining Reforms in the
Electric Power Industry):

• Section 22 - Distribution Sector - The distribution of

electricity to end-users shall be a regulated common carrier
business requiring a national franchise. Distribution of
electric power to all end-users may be undertaken by
private distribution utilities, cooperatives, local government
units presently undertaking this function and other duly
authorized entities, subject to regulation by the ERC.
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 EVEN IF HE DID NOT SECURE
A CPC
• A certi cate 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
rm acts as a common carrier, without regard to whether or
not such carrier has also complied with the requirements of
the applicable regulator y statute and implementing
regulations and has been granted a certi cate of public
convenience or other franchise. (Pedro De Guzman v. CA
and Ernesto Cendana, G.R. No. L-48722, 22 December 1988)
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 CHARTER PARTY
• A contract by which an entire ship, or some principal part thereof, is let by
the owner to another person for a speci ed time or use.

• Contract of Affreightment - 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 by Demise or Bareboat Charter - 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.

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 CONTRACT OF
AFFREIGHTMENT

• Time Charter - vessel is leased to the charterer

for a xed period of time.

• Voyage Charter - ship is leased for a single voyage.

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 WHAT IS THE EFFECT IF A
COMMON CARRIER ENTERS
INTO A CHARTER PARTY?

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EFFECT WHEN COMMON CARRIER
ENTERS INTO A CHARTER PARTY

• If only by contract of affreightment, whether

voyage or time charter, it remains a common
carrier.

• If by bareboat or demise charter, a common

carrier is transformed into a private carrier.

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DISTINGUISH A COMMON
CARRIER FROM A PRIVATE
CARRIER.

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 COMMON CARRIER V. PRIVATE
CARRIER
• Common carrier holds himself out in common, that is, to all persons who choose to employ
him, ready to carry for hire while the private carrier or special carrier agrees in some special
case with some private individual to carry for hire;

• A private carrier is not bound to carry for any reason, unless it enters a special agreement
to do so. A common carrier is bound to carry for all who offer such goods as it is
accustomed to carry and tender reasonable compensation for carrying them.

• A common carrier is subject to regulation as it is a public service. A private carrier is not.

• The common carrier is bound to exercise extraordinary diligence while a private carrier
owes only diligence of a good father of a family.

• A common carrier cannot stipulate that it is exempt from liability for the negligence of its
agents or employees. Such stipulation is void as it is against public policy. A private carrier
may validly enter into such stipulation (1980, 1981, 1984 Bar Exams)

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 TRUCKING SERVICE
• Engaged in the business of transporting goods by land,
through its trucking service.

• A common carrier if there is no indication that the

undertaking in the contract between the carrier and the
other party that the same was private in character, or if there
is no showing that the service was solely and exclusively
rendered to such party. (Loadmaster Customs Services, Inc. v.
Glodel Brokerage, G.R. No. 179446, 10 January 2011)
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 PROBLEM
• GPS, as the exclusive hauler of Concepcion Industries, undertook to
deliver thirty (30) units of Condura refrigerators from latter’s plant
in Alabang to Dagupan City. While the truck was traversing the
north diversion road along McArthur highway in Barangay Anupol,
Bamban, Tarlac, it collided with an unidenti ed truck, causing it to fall
into a deep canal, resulting in damage to the cargoes. Petitioner FGU
as subrogee to Concepcion Industries led a complaint for damages
and breach of contract of carriage against GPS and its driver.

• ISSUE 1: Is GPS a common carrier?

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• Answer: READ: FGU INSURANCE V.
G.P. SARMIENTO TRUCKING, GR
141910, 06 AUGUST 2002

• GPS, being an exclusive contractor and hauler

of Concepcion Industries, Inc., rendering or
offering its services to no other individual or
entity, cannot be considered a common carrier.

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• In culpa contractual, upon which the action of
petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of
the existence of the contract and the failure of
its compliance justify, pr ima facie , a
corresponding right of relief.

• A breach upon the contract confers upon the

injured party a valid cause for recovering that
which may have been lost or suffered.
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• The remedy serves to preserve the interests of the promisee that
may include his:

• “Expectation interest," which is his interest in having the

bene t of his bargain by being put in as good a position as he
would have been in had the contract been performed; or

• “Reliance interest," which is his interest in being reimbursed

for loss caused by reliance on the contract by being put in as good
a position as he would have been in had the contract not been
made; or

• “Restitution interest," which is his interest in having

restored to him any bene t that he has conferred on the other
party.
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• The effect of every infraction is to create a new duty, that is, to make
recompense to the one who has been injured by the failure of another
to observe his contractual obligation unless he can show extenuating
circumstances, like proof of his exercise of due diligence (normally that
of the diligence of a good father of a family or, exceptionally by
stipulation or by law such as in the case of common carriers, that of
extraordinary diligence) or of the attendance of fortuitous event, to
excuse him from his ensuing liability.

• In this case, the delivery of the goods in its custody to the place of
destination - gives rise to a presumption of lack of care and
corresponding liability on the part of the contractual obligor the burden
being on him to establish otherwise. GPS has failed to do so.

• Respondent driver, on the other hand, without concrete proof of his

negligence or fault, may not himself be ordered to pay petitioner.

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• The driver, not being a party to the contract of carriage between
petitioner’s principal and defendant, may not be held liable under the
agreement.

• A contract can only bind the parties who have entered into it or
their successors who have assumed their personality or their juridical
position.

• Consonantly with the axiom res inter alios acta aliis neque nocet
prodest, such contract can neither favor nor prejudice a third person.

• Petitioner’s civil action against the driver can only be based on culpa
aquiliana, which, unlike culpa contractual, would require the claimant
for damages to prove negligence or fault on the part of the
defendant.

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 COMMON CARRIAGE
DISTINGUISHED
FROM OTHER CONTRACTS

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 TOWAGE
• In towage, one vessel is hired to bring
another vessel to another place. Thus,
a tugboat may be hired by a common
carrier to bring the vessel to a port. In
this case, the operator of the tugboat
cannot be considered a common
carrier.

• In maritime law, towage refers to a

service rendered to a vessel by towing
for the mere purpose of expediting
her voyage without reference to any
circumstances of danger. It usually
con ned to vessels that have received
Tugboat
no injury or damage.
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 ARRASTRE
• The functions of an arrastre operator usually
include the following:

1. Receive, handle, care for, and deliver

all merchandise imported and
exported, upon or passing over
Government-owned wharves and
piers in the port;

2. Record or check all merchandise

which may be delivered to said port
at shipside, and in general and;

3. Furnish light, and water services and

other incidental services in order to
undertake its arrastre service.

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• Hence, the functions of an arrastre operator has nothing to
do with the trade and business of navigation, nor to the use
or operation of vessels.

• Both as to the nature of the functions and the place of their

performance (upon wharves and piers shipside), the arrastre
operator’s services are clearly not maritime.

• They are in fact, no different from those of a depositary or

warehouseman.

• Even if the arrastre service depends on, assists, or furthers

maritime transportation, it may be deemed merely incidental
and does not make its service maritime
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• Vs. Stevedoring -

• The diligence required of a stevedore is the diligence of a good father

of a family.

• Not a common carrier for it does not transport goods or passengers; it

is not akin to a warehouseman for it does not store goods for pro t.

• The loading and stowing of cargoes would not have a far reaching
public rami cation as that of a common carrier and a warehouseman;
the public is adequately protected by our laws on contract and quasi-
delict.

• The public policy considerations in legally imposing upon a common

carrier or a warehouseman a higher degree of diligence is not present
in a stevedoring out t which mainly provides labor in loading and
stowing of cargoes for its clients.

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• Vs. Travel Agency -

• Not a common carrier. The object of contractual

relation of a person who purchases a ticket through a
travel agency is only the agency’s service of arranging
and facilitating the booking, ticketing, and
accommodation in a package tour.

• In contrast, the object of the contract with a common

carrier is transportation. The contract between the
travel agency is a contract of service and not a
contract of carriage. (Crisostomo v. CA, et.al., GR No.
138334, 25 August 2003, 409 SCRA 528, 534)
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 GOVERNING LAWS
Coastwise Shipping

• New Civil Code (Arts. 1732-1766)

• Code of Commerce

Carriage from Foreign Ports to Phil. Ports

• New Civil Code (primary)

• Code of Commerce (suppletory)

• Carriage of Goods by Sea Act [COGSA] (suppletory)

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Carriage From Phil. Port to Foreign Ports

• The laws of the country to which the goods are to be transported.

Overland Transportation

• Civil Code (Primary)

• Code of Commerce (Suppletorily)

• R.A. 4136 (The Land Transportation and Traf c Code)

Air Transportation

• Civil Code (primary)

• Code of Commerce (suppletorily)

• For international carriage - Convention for the uni cation of certain rules
for international carriage by air done at Montreal on 28 may 1999 (MC99)
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 NATURE OF BUSINESS OF
COMMON CARRIERS
• Common carriers are public utilities within the contemplation of the
public service law.

• Public utilities are privately owned and operated businesses whose services are
essential to the general public.

• They are enterprises which specially cater to the needs of the public and
conduce to their comfort and convenience.

• When, one devotes his property to a use in which the public has an interest, he,
in effect grants to the public an interest in that use, and must submit to the
control by the public for the common good, to the extent of the interest he has
thus created. (KMU v. Garcia, GR 115381, 23 December 1994)*
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ALL PUBLIC UTILITIES ARE PUBLIC SERVICES, BUT NOT ALL PUBLIC SERVICES ARE PUBLIC UTILITIES.

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 REGISTRATION LAWS

• Registration of motor vehicles is governed by

Republic Act No. 4136 otherwise known as “The
Land Transportation and Traf c Code.”

• Administered by the Land Transportation Of ce.

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(g) “Dealer” shall mean every person, association, partnership, or corporation making, manufacturing,
constructing, assembling, remodeling, rebuilding, or setting up motor vehicles; and every such entity
acting as agent for the sale of one or more makes, styles, or kinds of motor vehicles, dealing in motor
vehicles, keeping the same in stock or selling same or handling with a view to trading same.

(h) “Garage” shall mean any building in which two or more motor vehicles, either with or without
drivers, are kept ready for hire to the public, but shall not include street stands, public service stations,
or other public places designated by proper authority as parking spaces for motor vehicles for hire
while awaiting or soliciting business.

(j) “Highways” shall mean every public thoroughfare, public boulevard, driveway, avenue, park, alley and
callejon, but shall not include roadway upon grounds owned by private persons, colleges, universities, or
other similar institutions.

(l) “Parking or parked”, for the purposes of this Act, shall mean that a motor
vehicle is “parked” or “parking” if it has been brought to a stop on the shoulder
or proper edge of a highway, and remains inactive in that place or close thereto
for an appreciable period of time. A motor vehicle which properly stops merely
to discharge a passenger or to take in a waiting passenger, or to load or unload
a small quantity of freight with reasonable dispatch shall not be considered as
“parked”, if the motor vehicle again moves away without delay.

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SECTION 5. Compulsory Registration of Motor Vehicles. – (a) All motor vehicles and
trailer of any type used or operated on or upon any highway of the
Philippines must be registered with the Bureau of Land Transportation  for
the current year in accordance with the provisions of this Act.

xxx

Any registration of motor vehicles not renewed or before the date xed by the Bureau of Land
Transportation shall become delinquent and invalid.

(c) Dealer’s Report. – Dealers shall submit to the Director of Land Transportation a report
concerning the sale or transfer of or any other transaction involving motor vehicles, including such
information as importation, manufacturing data, and number of stocks remaining, as the Director may
require for the effective enforcement of the provision of this Act within ve (5) working days from
such sale, transfer or transaction. Such dealers shall furnish also the buyer with a duplicate copy
thereof, duly authenticated by the Director of Land Transportation.

(d) Unauthorized repair of change of engine serial number. – Unless satisfactorily explained to and
approved by the Director of Land Transportation, no repair involving the restoration of the original
or registered serial number as stamped on the engine shall be allowed. No change involving an
alteration of or tampering with the original or registered engine serial number of a motor vehicle
shall ever be allowed, and any motor vehicle with a trace of having its engine serial number altered or
tampered with shall be refused registration or re-registration.
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SECTION 7. Registration Classi cation. – The classi cation of vehicles shall be:

(1) Private

(2) For Hire

(3) Government

(4) Diplomatic

Within ninety days from the approval of this Act, appropriate subclassi cations shall be determined by the Director
of Land Transportation  with the approval of the Minister of Transportation and Communications,  taking into
consideration the body con guration, weight, cubic displacement and/or number of cylinders of the motor vehicle.

(a) Private. – Motor vehicles registered under this classi cation shall not be used for hire under any circumstance.

(b) For Hire. – Motor vehicles registered under this classi cation are those covered by certi cates of public
convenience, or special permits issued by the Board of Transportation,  and shall be subject to the provisions of the
Public Service Act and the rules and regulations issued thereunder, as well as the provisions of this Act.

(c) Government. – Motor vehicles owned by the government of the Philippines or any of its political subdivisions
shall be registered under this classi cation.

(d) Diplomatic. Motor vehicles owned by foreign governments or by their duly accredited diplomatic of cers in the
Philippines and used in the discharged of their of cial duties.

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Tourists bringing their own motor vehicles to the
Philippines may, however, without registering such
motor vehicles, use the same during but not after
ninety (90) days of their sojourn: Provided, That the
motor vehicle displays the number plates for the current year of
some other country or state, and said number plates as well as the
name and address (permanent and temporary) of the thereof are
registered in the Bureau of Land Transportation  prior to the
operation of the motor vehicle.

If such tourists remain in the Philippines longer than ninety (90)

days, the motor vehicle shall not be operated unless registered in
accordance with this Act and the corresponding registration fees
paid.
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 SECTION 14. Issuance of Certi cates of Registration. – A properly numbered
certi cate of registration shall be issued for each separate motor vehicle after due
inspection and payment of corresponding registration fees.

SECTION 15. Use and Authority of Certi cate of Registration. – (a) The said
certi cate shall be preserved and carried in the car by the owner as evidence of the
registration of the motor vehicle described therein, and shall be presented with
subsequent applications for re-registration, transfer of ownership, or recording of
encumbrances: Provided, That in lieu of the certi cate of registration a true copy or
photostat thereof may be carried in the motor vehicle.

(b) The certi cate of registration issued under the provisions of this Act for any
motor vehicle shall, while the same is valid and effective and has not been
suspended or revoked, be the authority for the operation of such motor vehicle.

(c) No motor vehicle shall be operated on the public highways in a manner which
would place it under a classi cation requiring the payment of a larger registration
fee than that stated in the certi cate of registration.

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 SECTION 18. Use of Number Plates. – At all times, every motor vehicle
shall display in conspicuous places, one in front and one in the rear
thereof, the said number plates.

The number plates shall be kept clean and cared for, and shall be rmly
af xed to the motor vehicle in such a manner as will make it entirely
visible and always legible.

Except in the case of dealer’s number plates which may be used

successively on various motor vehicles in stock, no person shall transfer
number plates from one motor vehicle to another.

No dealer’s number plate shall be used on any motor vehicle after said
vehicle has been sold and delivered to a purchaser, and no dealer shall
allow such dealer’s number plates to be used on any motor vehicle after
its sale and delivery to a purchaser.
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SECTION 19. Duty to have License. – Except as
otherwise speci cally provided in this Act,
it shall be unlawful for any person to
operate any motor vehicle without having
in his possession a valid license to drive a
motor vehicle.

The license shall be carried by the driver at

all times when operating a motor vehicle,
and shall be shown and/or surrendered for cause and
upon demand to any person with authority under this
Act to con scate the same.
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SECTION 21. Operation of Motor Vehicles by Tourists. – Bona de
tourist and similar transients who are duly licensed to operate motor
vehicles in their respective countries may be allowed to operate motor
vehicles during but not after ninety days of their sojourn in the
Philippines.

If any accident involving such tourist or transient occurs, which upon

investigation by the Commissioner  or his deputies indicates that the said
tourist or transient is incompetent to operate motor vehicles, the
Commissioner shall immediately inform the said tourist or transient in
writing that he shall no longer be permitted to operate a motor vehicle.

After ninety days, any tourist or transient desiring to operate motor

vehicles shall pay fees and obtain and carry a license as hereinafter
provided.

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SPEED LIMIT AND KEEPING TO
THE RIGHT
SECTION 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 traf c, the width of the highway, and of any other condition then and
there existing; and no person shall drive any motor vehicle upon a
highway at such a 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.

(b) Subject to the provisions of the preceding paragraph, the rate of

speed of any motor vehicle shall not exceed the following:
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 MAXIMUM ALLOWABLE
SPEEDS
Location Passengers
Motor trucks and buses
Cars and Motorcycle

1. On open country roads, with

no "blinds corners" not closely 80 km. per hour 50 km. per hour
bordered by habitations

2. On "through streets" or
boulevards, clear of traffic, 40 km. per hour 30 km. per hour
with no " blind corners”,
when so designated.
3. On city and municipal
streets, with light traffic, when 30 km. per hour 30 km. per hour
not designated “through
streets”
4. Through crowded streets, approaching
intersections at "blind corners," passing
school zones, passing other vehicles
20 km. per hour 20 km. per hour
which are stationery, or for similar
dangerous circumstance

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(c) The rates of speed herein-above prescribed shall not apply to the
following:

(1) A physician or his driver when the former responds to emergency calls;

(2) The driver of a hospital ambulance on the way to and from the place of accident or other
emergency;

(3) Any driver bringing a wounded or sick person for emergency treatment to a hospital,
clinic, or any other similar place;

(4) The driver of a motor vehicle belonging to the Armed Forces while in use for of cial
purposes in times of riot, insurrection or invasion;

(5) The driver of a vehicle, when he or his passengers are in pursuit of a criminal;

(6) A law-enforcement of cer who is trying to overtake a violator of traf c laws; and

(7) The driver of cially operating a motor vehicle of any re department, provided that
exemption shall not be construed to allow unless or unnecessary fast driving of drivers afore-
mentioned.

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SECTION 36. Speed Limits Uniform Throughout the
Philippines. – No provincial, city or municipal authority
shall enact or enforce any ordinance or resolution
specifying maximum allowable speeds other than those
provided in this Act.

SECTION 37. Driving on Right Side of Highway. – Unless a different course

of action is required in the interest of the safety and the security of life,
person or property, or because of unreasonable dif culty of operation in
compliance herewith, every person operating a motor vehicle or an
animal-drawn vehicle on a highway shall pass to the right when meeting
persons or vehicles coming toward him, and to the left when overtaking
persons or vehicles going the same direction, and when turning to the left
in going from one highway to another, every vehicle shall be conducted to
the right of the center of the intersection of the highway.

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SECTION 39. Overtaking a Vehicle. – The driver of any motor vehicle
overtaking another vehicle proceeding in the same direction shall pass at a
safe distance to the left thereof, and shall not again drive to the right side
of the highway until safely clear of such overtaken vehicle except that on a
highway, within a business or residential district, having two or more lanes
for the movement of traf c in one direction, the driver of a vehicle may
overtake and pass another vehicle on the right. Nothing in this section shall
be construed to prohibit a driver overtaking and passing, upon the right,
another vehicle which is making or about to make a left turn.

SECTION 40. Driver to Give Way to Overtaking Vehicle. – The driver of a

vehicle about to be overtaken and passed by another vehicle approaching
from the rear shall give way to the overtaking vehicle on suitable and
audible signal being given by the driver of the overtaking vehicle, and shall
not increase the speed of his vehicle until completely passed by the
overtaking vehicle.
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 SECTION 41. Restrictions on Overtaking and Passing. –

(a) The driver of a vehicle shall not drive to the left side of the center line of a highway in overtaking or passing another
vehicle proceeding in the same direction, unless such left side is clearly visible, and is free of oncoming traf c for a
suf cient distance ahead to permit such overtaking or passing to be made in safety.

(b) The driver of a vehicle shall not overtake or pass another vehicle proceeding in the same direction, when
approaching the crest of a grade, not upon a curve in the highway, where the driver’s view along the highway is
obstructed within a distance of ve hundred feet ahead, except on a highway having two or more lanes for movement of
traf c in one direction where the driver of a vehicle may overtake or pass another vehicle: Provided, That on a highway
within a business or residential district, having two or more lanes for movement of traf c in one direction, the driver of a
vehicle may overtake or pass another vehicle on the right.

(c) The driver of a vehicle shall not overtake or pass any other vehicle proceeding in the same direction, at any railway
grade crossing, nor at any intersection of highways unless such intersection or crossing is controlled by traf c signal, or
unless permitted to do so by a watchman or a peace of cer, except on a highway having two or more lanes for
movement of traf c in one direction where the driver of a vehicle may overtake or pass another vehicle on the right.
Nothing in this section shall be construed to prohibit a driver overtaking or passing upon the right another vehicle which
is making or about to make a left turn.

(d) The driver of a vehicle shall not overtake or pass, or attempt to pass, any other vehicle, proceeding in the same
direction, between any points indicated by the placing of of cial temporary warning or caution signs indicating that men
are working on the highway.

(e) The driver of a vehicle shall not overtake or pass, or attempt to overtake or pass, any other vehicle proceeding in the
same direction in any “no-passing or overtaking zone.”

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SECTION 42. Right of Way. – (a) When two vehicles approach or enter an intersection at
approximately the same time, the driver of the vehicle on the left shall yield the right of way to
the vehicle on the right, except as otherwise hereinafter provided. The driver of any vehicle
traveling at an unlawful speed shall forfeit any right of way which he might otherwise have
hereunder.

(b) The driver of a vehicle approaching but not having entered an intersection, shall yield the right
of way to a vehicle within such intersection or turning therein to the left across the line of travel
of such rst-mentioned vehicle, provided the driver of the vehicle turning left has given a plainly
visible signal of intention to turn as required in this Act.

(c) The driver of any vehicle upon a highway within a business or residential district shall yield the
right of way to a pedestrian crossing such highway within a crosswalk, except at intersections
where the movement of traf c is being regulated by a peace of cer or by traf c signal. Every
pedestrian crossing a highway within a business or residential district, at any point other than a
crosswalk shall yield the right of way to vehicles upon the highway.

(d) The driver of a vehicle upon a highway shall bring to a full stop such vehicle before traversing
any “through highway” or railroad crossing: Provided, That when it is apparent that no hazard
exists, the vehicle may be slowed down to ve miles per hour instead of bringing it to a full stop.

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SECTION 43. Exception to the Right of Way Rule. – (a) The driver of a
vehicle entering a highway from a private road or drive shall yield the right of
way to all vehicles approaching on such highway.

(b) The driver of a vehicle upon a highway shall yield the right of way to
police or re department vehicles and ambulances when such vehicles are
operated on of cial business and the drivers thereof sound audible signal of
their approach.

(c) The driver of a vehicle entering a “through highway” or a “stop

intersection” shall yield the right of way to all vehicles approaching in either
direction on such “through highway”: Provided, That nothing in this subsection
shall be construed as relieving the driver of any vehicle being operated on a
“through highway” from the duty of driving with due regard for the safety of
vehicles entering such “through highway” nor as protecting the said driver
from the consequence of an arbitrary exercise of such right of way.

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SECTION 44. Signals on Starting, Stopping or Turning. –

(a) The driver of any vehicle upon a highway, before starting,

stopping or turning from a direct line, shall rst see that such
movement can be made in safety, and if any pedestrian may be
affected by such movement, shall give a clearly audible signal by
sounding the horn, and whenever the operation of any other
vehicle approaching or following may be affected by such
movement, shall give a signal plainly visible to the driver of such
other vehicles of the intention to make such movement.

(b) The signal herein required shall be given by means of

extending the hand and arm beyond the left side of the vehicle,
or by an approved mechanical or electrical signal device.
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SECTION 45. Turning at Intersections. – (a) The driver of a vehicle intending
to run to the right at an intersection shall approach such intersection in the
lane for traf c nearest to the right-hand side of the highway and, in turning,
shall keep as close as possible to the right-hand curb or edge of the highway.

(b) The driver of a vehicle intending to turn to the left shall approach such
intersection in the lane for traf c to the right of and nearest to the center
line of the highway, and, in turning, shall pass to the left of the center of the
intersection, except that, upon highways laned for traf c and upon one-way
highways, a left turn shall be made from the left lane of traf c in the direction
in which the vehicle is proceeding.

(c) For the purpose of this section, the center of the intersection shall mean
the meeting point of the medial lines of the highways intersecting one
another, except when it is occupied by a monument, grass plot or any
permanent structure, other than a traf c control device.

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SECTION 46. Parking Prohibited in Speci ed Places. – No driver shall park a vehicle, or permit
it to stand, whether attended or unattended, upon a highway in any of the following places:

(a) Within an intersection.

(b) On a crosswalk.

(c) Within six meters of the intersection of curb lines.

(d) Within four meters of the driveway entrance to and re station.

(e) Within four meters of a re hydrant.

(f) In front of a private driveway.

(g) On the roadway side of any vehicle stopped or parked at the curb or edge of the highway.

(h) At any place where of cial signs have been erected prohibiting parking.

SECTION 47. Parked Vehicle. – Whenever a motor vehicle is parked unattended on any
highway, the driver thereof must turn off the ignition switch and stop the motor and notch
effectively the hand brake.

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SECTION 48. Reckless Driving. – No person shall operate a motor
vehicle on any highway recklessly or without reasonable caution
considering the width, traf c, grades, crossing, curvatures, visibility and
other conditions of the highway and the conditions of the atmosphere
and weather, or so as to endanger the property or the safety or rights of
any person or so as to cause excessive or unreasonable damage to the
highway.

SECTION 49. Right of Way for Police and Other Emergency Vehicles. –
Upon the approach of any police or re department vehicle, or of an
ambulance giving audible signal, the driver of every other vehicle shall
immediately drive the same to a position as near as possible and parallel
to the right-hand edge or curb of the highway, clear of any intersection
of highways, and shall stop and remain in such position, unless otherwise
directed by a peace of cer, until such vehicle shall have passed.

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SECTION 50. Tampering with Vehicles. – No unauthorized person shall sound the horn, handle
the levers or set in motion or in any way tamper with a damage or deface any motor vehicle.

SECTION 51. Hitching to a Vehicle. – No person shall hang on to, or ride on, the outside or
the rear end of any vehicle, and no person on a bicycle, roller skate or other similar device, shall
hold fast to or hitch on to any moving vehicle, and no driver shall knowingly permit any person
to hang on to or ride, the outside or rear end of his vehicle or allow any person on a bicycle,
roller skate or other similar device to hold fast or hitch to his vehicle.

SECTION 52. Driving or Parking on Sidewalk. – No person shall drive or

park a motor vehicle upon or along any sidewalk, path or alley not
intended for vehicular traf c or parking.

SECTION 53. Driving While Under the In uence of Liquor or Narcotic Drug. – No person
shall drive a motor vehicle while under the in uence of liquor or narcotic drug.

SECTION 54. Obstruction of Traf c. – No person shall drive his motor vehicle in such a
manner as to obstruct or impede the passage of any vehicle, nor, while discharging or taking on
passengers or loading or unloading freight, obstruct the free passage of other vehicles on the
highway.

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SECTION 55. Duty of Driver in Case of Accident. – In the event that
any accident should occur as a result of the operation of a motor vehicle
upon a highway, the driver present, shall show his driver’s license, give his
true name and address and also the true name and address of the
owner of the motor vehicle.

No driver of a motor vehicle concerned in a vehicular accident shall

leave the scene of the accident without aiding the victim, except
under any of the following circumstances:

1. If he is in imminent danger of being seriously harmed by any person or

persons by reason of the accident;

2. If he reports the accident to the nearest of cer of the law; or

3. If he has to summon a physician or nurse to aid the victim.

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 PRESUMPTION OF
NEGLIGENCE

Article 2185. 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 traf c regulation.

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EXERCISES

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 I
Pia Wortsbak, a sales girl in a ower shop at the Ayala Station
of the Metro Rail Transit (MRT) bought two tickets, one for
her ride to work and another for her ride home. She got to
her ower shop where she usually worked from 8am to 5pm.
At about 3pm, while Pia was attending to her duties at the
ower shop, two crews of the MRT got into a ght near the
ower shop, causing injuries to Pia in the process. Can Pia sue
the MRT for contractual breach as she was within the MRT
premises where she would shortly take her ride home?
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 II
Alodya owned and controlled Beach Construction Company.
Acting for the company, Alodya contracted the construction of
a building. Without rst installing a protective net atop the
sidewalk adjoining the construction site, the company
proceeded with the construction work. One day, a heavy piece
of lumber fell from the building. It smashed a taxicab which at
that time had gone off road and onto the sidewalk in order to
avoid the traf c. The taxicab passenger died as a result. Could
the heirs hold the taxicab owner and driver liable? Explain.
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 III
During the last election, Mr. VVN, a congressional candidate in Cebu,
chartered the helicopter owned by Leni Mining Corporation (LMC) for use
in the election campaign. VVN paid LMC the same rate normally charged by
companies regularly engaged in the plane chartering business. In the charter
agreement between LMC and VVN, LMC expressly disclaimed any
responsibility for the acts or omissions of its pilot or for the defective
condition of the plane’s engine. The helicopter crashed killing VVN.
Investigations disclosed that the pilot’s error was the cause of the accident.

LMC now consults you on its possible liability for VVN’s death in the light of
the above ndings. How would you reply to LMC’s query?
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 IV
CheCheLex Railways Transit (CRT) provides train service for a fee to
commuters from Cebu City to Cordova. Commuters are required to
purchase tickets and then proceed to designated loading and unloading
facilities to board the train. Kai Shoti purchased a ticket for Cordova and
entered the station. While waiting, he had an altercation with the security
guards of CRT leading to a st ght. Kai fell on the railway just as a train
was entering the station. Kai was run over by the train and died.

In the action for damages led by the heirs of Kai Shoti, CRT interposed
lack of cause of action, contending that the mishap occurred before Kai
boarded the train and that it was not guilty of negligence. Decide.
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 V
Orco Trucking, a small company, operates two trucks for hire on
selective basis. It caters to only a few customers, and its trucks do not
make regular or scheduled trips. It does not even have a certi cate of
public convenience. On one occasion, Heman contracted Orco Trucking
to transport, for a fee, 100 sacks of rice from Danao to Oslob.
However, Orco failed to deliver the cargo, because its truck was
hijacked when the driver stopped in San Fernando to visit his girlfriend.

May Heman hold Orco Trucking as a common carrier and therefore

liable?

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 RECAP : GENERAL CONCEPTS
CC, Passenger
Carriage of:
Contract
of
CC, Shipper,
Transportation Common* v. Private Carrier *Consignee
- Contract of
Carriage

Affreightment

Charter
Party
Demise/Bareboat PERFECTION

Contract
of
Governing Laws: Common Contract to
Carriage: Carry
Goods +
Civil Code Passengers

Code of Commerce
Speci c Modes of
COGSA Perfection
Other
RA 4136 - on overland transportation Contracts
Warsaw now replaced by MC99
Convention for the uni cation of certain rules
for international carriage by air
done at Montreal on 28 May 1999
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CONCLUSIVE PRESUMPTION
THAT A VEHICLE IS FOR HIRE

• A vehicle habitually used to carry freight not

belonging to the registered owner thereof, or
passengers not related by consanguinity or af nity
within the fourth civil degree to such owner, shall
be conclusively presumed to be "for hire."

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REGISTERED OWNER RULE
• The person who is the registered owner of a
vehicle is liable for any damage caused by the
negligent operation of the vehicle although the
same was already sold or conveyed to another
person at the time of the accident.

• This is subject to the right of recourse by the

registered owner against the transferee or buyer.
103
REGISTERED OWNER RULE,
APPLICATION
• RO is not liable if the vehicle was taken from his garage
without his knowledge and consent.

• ROR applies even if the RO leased the vehicle to another

who is the actual operator.

• ROR applies in a nancial lease.

• ROR applicable whenever the persons involved are

engaged in what is known as the “kabit system.”
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 REGISTRATION
• PRINCIPAL PURPOSE(S):

• Identi cation of the vehicle and of the operator, in

case of accident;

• 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.
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 KABIT SYSTEM
• An arrangement whereby a person who has been granted a certi cate of
public convenience allows other persons who own motor vehicles to operate
them under his license, sometimes for a fee or percentage of the earnings.

• Although the parties to such an agreement are not outrightly penalized by

law, the KS is invariably recognized as being contrary to public policy and
therefore void and inexistent under Art. 1409 of the Civil Code. (Aberlado
Lim, et.al., v. CA, et.al., No. 125817, 16 January 2002; Baliwag Transit, Inc. v. CA,
147 SCRA 82 [1987])

• May also be applied to vessels and aircrafts that are covered by certi cates of
public convenience and necessity.

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 PARTIES IN KABIT SYSTEM
COVERED BY PARI DELICTO RULES

• Ex pact illicito non oritur action – No action arises

out of an illicit bargain.

• Having entered into an illegal contract, parties to

the kabit system cannot seek relief from the
courts, and each must bear the consequences of
his acts. (Lita Enterprises v. Intermediate Appellate
Court, No. 64693, 27 April 1984, 129 SCRA 79)
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 TEJA MARKETING V. IAC,
148 SCRA 347, 9 MARCH 1987
• Facts: Petitioner was constrained to le an action for damages
because private respondent allegedly failed to pay the balance
of the purchase price of its motorcycle sold. The motorcycle
which was used for sidecar remained under the name of
petitioner and operated under its franchise under an
arrangement called ‘kabit system’.

• Held: Dismissal of case sustained. Both parties are in pari

delicto. The court will not aid either party to enforce an illegal
contract.
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 PROBLEM:
• Tillanis owns a passenger jeepney covered by Certi cate of Public Convenience. He allowed
Gordy to use its Certi cate of Public Convenience for a consideration. Gordy therefore was
operating the passenger jeepney under the same Certi cate of Public Convenience under
the name of Tillanis. The passenger jeepney met an accident. Who will be liable?

A. Gordy, the one actually operating the jeepney, will be liable to the injured party.

B. Tillanis will be the one liable to the injured party despite the fact that it is Gordy
who is actually operating the jeepney, because while the Kabit System is tolerated,
the public should not be inconvenienced by the arrangement.

C. Tillanis will not be held liable if he can prove that he is not the owner anymore.

D. Public policy dictates that the real owner, even not the registered one, will be held
liable.

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 PROBLEM 2:
Clea purchased an Isuzu passenger jeepney from Harvy, a holder of a certi cate of
public convenience for the operation of public utility vehicle plying the Calamba Los
Baños route. While Clea continued offering the jeepney for public transport services
she did not have the registration of the vehicle transferred to her name. Neither did
she secure for herself a certi cate of public convenience for its operation. Thus, per
the records of the Land Transportation Franchising and Regulatory Board, Harvy
remained its registered owner and operator. One day, while the jeepney was
traveling southbound, it collided with a ten-wheeler truck owned by Malcolm. The
driver of the truck admitted responsibility for the accident, explaining that the truck
lost its brakes. Clea sued Malcolm for damages, but the latter moved to dismiss the
case on the ground that Clea is not the real party in interest since she is not the
registered owner of the jeepney. Resolve the motion with reasons.

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 ANSWER
• Suggested Answer: The motion to dismiss should be denied. The rule enjoining the registered
owner of the motor vehicle under the kabit system from proving another person is the owner
is intended to protect third parties. Since this case does not involve liability of the
registered owner to third parties, and it is the owner of the motor vehicle who is seeking
compensation for damages, the rule is not applicable. (Lim v. CA, 373 SCRA 394, 2002).

• Alternative Answer: The MTD is misplaced. Clea is a real party in interest who stands to be
bene tted or injured by the result of the action. Even if not the registered owner of the
jeepney, it was she who was wronged and was seeking compensation for the damage to her
vehicle. Moreover, the case arose from the admitted negligence of Malcolm’s driver where
representation with respect to the ownership and operation of the passenger jeepney was
not necessary. Besides the riding public was not inconvenienced by the illegal arrangement
between Clea and Harvy. (Abelardo Lim and Esmadito Gunnaban v. CA, 373 SCRA 394,
2002).

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 BOUNDARY SYSTEM
• In land transportation where the boundary system may be
implemented by the common carrier, the carrier cannot
escape liability by claiming that the driver is a lessee.

• The carrier cannot exempt himself on the ground that he

is a lessor because to tolerate such position would not
only abet agrant violations of the Public Service Law, but
also place the riding public at the mercy of reckless and
irresponsible drivers.
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OBLIGATIONS OF THE
PARTIES

113
 DUTIES OF THE
COMMON CARRIER
1. To accept passengers and goods without discrimination;

2. To seasonably deliver the goods or bring the passenger

to the destination;

3. To deliver the goods to the proper person; and

4. To exercise extraordinary diligence in the performance

of its duties.
114
 OBLIGATION OF
SHIPPER OR PASSENGER

1. Duty to exercise due diligence.

2. Duty to pay the amount of freight or passage on

time.

115
 DUTY TO ACCEPT
• A common carrier is duty bound to accept passengers
or cargo without any discrimination.

• The present laws forbid failures or refusals to receive

persons or property for carriage which have the effect
of giving an unreasonable or unnecessary preference or
advantage to any person, locality or particular kind of
traf c to any undue or unreasonable prejudice or
discrimination.
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FACTORS TO CONSIDER IN
ACCEPTING OR REFUSING:
A. Suitability of the Vessel for the Transportation of such products;

B. Reasonable possibility of danger or disaster resulting from their

transportation in the form and under the conditions in which
they are offered for carriage;

C. General Nature of the Business done by the carrier;

D. All the attendant circumstances which might affect the question

of the reasonable necessity for the refusal by the carrier to
undertake the transportation of this class of merchandise.
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GROUNDS FOR REFUSAL
1. When goods sought to be transported are dangerous objects, or substances including
dynamites and other explosives;

2. Goods are un t for transportation;

3. Acceptance would result in overloading;

4. Goods are considered contrabands or illegal goods;

5. Goods are injurious to health;

6. Goods will be exposed to untoward danger like ood, capture by enemies and the like;

7. Goods like livestock will be exposed to diseases;

8. Strike; and

9. Failure to tender goods on time.

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RULE ON HAZARDOUS AND
DANGEROUS SUBSTANCES
• A carrier may be granted authority to carry goods
that are by nature dangerous and hazardous. A
carrier specially designed to carry dangerous
chemicals and goods may be granted CPC for
such purpose.

• All other carriers may validly refuse to accept such

cargoes.
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RULES ON GOODS THAT ARE
UNFIT FOR TRANSPORT
• GENERAL: Carriers may refuse to accept goods that are un t for
transportation.

• Un t:

• Improper Packaging; or

• Defect in their Containers

• However, carrier may choose to transport such goods and limit

its liability by stipulation.
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 RELEVANT PROVISIONS
• ARTICLE 356 (COC). Carriers may refuse packages which appear un t
for transportation; and if the carriage is to be made by railway, and the
shipment is insisted upon, the company shall transport them, being
exempt from all responsibility if its objections, is made to
appear in the bill of lading.

• ARTICLE 1742 (CCP).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.
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DUTY TO DELIVER THE GOODS
• General Rule:

• IN THE ABSENCE OF A SPECIAL CONTRACT,

Carrier is not an insurer against delay in transportation of
goods. When a common carrier undertakes to convey the
goods, the law implies a contract that they shall be delivered at
destination within a reasonable time.

• Exception:

• When there is agreement as to the time of delivery.

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 RULES ON DELAY ON OVERLAND
TRANSPORTATION (CODE OF COMMERCE)

Art. 358, Code of Commerce:

If there is no period xed for the delivery of the

goods the carrier shall be bound to forward them in
the rst shipment of the same or similar
goods which he may make to the point of delivery;
and should he not do so, the damages caused by the
delay should be for his account.
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 DELAY WHEN PERIOD IS FIXED

• Art. 370. If a period has been xed for the delivery of

the goods, it must be made within such time, and,
for failure to do so, the carrier shall pay the indemnity
stipulated in the bill of lading, neither the shipper nor the
consignee being entitled to anything else. If no indemnity
has been stipulated and the delay exceeds the time
xed in the BL, the carrier shall be liable for the
damages which the delay may have caused.
124
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 WHEN DELAY IS DEEMED
REASONABLE
• Ordinary Goods – Expected date of arrival re ected in the bill of
lading may be considered. Thus, if the estimated date of arrival is April
3 of a given year, delay in the delivery of goods spanning a period of
more than 2 months is considered unreasonable. [Maersk Line v. CA,
May 17, 1993]

• Perishable Goods – Great diligence should be used in

forwarding such property with dispatch and haste; and
where a delay of 2 or 3 days, the property is damaged, the carrier may
be held liable for the damage. [Dissenting: Tan Chiong Sian v. Inchausti,
GR 6092, Mar. 8, 1912]
125
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CONSEQUENCES OF DELAY
1. EXCUSABLE DELAYS:

A. Suspend, but do not generally terminate, the contract of carriage, and when the cause is
removed, the master must proceed with the voyage and make delivery.

B. Vessel continues to be liable as a common carrier, not a warehouseman.

2. INEXCUSABLE DELAY:

A. Carrier is still liable even if natural disaster cause the damage (A1740, NCC);

B. Stipulation limiting the liability of the carrier is inoperative (A1747, NCC);

C. Carrier is liable for the damages caused by the delay;

D. Consignee may exercise his right to abandon under Article 371 of the Code of Commerce.
126
FIVE TYPES OF ABANDONMENT
UNDER MERCANTILE LAW
1. WHEN DAMAGE IS SO GREAT [Art. 365, Code of Commerce]

2. WHEN GOODS ARRIVE BEYOND THE DATE AGREED ON [Art. 371,

Code of Commerce]

3. ABANDONMENT BY SHIPOWNER WHEN LIABILITY EXCEEDS VALUE

OF VESSEL [Art. 578, Code of Commerce]

4. DAMAGE TO GOODS IN LIQUID FORM [Art. 687, Code of Commerce]

5. CONSTRUCTIVE LOSS UNDER THE INSURANCE CODE [Sub-Title 1-H,

Sections 140-157, Insurance Code]

127
 1ST TYPE:
WHEN DAMAGE IS SO GREAT
• Where the shipper ships goods and goods arrive in damaged
condition and damage is so great that shipper may not use
goods for the purpose for which they have been shipped, the
shipper may exercise right of abandonment.

• NOTICE TO THE CARRIER IS SUFFICIENT – consent of

carrier is not necessary and once perfected, the ownership
over damaged goods passes to the carrier and carrier must
pay the shipper market value of goods at point of destination.
128
 2ND TYPE:
WHEN GOODS ARRIVE
BEYOND DATE AGREED ON
• Under this set-up, shipper and carrier agreed in advance that cargo must
arrive on a certain date.

• The date has passed but the cargo has not yet arrived due to carrier’s fault.

• Shipper/consignee may exercise the right of abandonment by NOTIFYING

the carrier.

• Once carrier has been noti ed, ownership over the goods undelivered passes
to carrier.

• But carrier must pay shipper market value of the goods at the point of
destination.
129
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 PROCEDURE IN ABANDONMENT
BY CONSIGNEE IN CASE OF DELAY
(TYPE 2)
• Art. 371. In case of delay through the fault of the carrier referred to in the
preceding articles, the consignee may leave the goods transported in the hands
of the former, advising him thereof in writing before their arrival at the point of
destination.

• When this abandonment takes place, the carrier shall pay the full value of the
goods as if they had been lost or mislaid.

• If the abandonment is not made, the indemni cation for the losses and damages
by reason of the delay cannot exceed the current price which the goods
transported would have had on the day and at the place in which they should
have been delivered; this same rule is to be observed in all other cases in which
this indemnity may be due.
130
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 OTHER CODE OF
COMMERCE PROVISIONS
ARTICLE 372.    The value of the goods which the carrier must pay in cases if
loss or misplacement shall be determined in accordance with that declared in
the bill of lading, the shipper not being allowed to present proof that among
the goods declared therein there were articles of greater value and money.

Horses, vehicles, vessels, equipment and all other principal and accessory
means of transportation shall be especially bound in favor of the shipper,
although with respect to railroads said liability shall be subordinated to the
provisions of the laws of concession with respect to the property, and to what
this Code established as to the manner and form of effecting seizures and
attachments against said companies.

131
ARTICLE 373.    The carrier who makes the delivery of the merchandise to the consignee by
virtue of combined agreements or services with other carriers shall assume the obligations of
those who preceded him in the conveyance, reserving his right to proceed against the latter if
he was not the party directly responsible for the fault which gave rise to the claim of the
shipper or consignee.

The carrier who makes the delivery shall likewise acquire all the actions and rights of those
who preceded him in the conveyance.  The shipper and the consignee shall have an
immediate right of action against the carrier who executed the transportation contract, or
against the other carriers who may have received the goods transported without reservation.

However, the reservation made by the latter shall not relieve them from the responsibilities
which they may have incurred by their own acts.

ARTICLE 374.      The consignees to whom the shipment was made may not defer the
payment of the expenses and transportation charges of the goods they receive after the
lapse of twenty-four hours following their delivery; and in case of delay in this payment, the
carrier may demand the judicial sale of the goods transported in an amount necessary to
cover the cost of transportation and the expenses incurred.

132
 3RD TYPE:
ABANDONMENT BY SHIPOWNER WHEN
LIABILITY EXCEEDS VALUE OF VESSEL
• Re ects the hypothecary nature of maritime transactions.

• Instances when vessel carries goods and goods are damaged.

• Liability of the carrier over the damage goods exceeds the value
of the vessel.

• Shipowner or ship agent may exercise right of abandonment by

simply NOTIFYING TO THE SHIPPER.

• Liability of the shipowner is now limited to the value of the vessel.

133
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 4TH TYPE:
DAMAGE TO GOODS IN LIQUID FORM
Charterers and shippers may abandon the merchandise damaged
if :

1. Cargo should consist of liquids;

2. The contents have leaked out;

3. What remains in the container is but ¼ of its content;

4. The cause was on account of inherent defect or fortuitous

event.
134
 5TH TYPE:
CONSTRUCTIVE LOSS
UNDER THE INSURANCE CODE

• Shipowner’s right of abandonment for constructive loss;

• Takes place when vessel suffers damage in excess of ¾ of its

insured value;

• Notice to Insurer from the insured is suf cient;

• Thereafter, ownership over the damaged vessel passes to the

insurer; and

• Insurer must pay insured as if it were an ACTUAL LOSS.

135
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 CHARACTERISTICS OF
ABANDONMENT
• It is unilateral right;

• It is perfected by mere notice;

• Once perfected, ownership over damaged goods

passes to carrier; and

• Carrier must pay the shipper market value of goods

at the point of destination
136
BAR, MERCANTILE LAW
[1979]
• Problem:

• A, in Manila, shipped on board a vessel of B, chairs to be used in the

moviehouse of consignee C in Cebu. No date for delivery or
indemnity for delay was stipulated. The chairs, however, were not
claimed promptly by C and were shipped by mistake back to Manila,
where it was discovered and re-shipped to Cebu. By the time the
chairs arrived, the date of inauguration of the moviehouse passed by
and it had to be postponed. C brings an action for damages against B
claiming loss of pro ts during the Christmas season when he
expected the moviehouse to be opened. Decide the case with reason.
137
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Suggested Answer:

• C may sue B for the loss of his pro ts provided

that ample proof thereof are presented in
court. The carrier is obligated to transport the
goods without delay. The carrier is liable if he is
guilty of delay in the shipment of cargo, causing
damages to the consignee.

138
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 RIGHT OF PASSENGER
IN CASE OF DELAY

• MUST READ:

• Code of Commerce: Art. 698

• MARINA Circular No. 2018-07

139
 BAR MERCANTILE LAW
[1975]
• If a shipper, without changing the place of delivery
changes the consignment of consignee of the
goods (after said goods had been delivered to the
carrier), under what condition will the carrier be
required to comply with the new order of the
shipper?

140
Suggested Answer:

• Art. 360 of the Code of Commerce provides that

if the shipper should change the consignee of the
goods without changing their destination, the
carrier shall comply with the new order provided
the shipper RETURNS TO THE CARRIER the bill
of lading and a new one is issued showing the
novation of the contract. However, all expenses
for the change must be paid by the shipper.

141
 CARRIER’S
DUTY TO EXERCISE
EXTRAORDINARY DILIGENCE

• Art. 1733 (NCC). 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.

142
• Such extraordinary diligence in the vigilance over
the goods is further expressed in Arts. 1734, 1735,
and 1745, Nos. 5, 6, and 7, while the extraordinary
diligence for the safety of the passengers is further
set forth in Arts. 1755 and 1756.

• Art. 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.
143
• The foregoing provisions in the Civil Code modify Arts. 363, 364 &
365 of the Code of Commerce:

• Art. 363 on the requirement of the carrier to deliver the goods

shipped in the same condition where they were found at the time
they were received; and

• Art. 364 on when damage is merely diminution in the value of the

goods, carrier’s liability shall be reduced to the payment of the
amount constituting the difference in value determined by experts.

• Art. 365 on instance when goods are rendered useless for sale and
consumption for the purposes they are destined, consignee may
not receive them and may demand only their value at the current
price of the day.
144
 PRESUMPTION OF
NEGLIGENCE
In case of loss of effects or cargo; or In case of death
or injury of passenger:

• Common carrier is presumed to be at fault;

• Unless, it can prove that it had observed

extraordinary diligence in the vigilance thereof.

145
BATANGAS TRANSPORT CO. V. CAGUIMBAL, ET AL.,
G.R. L-22985, JAN. 24, 1968

• In an action based on a contract of carriage, the court need not

make an express nding of fault or negligence on the part of the
carrier in order to hold it responsible to pay the damages
sought;

• It is suf cient that plaintiff shows: a) there exist a contract

between the passenger or the shipper and the
common carrier; and b) the loss, deterioration,
injury or death took place during the subsistence
of the contract.
146
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 DURATION OF
DUTY TO EXERCISE EXTRAORDINARY
DILIGENCE [CARRIAGE OF GOODS]
Art. 1736, NCC:

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 the
person who has a right to receive them, without prejudice
to the provisions of Art. 1738.
147
Art. 1737 (NCC):

The common carrier’s duty to observe extraordinary diligence

over the goods remains in full force and effect even when they
are temporarily unloaded or stored in transit, unless the shipper
or owner has made use of the right of stoppage in transitu.

Note: Right to stoppage in transitu is the right of the

unpaid seller who has parted with the possession of the goods,
when the buyer is or becomes insolvent, to stop them and
resume possession while they are in transit. The unpaid seller
will become entitled to the same rights to the goods, as if he
had never parted with possession. [Art. 1530, NCC]

148
Art. 1738 (NCC):

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.
149
 ART. 1736 ILLUSTRATED:
[MACAM V. CA, G.R. 125524]
• Facts:

• Ben-Mac Enterprises shipped on board MV Nen Jiang, represented

by local agent Wallem Shipping, 3,500 boxes of watermelons valued
at $5,950 and 1,611 boxed of fresh mangoes valued at $14,273
with Pakistan Bank (Hongkong) as consignee and Great Prospect
Co., Hongkong as Notify Party.

• In the BL, it was stipulated that ‘One of the Bills of Lading must be
surrendered duly endorsed in exchange for the goods or delivery
order’.
150



• As per letter of credit requirement, copies of the BL and
commercial invoices were submitted by Ben-Mac to SolidBank.
The latter then paid Ben-Mac the total value of the shipment.

• Upon arrival in Hongkong, the shipment was delivered directly

to GPC, not to Pakistan Bank and without the required BL
having been surrendered.

• GPC failed to pay Pakistan Bank. Pakistan Bank refused to pay

Ben-Mac through Solidbank.

• Since SolidBank already pre-paid Ben-Mac the value of the

shipment, it demanded payment from Wallem but was refused.
Ben-Mac was forced to refund SolidBank.
151
Held:

• We emphasize that the extraordinary responsibility of the

common carriers lasts until actual or constructive delivery of the
cargoes to the consignee or TO THE PERSON WHO HAS A
RIGHT TO RECEIVE THEM.

• Pakistan Bank was indicated in the BL as consignee whereas GPC

was the notify party. However, in the export invoices GPC was
clearly named as buyer/importer. Ben-Mac also referred to GPC
as such in his demand letter to Wallem.

• This premise draws us to conclude that the delivery to GPC as

buyer/importer which, conformably with Art. 1736 had, other than
the consignee, the right to receive them was proper.
152
 DURATION OF
DUTY TO EXERCISE DILIGENCE
[CARRIAGE OF PASSENGERS]
• For Trains: Starts from the moment the person who
purchases the ticket (or token or card) from the
carrier presents himself at the proper place and in a
proper manner to be transported with bona de
intent to ride the coach. Same for Ships & Aircrafts.

• For jeepneys/buses: Starts from the time the person

steps on the platform.
153

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 WHEN CONTRACT OF
CARRIAGE ENDS

• The relation of carrier does not cease at the

moment the passenger alights from the carrier’s
vehicle but continues until the passenger has had a
reasonable time or a reasonable opportunity to
leave the carrier’s premises.

154
 LA MALLORCA V. CA,
G.R. L-20761, JULY 27, 1966
• Facts:

• Plaintiffs, as husband and wife boarded Pambusco Bus No. 352 together
with their (3) minor daughters from San Fernando, Pampanga to Anao,
Mexico, Pampanga.

• All alighted at the designated place of unloading but Mariano, the father
had to return to the bus to get one of his bayong left under his seat.

• Unknown to him, his daughter Raquel followed him. She was ran over
by the bus when it started to run again.
155
• Held:

• 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 does not necessarily cease where the latter, after
alighting from the car, aids the carrier’s conductor in removing his baggage.

• The issue to be determined here is whether as to the child, who was

already led by the father to a place about 5 meters away from the bus, the
liability of the carrier for her safety under the contract of carriage also
persisted.

• In the present case, the father returned to the bus to get one of his
baggages which was not unloaded when they alighted from the bus.

• Raquel, the child that she was, must have followed the father.

156
• 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 even the father had to
jump down from the moving vehicle.

• It was at 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 required under Art. 1755.

• The presence of 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.
157
ABOITIZ SHIPPING V. CA,
G.R. 84458, NOV. 6, 1989
Facts:

• Anacleto was a passenger of MV Antonia from San Jose, Mindoro to Manila.

Upon reaching Pier 4, North Harbor, he disembarked from the ship by jumping
from the 3rd deck which is at level with the pier.

• After 1 hour when all the passengers have already disembarked and the crane
started unloading the cargoes, Anacleto went back to the vessel after realizing
that he left some of his cargoes there.

• It was while he was pointing to the crew the place where his cargoes were
loaded that the crane hit him. He later died. His heir sued Aboitiz for breach of
contract of carriage.
158
Held:

• In consonance with common shipping procedure as to the minimum

time of 1 hr. allowed for the passengers to disembark, it may be
presumed that the victim had just gotten off the vessel when he went
to retrieve his baggage.

• Yet, even if he had already disembarked an hour earlier, his presence in

petitioner’s premises was not without cause. The victim had to claim
his baggage which was possible only one (1) hour after the vessel
arrived since it was admittedly standard procedure in the case of
petitioner’s vessels that the unloading operations shall start only after
that time.

• Consequently, the victim Anacleto is still deemed passenger at the

time of his tragic death.
159
 DEFENSES OF
COMMON CARRIERS
[ART. 1734, NCC]- GOODS
1. Flood, storm, earthquake, lightning, or other natural disaster or calamity;

2. Act of 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.

• Note: The enumeration is exclusive; no other defense may be raised by the

Common Carrier.
160
 DEFENSE NO. 1:
FORTUITOUS EVENT
REQUISITES:

• Independent of human will;

• Impossible to foresee or if it can be foreseen, impossible to avoid;

• Must be such as to render it impossible for the obligor to ful ll

the obligation in a normal manner; and

• Obligor must be free from any participation in or the aggravation

of the injury [Lasam v. Smith, No. 19495, Feb. 2, 1924]
161

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 ARTICLE 1739, NCC:
• In order that the common carrier may be exempted from
responsibility, the natural disaster must have been the
proximate and only cause of the loss. However, the
common carrier must exercise due diligence to
prevent or minimize loss before, during and after
the occurrence of ood, storm or other natural disaster in order
that the common carrier may be exempted from liability for the
loss, destruction, or deterioration of the goods. The same duty is
incumbent upon the common carrier in case of an act of the public
enemy referred to in Article 1734, No. 2.
162
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 FIRE NOT A NATURAL
DISASTER OR CALAMITY
[COKALIONG V. UCPB GEN. INSURANCE, G.R. 146018, JUNE 25, 2003]

• Facts:

M/V Tandag sank after a crack from her auxiliary engine’s fuel tank caused the spurt
of fuel towards the heating exhaust manifold ignited a re in the engine room.

• Held:

Fire is not considered a natural disaster or calamity. This must be so as it arises

almost invariably from some act of man or by human means.

It does not fall within the category of an act of God unless caused by
lightning or by other natural disaster or calamity.

163
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 HIJACKING NOT AN
EXEMPTING CAUSE
• A Common Carrier can be held liable for failing to prevent a hijacking by frisking
passengers and inspecting their baggages, especially when it had received prior
notice of such threat. (Fortune Express v. CA, 305 SCRA 14)

• Under Art. 1745 (6), 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. (De Guzman v. CA, G.R. No. L-47822 December 22, 1988).

164
 FIRECRACKERS EXPLODING FROM
PASSENGER BAGGAGE: CARRIER EXCUSED
(NOCUM V. LTD, 30 SCRA 69)

• Facts:

One of the bus passengers had recrackers inside his bag. They exploded after another
passenger smoked cigarettes causing injuries to another passenger. The injured passenger
sought to recover from the carrier.

• Held:

Carrier not liable. The carrier cannot be expected to examine and search each and every
piece of baggage of passengers, otherwise the bus may not all together be able to leave.

This is only true so long as the cause of the accident was not
apparent and the carrier or its employees are not guilty of
negligence.

165
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 MECHANICAL DEFECTS
[NECESITO V. PARAS, G.R. NO. L-10605, 30 JUNE 1958 AND G.R. NO. L-10606, 30 JUNE
1958]

• Facts:

A Phil. Rabbit Bus was traveling fast. During the trip the driver sensed that the wheels
did not respond to the movement of the steering wheel.

The bus hit a rut (pothole) and it turned turtle, killing a passenger.

The mechanic of the bus company discovered that the worn-out gear of the steering
wheel had a crack, which could not be seen by the naked eye from the outside.

The bus company proved that the defect was attributable to General Motors,
manufacturer of the bus and that the defect could not have been discovered by
expert mechanics.

166
 RULE ON MECHANICAL
DEFECTS
• 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" (10
Am. Jur. 205, s, 1324; see also Pennsylvania R. Co. vs. Roy, 102 U. S. 451; 20 L. Ed. 141; Southern R. Co. vs.
Hussey, 74 ALR 1172; 42 Fed. 2d 70; and Ed Note, 29 ALR 788; Ann. Cas. 1916E 929).

167
• 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 in insurer of the safety of his passengers, should
nevertheless be held to answer for the aws of his equipment if such aws were at all
discoverable.

• R E S O L U T I O N (to the MR) , September 11, 1958, REYES, J. B. L., J.:

And in Son vs. Cebu Autobus Company, 94 Phil., 892, this Court held a common carrier liable
in damages to passenger for injuries cause by an accident due to the breakage of a faulty
drag-link spring.

It can be seen that while the courts of the United States are at variance on the question of a
carrier's liability for latent mechanical defects, the rule in this jurisdiction has been consistent
in holding the carrier responsible. This Court has quoted from American and English
decisions, not because it felt bound to follow the same, but merely in approval of the
rationale of the rule as expressed therein, since the previous Philippine cases did not enlarge
on the ideas underlying the doctrine established thereby.

168
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 YOBIDO V. CA
G.R. 113003, OCT. 17, 1997
• Held:

• The explosion of a new tire cannot by itself be

considered a fortuitous event to exempt the common carrier
from liability in the absence of showing on the part of the carrier that
other human factors that could have intervened to cause the blowout
of the new tire did not in fact occur.

• Moreover, a common carrier may not be absolved from liability in case

of force majeure or fortuitous event alone. It must still prove that it was
not negligent in causing the death or injury resulting from the accident.
169
 OTHER INVALID CAUSES
• Explosion – Damage to cargo from explosion of another cargo is
not ordinarily attributable to peril of the sea or accidents of
navigation particularly where it occurs after the vessel has ended
its voyage and is nally moored to unload;

• Worms & rats – Whenever the ship is damaged by worms

resulting in damage to cargo, the same cannot be cited as an
excuse. The same is true with respect to damage of cargo by rats
whether the cargo was directly damaged by the rats or by water
let in through holes gnawed by rats in the ship or her xtures.
170
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• Water Damage: Damage by sea water is not a valid excuse
where the water gains entrance through a port which had
been left open or insuf ciently fastened on sailing.

• Barratry: The shipowner cannot escape liability to third

persons if the cause of damage is barratry. It is an act
committed by the master or crew of the ship for some
unlawful or fraudulent purpose, contrary to their duty to
the owner. Intentional fraud or breach of trust or willful
violation of law is necessary to constitute barratry. Barratry
includes theft by the purser of a specie shipped on board
and fraudulently running the ship ashore.

171
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 RAYNERA V. HICENTA
306 SCRA 102 (1999)
• Held:

• Drivers of vehicles who bump the rear of

another vehicle must be presumed to be
the cause of the accident, unless contradicted by
other evidence, since the rear driver is deemed
to have the last clear chance of avoiding
the accident, and therefore deemed negligent.
172
 DEFENSE NO. 2:
PUBLIC ENEMY
• Presupposes the existence of an actual state of war, and refers to the government
of a foreign nation at war with country to which the carrier belongs.

• Thieves, rioters, robbers, and insurrectionists, thought at war with social order, are
not in a legal sense classed as public enemies.

• Reason for the defense: The exception concerning the acts of public
enemies is understandable because the government itself is called
upon to protect its subjects from loss or from such hazard and
private citizens have no power to furnish the security and
protection required.

• Public enemy is also an exception under COGSA.

173
 DEFENSE NOS. 3 & 4:
ACT OR OMISSION OF OWNER &
IMPROPER PACKING
• COGSA also provides for similar defense, i.e. carrier shall not
be liable for (1) wastage in bulk or weight or any other loss or
damage arising from inherent defect, quality or vice of goods,
(2) insuf ciency of packing, (3) insuf ciency or inadequacy of
the marks, or (4) latent defect not discoverable by due
diligence.

• However, common carriers are still required to exercise due

diligence to forestall or lessen the loss notwithstanding the
existence of improper packing.
174
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 ARTICLE 1742
• Defect is want or absence of something necessary for
completeness or perfection; a lack of something essential to
the proper use for the purpose for which a thing is used.

• Defectiveness is not synonymous with inferiority.

• Inferior means of poor quality, mediocre or second rate.

(Phil. Charter Insurance Corp. v. Unknown Owner of the
Vessel M/V National Honor)
175
 A.F. SANCHEZ BROKERAGE V. CA,
21 DECEMBER 2004, 447 SCRA 427.
• The carrier must receive the goods under protest;

• The acceptance with reservation regarding such defect

which must be duly noted in the bill of lading.

• If the carrier accepted the cargo without reservation

or without protest with respect to the alleged
defective package, it can be inferred that there was no
damage to the package at the time of acceptance.
176
 DEFENSE NO. 5:
ORDER OF PUBLIC AUTHORITY

• Requisite: Such public authority must had power

to issue the order.

• Defense is not available if: (1) the public authority

has no authority to issue the subject order, or (2)
if the public authority exceeded his authority.

177
 DE GUZMAN V. CA, G.R. NO.
L-47822, 22 DECEMBER 1988
It is important to point out that the above list of causes of loss, destruction or deterioration which
exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the
foregoing list, even if they appear to constitute a species of force majeure fall within the scope of Article
1735, which provides as follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence as required in
Article 1733. (Emphasis supplied)

This presumption, however, may be overthrown by proof of extraordinary diligence on the part of
private respondent.

The duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional
speci cation not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article
1745.

178
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Under Article 1745 (6), a common carrier is held responsible — and will not be
allowed to divest or to diminish such responsibility — even for acts of strangers like
thieves or robbers, except where such thieves or robbers in fact acted "with grave or
irresistible threat, violence or force." We believe and so hold that the limits of the duty
of extraordinary diligence in the vigilance over the goods carried are reached where
the goods are lost as a result of a robbery which is attended by "grave or irresistible
threat, violence or force.”

In these circumstances, we hold that the occurrence of the loss must reasonably be
regarded as quite beyond the control of the common carrier and properly regarded as
a fortuitous event. It is necessary to recall that even common carriers are not made
absolute insurers against all risks of travel and of transport of goods, and are not held
liable for acts or events which cannot be foreseen or are inevitable, provided that they
shall have complied with the rigorous standard of extraordinary diligence.

We, therefore, agree with the result reached by the Court of Appeals that private
respondent Cendana is not liable for the value of the undelivered merchandise which
was lost because of an event entirely beyond private respondent's control.

179
DEFENSES IN CARRIAGE
OF PASSENGERS
• The carrier’s PRIMARY defense is exercise of
extraordinary or utmost diligence.

• It is believed that the defenses mentioned in Article

1734 like fortuitous event or acts of a public enemy
(EXCEPT NO. 4) may be invoked against the passenger
or his heirs PROVIDED that UTMOST DILIGENCE is
exercised. However, the presumption under Article 1756
applies.
180
 CARRIER LIABLE FOR
ACTS OF ITS EMPLOYEES
• Unlike in quasi-delict, a common carrier
cannot escape liability by claiming the he
exercised due diligence in the selection and
supervision of the employee.

• It is not a defense that the employee acted

beyond the scope of his authority because
the riding public is not expected to inquire
from time to time before they board the
carrier whether or not the driver or any
other employee is authorized to drive the
vehicle or that said driver is acting within the
scope of his authority and observing the
existing rules and regulations required of him.
(Silverio Marchan, et.al. v. Arsenio Mendoza,
No. 24471, 30 August 1968, 24 SCRA 888)

• Willful acts of the employees include theft.

181
 YU CON V. IPIL
GR NO. L-10195, DEC. 29, 1916
Held:

• It is well and good that the shipowner be not held

criminally liable for such crimes or quasi-crimes; but he
cannot be excused from liability for the damage and
harm which, in consequence of those acts, may be
suffered by the third parties who contracted with the
captain, in his double capacity of agent and subordinate
of the shipowner himself.
182
• In maritime commerce, the shippers and passengers in making contracts with the
captain do so through the con dence they have in the shipowner who appointed
him; they presume that the owner made a most careful investigation before
appointing him, and above all, they themselves are unable to make such an
investigation, and even though they should do so, they could not obtain complete
security, inasmuch as the shipowner can, whenever he sees t, appoint another
captain instead.

• The shipowner is in the same case with respect to the members of the crew, for,
though he does not appoint directly, he expressly or tacitly, contributes to their
appointment.

• On the other hand, if the shipowner derives pro ts from the results of the choice
of the captain and the crew, when the choice turns out successful, it is also just
that he should suffer the consequences of an unsuccessful appointment, by
application of the rule of natural law contained in the Partidaz, viz., that he who
enjoys the bene ts derived from a thing must likewise suffer the losses that ensue
therefrom.

183
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 FABRE V. CA, 259 SCRA 426 (1996)
[ON DUE DILIGENCE IN SELECTION
AND SUPERVISION OF EMPLOYEES]
• Held:

• For a bus company, due diligence in selection of employees is not

satis ed by nding that the applicant possessed a professional
driver’s license. The employer should also examine the applicant for
his quali cations, experience and record of service.

• Due diligence in supervision, on the other hand, requires the

formulation of rules and regulations for the guidance of employees
and issuance of proper instructions as well as actual implementation
and monitoring of consistent compliance with the rules.
184
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 CARRIER ALSO LIABLE FOR
ACTS OF STRANGERS AND
OTHER PASSENGERS
• But subject to defense of EXERCISE BY THE
CARRIER OF diligence of a good father of a
family TO PREVENT OR STOP THE ACT OR
OMISSION.

• Defense is not available if the carrier’s driver allowed

another person who is not an employee or a regular
driver to take over the task of driving the vehicle.
185
 MARANAN V. PEREZ
20 SCRA 413
• Facts: A taxi driver tried to hold-up his passenger, who resisted and was killed.
His heirs sued based on culpa contractual against the taxi company, which
denied liability on the ground that the driver acted beyond the scope of his
authority.

• Held: It may be true that the taxi driver was acting beyond the scope of his
authority, but Art. 1759 of the Civil Code expressly provides that the owner is
liable for negligence of the employees even if such acts are beyond the scope of
his authority.

• Note: This case repealed the doctrine in De Gillaco v. Manila Railroad, 97 Phil.
884 which absolved the carrier for liability caused by its security guard who killed
one of its passengers while already off-duty.
186
MANILA RAILROAD V. BALLESTEROS
6 SCRA 641
• Facts: A bus of the Manila Railroad reached one of the towns along its
route. The bus driver stopped the bus and went down to answer a call
of nature. While the driver was outside the bus, one of the passengers
went into the driver’s seat and drove off the bus. It met an accident
causing injuries to other passengers.

• Held: Carrier is liable. Its driver is guilty of negligence in leaving the key
on the ignition. Had he taken the key with himself, the passenger could
not have driven off the bus. The carrier is liable for the injuries of other
passengers when the carrier’s employees could have prevented the
injuries through the exercise of the diligence of a good father of a family.
187
 RULES - PASSENGER
BAGGAGE
• CHECKED-IN BAGGAGE: Governed by the rules
discussed in Article 1754 requiring extraordinary
diligence. In other words, the rules that are applicable to
goods that are being shipped are applicable to baggage
delivered to the custody of the carrier.

• HAND CARRIED LUGGAGE: Rules under Articles

1998, 2000 to 2003 of the Civil Code apply (necessary
deposits)
188
 SARKIES TOURS PHIL. V. CA
280 SCRA 58
• Held:

• Where a common carrier accepts 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, and the common carrier is
responsible for the consequent loss of the baggage.
189
 PAL V. IAC
216 SCRA 334
• Held:

• Although the baggage of a passenger was eventually delivered to

him, that did not constitute a case of mere delay in delivery since
the baggage was not delivered at all to the passenger for the
purpose of the trip in contravention of a common carrier’s
undertaking to transport the goods from the place of embarkation
to the ultimate point of destination.

• The non-delivery of luggage during the entire length of passenger’s

stay abroad is a breach of carrier’s obligation.
190
 OBLIGATION OF
SHIPPER & PASSENGER
• The shipper and passenger have the corresponding obligation
to exercise due diligence in avoiding damage to the goods or
injury to himself.

• However, contributory negligence on the part of the

passenger is not a defense that will excuse the carrier from
liability. It will only mitigate such liability.

• BUT IF HIS CONTRIBUTORY NEGLIGENCE IS THE SOLE

AND PROXIMATE CAUSE, CARRIER IS ABSOLVED.
191
 RELEVANT CIVIL CODE
PROVISIONS
• Article 1741. If the shipper or owner merely contributed to the
loss, destruction or deterioration of the goods, the proximate
cause thereof being the negligence of the common carrier, the
latter shall be liable in damages, which however, shall be
equitably reduced.

• Article 1761. The passenger must observe the diligence of a good father of
a family to avoid injury to himself.

• Article 1762. The contributory negligence of the passenger does not

bar recovery of damages for his death or injuries, if the proximate cause thereof is
the negligence of the common carrier, but the amount of damages shall be
equitably reduced.
192
 PROXIMATE CAUSE

• Proximate cause is that which, in the natural and

continuous sequence, unbroken by an ef cient
intervening cause, produces injury and without
which the result would not have occurred. [Sabena
Belgian World Airlines v. CA, 255 SCRA 38]

193

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 ISAAC V. AMMEN TRANSPORT,
101PHIL. 1046 (ON CONTRIBUTORY
NEGLIGENCE)
• Facts: The road on which the bus was passing was wide enough for 2 buses only.
A passenger placed his elbow outside the window railing of the bus. An
oncoming bus hit the passenger’s elbow, injuring it in such a manner that it had
to be amputated.

• Held: Carrier is not liable because the proximate cause of the injury was the
passenger’s own contributory negligence. This is a complete defense to the
common carrier, and absolves it from liability.

• Note: While contributory negligence will only serve to diminish the liability of
the carrier under Art. 1761, NCC, the same will not apply if the proximate cause
of his injury is his contributory negligence and not that of carrier’s negligence.

194
 DOCTRINE ON
AVOIDABLE CONSEQUENCES

• The party suffering loss or injury must exercise the

diligence of a good father of a family to minimize
the damages resulting from the act or omission in
question. (Art. 2203, NCC).

195
 DOCTRINE OF
LAST CLEAR CHANCE
• A negligent defendant is held liable to a negligent plaintiff, or even to a plaintiff who has
been grossly negligent in placing himself in peril, if he, aware of the plaintiff ’s peril, or
according to some authorities, should have been aware of it in the reasonable exercise
of due care, had in fact an opportunity later than that of the plaintiff to avoid an
accident. (Bustamante, et.al. v. CA, No. 89880, 6 Feb. 1991, 193 SCRA 603)

• The principle of last clear chance applies in a suit between the owners and drivers of
colliding vehicles. (Phil. Rabbit Bus Lines, Inc. v. IAC, GR Nos. 66102-04, 30 Aug. 1990)

• It does not arise where a passenger demands responsibility from the carrier to enforce
its contractual obligations.

• It would be inequitable to exempt the negligent driver of the jeepney and its owner on
the ground that the other driver was likewise guilty of negligence.

196
 DOCTRINE ON
ASSUMPTION OF RISK
• That passengers must take such risks incident to the mode of travel he
takes since carriers are not insurers of the lives of their passengers.

• In air travel, adverse weather conditions or extreme climatic changes are

some of the perils involved, the consequence of which the passenger must
assume or expect. (Japan Airlines v. CA, GR No. 118664, Aug. 7, 1998).

• But there is no assumption of risk in case the passenger voluntarily

boarded a carrier that was overloaded.

• Also, there is no assumption of risk by the mere fact that the carrier
posted notices against such liability. (Art. 1757, NCC)
197
 YOBIDO V. CA
281 SCRA 1 (1997)
• Held:

• As a rule, when a passenger boards a common carrier, he takes the risks

incidental to the mode of travel he has taken, since after all, a carrier is not
an insurer of the safety of its passengers and is not bound absolutely and at
all events to carry them safely and without injury.

• However, when a passenger is injured or dies while traveling, the law under
Art. 1755 of the Civil Code presumes that the common carrier is negligent,
and therefore the burden of proof is upon such common carrier to prove
that it has exercised the extraordinary diligence required under the law to
avoid damage or injury to the passenger.
198
 CALALAS V. CA
G.R. 122039, MAY 31, 2000
• Facts: A student took a passenger jeepney operated by petitioner. As the
jeepney was lled to capacity of about 24 passengers, the student was given
by the conductor an extension seat. The jeepney stopped on its way to let a
passenger off and the student gave way to the outgoing passenger. Just as
she was doing so, a truck bumped the rear end portion of the jeepney. She
suffered injuries as a result.

• Held: Construing the taking of an extension seat as an implied assumption

of risk is akin to arguing that the injuries to the many victims of the
tragedies in our seas should not be compensated merely because those
passengers assumed a greater risk of drowning by boarding an overloaded
ferry.
199
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CANGCO V. MANILA RAILROAD
CO., G.R. 12191, OCT. 14, 1918
• Facts:

• Cangco was clerk of Manila Railroad with a monthly wage of

P25. In going to his workplace daily, he rode on the trains
from his town of San Mateo, Rizal.

• One day while returning home and while the train was
slowing down, he alighted from his coach but one of his feet
came in contact with a sack of watermelon causing him to fell
violently on the platform. He sustained serious injuries.
200
• Held: The test by which to determine whether the passenger has been guilty of negligence in
attempting to alight from a moving railway train, is that of ordinary reasonable care.

• It is to be considered whether an ordinarily prudent person, of the age, sex and condition of the
passenger, would have acted as the passenger acted under the circumstances disclosed by the
evidence.

• This care has been de ned to be, not the care which may or should be used by the prudent man
generally, but the care which a man of ordinary prudence would use under similar circumstance, to
avoid injury.

• Or, if we prefer to adopt the mode of exposition used by this court in Picart v. Smith (37 Phil.
809), we may say that the test is this: Was there anything in the circumstances surrounding the
plaintiff at the time he alighted from the train which would have admonished a person of average
prudence that to get off the train under the conditions then existing was dangerous?

• If so, the plaintiff should have desisted from alighting; and his failure so to desist was contributory
negligence.

• Our conclusion is that the conduct of the plaintiff in undertaking to alight while the train was yet
slightly under way was not characterized by imprudence and that therefore he was not guilty of
contributory negligence.

201
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• Plaintiff was earning P25 a month. His expectancy of life,
according to the standard mortality tables, is approximately
33-years.

• We are of the opinion that a fair compensation for the

damage suffered by him for his permanent disability is the sum
of P2,500, and that he is also entitled to recover of defendant
the additional sum of P790.25 for medical attention, etc.

• Note: Net Earning Capacity = Life Expectancy

[2/3 x 80 less the age of the plaintiff] x Gross
Annual Income less Living Expenses [computed
@ 50% of Gross Annual Income]

202
 DUTY TO PAY FREIGHT
• Rates charged by vessels for hire is now deregulated (R.A. 9295).

• However, on overland transportation, deregulated rates are

applied only to aircon buses.

• Person to pay: The shipper, or the consignee if carrier and

shipper stipulates in the BL.

• Time to pay: NCC is silent but Art. 374 of the COC provides for
24-hr period to pay the freight.
203
CARRIAGE OF PASSENGERS BY
SEA
• Check MARINA MC No. 112, 15 December 1995:

• Requires ticket outlets or booking of ces to be set up in

every ports of call of the vessel.

• Carrier bound to observe a “No Ticket, No Boarding Policy.”

• Carrier shall collect/inspect the passenger’s ticket within 1

hour from the vessel’s departure so as not to disrupt the
passengers who are either resting or sleeping.
204
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 CARRIER’S LIEN
• If consignee fails to pay the freight within the period prescribed, the
carrier may exercise its lien in accordance with Art. 375 of the Code of
Commerce.

• ARTICLE 375. The goods transported shall be especially bound to

answer for the cost of transportation and for the expenses and fees
incurred for them during their conveyance and until the moment of delivery.

• This special right shall PRESCRIBE EIGHT (8) DAYS AFTER THE DELIVERY
HAS BEEN MADE, and once prescribed, the carrier shall have no other
action than that corresponding to him as an ordinary creditor.
205
 DEMURRAGE
• In its strict sense, it is the compensation provided for in the contract
of affreightment for the detention of the vessel beyond the laytime
or that period of time agreed on for loading and unloading. It is
given to compensate the shipowner for the nonuse of the vessel.

• In its broad sense, every improper detention of a vessel may be

considered demurrage.

• Notice of arrival of vessels or conveyances, or of their placement for

purposes of unloading is often a condition precedent to the right to
collect demurrage charges
206
EXTRAORDINARY DILIGENCE

207
 RATIONALE
• A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all circumstances.

• This extraordinary diligence required of common carriers is calculated to

protect the passengers from the tragic mishaps that frequently occur in
connection with rapid modern transportation.

• This high standard of care is imperatively demanded by the preciousness of

human life and by the consideration that every person must in every way
be safeguarded against all injury. [Report of the Code Commission, pp.
35-36]
208
 HOW DUTY IS COMPLIED
• Source of common carrier’s legal liability is contract of carriage by binding
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 due
regard for all the circumstances.

• It is not enough to exercise ordinary diligence; what is required is

extraordinary diligence.

• T h e re i s, h owe ve r n o xe d d e n i t i o n o n w h a t
extraordinary diligence means. In most cases, exercise of
extraordinary diligence are given meaning by way of
illustrative examples.
209
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 DUTY EXTENDS TO
THIRD PERSONS
• Primarily, the duty is owed by the common carrier to its
passengers and cargoes.

• But, the duty also extends to:

• - the members of the crew or complement;

• - the pedestrians; and

• - even to the owners and passengers of other vehicles.

210
KAPALARAN BUS LINES V. CORONADO
GR 85331, AUG. 25, 1989
• Judicial notice is made on the gross negligence and the appalling disregard
of the physical safety and property of other so commonly exhibited today
by the drivers of passenger buses and similar vehicles on our highways.

• In requiring the highest possible degree of diligence from common carriers

and creating a presumption of negligence against them, the law compels
them to curb the recklessness of their drivers.

• While the immediate bene ciaries of the standard of extraordinary

diligence are, of course the passengers and owners of cargo carried by a
common carrier, they are not the only persons that the law seeks to
bene t.
211
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• For if common carriers carefully observed the statutory
standard of extraordinary diligence in respect of their own
passengers,

• They cannot help BUT SIMULTANEOUSLY BENEFIT

PEDESTRIANS AND THE OWNERS AND PASSENGERS
OF OTHER VEHICLES who are equally entitled to the safe
and convenient use of our roads and highways.

• The law seeks to stop and prevent the slaughter and maiming
of people (whether passenger or not) and the destruction of
property (whether freight or not) on our highways by buses,
the very size and power of which seem often to in ame the
minds of their drivers.
212
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EFFECT ON STIPULATION LOWER
THAN THE REQUIRED DEGREE
On Goods:

Art. 1744: A stipulation between the common carrier and the shipper or owner
limiting the liability of the former for the loss, destruction, or
deterioration of the goods to a degree less than extraordinary
diligence shall be valid, provided it be:

1. In writing, signed by the shipper or owner;

2. Supported by a valuable consideration other than the service

rendered by the common carrier; and

3. Reasonable, just and not contrary to public policy.

213
On passengers in general:

Art. 1757: The responsibility of a common carrier for the safety of

passengers as required in Articles 1733 and 1755 cannot be
dispensed with or lessened by stipulation, by the posting of notices,
by statements on tickets, or otherwise.

On gratuitous passengers:

Art. 1758: When a passenger is carried gratuitously, a stipulation

LIMITING THE COMMON CARRIER’S LIABILITY for negligence is
valid, BUT NOT FOR WILLFUL ACTS OR GROSS NEGLIGENCE.

The reduction of fare does not justify any limitation of the

common carrier’s liability.
214
EXTRAORDINARY DILIGENCE
IN CARRIAGE BY SEA

215
 WARRANTY OF VESSEL’S
SEAWORTHINESS
• First step in complying with the required extraordinary degree of
vigilance.

• Seaworthiness of vessel is impliedly warranted under the Insurance

Code and the Carriage of the Goods by the Sea Act (COGSA).

• Shippers when transacting with common carriers are not expected

to inquire into the vessel’s seaworthiness, genuineness of its license
and compliance with all maritime laws. Also true with passengers.

• The burden of proof on seaworthiness is with the carrier.

216
 SEAWORTHINESS DEFINED
• Generally, seaworthiness is that strength, durability, and
engineering skill made a part of a ship’s construction and
continued maintenance, together with a competent and
suf cient crew, which would withstand the vicissitudes
and dangers of the elements which might reasonably be
expected or encountered during her voyage without
loss or damage to her particular cargo. [Delsan
Transport Lines v. CA, GR 127897, Nov. 15, 2001]
217
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 STATUTORY PROVISIONS
SEAWORTHINESS
• Section 116, Code of Commerce: A warranty of
seaworthiness extends not only to the condition of the
structure of the ship itself, but requires that it be properly
laden, and provided with a competent master, a suf cient
number of competent of cers and seamen, and the
requisite appurtenances and equipment, such as ballasts,
cables and anchors, cordage and sails, food, water, fuel and
lights, and other necessary or proper stores and
implements for the voyage.
218
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• SEC. 9. SAFETY STANDARDS. All vessels operated
by domestic ship operators shall at all times be in
seawor thy condition, properly equipped with
adequate life-saving, communication, safety and other
equipment operated and maintained in accordance
with the standards set by MARINA, and manned by
duly licensed and competent vessel crew.

• The MARINA shall have the power to inspect vessels

and all equipment on board to ensure compliance
with safety standards. (Republic Act 9295, Domestic
Shipping Act of 2004)
219
• Sec. 3[1] COGSA: The carrier shall be bound before and at
the beginning of the voyage to exercise due diligence to –

(a) Make the ship seaworthy;

(b) Properly man, equip, and supply the ship;

(c) Make the holds, refrigerating and cooling chamber s,

and all other parts of the ship in which goods are carried, t
and safe for their reception, carriage and preservation.

• Sec. 3[2] COGSA: The carrier shall properly and carefully

load, handle, stow, carry, keep, care for, and discharge the
goods carried.
220

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SUMMATION OF THE REQUIREMENT
ON SEAWORTHINESS
• A vessel must have such degree of tness which an owner who
is exercising extraordinary diligence would require his vessel to
have at the commencement of the voyage, having regard to all
the probable circumstances of it.

• Seaworthiness includes tness of the vessel itself to withstand

the vicissitudes of the voyage, tness of the vessel to store the
cargoes and accommodate passengers to be conveyed and
adequately equipped with and properly manned with suf cient
and competent of cers and crew.
221
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 CARGOWORTHINESS
• Ship must not only be seaworthy. IT MUST ALSO BE CARGO
WORTHY.

• To be cargo-worthy, the ship must be an ef cient storehouse for

her cargo.

• Cargo-worthiness means that the vessel must be suf ciently strong

and equipped to carry the particular kind of cargo which she has
contracted to carry and her cargo must be so loaded that it is safe
for her to proceed on her voyage. [Lord Chorley and O.C. Siles,
Shipping Law, 6th Ed., p. 120]
222
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ADEQUATELY EQUIPPED AND
PROPERLY MANNED
• Competency of Masters or Captains is required.

• The rule is violated if a carrier embarked on a voyage with unlicensed captain or

patron.

• It cannot claim to have exercised extraordinary diligence by placing a person whose

navigational skill are questionable, at the helm of the ship.

• Quali cations of Masters, Captains and Crew of ships are governed by the Philippine
Merchant Rules and Regulations (PMRR).

• The MARINA prescribes rules which provide for indispensable equipment and facilities,
which include adequate exit doors, life boats, life vests, and other similar items. (MMC
No. 114; Sec. 9, RA 9295)

223
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 STATUTORY PROVISION
• Art. 609, Code of Commerce: Captains, masters or patrons of vessels
must be Filipinos, have legal capacity to contract in accordance with this
code, and proven skill, capacity, and quali cations necessary to command
and direct the vessel, as established by marine or navigation laws,
ordinances, or regulations, and must not be disquali ed according to the
same for the discharge of the duties of the position

• If the owner of a vessel desires to be the captain thereof, without having

the legal quali cations therefor, he shall limit himself to the nancial
administration of the vessel, and shall entrust the navigation to a person
possessing the quali cations required by said ordinances and regulations.
224
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 OVERLOADING
• Duty to exercise due diligence also includes the
duty to take passengers or cargoes that are within
the carrying capacity of the vessel.

• A carrier fails in this requirement where it allowed

on 1,004 passengers when it total passenger
capacity is only 864 [Negros Navigation v. CA, G.R.
110398, Nov. 7, 1997]
225
 PROPER STORAGE
• It is not enough that vessel must be suited for the cargo it contracted. It
must also be properly stored.

• Hence, where it was found out that the cause of explosion was due to the
improper storage of an acetylene cylinder which caught re which was
placed in the accommodation area near the engine room instead at the
storage, the common carrier was held to be negligent. [Phil. Home
Assurance Corp. v. CA, G.R. 106999, June 20, 1996]

• Extraordinary diligence must include safeguarding the shipment from

damage coming from natural elements like rainfall. (Aboitiz Shipping Corp. v.
Insurance Comp. of North America)
226 fi
 LIMITED LIABILITY
RULE
• The liability of the carrier in connection with losses
related to maritime contracts is con ned to the
vessel, which is hypothecated for such obligations
or which stands as the guaranty for their
settlement.

• ‘No vessel, no liability’ rule.

227
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 NEGLIGENCE OF
CAPTAIN AND CREW
• If the negligence of the captain or crew can be
traced to the fact that they are incompetent and
that the ship owner was negligent in their
selection, the Limited Liability Rule will not apply.

• If simple negligence only by the captain or crew,

who are otherwise competent to discharge their
duties, at the time of the accident, the rule applies.
228
 RULES ON PASSENGER
SAFETY AND COURTESY
• Failure to comply with MARINA rules and regulations
constitutes negligence on the part of the captain and crew and
of the shipowner.

• MARINA Memorandum Circular 112 provides that

‘passengers have the right to be treated by the carrier and its
employees with kindness, respect, cour tesy and due
consideration. The are entitled to be protected against personal
misconduct, injurious language, indignities and abuses from the
carrier and its employees.
229
 DEVIATION
• Art. 359, CoC: If there is an agreement between the shipper and the
carrier as to the road over which the conveyance is to be made, the
carrier may not change the route, unless it be by reason of force
majeure; and should he do so without this cause, he shall be liable for all
the losses which he goods he transports may suffer from any of other
cause, beside paying the sum which may have been stipulated for such
case.

• When on account of said cause of force majeure, the carrier had to take
another route which produced an increase in transportation charges, he
shall be reimbursed for such increase upon formal proof thereof.
230
 NOTE
• Stipulation in the airway bill that the carrier assumes no obligation to carry the
goods in a particular route or routes is binding.

• However, this condition only serves to insulate the carrier from liability in those
instances when changes in routes, ights, and schedules are clearly justi ed by
the peculiar circumstances of a particular case, or by general transportation
practices, customs and usages, or by contingencies or emergencies in aviation
such as weather turbulence, mechanical failure, requirements of national security
and the like.

• It is plainly incumbent upon the carrier to exercise its rights with due deference
to the rights, interests, and convenience of its customers. (Saludo, Jr. v. Court of
Appeals)
231
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 TRANSSHIPMENT
• 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.

• Notes: Improper deviation and Transshipment without consent of the shipper is

violation of the required standard of care. Improper deviation may be a valid
ground to deny a marine insurance claim; while transshipment of freight without
legal excuse is a violation of the contract of carriage.

232
EXTRAORDINARY DILIGENCE
IN CARRIAGE BY AIR

233
 HOW EXERCISED:
• IT MUST BE PROVIDED WITH COMPETENT AND WELL TRAINED CREW.

- Assigning a pilot in icted with a tumor for a long time fails in the
requirement.

• IT MUST FOLLOW THE DESIGNATED ROUTE.

- A plane did not take the designated route resulting to the tragic crash. The
tragic crash could have been avoided had it taken said designated route. (Abeto v.
PAL, 115 SCRA 489)

• IT MUST INSPECT ALL CARGO AND/OR BAGGAGE FOR LOADING. (R.A.

6235)
234
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 DUTY TO INSPECT
• Where a common carrier has reasonable ground to
suspect that the offered goods are of a dangerous
or illegal character, the carrier has the right to know
the character of such goods and to insist on an
inspection, if reasonable and practical under the
circumstances, as a condition of receiving and
transporting such goods. (Saludo v. CA, GR No.
95536, 23 March 1992)
235
• Thorough inspection of the briefcase of Plaintiff is deemed justi ed
pursuant to the directive of the FAA of the US brought about by the
tragic event that unfolded on Sept. 11, 2001. The fact that Plaintiff was
greatly inconvenienced by the fact that his attache case was subjected to
further inspection does not warrant imposition of liability because he
was not singled out and discriminated by the employees of the carrier.

• Protection of passengers must take precedence over convenience.

Nevertheless, the implementation of the security measures must be
ATTENDED BY BASIC COURTESIES.

• Hence, the carrier was made liable not for implementing the security
measure BUT FOR TREATING THE PLAINTIFF IN A RUDE, BRUSQUE,
ARROGANT AND DOMINEERING manner that caused his humiliation.
(Northwest Airlines v. Laya, GR 146020, 29 May 2002)

236

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BILL OF LADING

237
 DEFINITION

• A written acknowledgment, signed by the master

of a vessel or other authorized agent of the carrier,
that he has received the described goods from the
shipper, to be transported on the expressed terms
to the described place of destination, and to be
delivered there to the designated consignee or
parties. [70 Am Jur 2d 924]
238
 CONCEPT
• A bill of lading, like a passage ticket, is not necessary for the perfection of a contract of
carriage.

• Art. 354, Code of Commerce: In the absence of a bill of lading, disputes shall be determined
by the legal proofs which the parties may present in support of their respective claims,
according to the general provisions established in this Code for commercial transaction.

• Note: If involving common carrier, disputes without BL is governed by the Civil Code. In
respect to electronic commerce, it is governed by R.A. 8792 of the Electronic Commerce Act.

• The quoted provision under Art. 354 is subject to the modi cation that the primary governing
law is the New Civil Code. Hence, in the absence of any bill of lading, disputes shall be
determined on the basis of the provisions of the New Civil Code and suppletorily by the
Code of Commerce.

239
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 KINDS
• Negotiable or Non-negotiable Bill of Lading

• Clean Bill of Lading or Foul Bill of Lading

• On-board Bill or Received-For-Shipment Bill of Lading

• Spent Bill of Lading

• Through Bill of Lading

• Custody Bill of Lading

• Port Bill of Lading

240
 NEGOTIABLE OR NON-
NEGOTIABLE BILL OF LADING

• When delivered to the Order or to bearer,

negotiable.

• Otherwise, non-negotiable.

241
 CLEAN BILL OF LADING OR
FOUL BILL OF LADING

• When it does not contain any notation indicating

any defect in the goods – Clean BL

• Otherwise, it is Foul BL

242
ON-BOARD BILL OR RECEIVED-
FOR-SHIPMENT BILL OF LADING
• On-board BL is one in which it is stated that the
goods have been received on board the vessel
which is to carry the goods

• Received for shipment BL is one which it is stated

that the goods have been received for shipment
with or without specifying the vessel by which the
goods are to be shipped.
243
 CUSTODY BILL OF LADING

• One which states that the goods are already

received by the carrier but the vessel indicated
therein has not yet arrived at port.

244
 PORT BILL OF LADING

• One which state that the vessel indicated in the BL

that will transport the goods is already in the port.

245
 NATURE OF BILL OF LADING
• It operates both as:

1. A receipt for the goods shipped; and

2. A contract to transport and deliver the goods as stipulated therein. Being

a contract, it is the law between the parties who are bound by its terms
and conditions so long as they are not contrary to law, morals, good
customs, public order and public policy.

3. A third characteristic may be added - It is also a document of title

(which makes it a symbol of the goods) [Lorenzo Shipping Corp. V.
Chubb and Sons, Inc., GR 147724, 8 June 2004].
246
 EFFICACY OF BL
• Upon delivery to and acceptance by the shipper.

• It is presumed that the stipulations of the BL were known to the shipper, in the absence
of fraud, concealment or improper conduct, and he is generally bound by his
acceptance whether he reads the bill or not.

• A shipper who receives a BL without objection after an opportunity to inspect it, and
permits the carrier to act on it by proceeding with the shipment is presumed to have
accepted it as correct and assented to its terms.

• A BL accepted 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
terms.

247
 AS A CONTRACT OF
ADHESION
• BLs, like tickets constitute a class of contracts of adhesion.

• Construed liberally in favor of the passenger or shipper.

• But, they are not ENTIRELY prohibited.

• One who adheres to the contract is in reality free to reject it entirely.

• If he adheres, he gives his consent.

• Receipt of the BL or ticket is tantamount to adherence to the

stipulation embodied therein.
248
 QUA CHEE GAN V. LAW UNION AND
ROCK INSURANCE CO.,
25 SCRA 70 [1968]
• Held: The courts cannot ignore that nowadays, monopolies, cartels and
concentration of capital endowed with overwhelm economic power,
manage to impose upon parties dealing with them cunningly prepared
‘agreements’ that the weaker party may not change one with his
participation in the ‘agreement’ being reduced to the alternative ‘to take
it or leave it’, labelled since Raymond Sleilles ‘contracts of
adherence’ (contracts d’ adhesion) in contrast (of which policies of
insurance and international bill of lading are prime examples) obviously
cap for greater strictness and vigilance on the part of the court with
view to protecting the weaker party from abuses and imposition, and
prevent their becoming traps of the unwary.
249
 RULE ON PROTECTION OF
THE DISADVANTAGED
• Art. 24, NCC: In all contractual property or other
relations, when one of the parties is at the
disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age
and other handicap, the courts must be vigilant for
his protection.

250
 SERVANDO, ET AL. V. PHIL. STEAM
NAVIGATION CO.,
G.R. NO. L-36481-2 OCTOBER 23, 1982
• While it may be true that petitioner had not signed the plane ticket (Exh. '12'), he is
nevertheless bound by the provisions thereof.

• Such provisions have been held to be a part of the contract of carriage, and valid
and binding upon the passenger regardless of the latter's lack of knowledge or assent
to the regulation.

• It is what is known as a contract of 'adhesion', in regards which it has been said that
contracts of adhesion wherein one party imposes a ready made form of contract on
the other, as the plane ticket in the case at bar, are contracts not entirely prohibited.

• The one who adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent.

251
 PAROLE EVIDENCE RULE
• Sec. 9, Rule 130, Rules of Court: When the terms
of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon
and there can be, between the parties and their
successors in interest, no evidence of such terms
other than the contents of the written agreement.

• BL is covered by the parole evidence rule.

252
 EVERETT STEAMSHIP V. CA,
287 SCRA 496
• A stipulation printed in BL limiting common carrier’s liability for loss or
destruction of a cargo to a certain sum, unless shipper or owner
declare a greater value is sanctioned by law, particularly Arts. 1749 and
1750 of the Civil Code, provided such stipulation must be reasonable
and just under the circumstances and has been freely and fairly
agreed upon.

• The printing of such limiting stipulation in a small print on the BL does

not make the BL invalid nor can it be argued that the stipulation has
not been fairly and freely agreed upon as to be binding on the carrier.

253
• At most, the situation only calls for a greater vigilance on the
part of courts when dealing with such contracts of adhesion
in that said contracts must be carefully scrutinized in order to
shield the unwary (or weaker party) from deceptive schemes
contained in ready-made covenants.

• In this case, since the shipper is engaged in trading business, it

cannot be said to be ignorant of the business transactions it
entered into involving the shipment of its goods to its
customers.

• The shipper could have known, or should know the

stipulations in the BL and there it should have declared a
higher valuation of the goods shipped.
254
VALENZUELA HARDWOOD V. CA,
274 SCRA 642
• A stipulation in a charter party that the owners shall not be
responsible for loss, split, short-landing, breakages and any kind of
damage to the cargo, is NOT VOID as being contrary to public
policy, when it is clear from the arrangement that the carrier merely
acted as private carrier under the terms of the charter party.

• In a contract of private carriage, the parties may validly stipulate the

responsibility for the cargo rests solely on the charterer, exempting
the shipowner from liability for loss of or damage to the cargo
caused even by the negligence of the ship captain.

255
 EXCEPTIONS TO PAROLE
EVIDENCE RULE
However, a party may present evidence to modify, explain or add to the terms of the
written agreement if he puts in issue in his pleading:

a) An intrinsic ambiguity, mistake or imperfection in the written agreement;

b) The failure of the written agreement to express the true intent and agreement
of the parties thereto;

c) The validity of the written agreement; or

d) The existence of other terms agreed to by the parties or their successors in

interest after the execution of the written agreement.

The term “agreement” includes wills.

256
 SUBSTANTIVE PROVISIONS
• Art. 353, Code of Commerce: The legal evidence of the contract between the shipper and
the carrier shall be the bills of lading, by the contents of which the disputes which may arise
regarding their execution and performance shall be decided, no exceptions being admissible
other the those of falsity and material error in the drafting.

• After the contract has been complied with, the bill of lading which the carrier has issued
shall be returned to him, and by virtue of the exchange of this title with the thing
transported, the respective obligations and actions shall be considered cancelled, unless in
the same act the claim which the parties may wish to reserve be reduced to writing, with
the exception of that provided for in Article 366

• 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.

257
• Art. 709, Code of Commerce: A bill of lading drawn up in
accordance with the provisions of this title shall be proof as
between all those interested in the cargo and between the
latter and the insurers, proof to the contrary being reserved
for the latter.

• Art. 710, Code of Commerce: If the bills of lading are

contradictory, and no change or erasure can be observed in
any of them, those possessed by the shipper or consignee
signed by the captain shall be proof against the captain or ship
agent in favor of the consignee or shipper; and those
possessed by the captain or ship agent signed by the shipper
shall be proof against the shipper or consignee in favor of the
captain or ship agent.
258
• Sec. 3[4] & [5], COGSA, C.A. No. 65:

• [4] Such a bill of lading shall be prima facie evidence of the

receipt by the carrier of the goods as therein described in
accordance with paragraphs 3(a), (b), and (c), of this section.

• [5] The shipper shall be deemed to have guaranteed to the

carrier the accuracy at the time of the shipment of the marks,
number, quantity, and weight, as furnished by him; and the
shipper shall indemnify the carrier against all loss, damages,
and expenses arising or resulting from inaccuracies in such
particulars. The right of the carrier to such indemnity shall in
no way limit his responsibility and liability under the contract
of carriage to any person other than the shipper.
259
KINDS OF STIPULATIONS
IN A BILL OF LADING
• First kind: One exempting the carrier from any and all liability for
loss or damage occasioned by its own negligence – VOID;

• Second kind: One providing for an unquali ed limitation of such

liability to an agreed valuation – VOID; and

• Third kind: One limiting the liability of the carrier to an agreed

valuation unless the shipper declares a higher value and pays a
higher rate of freight –VALID.

• [H.E. Heacock Co. v. Macondray & Co., G.R. 16598l, Oct. 3, 1991]
260
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LIABILITY OF CARRIER UNDER
COGSA
• If goods are to be shipped from a foreign port to the
Philippines, COGSA is applicable suppletorily to the Civil
Code.

• Liability of the carrier is US$500 per package, in the absence

of a shipper’s declaration of a higher value in the BL.

• The above condition is deemed part of the BL even if not

expressly stated.
261
• If no value is stated – Maximum: US$500.

• If value is stated – Rule on Quali ed Liability.

Quali ed Liability Rule:

• A carrier may x a maximum liability in the event

the shipper does not declare any value or a value
up to a certain amount. Should shipper declare a
higher value, and willing to pay higher freightage,
the carrier shall accordingly be liable for greater
damage.
262
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 PACKAGE
• If goods are shipped in cartons – Each carton is
considered a package even if they are stored in
container vans.

• If what ordinarily considered as packages are shipped in

a container supplied by the carrier and the number of
such unit is disclosed in the BL – Each of those units
(not the container) constitutes the package referred to
in COGSA.
263
WARSAW CONVENTION ON
AIR TRANSPORT
• Liability to passenger – 250,000 francs (passenger & carrier may
agree to a higher limit of liability…Nevertheless, by special contract,
the carrier and the passenger may agree to a higher limit of liability

• Liability to baggage and cargo – P250 francs per kg (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 not
exceeding the declared sum, unless he proves that sum is greater
than the actual value to the consignor at delivery.

264
• In case of loss, damage or delay of part of registered baggage or cargo,
or of any object contained in the waybill – The weight shall be taken
into consideration in determining the amount and carrier’s liability is
limited to the TOTAL WEIGHT OF THE PACKAGE/S

• However, 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 of the same
airway bill, the TOTAL WEIGHT OF SUCH PACKAGE/S shall also be
taken into consideration in determining the limit of liability.

• Liability to hand carried items – 5,000 francs per passenger

• The above limitations are without prejudice to the local court’s award
in accordance to its own law, in addition, the whole or part of the
court cost and other expenses of litigation incurred by plaintiff.
265
• Not applicable if the amount of damages awarded,
excluding court costs and other expenses of
litigation, does not exceed the sum which the carrier
has offered in writing to plaintiff within 6 months
from the date of occurrence causing the damage or
before commencement of the action, if that is later.

• If damage is caused by willful misconduct or by such

default on the part of the carrier: Carrier cannot
invoke the provisions in Warsaw Convention on
limited liability.
266
 HAGUE PROTOCOL AMENDMENT TO
WARSAW CONVENTION ON AIR
TRANSPORT
• Removed the provision that exculpates the airline completely if it
took all necessary steps to avoid the damage.

• The protocol declares that the stated limits of liability are 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.

• Note: Montreal Agreement of 1966 allows a passenger to recover

unlimited damages upon proof of willful misconduct.
267
 PAL V. CA, 255 SCRA 48
ON THE PERIOD PROVIDED IN WAY BILL
• Where the failure to le the formal claim within the prescriptive
period contemplated in the air waybill was largely due to the
fault of carrier’s representatives, the condition was deemed
ful lled considering the collective action of the carrier’s
personnel in tossing around the claim and leaving it unresolved
for an inde nite period of time, which was tantamount to
‘voluntarily preventing its ful llment’, and therefore the ling of
the baggage freight claim constituted substantial compliance
with the requirement of the ling of a formal claim.
268
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 CONVENTION FOR THE UNIFICATION OF CERTAIN
RULES FOR INTERNATIONAL CARRIAGE BY AIR DONE
AT MONTREAL ON 28 MAY 1999
(MONTREAL CONVENTION OF 1999)
ABOUT:

Establishes a modern compensatory regime in respect of passengers who suffer death or injury caused by an accident
during international carriage by air. It also provides a simpli ed liability regime for baggage and air cargo where it also
facilitates the use of electronic documents of carriage in place of paper. It was designed to replace the Warsaw
Convention system that had developed haphazardly since 1929 with a single, modern and universal liability regime.

IN THE PHILIPPINES:

The instrument of accession by the Philippines contains the following declaration in accordance with Article 57: “the
Convention shall not apply to:

a)  international carriage by air performed and operated directly by the Philippines for non-commercial purposes in
respect of its functions and duties as a sovereign State; and

b)  the carriage of persons, cargo and baggage for its military authorities on aircraft registered in or leased by the
Philippines, the whole capacity of which has been reserved by or on behalf of such authorities.”

269
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 ACCIDENTAL DEATH OR
INJURY TO PASSENGERS
• The rst tier is on the basis of a strict liability where an airline carrier shall be made
liable for damage sustained in case of death or bodily injury of a passenger on the
condition that the accident which caused the death or injury took place on board the
aircraft or in the course of any of the operations of embarking or
disembarking (Article 17). 

• Under the second tier of liability, or for all damages higher than 113,100 SDRs (or
approximately up to US$170,000 based on current IMF valuation), the carrier shall be
liable unless it can show that the damage was not due to its negligence or wrongful
act or omission, or that the damage was solely due to the negligence or wrongful act
or omission of a third party.  (Article 21)  Otherwise stated, for those claims above
113,100 SDRs, the carrier shall not be liable under this tier only if it shall prove that it
was not negligent or at fault. To emphasize, the burden of proof is on the carrier.
270
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DESTRUCTION, LOSS DAMAGE OR
DELAY IN CARRYING BAGGAGE
• In the case of destruction, or loss of, or of damage to, checked baggage, the
carrier shall be liable for damages  as long as the destruction, loss or
damage took place on board the aircraft or during any period within which
the checked baggage was under the carrier’s custody. The carrier may be
held not liable if and to the extent that the damage resulted from the
inherent defect, quality or vice of the baggage. In case of unchecked
baggage, including personal items, the carrier shall be liable if the damage
resulted from its faults or that of its agents. (Article 17)

• In those cases where the carrier is held liable, the carrier’s liability shall be
up to 1,131 SDRs for each passenger, or approximately US$70 per kg
luggage (per current valuation).
271
 SHIPMENT TERMS
• SERVE THE FOLLOWING FUNCTIONS:

A. They determine the point at which the risk of loss

passes from seller to buyer;

B. They determine what performance by the seller

amounts to a tender which will put the buyer, if he
thereafter refuses to accept delivery, in breach; and

C. They are used for quoting the price.

272
 SHIPMENT TERMS
• F.O.B. (Free on Board) - the risk passes to the buyer at the F.O.B. Point.

• F.O.B. Point of Destination - means the seller still assumes the risk until the goods
reach the point of destination.

• F.A.S. (Free Alongside Ship) - a variant of F.O.B. and is used for carriage by water.

• F.A.S Vessel - means that the seller relinquishes the risk the moment the goods are
delivered alongside the vessel.

• C.I.F. (Cost, Insurance, Freight) - indicates that the price quoted by the seller includes the
invoice price plus insurance and freight.

• C & F (Cost and Freight) - where the buyer decides to take his own insurance over the
cargo. The risk of the seller is the same as in C.I.F.
273
 F.A.S. VESSEL V. F.O.B. VESSEL

• F.A.S. Vessel - the seller is under no obligation to see to

the loading and all that is required is delivery to the
wharf.

• F.O.B Vessel - the seller must see to it that the goods are
loaded and his responsibility does not cease until the
loading is complete. Only an “On Board” bill of lading
signi es the completion of the loading of the goods.
274
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ACTIONS AND DAMAGES IN
CASE OF BREACH

275
 DISTINCTIONS
POINT OF
CULPA CONTRACTUAL CULPA-AQUILIANA
DISTINCTION

Source of Obligation Contract Quasi-Delict

None there being no Solidarily liable with the

Liability of Employee
privity of contract Employer
Due diligence in the selection Due diligence in selection and
Availability of Defense and supervision of employee supervision of employee a
is not a defense defense under Article 2180.

In what Capacity Liable As a Contracting Party As An Employer

276
 CONCURRENT CAUSES
OF ACTION
• The same act that breaches the contract may also be a tort.

• The cause of action of a passenger or shipper against a common carrier can be culpa
contractual or culpa aquiliana while the basis of liability on the part of the driver is
either culpa delictual or culpa aquiliana.

• The direct and primary liability of drivers based on quasi-delict and delict equally applies
to the captain, of cers and crew of the vessel or the captain and other personnel of the
air carrier in proper cases where they committed the negligent act or omission.

• The shipowner or the operator, as employer, may be held primarily liable under Article
2180 of the NCC or subsidiarily liable under the Revised Penal Code. These liabilities
are in the nature of vicarious liability because the negligence of the employee is
imputed to the employer-operator.

277
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 CONCURRENCE WITH
THIRD PERSONS
• If negligence of 3rd person concurs with the breach (where passenger injured because
the carrier collided with another vehicle), liability of the 3rd person and/or his
employer may be based on quasi-delict. Driver alone may be held criminally liable and
civil liability may be imposed on him based on delict. In the latter case, employer is
subsidiarily liable.

• If injury due to negligence of the 2 drivers, the drivers and the owners of the 2 vehicles
are jointly and severally liable for damages. If the owner and driver of the other vehicle
are not impleaded, carrier may implead them by ling a 3rd party complaint. (Francisco
Viluan v. The Court of Appeals, et.al., GR Nos. 21477-81, 29 April 1966)

• In case, negligence of carrier’s driver and a 3rd person concurs, liability of the parties,
carrier and his driver, third person is - joint and several. (MMTC v. CA, 223 SCRA 521)

278
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 ALTERNATIVE CAUSES OF
ACTION
• Permissible for plaintiff to allege in the Complaint
alternative causes of action and join as many
parties as may be liable on such causes of action
so long as the plaintiff does not
recover twice for the same injury.(Fabre
v. Court of Appeals, GR No. 111127, 26 July 1996)

279
PRESCRIPTIVE PERIODS IN
CLAIMS

280
 FILING OF CLAIM IN OVERLAND
TRANSPORTATION AND INTER-ISLAND
COMMERCE
(ART. 366, CODE OF COMMERCE)

If goods arrived in damaged condition:

• Apparent – Must le a claim immediately (oral or

written) (at the time of receipt)

• Not apparent – Must le a claim within 24 hours

from delivery

281
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FILING OF ACTION IN OVERLAND
TRANSPO AND
INTER-ISLAND TRADE
Period to le action if claim is led but CARRIER REFUSES TO PAY:

• 6 years – if no BL

• 10 years – if there is BL

• Note: Filing of the claim under Art. 366, CoC is CONDITION

PRECEDENT for recovery. If no claim is led, there will be no
recovery, even if an action therefor is meritorious since the claim
is part of the cause of action

282
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 FILING OF CLAIMS IN
OVERSEAS TRADE

• If damage is APPARENT – CLAIM SHOULD BE

FILED IMMEDIATELY.

• If damage is NOT APPARENT – CLAIM SHOULD

BE FILED WITHIN 3 DAYS.

283
 FILING OF ACTION IN
OVERSEAS TRADE
• 1 year from the time vessel departs from port without making delivery; or

• 1 year from the date the damaged cargo is delivered to arrastre.

• Note: the 1 year period applies also to collision cases but shall start not
from the date of the collision but when the goods should have been
delivered, had the cargoes been saved.

• If mis-delivered: 10 years; If claim is based on delay: 10 years.

• Note: Filing of claim is NOT A CONDITION PRECEDENT in the ling of

action.
284

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RIZAL SURETY V. MACONDRAY,
22 SCRA 902
• Facts: A vessel arrived in Manila on Oct. 25. It left Manila on
Oct. 31. The BL showed that the cargo was aboard the vessel,
but it was never delivered. The shipper brought an action
against the carrier for non-delivery.

• Held: Since there was no tally sheet AND NO DELIVERY, the

1- year prescriptive period for ling the action should be
counted from the LAST DAY ON WHICH THE CARRIER
HAD AN OPPORTUNITY TO MAKE THE DELIVERY, i.e. Oct.
31 when the vessel departed from port.
285
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UNION CARBIDE V. MANILA RAILROAD,
77 SCRA 359

• In the case when the vessel docked at the pier,

where the cargo has been unloaded and delivered
to the arrastre, the 1-year period begins to run
from the date of delivery to the arrastre operator.

286
ANG V. AMERICAN SS AGENCIES,
19 SCRA 631

• Where there was delivery to the wrong person,

the prescriptive period is (10) years because there
is a violation of contract, and COGSA does not
apply to mis-delivery.

287
US INSURANCE V. CIA. MARITIMA,
21 SCRA 998
• FACTS: Cargo was loaded in New York for Davao City. Since most of
the cargo was for Manila, the carrier unloaded all the cargo, including
that for Davao City, in Manila and did not make a trip to Davao.
Instead, the goods for Davao were transshipped on an inter-island
vessel. The cargo arrived in a damaged condition.

• HELD: The 1-year period provided in COGSA shall still apply since the
contract of carriage is from New York to Davao. The inter-island vessel
from Manila to Davao is considered merely a connecting vessel and
the transshipment did not constitute a separate contract of carriage.

288
 CASES
• The insurer of the goods is also bound by the 1-year
prescriptive period under the Carriage of Goods by Sea
Act. (Filipino Merchants Ins. Co. v. Alejandro, 145 SCRA
42)

• The written extrajudicial demand by creditor DOES

NOT TOLL the running of the 1-year prescriptive period
under COGSA since an action must be led within the
period. (Dole Philippines v. Maritime Co., 148 SCRA 118)
289
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 MITSUI O.S.K. LINES V. CA,
287 SCRA 366
• FACTS: Carrier undertook loading. However, while in Taiwan, goods were not transshipped immediately, with
the result that goods arrived in France late during the ‘off-season’. Consignee paid only half of the value of
the goods and balance was charged against loss sustained due to late arrival. Shipper now seeks to recover
unpaid balance from the carrier which opposes the same since the loss or damage to goods shipped under
Sec. 3(6) of the Carriage of the Goods by Sea Act has been barred by the lapse of 1-year period.

• HELD: Indeed, what is in issue here is not the liability of carrier of its handling of goods as provided under
Sec. 3(6) of COGSA, but its liability under its contract of carriage with shipper as covered by the laws of
more general application.

• Since the concept of ‘loss or damage’ involves he deterioration of goods DUE TO DELAY in their
transportation, the claims of shipper DO NOT CONSTITUTE LOSS OR DAMAGE within the meaning of
COGSA which requires the suit to be brought within 1-year from the time the cause of action accrued.

• The 1-year prescriptive period under COGSA is inapplicable. What is applicable is Art. 1144 of the Civil
Code providing for a 10-year prescriptive period.

290
 MAYER STEEL PIPE CORP. V. CA,
274 SCRA 432
• FACTS: The shipper has insured the merchandise against all risks with South Sea Surety. During the
voyage, the merchandise were damaged. Insurer opposed claim on the ground, inter alia, that it was
led more than one (1) year from discovery of the damage to the merchandise and therefore
barred by the provisions under COGSA.

• HELD: The provision applies only to carrier’s liability which is extinguished if no suit is brought within
one year.

• 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.

• COGSA governs relationship between carrier and shipper, the consignee and/or the insurer on the
other hand and de nes the obligations of the carrier under the contract of carriage.

• It does not, however, affect the relationship between shipper and insurer which is governed by
Insurance Code.

291
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 DAMAGES

• The pecuniary compensation, recompense, or

satisfaction for an injury sustained; or

• The pecuniary consequences which the law

imposes for the breach of some duty or violation
of some rights.

292
 RECOVERABLE DAMAGES
• Actual Damages (dano emergente)

• Unrealized Pro ts (lucro cesante)

• Moral Damages

• Nominal Damage

• Temperate or Moderate Damages

• Liquidated Damages

• Exemplary or Corrective Damages

• Other damages

293
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 ACTUAL & COMPENSATORY
DAMAGES
• Art. 2205, NCC: Damages may be recovered:

(1) For loss or impairment of earning capacity in cases of

temporary or permanent personal injury;

(2) For injury to the plaintiff ’s business standing or

commercial credit.

• Amount of damages in case of death: P100,000 per

passenger for overland; P200,000 for marine transportation.
294
KINDS OF ACTUAL DAMAGES
• 1st, the loss of what a person already possesses
(daño emergente); and

• 2nd, the failure to receive as a bene t that would

have pertained to him (lucro cesante)

Source: Integrated Packing Corporation v. CA, 333

SCRA 170 [2000]
295
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 NOT PRESUMED

• Damages cannot be presumed and courts, in

giving an award, must point out speci c facts that
could afford a basis for measuring whatever
compensatory or actual damages are borne. The
burden of proof rests on the plaintiff who is
claiming actual damages against the carrier. (Sales v.
CA, 192 SRA 526 [1990]
296
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 RECOVERABLE ACTUAL
DAMAGES
• In the case of goods, plaintiff is entitled to their value at the
time of destruction. Normally the award is the sum of money
which plaintiff would have to pay in the market for identical
or essentially similar good, plus in proper cases, damages for
the loss of use during the period before replacement.

• In case of pro t-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.
297
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• Personal injury and even death entitles the claimant to
all medical expenses as well as other reasonable
expenses that he incurred to treat his or his relative’s
injuries.

• Medical expenses may even include the amount spent

for the plastic surgery of the plaintiff or any procedure
to restore the part of the body that was affected.

• In case of death, plaintiff is entitled to the amount

spent during the wake and funeral of the deceased.
After the burial are not compensable.
298
LOSS OF EARNING CAPACITY
UNDER ART. 2206
Formula:

• Net Earning Capacity = Life Expectancy [2/3 x 80 – age

at death] x Gross Annual Income less Necessary
Living Expenses [ xed at 50% of the gross income in the
absence of proof]

• Applies when the breach of the carrier resulted in the

plaintiff ’s permanent incapacity. (Borromeo v. Manila
Electric Railroad & Light Co., 44 Phil. 165 [1922]).
299
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 MORAL DAMAGES
(ART. 2219, CIVIL CODE), INCLUDE:
• Physical suffering,

• Mental anguish,

• Fright,

• Serious anxiety,

• Besmirched reputation,

• Wounded feelings,

• Moral shock,

• Social humiliation, and

• Similar injury

300
 PRINCIPLES INVOLVING
AWARD OF MORAL DAMAGES
• As a general rule, no moral damages may be awarded where the breach of
contract is NOT MALICIOUS.

• Moral damages may be awarded if the contractual negligence is considered

gross negligence.

• Though incapable for pecuniary estimation, moral damages may be recovered

if they are the proximate result of the defendant’s wrongful act or omission.

• The award of moral damages is designed to compensate the claimant for

actual injury and is not meant to enrich the complainant at the expense of the
defendant.

301
 CASES WHEN MORAL DAMAGES MAY
BE AWARDED (ARTS. 2219 & 2220, NCC)
• Criminal offense resulting in physical injuries;

• Quasi-delicts causing physical injuries

• Seduction, abduction, rape, or other lascivious acts

• Adultery or concubinage

• Illegal or arbitrary detention or arrest

• Illegal search

• Libel, slander or any other form of defamation

• Malicious prosecution

• Acts mentioned in Art. 309 [disrespect to the dead, or wrongful interference with a funeral]

• Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 [on human relations]

302
• In culpa contractual, moral damages may be awarded:

• Where the mishap resulted in the death of the

passenger. (Art. 1764 in relation to Art. 2206)

• When the carrier was guilty of fraud or bad faith, even

if death did not result. (Art. 2220; Sabena Belgian World
Airlines v. CA, 171 SCRA 620)

• Note: If the cause of action is culpa aquiliana where the

passenger suffered physical injuries, there is no more
need to prove that the carrier acted fraudulent or in
bad faith (Art. 2210[2], Civil Code)
303
 FACTORS TO CONSIDER:
AMOUNT TO BE RECOVERED
• The extent of humiliation;

• The extent of pain and suffering;

• Of cial, political, social and nancial standing of the

offended party and the business and nancial position of
the offender; and

• Age of claimant (Zamboanga Trans Co., Inc. v. Court of

Appeals, 30 SCRA 717)
304
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 NOMINAL DAMAGES
• Vindication or recognition of the plaintiff ’s right.

• Assessment is left to the discretion of the court

according to the circumstances of the case.

• The award of nominal damages is also justi ed in

the absence of competent proof of the speci c
amounts of actual damages suffered.
305

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 LIQUIDATED DAMAGES
• Those agreed upon by the parties to a contract, to be paid in
case of breach thereof. (PNB v. CA, 256 SCRA 44 [1996])

• Shall be equitably reduced if they are iniquitous or

unconscionable.

• When the breach committed by the defendant is not the one

contemplated by the parties in agreeing upon the LD, the law
shall determine the measure of damages, and not the
stipulation.
306
 EXEMPLARY OR CORRECTIVE
• Requisites:

• May be imposed by way of example in addition to

compensatory damages, and only after the claimant’s right to
them has been established;

• Cannot be recovered as a matter of right, their determination

depending upon the amount of compensatory damages; and

• Act must be accompanied by bad faith or done in wanton,

fraudulent, oppressive, or malevolent manner.
307
 IMPORTANT NCC
PROVISIONS TO READ:
• Article 2201

• Article 2205

• Article 2206

• Article 2208

• Articles 2219, 2220, 2221, 2222, 2223, 2224, and 2225

• Articles 2232, 2233, 2234, and 2235

308
 LOPEZ V. PAN AM,
16 SCRA 431 (1966)
• FACTS: VP Lopez with his wife, daughter and son-in-law
had tickets for 1st class bound for SF. When they arrived in
Tokyo, the plane’s crew found out that the 1st class tickets
had been oversold, and Lopez and his family were
compelled to take the economy seats.

• When the plane arrived at SF, Filipino of cial and the

Filipino community with a band waited for Lopez to appear
from the 1st class section. It caused him humiliation.
309
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 HELD:
• Pan-Am should have informed Lopez of the possible
downgrading to prevent his humiliation

• The court award Lopez P300,000 in moral damages

and P150,000 in attorney’s fees.

• The substantial amount of damages was awarded in

view of the importance of the person of the
passenger
310
 ZULUETA V. PAN-AM (1972)
• Facts: Zulueta was a passenger on a Pan-Am ight with his wife
and children from SG to Manila. On stopover at Wake Island, the
passengers were told that the plane would leave in 30 minutes.
After 30 mins. Zulueta failed to show up, the crew had to look for
him. When he was found, the plane captain called him ‘a brown
monkey. Bitter exchanged followed. The captain then order the
crew to unload Zulueta’s baggage and he was left behind.

• Held: Zulueta is entitled to moral damages of P500,000 and

Attorney’s fees of P50,000
311
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 ON ARRASTRE
• Formal claim against arrastre:

- Within 30 days from date of nal entry with the Bureau of Customs supported by
invoices and other shipping documents. (A condition precedent)

• Action on claim by arrastre: 60 days from receipt. (A condition precedent)

• If claim is refused: Action to be led within 1 year.

• If claim is not acted upon: The 1 year period begins to run from the date of the expiry
of the 60-day period.

• Quali ed liability of arrastre: P2,000 per package unless higher value is declared.

• NATURE OF LIABILITY OF ARRASTRE & CARRIER: Solidary

312
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 METRO PORT SERVICES V. IAC,
213 SCRA 103 (1992)
• Held: A provision limiting the liability of arrastre operator through the imposition
of a requirement that a formal claim must be made within 30 days from ling of
entry is complied with when the consignee led a provisional claim within the
30-day period.

• As of that date, the arrastre operator was given reasonable opportunity to

check the validity of the claim while the facts were still fresh in the minds of the
person who took part in the transaction and while pertinent documents were
still available.

• It did not matter that the provisional claim was for the whole amount of the
invoice. It is suf cient as long as the name of the carrying vessel, its date of arrival
and BL are attached.
313
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PART II
Maritime Law
314
 CONFLICTING INTERESTS VENTURED
AND RISKED IN MARITIME EXPEDITION
(SET FORTH IN TREATISE OF MADIRAGA)
• Interest of the vessel and of the agent;

• Interest of the owners of the cargo and consignees;

• Interest of those who salvage the ship;

• Interest of those who make loans upon the cargo;

• Interest of the sailors and members of the crew as to their wages;

• Interest of a constructor as to repairs made to the vessel

315
 MEANING OF REAL AND
HYPOTHECARY NATURE
• The liability of the carrier in connection with losses related to
maritime contracts is con ned to the vessel, which is hypothecated
for such obligations or which stands as the guaranty for their
settlement.

• 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. The total destruction of the vessel extinguishes maritime
liens because there is no longer any res to which it can attach.

• NO VESSEL, NO LIABILITY RULE.

316
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 SUMMARY OF THE NATURE
OF MARINE TRANSACTIONS
• REAL – A vessel is essentially a personal property because it is
movable. But the Supreme Court characterized maritime
transactions as having a real nature insofar as these transactions
are similar to transactions over real property with respect to
effectivity against third persons which are effected through
registration. Registration of vessels now lodged at MARINA.

• HYPOTHECARY – The liability of the owner of the vessels is

limited to the vessel itself. If the vessel sinks, generally the liability of
the owner is extinguished, although he may have other properties
317
 EVIDENCE OF REAL NATURE
OF MARITIME LAW
• Limitation of the liability of the agents to the actual
value of the vessel and the freight money; and

• Right to retain the cargo and the embargo and

detention of vessel even in cases where the
ordinary civil law would not allow more than a
personal action against the debtor or person liable.
[Luzon Stevodoring v. CA, 156 SCRA 169]
318
 ABOITIZ SHIPPING V. GENERAL
ACCIDENT FIRE INS., 217 SCRA 359
• Held:

• The rights of 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.

• In both insolvency of a corporation and the sinking of a

vessel, the claimants or creditors are limited in their
recovery to the remaining value of accessible assets.
319
 RELEVANT PROVISIONS ON
LIMITED LIABILITY RULE
• Art. 587, CoC: 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 the vessel shall be civilly liable in the proportion of their contribution to 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 that part of the
vessel belonging to him
• Art. 643 (Ibid): If the vessel and her cargo should be totally lost, by reason of capture or wreck, all rights shall be
extinguished, both as regards the crew to demand any wages whatsoever, and as regards the ship agent to recover
the advances made.
• If a portion of the vessel or of the cargo, or both, should be saved, the crew engaged on wages, including the
captain shall retain their rights on the salvage, so far as they go, on the remainder of the vessel as well as on the
amount of freightage of the cargo saved;
• But sailors who are engaged on shares shall not have any right whatsoever on the salvage of the hull, but only on
the portion of the freightage saved. If they should have worked to recover the remainder of the shipwrecked
vessel they shall be given from the amount of the salvage an award in proportion of the efforts made and to the
risks encountered in order to accomplish the salvage.
• Art. 837 (Ibid): The civil liability incurred by the shipowners in the cases prescribed in this section, shall be
understood as limited to the value of the vessel with all her appurtenances and freight.
• Notes: Art. 837 applies to collision cases only.

320

 COVERAGE OF THE RULE

• Article 837 applies the principle of limited liability in cases
of collision while Articles 587 and 590 embody the
universal principle of limited liability in all cases.
However, it was explained in Aboitiz Shipping
Corporation v. General Accident Fire and Life Assurance
Corporation Ltd., that taken together with related articles,
Articles 837, 587 and 590 cover only:
(1) liability to third persons,
(2) acts of the captain, and
(3) collisions.

321

 EXCEPTIONS
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.
2. Where the vessel is insured.
3. In workmen’s compensation claims.
4. Where vessel is partially lost.
5. Liability on repairs made PRIOR to the loss of the vessel.
6. Foreclosure of mortgage on the ship.
322
 ABANDONMENT OF VESSEL
• Abandonment of the vessel, its appurtenances and freightage is an
indispensable requirement before the shipowner can enjoy the
bene ts of the limited liability principle.

• In 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.

• Only instance abandonment is dispensed with is when the vessel

was entirely lost. [Phil. Shipping Co. v. Garcia, 6 Phil. 281]

323
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 PROTEST
• A written statement by the master of a vessel or any
authorized officer, attested by a proper officer or a notary, to
the effect that damages has been suffered by the ship.
• Protest is required under the Code of Commerce in the
following cases:
1. Arrival under stress
2. Shipwrecked
3. Gone through a hurricane or the captain believes that the
cargo has suffered damage or average
4. Maritime collisions

324

TESTS TO DETERMINE ADMIRALTY

& MARITIME JURISDICTION
• Locational Test (English Rule) - maritime and admiralty
jurisdiction, with a few exceptions, is exercised only on contracts
made upon the sea and to be executed thereon.

• Subject Matter Test (American Rule) - The criterion in

determining whether a contract is maritime depends on the nature
and subject matter of the contract, having reference to maritime
service and transactions.

Crescent Petroleum Ltd., v. M/V Lok Maheshwari, et.al., G.R. No.

155014, 11 November 2005.
325
 THEORY OF MODE & TITLE
• Ownership is acquired by another only if mode and title concurs.

• Mode - speci c cause which gives rise to them, as the result of the
presence of a special condition of things, of the aptitude and intent of
persons, and of compliance with the conditions established by law. This is
the proximate cause of the acquisition.

• Title - juridical justi cation for the acquisition or a transfer of ownership or

other real right. The remote cause of the acquisition.

Note: Vessels that are under the jurisdiction of the MARINA can be
transferred only with notice to said administrative agency.
326
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 PRESCRIPTIVE PERIOD ON
VESSELS
• Acquisitive prescription: Good faith – 3 years; bad
faith – 10 years. Prescription doesn’t run in favor
the captain since he holds the position that of a
trustee. [Art. 573]

• Right of pre-emption and legal redemption

available to co-owners to be exercised within 30-
days from sale of the vessel. [Art. 575]
327
 FLAGS OF CONVENIENCE
• Article 92, UNCLOS provides that there must be a genuine link between the
State and the ship in order to confer nationality over the ship.

• There are instances when the countries may allow registration of vessels
belonging to nationals of other countries. There is no genuine link between the
State and the ship and the registration is just a matter of convenience, hence the
term FLAGS OF CONVENIENCE.

• The absence of genuine link is re ected in either the absence of or minimal

regulation of the registered vessels by the country where the vessels are
registered.

• Philippines is NOT a Flag of Convenience country.

328
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 RULES ON CO-OWNERSHIP
OF VESSEL
• Co-ownership of vessel gives rise to a partnership ipso jure. No agreement
is needed before a partnership is created. {Note: This is one instance of a
partnership coming into existence by mere operation of law. Another
instance when there is commingling of similar good of fungible nature.}

• Majority may perform acts of administration but acts of ownership require

the concurrence of all the co-owners.

• Majority is determined in accordance to the following: 1 vote given to the

co-owner who contributed the least capital, 2 votes to the one who gave
double, et sequitur.

329
 PECULIAR NATURE OF
VESSELS
• Vessels are considered personal property under civil law.
Similarly under the common law, vessels are personal
property although referred to as a peculiar kind of
personal property.

• Since the term personal property includes vessels, they

are subject to mortgage agreeably to the provisions of
the Chattel Mortgage Law (Act No. 1508, Sec. 2).
(Philippine Re ning Co. v. Jarque, GR 41506, 25 Mar. 1935)
330
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• The only difference between a chattel mortgage of a
vessel and of other personalty is that it is not now
necessary for a chattel mortgage of a vessel to be
noted in the register of deeds, but it is essential that a
record of documents affecting title to a vessel be
entered in the record of the Collector of Customs
(now with MARINA by virtue of M.C. 90) at the port
of entry (now at the port of registry, in case of
coastwise vessel).

• Otherwise, a mortgage on a vessel is generally like

other chattel mortgages as to its requisites and validity.
331
 MARITIME LIEN
• In general terms, maritime lien is a privileged claim on a vessel for some service rendered to it
to facilitate its use in navigation.

• A special property right in a ship given to a creditor by law as security for a debt or claim
subsisting from the moment the debt arises with right to have the ship sold and debt paid out
of the proceeds.

• In the Philippines, it is akin to a mortgage lien in that in spite of the transfer of ownership, the
lien is not extinguished. It is inseparable from the vessel and until discharged, it follows the
vessel.

• The expression action in rem is, in its narrow application, used only with reference to certain
proceedings in courts of admiralty wherein the property alone is treated as responsible for
the claim or obligation upon which the proceedings are based. Thus, it subsists notwithstanding
the subsequent transfer of the vessel.
332
 MARITIME LIEN FOR
NECESSARIES (SEC. 21, PD 1521)
• Repairs, supplies, towage, use of dry-dock or marine railway,
or other necessaries were furnished to the vessel.

• The work is done on orders of the ship owner or person

authorized by the owner.

• Such credit must be alleged or proved that it was given to

the vessel.

• Enforceable by suit in rem.

333
 MULTIPLE-CONTACT TEST
• To determine, in the absence of a speci c Congressional directive as to the statute’s reach,
which jurisdiction’s law should be applied, the following factors were considered:

• Place of the wrongful act;

• Law of the Flag;

• Allegiance or domicile of the injured;

• Allegiance of the defendant shipowner;

• Place of contract;

• Inaccessibility of foreign forum; and

• Law of the forum.

334
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 MARINA M.C. 100 (GUIDELINES ON
ANNOTATION/CANCELLATION OF
MORTGAGE)
• Documentary requirements:

• Letter of Intent & Duly accomplished application form;

• Duly notarized mortgage contract;

• Proof of payment of documentary stamp tax with the BIR; and

• Original copy of CO and CVR.

• Note: The annotation of mortgage to be re ected at the back of the

CVR and CO.
335
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 REPUBLIC ACT 9295
THE DOMESTIC SHIPPING
DEVELOPMENT ACT OF 2004

336
DEREGULATION OF THE DOMESTIC
SHIPPING INDUSTRY (SEC. 8)
• Domestic ship operators authorized to establish their
own domestic shipping rates provided that effective
competition is fostered and public interest is served.

• MARINA shall monitor all shipping operations and

exercise regulator y inter vention where it is
established, after due process that public interest
needs to be protected and safeguarded.
337
 SAFETY STANDARDS (SEC. 9)
• All vessels shall at all times be in seaworthy condition,
properly equipped with adequate life-saving, communication,
safety and other equipment, operated and maintained in
accordance with the standards set by MARINA, and
manned by duly licensed and competent vessel crew.

• The MARINA given the power to inspect vessels and all

equipment on board vessels to ensure compliance with
safety standards.
338
 INSTANCES WARRANTING MARINA
INTERVENTION (SEC 4, RULE VIII, IRR)
• Monopoly of a route/link, lack of effective competition in a route/link,
and practices which constitute combinations in restraint of trade.

• Any complaint against the rates charged and/or services rendered

by the shipowners/operators provided suf cient basis/justi cation is
submitted.

• Any adverse ndings/recommendations as a result of monitoring

activities undertaken by the MARINA.

• Other analogous instances.

339
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 COMPULSORY INSURANCE
COVERAGE (SEC. 1, RULE IX, IRR)
• (1) Not less than Php 200,000.00 per manifested passenger;

• (2) Adequate insurance coverage for cargo, in an amount to be

computed in accordance with existing laws, rules and regulations,
and the total amount of such coverage shall be equivalent to the
total cargo capacity being offered by the vessel.

• (3) If a domestic shipowner/operator should offer both passenger

and cargo service, then the total insurance coverage shall be in the
total sum equivalent to that stipulated in paragraphs (1.1) and (1.2)
of this Section.
340
 AMOUNT OF INSURANCE IF
OPERATING MORE THAN 1 SHIP

• The amount equivalent to the total authorized

number of passengers, or total cargo capacity, or
both, of the largest operating ship.

• But must not exceed the value of such ship.

341
 PROHIBITED ACTS (SEC. 1,
RULE XII, IRR)
• Operating without a valid certi cate of public convenience, accreditation or other form of
authority.
• Refusal to accept or carry any passenger or cargo without just cause, except for tramp
operations.
• Failure to maintain the vessels in safe and serviceable condition, or violation of the safety rules
and regulations.
• Failure to obtain or maintain adequate insurance coverage.
• Failure to meet or maintain safe manning requirements.
• Failure to submit the required Quarterly Report and an audited Annual Report of Operations
and Finances, attaching the copy of the Of cial Receipt (OR) of Quarterly and Monthly
Common Carriers Tax Payments to the Bureau of Internal Revenue.
• Other detrimental or prejudicial to the safety, stability and integrity of domestic shipping.
• Those prohibited acts de ned in existing MARINA Circulars.
342
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 POWERS OF MARINA
(RULE XIV, IRR)

• Power to Investigate

• Power to Hear and Adjudicate

• Power to Issue Summons

343
 RULES ON APPEALS TO MARINA
REGIONAL OFFICES’ CPC DECISIONS
(RULE XV, IRR)
• Order, ruling, decision or resolution rendered by
MARINA Regional Office relating to CPC application
• MR – 15 days from receipt;
• If denied, appeal to Administrator – 15 days from receipt.
• If denied by MARINA Administrator:
- ADMINISTRATIVE APPEAL to the MARINA Board
within 15 days from receipt; or
- Special Civil Action on Certiorari with CA within 30
days from receipt.
344

 ALL OTHER DECISIONS

• MR – 15 days from receipt;

• If denied, appeal to MARINA Administrator – 15

days from receipt.

• If denied by MARINA Administrator:

ADMINISTRATIVE APPEAL to the MARINA
Board within 15 days from receipt.
345
 PERFECTION OF APPEAL
• File a Notice of Appeal with the MARINA Administrator
and the concerned CO/MRO Director/OIC.

• Copy to be served upon the adverse party.

• Within 15 days from receipt of the appealed from

decision, etc.

• Payment of Docket Fee of P1,000.

346
 TEMPORARY TAKE-OVER OF
OPERATIONS (SEC. 1, RULE IX, IRR)
• In times of national emergency;

• When the public interest so requires;

• Under reasonable terms prescribed by the Flag state;

• Flag state may temporarily take over or direct the operations of any vessel
engaged in domestic trade and commerce or prescribe its rates or routes of
operation.

• Immediately upon the cessation of the emergency, the State shall immediately
reinstate to the domestic shipowner/operator the operation of the ship under the
same terms and conditions existing prior to the occurrence of the emergency.

347
PERSONS WHO TAKE PART IN
MARITIME COMMERCE

348
 SHIP OWNER AND SHIP
AGENT
• Ship owner – the person primarily liable for damages sustained in the
operation of vessel.

• Ship agent – the person entrusted with provisioning of the vessel, or who
represents her in the port in which she happens to be.

• Both are civilly liable for the acts of the captain and for the obligations
contracted by him to repair, equip, and provision the vessel. [Art. 586, Code
of Commerce]

• The joint and several liability applies both for breach of contract and extra-
contractual obligation such as tort. (Verzosa and Ruiz v. Lim, 45 Phil. 416)

349
 CAPTAIN AND MASTERS
• Captain – those who govern vessels that navigate the
high seas or ships of large dimensions and importance,
although they may be engaged in coastwise trade.

• Masters – those who command smaller ships engaged

exclusively in the coastwise trade.

• Note: For purposes of maritime commerce, both have

the same meaning, i.e. they command ships.
350
LIABILITIES - ACTS OF CAPTAIN
• The shipowner and the ship agent are liable in certain cases even if the captain has exceeded his
authority if the proceeds of an obligation redounded to the bene t of the vessel. Check Section
588.

• The shipowner and the ship agent are liable for the tortuous acts of his agent (Yu Biao Sontua &
Co. v. Ossorio, G.R. No. 17690, 14 June 1922)

• The shipowner and the ship agent, in turn, can make the captain liable for his negligence under
Article 612 and 618 of the Code of Commerce.

• If the cause of action is quasi-delict under Article 2176 of the NCC, there is vicarious liability on
the part of the shipowner under Article 2180 of the NCC.

• The liability under Article 2180 of the NCC is direct and primary and solidary with the employee.

• While negligence of the employee must be established, there instantly arises a presumption that
there was negligence on the part of the master or employer in the selection and supervision of
the employee. (Walter Smith & Co. v. Cadwaller Gibson Lumber Co., G.R. No. 32660, 29
December 1930)
351
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 POWERS AND FUNCTIONS
OF CAPTAINS (MASTERS)
• Nature of his position: confidential and managerial.
• 3 distinct roles he performs:
(1) As general agent. If he is also a co-owner, his agency
becomes one coupled with interest. He may not be dismissed
if he is a co-owner or the partnership agreement stipulates as
a condition as ship captain [see Art. 602 & 606 -607];
(2) As commander and technical director of the vessel; and
(3) As representative of the country under whose flag he
navigates.

352

 VESSEL PILOT

• A person duly qualified, and licensed, to conduct a vessel into

or out of ports, or in certain waters.
• In a broad sense, the term ‘pilot’ includes:
- Those whose duty it is to guide vessels into or out of ports,
or in particular waters; and
- Those entrusted with navigation of vessels on the high seas.
• Compulsory pilotage is enforced in the Port of Manila, Port of
Cebu, Port of Tacloban, among others.

353

 PRO HAC VICE NATURE OF

POSITION OF PILOT
• Under English and American authorities, generally
speaking, the pilot supersedes the master for the time
being in the command and navigation of the ship, and his
order must be obeyed in all matters connected with her
navigation.
• He becomes 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 as pilot. [Far
Eastern Shp., v. CA, G.R. No. 130068, Oct. 1, 1998]
354

WHEN MASTER MAY INTERFERE

OR EVEN DISPLACE PILOT
• When Pilot is obviously incompetent or intoxicated;

• In cases of danger which pilot does not foresee;

• In all cases of great necessity.

• To advise or offer suggestions to the pilot considering that he is still in command of

the vessel, except so far as her navigation is concerned.

• To see that there is suf cient watch on deck and that the men are attentive to their
duties, etc.

• Failure on the part of the Master to comply with above duties makes him personally
liable for resulting damage caused. [Ibid]
355
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 LIABILITY OF PILOT
• Rule: a pilot is personally liable for damages caused by his own negligence
or default to the owners of the vessel and to third parties for damages
sustained in a collision.

• Negligence of Pilot is known as ‘MARITIME TORT’

• As held In Far Eastern Shipping:

In the United States, 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.
356
• 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 in rem does not release the pilot from the
consequences of his own negligence. The rationale for this
rule is that the master is not entirely absolved of responsibility
with respect to navigation when a compulsory pilot is in
charge.
357
 MARITIME TORT
• Civil wrongs committed on navigable waters (Black’s Law Dictionary, p. 874)

• As a general principle, any conduct which is tortuous under general law and
which is connected with the ship or its uses creates a maritime lien
(Gilmore and Black, p. 629). It includes collision claims and personal injury
claims (State of California v. S/S Bournemouth, 307 E.Supp. 922 [1970]).

• Hence, personal injuries resulting from defective appliances, improper

construction or negligence of the ship’s crew give rise to maritime lien.
(Gilmore and Black, p. 628, citing North American Dredging Co. v. Paci c
Maill S.S. Co., 185 F. 698 [1911])

358

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BOTTOMRY AND
RESPONDENTIA

359
 CONCEPTS
• Bottomry: A maritime contract whereby the owner of a ship
borrows for the use, equipment or repair of the vessel, for a
de nite term, and pledges the ship (or the keel or bottom of the
ship pars pro toto) as security, with the stipulation that if the ship
is lost during the voyage or during the limited time on account
of the perils enumerated, the lender shall lose his money.

• Respondentia: A maritime contract where it is the goods, or

some part thereof, are hypothecated as security for a loan, the
repayment of which is dependent upon maritime risks.
360
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DISTINGUISHED FROM SIMPLE
LOAN
• Firstly, in bottomry & respondentia, rate of interest is not subject to the Usury Law on account of the
extraordinary risks involved while in simple loan, the rate of interest must not exceed the ceiling xed by
the Usury Law (note: read now as unconscionable).

• Secondly, in the former, there must necessarily be a marine risk, the existence of which must be duly
established while there is no need for such risk under the latter.

• Thirdly, in the former, it must be executed in accordance with form and manner required in the Code of
Commerce while in the latter, the formal requisites on contract apply.

• Fourthly, loan on bottomry or respondentia must be recorded in the registry of vessels in order to bind
third persons while no such registration is required in simple loan.

• Lastly, in the former, preference is extended to the last lender if there are several lenders upon the theory
that were it not for the last lender, then the prior lenders would not have bene ted from the preservation
of the security. Whereas in the latter, the rst lender, as a general rule, enjoys preference over subsequent
ones. [Art. 730, CoC]

361
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 COMMON ELEMENTS OF
BOTTOMRY AND RESPONDENTIA

• Exposure of security to marine peril. [Art. 732]

• Obligation of debtor conditioned only upon the

safe arrival of the security at the point of
destination.

362
 WHO MAY CONTRACT

• Bottomry: General rule – only the owner. If owner

is absent – the captain. [Art. 728]

• Respondentia: only the owner of the cargo.

363
 HYPOTHECARY NATURE OF
BOTTOMRY & RESPONDENTIA
General Rule:
• The loss of the security, i.e. vessel in bottomry or cargo in
respondentia, extinguishes the obligation.
Exceptions:
1.Due to inherent defect (cargo);
2.Due to barratry on the part of the captain, i.e.
malfeasance;
3.Due to fault or malice of borrower;
4.Vessel was engaged in contraband; and
5.Cargo loaded different from that agreed upon.
364

AVERAGES

365
 DEFINED
• Any damage deliberately caused, or any expense deliberately incurred due
to a marine peril and because of which the vessel and/or cargo is saved.

• Art. 806: All extraordinary or accidental expenses which may be incurred

during the voyage in order to preserve the vessel, the cargo, or both.

• Excludes: Petty and ordinary expenses incident to navigation, e.g., pilotage,

lighterage, towage, anchorage, inspection, health, quarantine, lazaretto [i.e.,
quarantine station for maritime travelers] , and other so-called port
expenses, costs of barges and unloading until the merchandise is placed in
the wharf, and any other usual expenses in navigation.

366
 KINDS
• Particular (or Simple) Average – All the damages and expenses
caused to the vessel or to her cargo which have NOT INURED
TO THE COMMON BENEFIT AND PROFIT of all the persons
interested in the vessel and her cargo. The damages sustained shall
be borne by the owner of the vessel or the goods only. [Art. 809]

• General Average – All the damages and expenses which are

DELIBERATELY caused in order to save the vessel, its cargo or
both, AT THE SAME TIME, from REAL AND KNOWN RISKS. [Art.
811]
367
 JETTISON OF CARGO
• Cargo on deck shall be rst to be jettisoned beginning with those which embarass the
maneuver or damage the vessel, preferring, if possible, the heaviest ones with the least
utility and value;

• followed by those from the lower deck always beginning with those of the greatest
weight and smallest value, to the amount and number absolutely indispensable. [Art.
815, Code of Commerce]

• Cargo jettisoned, to be entitled to reimbursement for general average, must be covered

by a bill of lading. [Art. 816]

• Expenses to lighten a vessel by the transfer of goods to other vessels is general average.
Also when there is re on port and there is need to sink the vessel to save the goods.
[Arts. 817 & 818]

368
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 LIQUIDATION OF AVERAGE
• Whether general or particular average, the person
bene ted by the damage or expense incurred must
contribute his proportionate share, to be determined by
the amount of damages or expenses incurred and
apportioned among the those bene ted in proportion to
the value of their property save.

• In particular average, it is implied that there is only one

interest involved and the proportion pertains to him 100%.
369
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 THE YORK-ANTWERP RULES,
1974
• May be used to solve controversies where no provision in the Code of
Commerce is in point because the said rules embody the custom of maritime
states.

• Allow deck cargo on coastwise shipping but prohibits it on overseas trade.

• Hence, a deck cargo stowed on deck, with consent of the shipper in an overseas
trade must always contribute to general average. But if it is the one jettisoned, it
will not be entitled to reimbursement.

• On the other, a deck cargo stowed on deck in a coastwise trade with consent of
the shipper while also must contribute to general average is likewise entitle to
reimbursement if jettisoned.
370
COLLISIONS

371
 COLLISION & ALLISION
• Collision – occurs when both vessels are on motion.

• Allision – happens when one of the vessels is stationary.

• Rule on Collision: The guilty vessel shall pay for the

damage caused by the collision. Exception: If guilty vessel
sinks due to the hypothecary nature of maritime
transactions. Exception to exception: When there is
negligence of ship owner [see Abdulhaman case]
372
 FIVE CASES COVERED
• One vessel is at fault – Vessel at fault is liable for the damage caused to the
innocent vessel as well as to the damage suffered by the owners of cargo of
both vessels.

• Both vessels at fault – Each vessel must bear its own loss, but the shippers of
both vessels may go against the ship owners, being solidarily liable to them.

• Vessel at fault is unknown – Same rule when both vessels are at fault.

• Third vessel at fault – Same rule as when one vessel is at fault.

• Fortuitous Event – No liability; res perit domino.

373
 3 STAGES IN COLLISION
• When the 2 vessels approach each other.

• When the vessel are so near each other that contact is imminent.

• Actual contact or collision.

• Note: The foregoing rule was laid down in Urrutia v. Baco River
Plantation, 26 Phil. 623 to apply the doctrine of last clear chance.
But this ruling was abandoned in Williams v. Yangco, 27 Phil. 68
(infra)

374
 DOCTRINE OF ERROR IN
EXTREMIS
• There are three (3) zones in collusion: (a) rst zone - time up to the
moment when risk of collision begins; (b) second zone - time between
moment when risk of collision begins up to the moment it becomes
practical certainty; and (c) third zone - time when collision is certain
up to the time of impact.

• If a vessel having a right of way suddenly changes its course during the
3rd zone, in an effort to avoid an imminent collision due to the fault of
another, such act may be said to be done in extremis, and even if
wrong cannot create responsibility on the part of said vessel with the
right of way.
375
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 WILLIAMS V. YANGCO,
27 PHIL. 68 (1914)
• The doctrine of last clear chance is inapplicable for marine
collision since the rule of liability in this jurisdiction for
maritime accidents such as that now under consideration is
clearly, de nitely, and unequivocally laid down in Art. 827 of
the Code of Commerce.

• Under the rule, the evidence disclosing that both vessels were
at fault gives neither of the owners an action against the other
for the loss or injury sustained by their respective vessel.
376
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ARRIVAL UNDER STRESS &
SHIPWRECKS

377
 STEPS TO BE UNDERTAKEN IN
DETERMINATION OF PROPRIETY OF
ARRIVAL UNDER STRESS
1. Captain to determine during voyage if there is well-founded fear of seizure,
privateers or other valid grounds.

2. He then assembles all the of cers.

3. He summons the persons interested in the cargo who are present and who
may attend. They have no right to vote.

4. Of cers to be determined and agree if there is well-founded reason after

examining the circumstances. The captain has the deciding vote.

5. Agreement to be drafted and minutes to be signed and entered in the deck

log book. Also objections.
378
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 ARRIBADA
• Lack of provision or fuel
• Pirates
• Inability to navigate.
Note: If the lack of fuel or provision is not due to lack of
foresight, or the fear of pirates is well-founded or the
inability to navigate is not attributable to fault of captain
or crew, then these arrivals under stress becomes
particular average of the vessel. Shippers must wait.
No damage needs to be paid to the shippers. But if due to
bad faith, the damages must be paid to shippers for delay
and the vessel bears the loss.
379

 IMPROPER ARRIBADA
• If lack of provisions should arise from the failure to take the necessary provisions for the
voyage according to usage and customs, or if they should have been rendered useless or lost
through bad stowage or negligence in their care.

• If the risk of enemies, privateers, or pirates should not have been well-known, manifest, and
based on positive and provable facts.

• If the defect of the vessel should have arisen from the fact that it was not repaired, rigged
equipped, and prepared in a manner suitable for the voyage, or from some erroneous order
of the captain.

• When malice, negligence, want of foresight, or lack of skill on the part of the captain exists in
the act causing the damage.

• Expenses. [Art. 820, Code of Commerce]

380
 SHIPWRECK (AGROUNDING)

• The demolition or shattering of a vessel caused by

her driving ashore or on rocks and shoals in the
mid-seas, or by the violence of winds and waves in
tempests.

381
 RULES ON SHIPWRECKS
(ARTS. 840-845)
• Losses/deterioration due to shipwreck or stranding to the account of the owners & ship owner.

• If caused by malice, negligence, or lack of skill of the captain or because vessel put to sea was
insuf ciently repaired and equipped: Shippers can demand indemnity from the captain.

• The goods saved from the wreck to be specially bound for the payment of the expenses of the
respective salvage.

• If several vessels sail under convoy, and any of them should be wrecked, the cargo saved will be
distributed among the rest in proportion to the amount which each one is able to take.

• If any captain should refuse, without suf cient cause, to receive what may correspond to him, the
captain of the wrecked vessel to enter a marine protest against him.

• If it is not possible to transfer to the other vessels the entire cargo of the vessel wrecked, the goods of
the highest value and smallest volume to be saved rst. Designation to be made by the captain with
concurrence of his of cers.

382
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• The captain taking on-board the goods saved from the wreck to
continue his course to the port of destination and upon arrival he
should deposit the goods for disposal to their owners.

• In case the captain changes his course, and if he can unload them at
the port of which they were consigned, he may make said port if the
shippers or supercargoes present and the of cers and passengers of
the vessel consent thereto. But he is not required to do so even if he
has the consent during time of war or when the port is dif cult and
dangerous to make.

• The owners of the cargo to defray all the expenses of this arrival and
the payment of the freightage.

• If cannot be, proceed to judicial sale complying with the formalities

and on publicity.
383
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SALVAGE

384
 DEFINITION AND
PHILOSOPHY
• Salvage is a service which one person renders to the owner of a ship
or goods, by his own labor, preserving the goods or the ship which
the owner or those entrusted with the care of them have either
abandoned in distress at sea, or are unable to protect and secure.

• Salvage Law provides for the compulsory reward to those who brave
the perils of the sea to save the cargo or vessel in order to
encourage such services. Whether the owner of the property save
likes it or not, he must give a reward. The maximum amount is 50%
of the value of the property save.

385
 REQUISITES FOR SALVAGE
REWARD
1. Valid object of salvage.

2. Such object must be exposed to marine peril.

3. Must be rendered voluntarily.

4. Must be successful.

386
 PERSONS NOT ENTITLED TO
SALVAGE COMPENSATION
1. Crew of the vessel shipwrecked or which was in
danger of shipwrecked;

2. He who shall have commenced the salvage in spite of

opposition of the captain or of his representatives;
and

3. He who shall have failed to comply with the

provisions of section three (see Salvage Law)
387
• Salvage is founded on the equity of remunerating private and
individual services performed in saving, in whole or in part, a
ship or its cargo from impending peril, or recovering them
after actual loss. It is a compensation for actual services
rendered to the property charged with it, and is allowed for
meritorious conduct of the salvor, and in consideration of a
bene t conferred upon the person whose property he has
saved. A claim for salvage rests on the principle that, unless
the property be in fact saved by those who claim the
compensation, it cannot be allowed, however benevolent
their intention and however heroic their conduct. (The Job
H. Jackson, 161 Fed. Rep., 1015, 1017)

388
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 DERELICT
• A vessel or cargo badly damaged and abandoned
by the crew to the mercy of the sea.

• Mere abandonment does not make such vessel or

cargo res nullius.

• Proper procedure must be followed by the salvors

to be entitled of the reward.
389
 SOURCES
• www.sc.judiciary.gov.ph

• Timoteo B. Aquino and Ramon Paul L. Hernando, Essentials of Transportation and Public Utilities
Law (Rex Printing Company, Inc., Reprinted 2020);

• Josephrally L. Chavez, Jr., Transportation Laws Simpli ed (A Guide to Passing the Bar ) Volume V,
2014 Edition, (Rex Book Store);

• Jose R. Sundiang, Sr. and Timoteo B. Aquino, Reviewer on Commercial Law (Rex Book Store,
2014 Edition);

• https://www.divinalaw.com/dose-of-law/airline-passenger-rights-part-2-montreal-convention/;

• https://www.iata.org/en/programs/passenger/mc99/;

• https://www.icao.int/secretariat/legal/list of parties/mtl99_en.pdf.

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