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AIR TRANSPORTATION iii.it is a public registry for aircraft and regulating the
LAWS CONCERNING AIR TRANSPORTATION
ART. 1766 CIVIL CODE – in all matters not regulated
by this code, the rights and obligations of common
carriers shall be governed by the code of commerce
and by special laws (thus, CIVIL AERONATICS ACT;
CIVIL AVIATON AUTHORITY ACT; and
INTERNATIONAL TREATIES are applicable)
ASPECTS TO CONSIDER IN AIR TRANSPORTATION
A. DOMESTIC AIR TRANSPORTATION
1. CIVIL AERONAUTICS ACTS OF THE PHILIPPINES:
RA 776 AS AMENDED BY PD 1462 AND EO 217
CIVIL AERONAUTICS ACT: reorganized the civil
aeronautics board (cab) and the civil aeronautics
administration to provide for the regulation of civil
aeronautics in the Philippines
CIVIL AERONAUTICS BOARD (CAB): empowered to
regulate the economic aspect of air transportation and
has general supervision and regulation of and
jurisdiction and control over air carriers, general sales
agents, cargo sales agents and air freight forwarders
POWERS OF CAB
i. issue CPCN to domestic air carriers
ii. issue letters of authority to airfreight forwarders,
general sales agents, cargo sales agents
iii. fix and determine reasonable individual, joint or
special rates, charges or fares
iv. performs quasi-judicial functions
v. issue foreign CIR carrier’s permit (FACP) who
wish to operate to and from the Philippines
vi. only foreign air carriers duly designated by their
respective governments with which the
Philippines has an air service agreement (ASA)
can operated in the Philippines by applying for
FACP
vii. in connection with the regulatory powers of cab,
the air passenger bill of rights (cab economic
regulation no. 9 and DOTC-DTI joint
administrative order no. 1) was issued which
aims to protect travelers from possible abusive
practices of airlines by defining the right of
passengers and the obligations of carriers
2. CIVIL AVIATION AUTHORITY ACT: RA 9497 (2008)
CREATED THE CIVIL AVIATION AUTHORITY OF
THE PHILIPPINES (CAAP) IN PLACE OF THE AIR
TRANSPORTATION AUTHORITY (ATO)
POWERS OF CAAP
i. responsible for implementing policies on civil
aviation to assure safe, economic and efficient air
travel
ii. investigates aviation accidents via its aircraft
accident investigation and inquiry board
technical, operational, safety and security aspects
of aviation
iv. issue airmen certificates to individuals; issue
airworthiness certificate for Filipino-registered
aircrafts; issue air operator certificates to air
carriers
v. record of any conveyance made or executed which
affects the title to or interest in any aircraft of
Philippine registry to be made with CAAP in order
to be valid against third parties
CHICAGO CONVENTION: in connection with the
power of the CAAP director general’s power and
duty to promote safety of flight of civil aircraft in civil
aviation, must comply with the convention on
international civil aviation, also known as the
Chicago convention; signed on December 7, 1944,
ratified on march 5, 1947 by the Philippines and
took effect on April 4, 1947; it established the
international civil aviation organization (ICAO), a
specialized agency of the united nations charged
with coordinating and regulating international air
travel; it established rules of airspace, aircraft
registration and safety; exempts commercial air
fuels from tax
B. INTERNATIONAL AIR TRANSPORTATION
WARSAW CONVENTION
applies to all international transportation of
persons, baggage or goods performed by any
aircraft for hire. it seeks to accommodate or
balance the interests of the passengers seeking
recovery for personal injuries and the interest of air
carriers seeking to limit potential liability.
principal goal: to provide uniformity of rules
governing claims arising from international air
travel. it precludes a passenger from maintaining
an action for personal injury damages under local
law when his or her claim does not satisfy the
conditions of liability under the convention
(robertson vs. american airlines, aug. 18, 2003)
history: first airlines capable to carry passengers,
mail and freight were established shorty after wwii
in 1923, the government of France attempted to
adopt national laws relating to liability in the carriage
by air; called for unification of the law on a wide
international level to prevent unforeseeable conflicts
of law and conflicts of jurisdiction
(oct. 27-nov. 6, 1925) the 1ST international
conference on air law was held in Paris where the
Citeja was formed
(oct. 4-12, 1929) the 2nd international conference on
private air law was held in royal caste at Warsaw,
Poland.

(oct. 12, 1929) convention for the unification of
certain rules relating to international carriage by air
commonly known as the Warsaw convention of 1929
WARSAW SYSTEM: the several amending
protocols, supplementary instruments, rules and
regulations which amended or supplemented the
Warsaw convention of 1929
1. WARSAW CONVENTION OF 1929
Philippines became a signatory on May 16, 1950
through Senate Resolution No. 19. The Philippine
instrument of accession on October 13, 1950 and
deposited to the Polish Government on November 9,
1950. The convention became applicable to the
Philippines on February 9, 1951. On September 23,
1955, Proclamation No. 201 was issued declaring the
Philippine’s formal adherence to the Warsaw
Convention
RELEVANCE OF ADHERENCE: It was a treaty
commitment voluntarily assumed by the Philippines
government, consequently it has the force and effect of law
(Santos III and Northwest Orient Airlines, G.R. No. 101538,
June 23, 1992)
The recognition by the Philippines of the Warsaw
3. GUADALAJARA CONVENTION 1961
Convention does not preclude the operation of the Civil
Code and other pertinent laws in the determination of
the extent of the liability of the common carrier (Cathay
Pacific Airways, Ltd. vs. CA, G.R. No. 60501, March 5,
1993)
RELEVANT PROVISIONS IN THE WARSAW
CONVENTION:
Applicability: Regulates liability in the even to accident, for
international carriage of persons, luggage or goods
performed by aircraft for reward
Applies equally to gratuitous carriage by aircraft performed
by an air transport undertaking. Provides for a monetary cap
limiting the carrier’s liability in relation to both passengers
and their luggage and cargo. Creates a presumption of fault
on the part of the carrier. Provisions are of exclusive
application and have mandatory effect. In circumstances
where the WC applies, a claimant can only rely on the
liability rules of the WC and may not rely on any other
relevant national law. On the part of the carrier, it may not
seek to exclude or limit its liability or otherwise derogate
from the mandatory rules laid down.
Monetary cap – it was fixed to the monetary unit of the
French and consisted of a specified quantity of gold
a. For passenger injury or death – 125,000 gold
francs (about $5,000 at the rate of exchange
prevailing in 1929)
b. For loss or damage to cargo or registered baggage
– 250 gold francs (about $10)
c. For loss or damage to unregistered baggage –
5,000 gold francs per passenger (about $200)
2. HAGUE PROTOCOL 1955
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Why the need for another treaty? Because of
dissatisfaction with the level of monetary limitation of
air carrier’s liability and erosion of the value of the gold
franc standard after WWII
ICAO convened a Diplomatic Conference held from
Sept. 6-28, 1955 at the Hague where the WC of 1929
was amended
RELEVANT AMENDMENTS BY HAGUE PROTOCOL
OF 1955
a. It doubles the monetary cap on the carrier’s liability
in respect of passenger injury or death from
125,000 to 250,000 gold francs
b. It did not change the financial limitation of the
carrier’s liability in respect of cargo and
un/registered baggage
c. HP 1955 expressly provides that if a State
becomes a contracting state to the Hague Protocol
but is not a contracting state to the Warsaw
Convention, this shall have the effect of adherence
to the Warsaw Convention as amended
d. HP 1955 entered into force on August 1, 1963
This is a further amendment to the Warsaw Convention
1929 or Warsaw-Hague Convention 1955 which
entered into force on May 1, 1964
This convention was adopted in order to extend the
contracting carrier’s rights and liabilities under the
Warsaw Convention 1929 to any non-contracting
actual carrier
RELEVANT AMENDMENT BY THE GUADALAJARA
CONVENTION 1961:
a. On code-share agreements – it is where a
contracting carrier would substitute his own
performance of part of the carriage with that of
another carrier, without the agreement of the
consignor
b. The actual carrier is not a party to the contract of
carriage with the consignor
c. Montreal Agreement 1966: Early in the 1960s, it
became clear that the US was not prepared to
ratify the Hague Protocol of 1955 as they
considered the liability for carriage of persons too
low. On Oct. 18, 1965, the US announced its
withdrawal from the 1929 Convention effective
May 15, 1966. This announcement of withdrawal
by the US was seen as a serious crisis of
unification of private law and the solution arose in
the form of the Montreal Agreement of 1966 (also
called CAB 1966) signed on May 13, 1966. This,
however, is not a convention or protocol but an
agreement between the American Civil
Aeronautics Board and the air carrier operating
passenger transport without a stopping place in
the USA.

Because of the agreement, airline companies adjusted
their conditions of carriage – with regard to death,
wounding and other personal injury - $58,000 exclusive
of legal costs and $75,000 including legal costs. Also,
the US revoked the withdrawal from the 1929
convention at the last minute
4. GUATEMALA CITY PROTOCOL 1971
There was another proposal to amend the Warsaw-
Hague Convention aimed to raise the monetary cap on
the carrier’s liability with respect to passengers and
their luggage but not with respect to the cargo.
Unfortunately, this never entered into force.
5. MONTREAL ADDITIONAL PROTOCOLS NUMBERS 1, 2, 3
AND 4 OF 1975
Attention was drawn to the uncompleted business with
the problem of cargo. Further, because of
developments at the International Monetary Fund
(IMF) which led to the demonetization of gold and
prevented the member States from setting official
prices of gold in relation to currency, from Sept. 3-25,
1975, another Diplomatic Conference on International
Law was held in Montreal
RELEVANT AMENDMENTS OF MAP 1, 2, 3 AND 4
OF 1975
a. The amendment increased the liability limit found
in the Guatemala Protocol, altered the monetary
measurement from gold to Special Drawing Rights
(SDR: US$1=0.0729624 or SDR1=US$1.370570,
as of the present March 2020); and eliminated
outdated documentary requirements with respect
to the transport of cargo
b. SDR – The currency value of the SDR is
determined by summing the values in U.S. dollars,
based on the market exchange rates, of a basket
of major currencies (the U.S. dollar, Euro,
Japanese yen, pound sterling and the Chinese
renminbi). The SDR currency value is calculated
daily and the valuation basket is reviewed and
adjusted every five years
6. MONTREAL CONVENTION 1999
In order to unify the fragmented liability regime of the
Warsaw system conventions, the Convention for the
Unification of Certain Rules Relating to International
Carriage by Air (referred to as Montreal Convention
1999) was adopted in Montreal on May 28, 1999
RELEVANT AMENDMENTS OF MONTREAL
CONVENTION 1999
Consolidates all the various Warsaw-system
conventions in one single text. It provides certainty as
to the applicable International Air Conventions and the
contracting parties’ corresponding rights and
obligations. As a result, it creates greater international
uniformity of legislation and reduces the need for costly
litigation as to the applicable legal regime
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The Montreal Convention 1999 reflects changes to the
Warsaw-Hague Convention 1955 which had been
effected by MAP 4 in relation to carriage of cargo and
clarifies the obligations of carriers engaged in code-
share or similar operations by incorporating provisions
of the Guadalajara Convention 1961; and introduces
substantive changes in relation to carriage of
passengers and their luggage
1. For damages in excess of 100,000 SDR arising from
injury or death of passengers the monetary cap limiting
the carrier’s liability is removed; the carrier may still be
wholly or partly exonerated if he proves that he was not
negligent or that there was contributory negligence to
the passenger
2. There is a strict liability for proven damages up to
100,000 SDR for injury or death of passengers and the
carrier may be excluded or limit its liability (liability
independent of fault)
3. Liability of carrier for delay of passengers is limited
to 4,150 SDR
4. Liability of carrier for loss, damage or delay to
baggage is limited to 1,000 SDR for each passenger
5. An action for damages in respect of injury or death
of passengers may also be brought before the courts
of contracting states in which, at the time of the
accident, the passenger had his principal and
permanent residence
Entered into force on November 4, 2003
WHICH CONVENTIONS IS THE PHILIPPINES A
SIGNATORY?
1. Warsaw Convention 1929
2. Hague Protocol 1955
3. Guadalajara Convention 1961
4. Montreal Convention 1999
WHEN DID THE PHILIPPINES BECOME A SIGNATORY
The Convention was concurred in by the Senate
through Res. No. 19 on May 16, 1950. The Philippine
instrument of accession was signed by Pres. Elpidio
Quirino on Oct. 13, 1950 and was deposited to the
Polish Government on Nov. 9, 1950. The convention
became applicable to the Philippines on Feb. 9, 1951.
Then on Sept. 23, 1955, Pres. Ramon Magsaysay
issued Proc. No. 201 declaring the Philippines’ formal
adherence to the Warsaw Convention
With respect to the Montreal Convention 1999 on
Aug. 10, 2015, the Phil. Senate ratified the Convention
for the Unification of Certain Rules for International
Carriage by Air or MC99. However, MC99 is still to be
presented before the ICAO before the same can take
effect

HOW TO DETERMINE THE APPLICABLE INTERNATIONAL
AIR CONVENTION?
1. Determine if it is under the definition of “international
carriage” which is defined by reference to the agreed
places of departure and destination and any agreed
stopping place
WHAT COMPRISES “INTERNATIONAL AIR
CARRIAGE”: 1. The agreed place of departure and the
place of destination are situated within the territories of
two Contracting States, whether or not there is a break
in the carriage or a transshipment; and 2. The agreed
place of departure and the place of destination are
situated within the territory of a single Contracting
State, if there is an agreed stopping place within the
territory of another state, whether or not this is a
Contracting State
2. Check that the state/s of departure and destination
are Contracting States to the same version of either
one of the Warsaw System Conventions of the
Montreal Convention 1999
3. If it is not within the definition of international carriage
or not contracting states, apply the national law and/or
the terms of the contract
4. If there are more than one international air
convention applicable – identify the specific legal
regime applicable (determine the “latest treaty
relationship common to both States, described as the
determination of the “lowest common denominator”)
5. Once determined, the application of the identified
legal regime is exclusive and mandatory (exclusive –
conditions and limits of liability set out in the applicable
convention must be applied and they cannot
circumvent the application of the rules laid down by
pleading another cause of action; mandatory – parties
to the contract of carriage cannot agree to relieve the
carrier of liability or agree to lower limits of liability other
than those laid down by the international air
convention)
Lhuillier vs. British Airways, G.R. No. 171092, Mar. 15,
2010 – Courts have to apply the principles of
international law, and are bound by treaty stipulations
entered into by the Philippines which form part of the
law of the land. One of this is the Warsaw Convention.
Being a signatory thereto, Philippines adheres to its
stipulations and is bound by its provisions including the
place where actions involving damages to be instituted.
Courts cannot deviate from indicated limitations as it
will only run counter to the provisions of the Warsaw
Convention. Adherence is in consonance with the
comity of nations and deviations from it can only be
effected through proper denunciation.
CARRIAGE NOT COVERED BY THE WARSAW
CONVENTION
1. Carriage of mail and postal packages
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2. Carriage performed by way of experimental trial by
“air navigation undertakings” with a view to establishing
a regular line or air navigation
3. Carriage performed in extraordinary circumstances
outside the normal scope of the air carrier’s business
(ex. Carriage of cargo to territory affected by hostilities)
However, under the Warsaw-Hague Convention to
which the Phil. Is a signatory, the provisions as to the
liability of the air carrier continues to apply
4. Under the Warsaw-Hague Convention, there may be
reservation in relation to carriage for a State’s military
authorities on aircraft registered in that State the whole
capacity of which has been reserved by or on behalf of
such authorities (ex. State charters aircraft to transport
military goods to a war zone in another state) – no
reservation made by the Phil.
5. Contracting state may also make a reservation so
that relevant international air conventions will apply in
relation to carriage performed directly by the State. If a
State holds shares in an air carriage company, the air
carrier is not entitled to avoid the application of the
international air convention by invoking the State
reservation. To come within the state reservation
exception, the carriage has to be performed directly by
the State for the State, and not an air carrier as part of
its commercial operation
WHEN DOES AN AIR CARRIER BECOME LIABLE (WC)
a. Art. 17 – Damages sustained in the event of the
death or wounding by a passenger, if the accident
which caused the damages so sustained took
place on board the aircraft or in the course of any
of the operations of embarking or disembarking
b. Art. 18 – Damages sustained in the even of the
destruction or loss of, or of damage to, any
checked baggage, or any goods, if the occurrence
which caused the damage so sustained took place
during the transportation by air
c. Art. 19 – Damage occasioned by delay in the
transportation by air of passengers, baggage or
goods
WHAT IS TRANSPORTATION BY AIR
a. Art. 18 (2) – Transportation by air comprise the
period during which the baggage or goods are in
charge of the carrier, whether in an airport or on
board an aircraft, or, in the case of a landing
outside an airport, in any place whatsoever
(meaning, the carrier must be in a position to
control the situation and protect the goods)
b. Art. 18 (3) – The period of transportation by air
shall not extend to any transportation by land, sea
or river performed outside an airport. However, if
such transportation takes place in the performance
of a contract for transportation by air, for the
purpose of loading, delivery or transshipment, any
damage is presumed, subject to proof to the
contrary, to have been the result of an event which
took place during the transportation by air.

WHERE TO FILE ACTION FOR DAMAGES
At the option of the plaintiff, in the territory of one of the
Contracting Parties, either before the Court having
jurisdiction where:
1. the carrier is ordinarily a resident
2. the carrier has principal place of business
3. the carrier has an establishment by which the
contract has been made; or
4. before the court having jurisdiction at the place of
destination
Philippine Courts are divested of jurisdiction over the
case for damages because the Philippines is not the
place of domicile of the defendant nor is it the principal
place of business; neither was plaintiff’s ticket issued in
this country or was her destination Manila but Rome in
Italy
Note however that in the Montreal Convention 1999,
this was amended with respect to the injury or death of
passengers. An action for damages may be brought
before the courts of contracting stated in which, at the
time of the accident, the passenger had his principal
place and permanent residence
DEFENSES AVAILABLE TO AN AIR CARRIER TO BE
WHOLLY OR PARTLY LIABLE
Under international air carriage, there is still a presumption of
liability. However, there are only a number of narrowly defined
defenses given an air carrier and the burden to prove the
defense is on the air carrier
1. Defense of “all necessary measures” – Rule: the air carrier
is liable unless he can prove: a. that he and his servants
and agents took “all necessary measures” to avoid the
damage; or b. that “it was impossible to take such
measures”
Under the MC99, it states “all measures that could
reasonably be required to avoid the damage”
2. Defense of Negligent Pilotage - air carrier will be excused
from liability if it can prove that the damage to the goods
was caused by “negligent pilotage or negligence in the
handling of the aircraft or in navigation” and that in all other
respects the carrier and his agents “have taken all
necessary measures to avoid the damage” (not reproduced
in other Warsaw-system conventions or the MC99 because
of the considerable technological progress in air navigation
equipment)
3. Defense of Contributory Negligence of Claimant – the
carrier is wholly or partly relieved from liability if he proves
that negligence on the part of the claimant caused or
contributed to the loss, damage or delay in question. Carrier
may be exonerated wholly or partly from liability if he proves
that the damage “was caused by or contributed to by the
negligence of the injured person”
LIMITING OR EXTINGUISHING LIABILITY OF AIR CARRIER
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Art. 23, WC – Any provision tending to relieve the
carrier of liability or to fix a lower limit than that which is
laid down in the WC shall be null and void but the nullity
of such provision does not involve the nullity of the
whole contract of carriage
MONETARY CAP: The monetary cap provided under
the WC can be subject of an agreement to increase the
same by special contract entered into between the
carrier and passenger (Alitalia vs. IAC, 192 SCRA 9)
MAY A CARRIER LOSE THE BENEFIT OF FINANCIAL
LIMITATION OF LIABILITY
1. Under the WC, a carrier may not rely on the monetary cap
limiting his liability in cases where the carrier or any of his
agents acting within the scope of their employment are
guilty of “willful misconduct.” Therefore, the carrier’s liability
will not be limited to the declared value
WILLFUL MISCONDUCT: While not defined, it would seem
to require a degree of intention or subjective recklessness.
Since there is no definition, WC leaves the determination of
whether or not the carrier or his agent, acting within the
scope of their employment, are guilty of the relevant
misconduct to the law of the court before which a case is
brought
The Warsaw-Hague Convention 1955 sought to clarify
the meaning and replaced it with the phrase “act or
omission done with intent to cause damage or recklessly
and with knowledge that damage would probably result”
(Lufthansa German Airlines vs. IAC, G.R. No. 71238, March
19, 1992)
Under The Hague Protocol as adopted in Montreal
Agreement 1966, it removed the provision that the airline
can exculpate itself completely if it takes all necessary steps
to avoid the damage and by declaring the stated limits of
the liability is 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.
Therefore, the result is that a passenger could recover
unlimited damages upon proof of willful misconduct (Cathay
Pacific Airways, Ltd. vs. CA, G.R. No. 60501, March 5,
1993)
2. Gross Negligence – Sabena Belgian World Airlines vs. CA,
G.R. No. 104685, Mar. 14, 1996 – there was gross
negligence because the carrier lost the baggage of the
passenger not only once but 2x which showed the wanton
negligence and lack of care on the part of the carrier
3. Delay amounting to willful misconduct
4. Accepting passengers without ticket (Art. 3, WC) – it
subjects the carrier to unlimited liability if it accepts a
passenger without a ticket having been delivered
5. Accepting goods without airway bill or baggage without
baggage check (Art. 4, WC) – absence of baggage check
does not affect the existence or validity of the contract of

transportation but will deprive the carrier the right to invoke
limited liability
6. Waiver on the part of the carrier – British Airways vs. CA,
G.R. No. 121824, Jan. 29, 1998- the airline failed to raise
timely objections during the trial when questions and
answers on the actual claims and damages sustained were
asked
7. Estoppel – PAL vs. CA, G.R. No. 119706, Mar. 14, 1996 –
the passenger was advised by PAL’s personnel not to
declare the value of transportation charges
DEFENSES AVAILABLE WITH RESPECT TO CARRIAGE OF
CARGO
1. Inherent defect, quality or vice of the goods
2. Defective packing of the goods
3. Act of war
4. Act of public authority
WHEN ACTION MUST BE FILED
The right to damage shall be extinguished if an action is not
brought within 2 years, reckoned from:
1. Date of arrival at the destination;
2. From the date on which the aircraft ought to have
arrived;
3. 3. From the date on which the carriage stopped
HOW ACTION FILED
1. Complain within the specified period
In case of damage or delay to cargo – the person entitled to
delivery or claimant must complain in writing to the carrier
after the discovery of the damage, and within a specified
number of days from the date of the receipt in case of
damage (Art. 26(2), WC – 7 days from date of receipt in
case of damage; but in Warsaw-Hague, Warsaw-Hague-
MAP 4 and MC99 – 14 days); or from the date which the
cargo should have been delivered in case of delay (WC- 14
days; W-H, W-H-MAP4 & MC99 – 21 days) Failure to
complain within the specified period is prima facie evidence
that the goods have been delivered in good condition and
in accordance with documents of carriage.
2. File action within 2 years
3. Failure to complain will prevent the claimant from
subsequently bringing an action against the carrier, except
in cases where there is fraud on the part of the carrier
If these 3 conditions are met or complied with, then the
carrier is prima facie liable for the loss of or damage to the
cargo and for delay during the time the cargo is in the
charge of the carrier
What losses may be proved: claimant needs to prove the
extent of his loss and damages and are payable only in
respect of the actual loss suffered
PAL vs. CA, 255 SCRA 48 – Respondent filed an action for
damages against petitioner airline for the breakage of the
front glass of the microwave over which she shipped. PAL
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averred that the action was filed 7 months after the arrival
at the port of destination and failed to make a complaint in
writing immediately after discovery of damage as provided
in the Airway Bill. SC stated that respondent’s immediate
submission of a formal claim to petitioner, which however
was not immediately entertained as she was referred from
one employee to another, she was deemed to have
substantially complied with the requirement
WHEN NOTICE TO CARRIER SHOULD BE GIVEN
In order for prescription of 2 years to start, notice to the
carrier should be given:
Damage to baggage: within 3 days from receipt
Damage to goods: within 7 days from receipt
Delay: within 21 days from receipt
Failure to file written notice – no action shall lie against the
carrier save on the case of fraud on his part
Notice of Claim is a condition precedent (Federal Express
vs. American Home Assurance, G.R. No. 150094, Aug. 18,
2004)
Reason: 1. To inform the carrier that the cargo has been
damaged and it is being charged with liability therefor; 2. To
give it an opportunity to examine the nature and extent of
the injury (affords the carrier opportunity to make an
investigation while the matter is fresh and easily
investigated so as to safeguard itself from false and
fraudulent claims)
If notice of claim is not complied with, its enforcement can
be prevented and the liability cannot be imposed on the
carrier. Thus, if notice is given and it was not acted upon,
then that is the time that a suit for enforcement must be filed
within 2 years
Notice is not applicable if there is fraud on the part of the
carrier or failure of the passenger to file was due to the acts
or omission of the carrier
WARSAW CONVENTION DOES NOT PRECLUDE THE
OPERATION OF THE CIVIL CODE AND OTHER LAWS
United Airlines vs. Uy, G.R. No. 127768, Nov. 19, 1999
– Respondent filed a case on 2 grounds: 1. the shabby
and humiliating treatment he received from petitioner’s
employees at the San Francisco Airport which caused
him extreme embarrassment and social humiliation;
and 2. the slashing of his luggage and the loss of his
personal effect amounting to US$5,310.00 SC: The
action for damages arising from theft or damage to
property or goods is well within the bounds of the
Warsaw Convention, however and action for damages
arising from misconduct of the airline employees and
the violation of respondent’s rights as passenger is not.
Thus, as to the first cause of action, it is not covered by
the 2-year limitation of the WC since petitioner airline
may still be held liable for breach of other provisions of
the Civil Code which prescribed a different period (4
years – Art. 1146, NCC) but as to the second cause of

action, it was dismissed because it was filed beyond
the 2 year prescriptive period
PAL vs Savillo, G.R. No. 149547, Jul. 4, 2008 – Art. 19
provides for damages occasioned by delay in the
transportation by air of passengers, baggages or
goods. Claims covered under the Warsaw Convention
can no longer be recovered under local law if the
statute of limitation of 2 years has lapsed. But it also
noted that the WC does not “exclusively regulate” the
relationship between passenger and carrier. SC: failure
of PAL to endorse the tickets did not fall under the WC
since the purported negligence did not occur during the
performance of the contract of carriage. If, however,
the case was merely claims incidental to the airlines’
delay in transporting their passengers, the complaint
would have been time barred under the WC. But
because this case does not fall under the WC, the
prescriptive period to file the case was 4 years under
Art. 1146 of the NCC
SUCCESSIVE CARRIERS
Art. 13, WC – Transportation performed by several
successive carriers shall be deemed as one undivided
transportation, if it has been regarded by the parties as
a single operation, whether it has been agreed upon
under the form of a single contract or a series of
contracts. A contract of international carriage between
a passenger and a particular airline although
performed by different carriers under a series of airline
tickets constitutes a single operation.
Members of the International Air Transport Association
(IATA) are under a “general pool partnership
agreement wherein they act as agent of each other in
the issuance of tickets to contracted passengers to
boost ticket sales worldwide and provide passengers
easy access to airlines which are otherwise
inaccessible in some parts of the world. Xxx. A member
airline which enters into a contract of carriage
consisting of a series of trips to be performed by
different carriers is authorized to receive the fare for the
whole trip.”
Successive carriage does not lose its international
character because one or more stages are to be
performed entirely within the territory of the same state
Under a general pool partnership agreement, the
ticket-issuing airline is the principal in a contract of
carriage, while the endorsee-airline is the agent
The obligation of the ticket-issuing airline remains and
does not cease, regardless of the fact that another
airline undertakes to carry passengers to one of their
destination
What happens when there is a problem with one leg of
the trip? The issuing airline which acted as an agent of
the other airlines would be liable because the various
legs of the trip constitutes a single operation in other
portions of the trip (Chine Airlines vs. Chiok)
cvrb Page |7
The same rule will apply if the act or omission was
committed by the agent (American Airlines vs. CA,
G.R. No. 116044-45, March 9, 2000)
REMEDIES OF PARTIES IN CARRIAGE OF PASSENGERS
AND GOODS
Gen rule: in the carriage of passengers, an action may be filed
only against the carrier in which the accident or delay occurred,
except when there is an agreement of contract whereby the first
carrier assumes liability for the entire journey. With respect to
carriage of baggage or goods, the following remedies are
available:
1. The passenger or consignor can file an action against
the first carrier and the carrier in which the damage
occurred (first carrier is the one identified in the airway
bill and is often the one who actually contracted with
the consignor)
2. The passenger or consignee can file an action against
the last carrier and the carrier in which the damage
occurred. If the stage of the carriage during which the
destruction, loss, damage or delay took place can be
identified, the consignor and the consignee may each
take action against the successive carrier who actually
performed the carriage
3. The carriers are jointly and severally liable to the
passenger or to the consignor or consignee. Thus, if
one of the aforementioned successive carriers is
successfully sued, he is liable for the totality of the loss
or damage, but may be entitled to take recourse
against another successive carrier.
CASES
G.R. No. 171092 March 15, 2010
EDNA DIAGO LHUILLIER vs. BRITISH AIRWAYS
Facts
Lhuillier filed a Complaint2 for damages against British
Airways before the RTC. She alleged that she took respondent’s
flight from London to Rome. Once on board, she allegedly
requested Halliday, a flight attendant, to assist her in placing her
hand-carried luggage in the overhead bin. However, Halliday
allegedly refused to help her, and even sarcastically remarked
that "If I were to help all 300 passengers in this flight, I would
have a broken back!" She further alleged that when the plane
was about to land in Rome another flight attendant, Kerrigan,
singled her out from among all the passengers in the business
class section to lecture on plane safety. Affronted, she assured
Kerrigan that she knew the plane’s safety regulations being a
frequent traveler. Thereupon, Kerrigan allegedly menacingly
told her that "We don’t like your attitude." Upon arrival in Rome,
petitioner complained to respondent’s ground manager and
demanded an apology. However, the latter declared that the
flight stewards were "only doing their job." Thus, petitioner filed
the complaint for damages.

Issues
WON RTC of Makati has jurisdiction over the case
Held
No. In Santos III v. Northwest Orient Airlines,
Philippines is a party to the Warsaw Convention of 1933. The
Convention is a treaty commitment voluntarily assumed by the
Philippine government and, as such, has the force and effect of
law in this country.13Article 1 of the Warsaw Convention
provides:
1. This Convention applies to all international carriage of
persons, luggage or goods performed by aircraft for reward. It
applies equally to gratuitous carriage by aircraft performed by an
air transport undertaking.
2. For the purposes of this Convention the expression
"international carriage" means the place of departure and the
place of destination, whether or not there be a break in the
carriage or a transhipment, are situated either within the
territories of two High Contracting Parties, or within the territory
of a single High Contracting Party, if there is an agreed stopping
place within a territory subject to the sovereignty, suzerainty,
mandate or authority of another Power, even though that Power
is not a party to this Convention. A carriage without such an
agreed stopping place between territories subject to the
sovereignty, suzerainty, mandate or authority of the same High
Contracting Party is not deemed to be international for the
purposes of this Convention.
Here, Petitioner’s place of departure was London while
her place of destination was Italy. 15 Both signed and ratified the
Warsaw Convention. As such, the transport of the petitioner is
deemed to be an "international carriage" within Warsaw
Convention. Since the Warsaw Convention applies, then the
jurisdiction over the subject matter of the action is governed by
its provisions.
Under Article 28(1) of the Warsaw Convention, the
plaintiff may bring the action for damages before – 1. the court
where the carrier is domiciled; 2. the court where the carrier has
its principal place of business; 3. the court where the carrier has
an establishment by which the contract has been made; or 4. the
court of the place of destination. In Santos III v. Northwest Orient
Airlines, jurisdiction in the international sense must be
established in accordance with Article 28(1) of the Warsaw
Convention, following which the jurisdiction of a particular court
must be established pursuant to the applicable domestic law.
Only after the question of which court has jurisdiction is
determined will the issue of venue be taken up.
In this case, respondent is a British corporation
domiciled in UK. Hence, under the first and second jurisdictional
rules, the petitioner may bring her case before the courts in UK.
In the passenger ticket and baggage check presented by both
the petitioner and respondent, it appears that the ticket was
issued in Italy. Consequently, under the third jurisdictional rule,
the petitioner has the option to bring her case before the courts
of Italy. Finally, both the petitioner and respondent aver that the
place of destination is Italy. Accordingly, petitioner may bring her
action before the courts of Rome, Italy. We thus find that the
cvrb Page |8
RTC of Makati correctly ruled that it does not have jurisdiction
over the case filed by the petitioner.
PHILIPPINE AIRLINES, INC vs. HON. ADRIANO SAVILLO
and SIMPLICIO GRIÑO
G.R. No. 149547 July 4, 2008
Facts
Private respondent was invited to participate in the
1993 ASEAN Seniors Annual Golf Tournament held in
Indonesia. He decided to purchase passenger ticket from PAL:
MANILA-SINGAPORE-JAKARTA-SINGAPORE-MANILA. He
and his companions were made to understand by PAL that its
plane would take them from Manila to Singapore, while
Singapore Airlines would take them from Singapore to Jakarta. 4
They took the PAL flight to Singapore. Singapore Airlines
rejected the tickets of private respondent and his group because
they were not endorsed by PAL. Private respondent tried to
contact PAL’s office at the airport, only to find out that it was
closed. They were forced to purchase tickets from Garuda
Airlines and board its last flight bound for Jakarta. After the
series of nerve-wracking experiences, private respondent
became ill and was unable to participate in the
tournament. Upon his return to the Philippines, private
respondent brought the matter to the attention of PAL and SA.
However, both airlines disowned liability and blamed each other
for the fiasco. Private respondent filed a Complaint for Damages
before the RTC.7
Issue
WON Warsaw Convention is applicable in this case
Held
No. Article 19 of the Warsaw Convention provides for
liability on the part of a carrier for "damages occasioned by delay
in the transportation by air of passengers, baggage or goods."
Article 24 excludes other remedies by further providing that "(1)
in the cases covered by articles 18 and 19, any action for
damages, however founded, can only be brought subject to the
conditions and limits set out in this convention." Therefore, a
claim covered by the Warsaw Convention can no longer be
recovered under local law, if the statute of limitations of two
years has already lapsed. Nevertheless, this Court notes that
jurisprudence in the Philippines and the United States also
recognizes that the Warsaw Convention does not "exclusively
regulate" the relationship between passenger and carrier on an
international flight. This Court finds that the present case is
substantially similar to cases in which the damages sought were
considered to be outside the coverage of the Warsaw
Convention. In United Airlines v. Uy,18 this Court distinguished
between the (1) damage to the passenger’s baggage and (2)
humiliation he suffered at the hands of the airline’s employees.
The first cause of action was covered by the Warsaw
Convention which prescribes in two years, while the second was
covered by the provisions of the Civil Code, which prescribes in
four years.
Here, private respondent’s Complaint alleged that both
PAL and SA were guilty of gross negligence, which resulted in

his being subjected to "humiliation, embarrassment, mental
anguish, serious anxiety, fear and distress."21 The emotional
harm suffered by the private respondent as a result of having
been unreasonably and unjustly prevented from boarding the
plane should be distinguished from the actual damages which
resulted from the same incident. Under the Civil Code provisions
on tort,22 such emotional harm gives rise to compensation where
gross negligence or malice is proven.
AIR FRANCE VS. BONIFACIO H. GILLEGO, SUBSTITUTED
BY HIS SURVIVING HEIRS
G.R. No. 165266 : December 15, 2010
Facts
Gillego,[3] then incumbent Congressman, was invited
to participate as one of the keynote speakers at the
Conference Symposium to be held in Hungary and Tokyo from
May 19 to 22, 1993. The Philippines is a member of the Inter-
Parliamentary Union which organized the event. He left Manila
on board Air France's aircraft bound for Paris. While waiting at
the Airport for his connecting flight to Budapest, respondent
learned that petitioner had another aircraft bound for Budapest
with an earlier departure time than his scheduled flight. He then
went to petitioner's counter and made arrangements for the
change in his booking. He was given a corresponding ticket and
also a new baggage claim stub. However, upon arriving in
Budapest, respondent was unable to locate his luggage at the
claiming section. He was advised to just wait for his luggage at
his hotel. But said luggage was never delivered despite follow-
up inquiries by respondent. Respondent filed a complaint [7] for
damages against the petitioner alleging that by reason of its
negligence and breach of obligation to transport and deliver his
luggage, respondent suffered inconvenience, serious anxiety,
physical suffering and sleepless nights.
Issue
Is Air France liable for damages?
Held
As held in Kierulf v. Court of Appeals, social and
financial standing of a claimant may be considered only if he was
subjected to contemptuous conduct despite the offender's
knowledge of his or her social and financial standing.
Article 1735 of the Civil Code provides that in case of lost or
damaged goods, common carriers are presumed to have been
at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as required by Article 1733. All
that he has to prove is the existence of the contract and the fact
of its non-performance by the carrier.[23]
Here, the action filed by the respondent is founded on
such breach of the contract of carriage with petitioner who
offered no satisfactory explanation for the unreasonable delay in
the delivery of respondent's baggage. The presumption of
negligence was not overcome by the petitioner and hence its
liability for the delay was sufficiently established. However,
upon receipt of the said luggage during the pendency of the case
in the trial court, respondent did not anymore press on his claim
for actual or compensatory damages and neither did he adduce
evidence of the actual amount of loss and damage incurred by
such delayed delivery of his luggage. After a careful review, we
find that petitioner is liable for moral damages.
cvrb Page |9
G.R. No. 122308 July 8, 1997
PURITA S. MAPA, CARMINA S. MAPA and CORNELIO P.
MAPA vs. CA and TRANS-WORLD AIRLINES INC.
Facts
Plaintiffs entered into contract of air transportation with
TWA purchased in Thailand. Said TWA tickets are for Los
Angeles-New York-Boston-St. Louis-Chicago. Carmina was to
commence schooling and thus was accompanied by Purita to
assist her in settling down at the University. They departed for
Boston, taking a connecting flight on TWA's carrier from JFK
Airport to Boston's Logan Airport, checking in (7) pieces of
luggage at the TWA counter in the JFK Airport. The TWA ground
stewardess informed plaintiffs that they were at the wrong gate.
Upon hearing this, plaintiffs rushed to gate 1. At gate 1, they
were told by a TWA ground stewardess that flight had just
departed. However, they were consoled that another TWA flight
was leaving for Boston after 30 minutes and plaintiffs could use
the same boarding pass for the next flight. Upon arriving in
Boston, they proceeded to the carousel to claim their baggages
and found only three out of the seven they checked in. Plaintiffs
immediately reported the loss of their four baggages to TWA.
TWA's representative confidently assured them that their
baggages would be located within 24 hours. Five months lapsed
without any result on TWA's intensive search. Despite demands
by plaintiffs, TWA failed and refused without just cause to
indemnify and redress plaintiffs for the grave injury and
damages they have suffered.4 Petitioners then filed with the trial
court a complaint5 for damages,.
Issue
WON the contracts of transportation between plaintiffs
and TWA were contracts of "international transportation" under
the Warsaw Convention
Held
No. In Article I(2) of the Warsaw Convention, there are
two categories of international transportation, viz., (1) that
where the place of departure and the place of destination are
situated within the territories of two High Contracting Parties
regardless of whether or not there be a break in the
transportation or a transshipment; and (2) that where the place
of departure and the place of destination are within the territory
of a single High Contracting Party if there is an agreed stopping
place within a territory subject to the sovereignty, mandate, or
authority of another power, even though the power is not a party
of the Convention. The High Contracting Parties referred to in
the Convention are the signatories thereto and those which
subsequently adhered to it. In the case of the Philippines, the
Convention was concurred in by the Senate, through Resolution
No. 19, on May 1950; and Proclamation No. 201, declaring the
Philippines' formal adherence thereto.
Here, the contracts of transportation are evidenced by
the two TWA tickets. On the basis alone of the provisions
therein, it is obvious that the place of departure and the place of
destination are all in the territory of the United States, or of a
single High Contracting Party. The contracts, therefore, cannot
come within the purview of the first category of international
transportation. Neither can it be under the second category

since there was NO agreed stopping place within a territory
subject to the sovereignty, mandate, or authority of another
power.
AMERICAN AIRLINES v. CA, HON. BERNARDO LL. SALAS
and DEMOCRITO MENDOZA
G.R. No. 165266 : December 15, 2010
Facts
Mendoza purchased from Singapore Airlines in Manila
conjunction tickets for Manila - Singapore - Athens - Larnaca -
Rome - Turin - Zurich - Geneva - Copenhagen - New York. The
petitioner was not a participating airline in any of the segments
in the itinerary under the said conjunction tickets. In Geneva the
petitioner decided to forego his trip to Copenhagen and to go
straight to New York and in the absence of a direct flight under
his conjunction tickets from Geneva to New York, he exchanged
the unused portion of the conjunction ticket for a one-way ticket
from Geneva to New York from the petitioner airline. Petitioner
issued its own ticket to him in Geneva and claimed the value of
the unused portion of the conjunction ticket from the
IATA2 clearing house in Geneva. He filed an action for damages
before the RTC for the alleged embarassment and mental
anguish he suffered at the Geneva Airport when the petitioners
security officers prevented him from boarding the plane,
detained him for about an hour and allowed him to board the
plane only after all the other passengers have boarded.
Issue
WON issuance of a new ticket in Geneva created a
contract of carriage separate and distinct from that entered by
the private respondent in Manila.
Held
No. Art 1(3) of the Warsaw Convention which states:
"Transportation to be performed by several successive carriers
shall be deemed to be one undivided transportation, if it has
been regarded by the parties as a single operation, whether it
has been agreed upon under the form of contract/s, and it shall
not lose its international character merely because contract/s is
to be performed entirely within the territory subject of the
sovereignty, suzerainty, mandate or authority of the same High
contracting Party." The number of tickets issued does not detract
from the oneness of the contract of carriage as long as the
parties regard the contract as a single operation. The evident
purpose underlying this Article is to promote international air
travel by facilitating the procurement of a series of contracts for
air transportation through a single principal and obligating
different airlines to be bound by one contract of transportation.
Here, the contract of carriage between the private
respondent and Singapore Airlines although performed by
different carriers under a series of airline tickets, including that
issued by petitioner, constitutes a single operation. Members of
the IATA are under a general pool partnership agreement
wherein they act as agent of each other in the issuance of
tickets11 to contracted passengers to boost ticket sales
worldwide and at the same time provide passengers easy
access to airlines which are otherwise inaccessible in some
c v r b P a g e | 10
parts of the world. A member airline which enters into a contract
of carriage consisting of a series of trips to be performed by
different carriers is authorized to receive the fare for the whole
trip and through the required process of interline settlement of
accounts by way of the IATA clearing house an airline is duly
compensated for the segment of the trip serviced.13 Thus, when
the petitioner accepted the unused portion of the conjunction
tickets, entered it in the IATA clearing house and undertook to
transport the private respondent over the route covered by the
unused portion of the conjunction tickets, the petitioner tacitly
recognized its commitment under the IATA pool arrangement to
act as agent of the principal contracting airline, Singapore
Airlines, as to the segment of the trip the petitioner agreed to
undertake. As such, the petitioner thereby assumed the
obligation to take the place of the carrier originally designated in
the original conjunction ticket. The new ticket was simply a
replacement for the unused portion of the conjunction ticket,
both tickets being for the same amount of US$ 2,760 and having
the same points of departure and destination. 14
UNITED AIRLINES vs. WILLIE J. UY
G.R. No. 127768 November 19, 1999
Facts
Uy, a revenue passenger on UA Flight for San
Francisco — Manila route, checked in together with his luggage
one piece of which was found to be overweight at the airline
counter. An employee of UA rebuked him saying that he should
have known the maximum weight allowance to be 70 kgs. per
bag. Then, in a loud voice in front of the milling crowd, she told
Uy to repack his things. Uy acceded only to find his luggage still
overweight. The airline then billed him overweight charges which
he offered to pay with a miscellaneous charge order (MCO).
However, the airline's employee refused to honor the MCO
pointing out that there were conflicting figures listed on it. Faced
with the prospect of leaving without his luggage, respondent
paid the overweight charges with his American Express credit
card. Upon arrival in Manila, he discovered that one of his bags
had been slashed and its contents stolen. He bewailed the
insult, embarrassment and humiliating treatment he suffered in
the hands of UA employee and requested reimbursement
thereof. UA paid him US $9.70 per pound. Uy, thinking the
amount to be grossly inadequate to compensate him for his
losses, he demanded P1,000,000.00. UA did not accede to his
demands. Consequently, Uy filed a complaint for damages
against UA.
Issue
WON Warsaw Convention can be applied in this case
Held
Yes. Warsaw Convention’s provisions do not regulate
liability for other breaches of contract by the carrier or
misconduct of its officers and employees. It does not regulate,
much less exempt, the carrier from liability for damages for
violating the rights of its passengers under the contract of
carriage, especially if willful misconduct on the part of the
carrier's employees is found or established. 18

Respondent's complaint reveals that he is suing on: (a)
the shabby and humiliating treatment he received from
petitioner's employees at the San Francisco Airport which
caused him extreme embarrassment and social humiliation
(not); and, (b) the slashing of his luggage and the loss of his
personal effects amounting to US $5,310.00 (w/n warsaw
convention). Consequently, insofar as the first cause of action is
concerned, respondent's failure to file his complaint within the
two year limitation of the Warsaw Convention does not bar his
action since petitioner airline may still be held liable for breach
of other provisions of the Civil Code which prescribe a different
period, Art. 1146 thereof which prescribes four years for filing an
action based on torts.
On the second cause of action, respondent filed his
complaint more than two (2) years later. However, it is obvious
that respondent was forestalled from immediately filing an action
because petitioner airline gave him the runaround, answering
his letters but not giving in to his demands. Hence, despite the
express mandate of Art. 29 of the Warsaw Convention that an
action for damages should be filed within two (2) years from the
arrival at the place of destination, such rule shall not be applied
in the instant case because of the delaying tactics employed by
petitioner airline itself. Thus, private respondent's second cause
of action cannot be considered as time-barred under Art. 29 of
the Warsaw Convention.
SEA/MARITIME TRANSPORTATION
A. CODE OF COMMERCE
1. PROVISIONS ON OVERLAND TRANSPORTATION
 COVERAGE OF CODE OF COMMERCE: this law only
pertained to commercial contracts of carriage. The
transportation of merchandise is always seen as
commercial. Thus, transportation of persons or news is not
considered as such.
 Commercial: the carrier in the transportation of persons or
news must be a merchant or is habitually engaged in
transportation for the public.
 If the carriage of persons is an accessory to another
industry which is governed by the civil laws, the contract of
transportation is not commercial.
 Air transportation is not covered by the Code of Commerce
because at the time the Code of Commerce was
promulgated, transportation by air on a commercial basis
was not yet known.
 EFFECT OF THE CIVIL CODE: Because of the limited
coverage of the Code of Commerce on contracts of
transportation, when the Civil Code was enacted which
contained provisions on common carriers, it now became
the primary law on contracts of transportation. However, it
did not expressly repeal the provisions of the Code of
Commerce on overland transportation but makes it now
suppletory to the provision of the Civil Code.
 HOW DO YOU KNOW WHAT LAW TO APPLY?:
1. If it involves a commercial contract involving common
carriers, refer to the Civil Code then to the Code of
Commerce
c v r b P a g e | 11
2. If it involves private carriers involved in commercial
contract, refer to the Code of Commerce then to the
Civil Code excluding the provisions on common carrier
 SCOPE OF OVERLAND TRANSPORTATION: Overland
transport applies to transport on land and on small bodies
of water, both natural and artificial, including transport on
rivers which are not very large. If it transport at sea, it is
admiralty.
 NATURE OF CONTRACT OF TRANSPORTATION
A contract of transportation by land or water shall be
considered as commercial when:
1. it has for its object merchandise or any article of
commerce;
2. when, whatever its object may be, the carrier is a
merchant or is habitually engaged in transportation for
the public (Art. 349, Code of Commerce)
 BILL OF LADING
 When shipping merchandise/goods a bill of lading
is issued as proof of the contract.
 Bill of Lading – It is a written acknowledgment of
the receipt of goods and an agreement to transport
and deliver then at a specified place to a person
named or on his order.
 Lading – The word “lading” as used in the term “bill
of lading” literally means cargo or the action or
process of loading a ship or other vessel with
cargo.
 Ace Navigation Co., Inc. vs. FGU Insurance
Corporation, G.R. No. 171591, June 25, 2012: a
bill of lading was defined as “an instrument in
writing, signed by a carrier or his agent, describing
the freight so as to identify it, stating the name of
the consignor, the terms of the contract for
carriage, and agreeing or directing that the freight
to be delivered to the order or assign of a specified
person at a specified place”
 Sometimes called shipping receipts, forwarders
receipts and receipt for transportation
 FUNCTION /NATURE:
1. Receipt of the goods received and symbol of
the goods covered by it (it recites the date and
place of shipment, describes the goods as to
quantity, weight, dimensions, identification
marks, condition, quality and value)
2. Contract in itself between the parties where
they are bound by the terms thereof or where
they undertake specific responsibilities and
assume stipulated obligations (it is a contract
because it names the contracting parties,
fixes the route, destination, and freight rate or
charges, and stipulates the right and
obligations assumed by the parties)
3. Document of title (Unsworth Transport
International Phils, Inc. vs. CA, G.R. No.
166250, July 26, 2010)
o Bills of lading, as legal evidence of the contract
between the shipper and the carrier, all its

contents shall decide all dispute that may arise
with regard to their execution and fulfillment
o Saludo vs. CA, G.R. No. 95536, March 23,
1992 – Acceptance of a bill of lading without
dissent raises a presumption that all 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. In order that presumption of assent
to a stipulation in a bill of lading limiting the
liability of a carrier may arise, it must appear
that the clause containing this exemption from
liability plainly formed a part of the contract
contained in the bill of lading.
 CLASSES
1. Negotiable – A bill of lading that transfers control
of the goods to the order of the entity named on
the document. A bill of lading must be clean in
order to be negotiable. It is also known as Order
bill of lading.
2. Non-negotiable – A bill of lading in which it is stated
that the good referred to therein will be to a specific
person. Also known as Straight bill of lading.
3. Clean – A bill of lading issued by a carrier declaring
that the goods have been received in an
appropriate condition without the presence of
defects
4. Foul or claused – A bill of lading that shows or
contains a notation indicating that the goods
covered by it are in bad condition. If the shipped
products deviate from the delivery specifications or
expected quality, the receiver may declare a
claused bill of lading
5. Spent – One which covers goods that have already
been delivered by the carrier without a surrender
of a signed copy of the bill of lading
6. Through – A bill of lading that allows the
transportation of goods both within domestic
borders and through international shipment. It is
one issued by a carrier who is obliged to use the
facilities of other carriers as well as his own
facilities for the purpose of transporting the goods
from the city of the seller to the city of buyer, which
bill of lading is honored by the second and other
interested carriers who do not issue their own
ladings. It is also often required for the exportation
of goods, as it serves as a receipt or carriage
contract for the products. If domestic
transportation, it is an “inland bill of lading” but if
the goods are to be moved across the ocean, an
“ocean bill of lading” will be requred.
7. On board – A bill of lading issued when the goods
have been actually placed aboard the ship with
very reasonable expectation that the shipment is
as good as on its way. Also called the “shipped bill
of lading”
8. Received for shipment – A bill of lading in 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. These are
c v r b P a g e | 12
issued whenever conditions are not normal and
there is an insufficiency of shipping space.
9. Custody – A bill of lading in which the goods are
already received by the carrier but the vessel
indicated therein has not yet arrived at the port
where the goods are held for shipment
10. Port to Port – A bill of lading under which the
carrier’s responsibility begins at the port of loading
and ends at the port of discharge. It is also known
as “Ocean bill of lading”
 FORM AND CONTENTS (Art. 350, Code of
Commerce)
1. Name, surname and domicile of shipper;
2. Name, surname and domicile of carrier;
3. Name, surname and domicile of the person to whom
or whose order the goods are addressed, or whether
they are to be delivered to the bearer or said bill;
4. Description of the goods (generic character, weight,
external marks or signs of the packages)
5. Cost of transportation;
6. Date on which the shipment is made;
7. Place of the delivery by the carrier;
8. Place and time at which the delivery is to be made
to the consignee;
9. Damages to be paid by the carrier in case of delay,
if any agreement is made on this point
o Is the form of the bill of lading material? No. as long
as it contains an acknowledgment by the carrier of
the receipt of goods for transportation, it is in legal
effect a bill of lading.
o Is a bill of lading always needed in proving a
contract of transportation? – No. While Art. 350
states that the shipper and the carrier may
mutually demand that a bill of lading be made, it is
not obligatory. The fact that a bill of lading is not
issued does not preclude the existence of a
contract of transportation.
o How are disputes between parties decided when
there is no bill of lading? Art. 354, Code of
Commerce – In the absence of a bill of lading, the
respective claims of parties shall be decided by the
legal proofs that each one may submit in support
of his claims, in accordance with the general
provisions established for commercial contracts.
 CONTRACTS OF ADHESION
o Bills of lading are contracts of adhesion, thus
generally they should be void. However, in
several cases, the SC stated that bills of lading
are contracts not entirely prohibited because
one who adheres to the contract is free to reject
it in its entirety. If he adheres, he gives his
consent. (Ong Yiu vs. CA, 91 SCRA 223)
o A shipper who receives a bill of lading 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 correctly stating the contract and
to have assented to its terms. The acceptance
of the bill without dissent raises the
presumption that all the terms therein were

brought to the knowledge of the shipper and
agreed to by him and, in the absence of fraud
or mistake, he is estopped from thereafter
denying that he assented to such terms.
(Magellan Manufacturing Marketing Corp. vs.
CA, 201 SCRA 102)
 PARTIES
1. Shipper
2. Carrier
3. Consignee
 RESPONSIBILITY/OBLIGATION OF CARRIER
 Duties: 1. to accept the goods; 2. to deliver the
goods.
1. When does the responsibility of the carrier
commence? Art. 355 – From the moment the
carrier receives the merchandise, personally
or through a person charged for the purpose,
at the place indicated for receiving them
2. Can the carrier determine on its own the route
to take in the transportation of goods? Art. 359
– If there should be an agreement between
the shipper and carrier with regard to the road
over which the transportation is to be made,
the carrier cannot change the route
o If there is no agreement? Carrier must
select on which may be the shortest, least
expensive and practically passable
o When can the carrier change the route?
The carrier is obliged to do so under force
majeure. If there is increase in
transportation charges, the carrier is
reimbursed for said increase after
presenting the formal proof thereof.
o If there is no justifiable reason to change
the route – the carrier will be liable for any
damage which the goods shall have
suffered plus the indemnity agreed upon
3. Care of the goods – Art. 361 – Merchandise
shall be shipped and transported at the risk of
the shipper, unless the contrary is expressly
stipulated. Thus, all damages and
impairments suffered by the goods during the
transportation, by reason of accident, force
majeure, or by reason of the nature or defect
of the goods, shall be for the account of the
shipper.
o However, Art. 362 stated that if the
damages occurred on account of the
carrier’s negligence, or because he id not
take precautions usually adopted by
careful persons, the carrier will be liable
for damages and losses. However, if the
shipper committed fraud in the bill of
lading, making the carrier believe that the
class or quality of the goods are different
from what they really were, the carrier will
not be liable
o As compared to the provisions of the Civil
Code, under Art. 1734, common carriers
are not responsible for loss, destruction
c v r b P a g e | 13
or deterioration due to natural disaster or
character of the goods or defects in the
packaging or containers. Nevertheless,
still a common carrier must exercise
extraordinary diligence. Likewise,
transportation of goods is never at the risk
of the shipper.
o Remedy of carrier when damage is
incurred during transportation – sale by
the carrier of the goods, placing them for
the purpose at the disposal of the judicial
authority or of the officials designated by
special provisions, provided the owners
did not have time to dispose the same
4. May the carrier refuse to accept or transport
the goods? The general rule is that a carrier
cannot refuse to carry a particular class of
goods to the prejudice of the traffic of these
goods. Except:
a. Art. 356 – carriers may refuse to accept
packages which appear unfit for
transportation. However, if transportation
is through railroad, the rule is not
absolute, thus, if the shipper insisted,
carriers transporting through railroads
cannot refuse to carry them but they shall
be exempt from all responsibility if their
objections are made to appear in the bill
of lading
b. Art. 357 – Falsity of declaration as to the
contents: if the carrier has well founded
suspicion of falsity in the declaration as
to the contents of the package, he may
examine it (How: to make the
examination either: i. in the presence of
the shipper or consignee and witness; or
ii. before a notary public where the
shipper or consignee does not appear
after having been cited to do so)
o If the declaration is correct, carrier is
liable for the cost of examination and
those of carefully repacking the goods; if
incorrect, the shipper will be the one liable
for these expenses
o Other causes/examples for refusal to
accept:
a. Goods are found to be contrabands or
illegal;
b. Goods are injurious to health;
c. Failure to tender the goods on time;
d. Acceptance of the goods would result
in overloading;
e. Goods are improperly packed or are
otherwise in an unfit condition for
carriage;
f. Goods are of a sort which the carrier
cannot convey or is not in the habit of
conveying;
g. Goods, like livestock, will be exposed
to disease;
h. Goods offered are of a dangerous
character which might subject the carrier,

its passengers, strangers or other freight
to the risk of injury;
i. Goods sought to be transported are
dangerous articles or substances such as
dynamite and other explosives;
j. Goods will be exposed to untoward
danger like flod, capture by enemies and
the like;
k. Risk sought to be imposed upon the
carrier appears to be extraordinary;
l. There is a transportation strike
5. Delivery – A carrier is not only obliged to
transport the goods safely but also to deliver
the same to the person indicated in the bill of
lading. The goods should be delivered to the
consignee or any other person to whom the
bill of lading was validly transferred or
negotiated
o How should delivery be made? Art. 363 –
carriers are obliged to deliver the goods
transported in the same condition in
which, according to the bill of lading, they
were at the time they were received,
without detriment or impairment
o When should delivery be made? Art. 370
– Where there is a period fixed – deliver
the goods within the time fixed. Failure to
do so, the carrier must pay the indemnity
stipulated in the bill of lading; if there is no
indemnity stipulated and delay exceeds
the time fixed in the bill of lading, the
carrier will be liable for the damages
which the delay may have caused.
o If no period is fixed – Art. 358 – Carrier is
bound to forward them in the first
shipment of the same or similar goods
which he makes to the point where he
must deliver them. Failure to do so,
carrier will be liable for damages caused
by the delay
o To whom should delivery be made? Art.
368 – to the consignee without any delay
or difficulty. Where the bill of lading is
issued to the order of the shipper, the
carrier is under a duty not to deliver the
merchandise except upon presentation of
a bill of lading duly endorsed by the
shipper. Thus, if it is delivered without
endorsement, there will be misdelivery.
o What if the carrier cannot make delivery?
The carrier can make a judicial deposit.
How: Deposit with judicial intervention is
made through the municipal judge, where
there is none of the first instance, who
shall provide for their deposit at the
disposal of the shipper. Effect: It will
produce all the effects of delivery without
prejudice to third parties with better right
o Valid reasons for failure to make
delivery (Art. 369, Code of
Commerce)
c v r b P a g e | 14
1. When the consignee cannot be
found at the residence indicated;
2. Where the consignee refuses to
pay the transportation charges; and
3. Where the consignee refuses to
receive the goods.
o Where there was partial or defective
delivery – The consignee may lawfully
abandon or refuse to receive the goods:
1. When the goods cannot be used
independently of those not delivered
(Art. 363)
2. If the goods delivered were
rendered useless for sale or
consumption for the the purposes for
which they are properly destined
(Art. 365)
3. If the goods delivered are
damaged to such an extent that their
value is diminished (carrier must pay
the difference in value as judged by
experts);
4. When the delay is incurred
through the fault of the carrier (Art.
371)
In the first two (2) cases, the
consignee may exercise
abandonment. If he exercises
abandonment, he will be entitled to
the full value of the goods
6. When there are 2 or more carriers – Art. 373
– If there is an agreement or there are
combined services with other carriers, they
shall assume the obligations of the carriers
who shall precede them, reserving his right to
proceed against the latter, if he should not be
directly responsible for the fault which gives
rise to the claim of the shipper or consignee
o Therefore, if the damages were incurred
through their own acts, even if there is a
reservation made, the same shall not
relieve them from the responsibility
thereof.
o Doctrine of combined or connecting
services – 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 proceeded him in the
conveyance. The carrier who makes
delivery shall likewise acquire all the
actions and rights of those who preceded
him in the conveyance.
o Accordingly, the shipper or consignee
shall have an immediate right of action
against any of the following:
a. The carrier who executed the contract
of transportation; or
b. The other carrier who received the
goods transported without reservation.

 CLAIM FOR DAMAGE
 When should the claim be made? Art. 366
1. If the damage is apparent from the exterior of
the package, claim is made upon receipt of
the package (Patent damage – damage on
the goods which is readily apparent from the
examination of the packages in which the
goods are delivered)
2. If the damage cannot be known from the
exterior, claim is made within 24 hours
following the receipt of merchandise (longer
period may be stipulated) – Latent damage –
damage of such a character that the nature
and extent thereof is not readily apparent
until the packages are opened and the
contents are examined
 Notice of claim is a condition precedent to the right
of action, which must be filed within 1 year from
delivery of goods or denial of the claim. A sufficient
shorter period may be stipulated in the bill of lading
 After the periods have elapsed, or after the
transportation charges have been paid, no claim
whatsoever shall be admitted against the carrier
with regard to the condition in which the goods
transported were delivered
 RIGHTS OF THE SHIPPER
1. AMOUNT OF DAMAGES FOR LOSS – Art. 372 –
The amount of the goods which the carrier must
pay in case they were lost or mislaid shall be fixed
in accordance with the bill of lading. The shipper is
not allowed to show proof that among the goods
declared are articles of greater value or money
 Shipper’s Lien – It is the security for the
payment of the value of the goods which
the carrier must pay in cases of loss or
misplacement. The horses, vehicles,
vessels and equipment and other
principal and accessory means of the
carrier are bound in favor of the shipper
2. AMOUNT OF DAMAGES FOR DELAY – Art. 371
(3) – If abandonment does not occur – the
indemnity for delay cannot exceed the current
price of the goods transported on the day and the
place where the delivery should have been made
 Right to abandon – In case of delay on
account of the carrier, the consignee may
leave the goods transported on the hands
of the carrier, informing him thereof in
writing before the arrival of the same at
the point of destination
 Effect of right to abandon – The carrier
shall satisfy the total value of the goods
as if they have been lost or mislaid
c v r b P a g e | 15
3. RIGHT TO CHANGE CONSIGNMENT – Art. 360
– The shipper may without changing the place
where delivery is to be made, change the
consignment of the goods delivered to the carrier.
 Condition: at the time of the changing of
the consignee, the bill of lading shall be
returned to the carrier if one was issued,
changing it for another containing the
novation of the contract
4. OBLIGATION TO PAY FOR TRANSPORTATION
CHARGES. Art. 374 – The consignee to whom the
remittance may have been made cannot defer the
expenses and transportation charges on the
goods after 24 hours from delivery
 General Rule: the parties to a contract of
transportation are the carrier and shipper
who is the one liable for freight charges.
The consignee is initially a stranger to the
bill of lading.
 When can the consignee be made liable?
Only when the bill of lading specifies that
the charges are to be paid by the
consignee
 When does this liability of the consignee
arise:
1. There is a contract of agency between
the shipper/consignor and the consignee;
2. Acceptance of the bill of lading
delivered to the consignee, with full
knowledge of its content; or
3. The consignee’s availment of the
stipulation pour autrui drawn up by and
between the shipper and carrier upon the
consignee’s demand that the goods be
delivered to it (MOF Company, Inc. vs.
Shin Yang Brokerage, Corp. G.R. No.
172822, December 18, 2009)
 Remedy of the carrier in case
transportation charges are not paid:
1. Art. 374 – Judicial sale of the goods
transported;
2. Art. 375 – Carrier’s lien (made within 8
days after the delivery has been made,
otherwise, right prescribes)
3. Right to demand in a proper action the
amounts owing to it by reason of the
contract of transportation
 Effect of bankruptcy of consignee – Art.
376 – It shall not cut off the preference of
the carrier as long as made within 8 days
5. OBLIGATION TO RETURN BILL OF LADING –
Art. 353 (2) and (3) – After the contract has been
complied with, the bill of lading issued by the
carrier shall be returned to him
 Effect: The respective obligations and
actions shall be considered cancelled
unless the claim which the parties
reserved are reduced in writing
 In case of loss or for any reason
whatsoever the consignee cannot return

the bill of lading – He shall give the carrier
a receipt for the goods delivered, the
receipt producing the effect of the return
of the bill of lading
CASES
EASTERN SHIPPING LINES, INC v. BPI/MS INSURANCE
CORP., & MITSUI SUMITOMO INSURANCE CO., LTD
G.R. No. 182864, January 12, 2015
Facts
Sumitomo Corporation shipped on board ESLI’s vessel
22 coils of various Steel Sheet for transportation to and delivery
at the port of Manila in favor of consignee Calamba Steel located
in Laguna as evidenced by a Bill of Lading. The declared value
of the shipment was US$83,857.59. The shipment was insured
with the respondents BPI/MS and Mitsui against all risks under
Marine Policy. Upon withdrawal of the shipment by the Calamba
Steel’s representative, it was found out that part of the shipment
was damaged and was in bad order condition. It was found out
that the damage amounted to US$4,598.85 prompting Calamba
Steel to reject the damaged shipment for being unfit for the
intended purpose. Sumitomo Corporation again shipped on
board ESLI’s vessel 50 coils in various Steel Sheet weighing
383,532 kilograms in good order and condition for transportation
to and delivery at the port of Manila, in favor of the Calamba
Steel as evidenced by a Bill of Lading. The shipment was
insured with the BPI/MS and Mitsui against all risks under
Marine Policy. ESLI’s vessel with the second shipment arrived
at the port of Manila partly damaged and in bad order.
Calamba Steel rejected the damaged shipment for being unfit
for the intended purpose. BPI/MS and Mitsui filed a
Complaint3 before the RTC of Makati City against ESLI and ATI
to recover actual damages.
Issue
Is ESLI liable for damages?
Held:
Yes. The extraordinary responsibility of the common
carrier lasts from the time the goods are unconditionally placed
in the possession of, and received by the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person
who has a right to receive them. In maritime transportation, a
bill of lading is issued by a common carrier as a contract, receipt
and symbol of the goods covered by it. If it has no notation of
any defect or damage in the goods, it is considered as a “clean
bill of lading.” A clean bill of lading constitutes prima
facie evidence of the receipt by the carrier of the goods as
therein described.
Here, based on the bills of lading issued, it is
undisputed that ESLI received the two shipments of coils from
Sumitomo Corporation in good condition. However, upon arrival
at the port of Manila, some coils from the two shipments were
partly dented and crumpled Mere proof of delivery of the goods
in good order to a common carrier and of their arrival in bad
order at their destination constitutes a prima facie case of fault
or negligence against the carrier. If no adequate explanation is
given as to how the deterioration, loss, or destruction of the
goods happened, the transporter shall be held
c v r b P a g e | 16
responsible.61 From the foregoing, the fault is attributable to
ESLI hence liable for damages.
According to the NCC, the law of the country to which
the goods are to be transported shall govern the liability of the
common carrier for their loss, destruction or
deterioration.67 The New Civil Code provides that a stipulation
limiting a common carrier’s liability to the value of the goods
appearing in the bill of lading is binding, unless the shipper or
owner declares a greater value.69 In addition, a contract fixing
the sum that may be recovered by the owner or shipper for the
loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been
fairly and freely agreed upon. COGSA (Section 4 Subsection 5)
that an amount recoverable in case of loss or damage shall not
exceed US$500.00 per package or per customary freight
unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in the
bill of lading. Here, ESLI admitted the existence and due
execution of the two Bills of Lading78 together with
the Invoice on the second shipment.
MOF COMPANY, INC., v. SHIN YANG BROKERAGE
CORPORATION
G.R. NO. 172822 : December18, 2009
Facts
Halla Trading Co., a company based in Korea, shipped
to Manila secondhand cars and other articles on board the
vessel Hanjin Busan. The bill of lading covering the shipment
which was prepared by the carrier Hanjin, named Shin Yang as
the consignee and indicated that payment was on a "Freight
Collect" MOF, Hanjin's exclusive general agent in the
Philippines, repeatedly demanded the payment of ocean freight,
documentation fee and terminal handling charges from Shin
Yang. The latter, however, failed and refused to pay contending
that it did not cause the importation of the goods, that the
ultimate consignee did not endorse in its favor the original bill of
lading and that the bill of lading was prepared without its
consent. MOF filed a case for sum of money before the MeTC.
Issue
WON a consignee, who is not a signatory to the bill of
lading, is bound by the stipulations thereof
Held
The bill of lading is oftentimes drawn up by the
shipper/consignor and the carrier without the intervention of the
consignee. However, the latter can be bound by the stipulations
of the bill of lading when a) there is a relation of agency between
the shipper or consignor and the consignee or b) when the
consignee demands fulfillment of the stipulation of the bill of
lading which was drawn up in its favor.12In Keng Hua Paper
Products Co., Inc. v. Court of Appeals,13 once the bill of lading
is received by the consignee who does not object to any terms
or stipulations contained therein, it constitutes as an acceptance
of the contract and of all of its terms and conditions, of which the
acceptor has actual or constructive notice.

EDGAR COKALIONG SHIPPING LINES, INC vs. UCPB
GENERAL INSURANCE COMPANY, INC
G.R. No. 146018 June 25, 2003
Facts
Angelia (S and C) delivered to petitioner (now
Cokaliong Shipping Lines cargo consisting of one carton of
Christmas décor and two sacks of plastic toys, to be transported
on board the M/V scheduled to depart from Cebu City for
Tandag, Surigao del Sur. [Petitioner] issued Bill of Lading No.
58 and 59 Legaspi insured the cargo, covered by Bill of Lading
No. 59, with [respondent against all risks’ under Open
Policy for which she was issued Marine Risk Note. She also
insured the cargo covered by Bill of Lading No. 58.
When the vessel left port, it had thirty-four passengers
and assorted cargo on board. After the vessel had passed by
the Bridge, fire ensued in the engine room, and, despite earnest
efforts of the officers and crew of the vessel, the fire engulfed
and destroyed the entire vessel resulting in the loss of the vessel
and the cargoes therein. Shortly thereafter, Legaspi filed a claim,
with [respondent], for the value of the cargo insured
under Marine Risk Note No. 18409 and covered by Bill of
Lading No. 59.
Issue
Is petitioner liable for the loss of the goods?
Held
Yes. In Eastern Shipping Lines, Inc. v. Intermediate
Appellate Court, 15 Fire arises almost invariably from some act
of man. It does not fall within the category of an act of God
unless caused by lighting or by other natural disaster or
calamity. "As the peril of fire is not comprehended within the
exceptions in Article 1734, supra, Article 1735 of the Civil Code
provides that in all cases other than those mentioned in Article
1734, the common carrier shall be presumed to have been at
fault unless it proves that it has observed the extraordinary
diligence required by law." Where loss of cargo results from the
failure of the officers of a vessel to inspect their ship frequently
so as to discover the existence of cracked parts, that loss cannot
be attributed to force majeure, but to the negligence of those
officials.16 Ensuring the seaworthiness of the vessel is the first
step in exercising the required vigilance. Petitioner did not
present sufficient evidence showing what measures it had
undertaken to ensure the seaworthiness of the vessel. It failed
to show when the last inspection and care of the auxiliary engine
fuel oil service tank was made, what the normal practice was for
its maintenance, or some other evidence to establish that it had
exercised extraordinary diligence. Necessarily, in accordance
with Article 173517 of the Civil Code, we hold petitioner
responsible for the loss of the goods covered by Bills of Lading
Nos. 58 and 59.
In Everett Steamship Corporation v. Court of Appeals,
A stipulation (limited liability clause) in the bill of lading limiting
the common carrier’s liability for loss or destruction of a cargo to
a certain sum, unless the shipper or owner declares a greater
value, is sanctioned by law, particularly Articles 1749 and 1750
c v r b P a g e | 17
of the Civil Code. In Sea-Land Service, Inc. vs. Intermediate
Appellate Court, ‘It seems clear that even if said section 4 (5) of
the Carriage of Goods by Sea Act did not exist, the validity and
binding effect of the liability limitation clause in the bill of lading
here are nevertheless fully sustainable on the basis alone of the
cited Civil Code Provisions. "Pursuant to the afore-quoted
provisions of law, it is required that the stipulation limiting the
common carrier’s liability for loss must be ‘reasonable and just
under the circumstances, and has been freely and fairly agreed
upon. Concededly, the purpose of the limiting stipulation in the
Bill of Lading is to protect the common carrier. Hence, a
shipper/consignee that undervalues the real worth of the goods
it seeks to transport does not only violate a valid contractual
stipulation, but commits a fraudulent act when it seeks to make
the common carrier liable for more than the amount it declared
in the bill of lading.
Here, the stipulation limiting petitioner’s liability is not
contrary to public policy. In fact, its just and reasonable
character is evident. The shippers/consignees may recover the
full value of the goods by the simple expedient of declaring the
true value of the shipment in the Bill of Lading. In fact, they
committed fraud against the common carrier by deliberately
undervaluing the goods in their Bill of Lading, thus depriving the
carrier of its proper and just transport fare.
Questions answered by Judge
1. Good day Judge. Maam regarding sa classes of bill of
lading, how do wu differentiate yung "ocean bill of lading"
under number 6 and yung number 10 na port to port? Since
another term for port to port is Ocean bill of lading, would
that also mean na in a Through bill of lading, the carriers
responsibility will begin at the port of discharge?
A: A bill of lading may have different classifications in one bill of
lading issued. A Through Bill of Lading is one which allows the
transportation of goods both within domestic borders and
through international shipment. If one also intends it to be a port
to port bill of lading at the same time, it is possible. If a shipper
also wants the bill of lading to be negotiable or not, it is also
possible to include the classification in that same bill of lading.
Example therefore, if one intends to ship the goods through
international shipment, aside from the bill of lading being a
through bill of lading, it may also be considered a port to port bill
of lading where the responsibility of the carrier begins at the start
of loading and ends at the port of discharge. Thus, the status of
your bill of lading as both kinds of bills of lading is possible where
responsibility will start from the port of discharge, allowing the
same to be transported through international shipment and the
responsibility will end at the port of discharge.
2. Ibig sabihin sabihin po ba nito is that the classification of bill
of lading depends on how we treat them? At hindi na po
necessary na dapat expressly provided po sa bill of lading
itself na, for example po, Through bill of lading po siya?
A: The classification must be expressly provided in the bill of
lading. provisions or terms in the bill of lading will control the
contract which the shipper and carrier will enter into. In the case
of Saludo, acceptance of a bill of lading without objection will
raise the presumption that all terms are agreed by the shipper.
MARINE TRANSPORTATION

Marine Transportation – is the carriage (shipment) of goods
(cargo) and people (passenger) by sea and other waterways
Admiralty or Maritime Law – is defined as a distinct body of law
that governs maritime questions and offenses. It is the body of
both domestic law governing maritime activities, and private
international law governing the relationships between private
entities that operate vessels on the oceans. It deals with matters
including marine commerce, marine navigation, marine
salvaging, shipping, sailors and the transportation of passengers
and goods by sea.
Governing Law
 The primary law is the Civil Code and in default thereof,
the Code of Commerce and other special laws are to
be applied (Salvage Law or COGSA). Since the Civil
Code contains no provisions regulating liability of ship
owners or agents in the event of total loss or
destruction of the vessel, the provisions of the Code of
Commerce shall govern
 Maritime transportation and maritime commerce are
governed by Articles 573 to 869 of the Code of
Commerce
Difference between Civil Code provisions and Code of
Commerce provisions
 Civil Code – vessels engaged in the business of
carrying or transporting passengers or goods, for
compensation, offering their services to the public are
common carriers
 Code of Commerce – they involve vessels which are
licensed to engage in maritime commerce or
commerce by sea, whether in foreign or coastwise
trade; under the Code of Commerce, when it states
vessels, it refers solely and exclusively to merchant
ships
Vessel
 In its broad sense, the term vessel extends to
everything floating in an on the water, built in the form
of a vessel, and used for navigation regardless of form,
right or motor power.
 A merchant vessel refers to a boat or ship that
transports cargoes or carries passengers for hire. It
may also pertain to a vessel engaged in maritime
commerce, whether foreign or domestic.
 not included:
a) When the code speaks of vessels, they should
not be understood as referring to pleasure craft,
yachts, pontoons, health service and harbor
police vessels, floating storehouses, warships or
patrol vessels, coast guard vessels, fishing
vessels, towboats and other craft destined to
other uses, such as for instances as coast and
geodetic survey, those engaged in scientific
research and exploration, craft engaged in the
loading and discharge of vessels or
transshipments from one vessel to another, and
those small crafts which in harbors, along
shores, bays, inlets, coves and anchorages are
c v r b P a g e | 18
engaged in transporting passengers and
baggage
b) In the case of Lopez vs. Duruelo, 52 Phil. 229 –
it stated that vessels of minor nature not
engaged in maritime commerce, such as river
boats and those carrying passengers from ship
to shore, must be governed as to their liability to
passengers by the provisions of the Civil Code or
other appropriate provisions of law.
 Nature
a) It is considered personal and movable property
on account of their value and importance in the
world of commerce.
b) Being a property, it is subject to acquisition of
ownership such as:
1. purchase and sale;
2. prescription;
3. construction (Art. 574);
4. capture;
5. donation;
6. succession; and
7. other means (example Barter)
 Purchase and Sale
 It is the most common mode of ownership
 Kinds of sale allowed: Voluntary (Art. 575-578) or
Judicial (Art. 578-582)
 Requisites: a. It must appear in a written
instrument; and b. Such instrument must be
registered
 Purpose: In order that the transfer may affect third
persons
 Where to register: With the Philippine Coast Guard
which is vested with the exclusive authority over
the registration and documentation of Philippine
vessels, as well as the issuance of all certificates,
licenses or other document necessary or incident
to such registration (PD 1064 – Tarrif and Customs
Code)
 Vessels required to be registered: 1. all vessels
used in Philippine waters, not being a transient of
foreign registry; 2. vessels 3 tons gross or less
shall not be registered unless the owner shall so
desire
 Where to register – at its home port when a coast
guard district or station is in the said home port,
and at the nearest Coast Guard District or station
when none
 Purpose – It confers upon the vessel the right to
engage, consistently with law, in the Philippines
coastwise trade and entitles it to the protection of
the authorities and the flag of the Philippines in all
ports and on the high seas, and at the same
secures it to the same privileges and subject it to
the same disabilities as pertain to foreign-built
vessels transferred abroad to citizens of the
Philippines
 Modes of Sale
a) Voluntary (Art. 575) – if sold to strangers, co-
owner may exercise the right to pre-emption
and the right to redemption
 c v r b P a g e | 19

b) Right of Pre-emption – Before making the l) Effect of sale on prior liens – Sale of a vessel
sale, the co-owner purchases for himself in or foreclosure of the chattel mortgage cannot
order that the sale to third persons will be affect the prior liens
prevented
c) Right of Redemption – After making the sale, Persons who take part in Maritime Commerce
the co-owner must exercise the right within 9
1. Ship owners
days following the inscription of the sale in
 A person who has possession, control and
the registry and by depositing the price at the
management of the vessel and the consequent right
same time. Purpose is to dissolve a perfected
to direct her navigation and receive the freight earned
and consummated sale
and paid while his possession continues.
d) Judicial Sale: A Judicial Sale is made for
2. Ship agents
purposes of payment to creditors
 person entrusted with the provisioning or representing
e) Art. 580 provides how the funds received
the vessel in the port in which it may be found. He is
from a judicial sale shall be distributed. It
not considered as a mere agent as contemplated in
creates therefore a lien upon the vessel in
the Civil Code and is therefore, generally held to be
favor of the various creditors enumerated
solidarily liable with the shipowner.
f) Maritime Lien – the right of a particular
 In Maritime Co. of the Phil. vs. CA, 171 SCRA 61 – a
person to compel the sale of a ship because
ship agent is one appointed to manage and operate
he has not been paid a debt owed to him on
the vessels of the shipowner, bound to “provisions and
account of such vessel. It is a lien designed
victual” and to render reports on the operations of the
to furnish security to a creditor and to enable
vessel; one authorized to appoint sub agents
a person to obtain repairs and supplies even
remaining responsible to the shipowner
in the vent that the ship is a distance away
 A ship agent, even though he may not be the owner,
from its owners and no significant amount of
is liable to the shipper and owners of the cargo
money is on board to pay for the goods and
transported by it, for losses and damages occasioned
services that are provided
to such cargo without prejudice to his rights against
g) Preferred Maritime Lien – refers to a maritime
the owner of the ship, to the extent of the value of the
lien on a vessel to which any person who
vessel, its equipment and the freight
furnishes repairs, supplies or other
 Extent of authority of Ship agent
necessaries to such vessel will be entitled
 Art. 595 – authorized to represent the ownership
and which maritime lien, it if arose prior to the
of the vessel and take judicial and extrajudicial
recording of a preferred mortgage lien, shall
steps in his own name and in such capacity in
have priority over the said mortgage lien (PD
matters relating to commerce
1521- Ship Mortgage Decree of 1978)
 Art. 598 – may not order a new voyage, make
h) This is in contrast to Art. 580 which lays down
contracts for a new charter, or insure the vessel
the order of preference created by a lien upon
without the authorization of the owner/s, unless
the vessel in favor of the various creditors
he has special authority therefor
enumerated therein (10)
 Art. 599 – render an account of the results of
i) However, since the provisions of PD 1521 on
each voyage of the vessel
the order of preference in the satisfaction of
the claims against the vessel, being a special  Art. 602 – indemnify the captain for all the
legislation, is more statute compared to the expenses incurred with funds of his own or of
provisions on the concurrence and others, for the benefit of the vessel
preference of credit under the Civil Code  Art. 603 – before the vessel sets out to sea, the
which is a general law. ship agent may discharge the captain and
j) Creditors, therefore, have a real hypothecary members of the crew whose contracts are not for
right over the vessel. It means that it definite period or voyage, paying them the
constitutes a guarantee for the satisfaction of salaries earned according to the contract and
their claims, insofar as may be covered by without indemnity whatsoever, unless expressly
the proceeds of the sale of the vessel, specified in the agreement
whether the sale be voluntary or judicial
Primary liability of shipowner and ship agent
k) Liens in favor of creditors are known as legal
liens. Therefore, whoever buys a vessel or 1. Civilly liable fore the acts of the captain and for obligations
loans money with the vessel as security on a contracted by the latter to repair, equip, and provision the vessel
chattel mortgage, takes the vessel subject to provided the amount claimed was invested for the benefit of the
such prior lien. It also gives the lienor a right vessel (Art. 586)
to arrest the vessel for payment of his claim.
This right to arrest, however, has a 2. Civilly liable for the indemnities in favor of third persons which
“proprietary” interest which is conceived as a arise from he conduct of the captain in the care of the goods
kind of limited ownership to the extent of his which the vessel transported as well as for the safety of the
claim against the vessel. passengers transported; but may exempt himself therefrom by

abandoning the vessel with all her equipment and the freight he
may have earned during the voyage (Art. 587)
3. For damages to third persons for the tort or quasi-delict
committed by the captain, except collision with another vessel
(Art. 2180, Civil Code)
4. Damages in case of collision due to the fault, negligence or
lack of skill of the captain, sailing mate, or any member of the
complement (Art. 826)
Extent of liability of shipowner and ship agent
 The liability of the shipowner and ship agent is limited.
It is merely co-extensive with his interest in the vessel
such that a total loss of the vessel results in its
extinction. The liability of the vessel owner and agent
arising from the operation of the vessel is confined to
the vessel itself, its equipment, freight and insurance
(Aboitiz Shipping Corp. vs. CA, G.R. Nos. 121833,
130752, 137801, October 17, 2008)
 This is in view of the so called real and hypothecary
nature of maritime law
Real and Hypothecary Nature of Maritime Law
 It means that the liability of the carrier in connection
with losses related to maritime contracts is confined to
the vessel, which is hypothecated for such obligations
or which stands as the guaranty for their settlement
(Aboitiz Shippiong Corp. vs. General Accident Fire and
Life Assurance Corp., Ltd., G.R. No. 100446, January
21, 1993)
 To reiterate and to simply the real and hypothecary
nature of maritime law, the owner of the vessel is only
liable up to the extent of the value of the vessel or
limited to the value of the vessel
Doctrine of Limited Liability
Doctrine of limited liability or the Limited liability rule principle in
maritime commerce states that while 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, he may nonetheless
exempt himself therefrom by abandoning the vessel with all the
equipment and the freight it may have earned during the voyage
(Art. 587; Yangco vs. Laserna, G.R. No. L-47447-47449,
October 29, 1941)
“No vessel, no liability”
 “No vessel, no liability” expresses the limited liability
rule where the liability is merely co-extensive to the
interest in the vessel. The total loss or destruction of
the vessel extinguishes maritime liens because there is
no longer any res to which it can attach
 Rationale for the doctrine/rule: the need to offset
against innumerable hazards and perils of sea voyage
and to encourage ship building and maritime
commerce. By abandonment, the shipowner and ship
agent exempt themselves from liability, thus avoiding
the possibility of risking his whole fortune in the
business
c v r b P a g e | 20
 Doctrine applies to the following cases:
1. Art. 587 – civil liability of the ship agent for indemnities in favor
of third persons
2. Art. 590 – civil liability of co-owners from negligent acts of the
ship captain
3. Art. 643 – liability for the wages of the ship captain and crew
as well as for the advances made by the ship agent if the vessel
is totally lost by reason of capture or shipwreck
4. Art. 837 – civil liability of the shipowners arising from collision
Doctrine of Limited Liability – exceptions
The shipowner cannot set up the defense of limited liability in
cases where:
1. the injury or death to a passenger is due either to the fault of
the shipowner, or to the concurring negligence of the shipowner
and the captain
2. the vessel is insured
3. in workmen’s compensation claims
4. in case there is no total loss and the vessel is not abandoned
5. in the event of a collision between 2 mutually negligent
vessels
6. by reason of fault of negligence
7. where the expenses for repairs done on the vessel were
completed before the loss or sinking of the vessel
Abandonment
 In marine insurance, abandonment is defined as the
act of the insured by which, after a constructive total
loss, he declares the relinquishment to the insurer of
his interest in the thing insured
 Reason for abandonment: Arts. 587, 590 and 837 of
the Code of Commerce intend to limit the liability of
shipowner or the agent to the value of the vessel, its
appurtenances and freightage earned in the voyage,
provided that the owner or agent abandons the vessel.
 When may it be exercised:
1. In case of civil liability of the ship agent for indemnities in favor
of third persons (Art. 587)
2. In case of leakage of at least ¾ of the contents of a cargo
containing liquids (Art. 687)
3. In case of constructive loss of the vessel (Sec. 138, Insurance
Code)
 When abandonment not necessary: The only instance
where such abandonment is dispensed with is when
the vessel was entirely lost. In such case, the obligation
is extinguished (Luzon Stevedoring Corp. vs. CA, G.R.
No. L-58897, December 3, 1987).
 However, despite the total loss of the vessel, its
insurance answers for the damages for which a

shipowner or agent may be held liable (Vasquez vs.
CA, G.R. No. L-42926, September 13, 1985)
 Abandonment must be neither partial nor conditional
 Again, if abandonment was made to the insurer and the
latter answers for the damages, the shipowner or agent
may be made liable.
 However, abandonment may be made in favor or a
creditor. Acceptance by the creditor is compulsory thus
limiting the liability of the shipowner or agent over the
extent of their interest on the vessel
 Effect of abandonment:
1. Abandonment amounts to an offer of the value of the
vessel, of her equipment, and freight money earned.
2. It also provides for the cessation of the responsibility of
the shipowner over the vessel and transfers ownership
thereof to the creditors, thus abandonment cannot be
refused by the creditor
3. Captains or master of the vessel
Ship captain and master of the vessel
 The name of captain or master of the vessel is given
according to the kind of vessel, to the person in charge
of it
 Captain – applied to those who govern vessels that
navigate the high seas or ships of large dimensions
and importance, although engaged in coastwise trade
 Master of Vessel – those who command smaller ships
engaged exclusively in coastwise trade
 For purposes of maritime commerce, they have the
same meaning, both being the chiefs or commanders
of ships
Nature of position of captain
1. Acts as the general agent of the shipowner
2. The technical director of the vessel
3. Represents the government of the country under whose flag
he navigates
Solidary liability of the captain and ship agent
 The captain shall be civilly liable to the ship agent and
the latter to the third persons who may have made
contracts with the former for:
1. All the damages suffered by the vessel and its
cargo by reason of want of skill or negligence on
this part. If a misdemeanor or crime has been
committed, he shall be liable in accordance with
the Penal Code
2. All the thefts committed by the crew, reserving
his right of action against the guilty parties
3. The losses, fines and confiscations imposed on
account of violations of customs, police, health
and navigation laws and regulations
4. Losses and damages caused by mutinies on
board the vessel or by reason of faults committed
by the crew in the service and defense of the
same, if he does not prove that he made timely use
of all his authority to prevent or avoid them
c v r b P a g e | 21
5. Those caused by the misuse of the powers and
the non-fulfillment of the obligations pertaining to
him in accordance with Arts. 610 to 612 of the
Code of Commerce
6. Those arising by reason of his going out of his
course or taking a course which he should not
have taken without sufficient cause, in the opinion
of the officers of the vessel, at a meeting with the
shippers or supercargoes who may be on board
7. Those arising by reason of his voluntary
entering port other than that of his destination,
outside the cases or without the formalities
referred to in Art. 612 of the Code of Commerce
8. Those arising by reason of non-observance of
the provisions contained in the regulations on
situations of lights and maneuvers for the purpose
of preventing collisions
Duties of the captain
1. Over the cargo – Art. 619: the responsibility of the captain
over the cargo starts from the time when it is delivered to
him at the dock or afloat alongside the ship at the port of
loading and terminates when he delivers it on the shore or
on the discharging wharf at the port of unloading, unless the
contrary is agreed upon
When captain incurs no liability
a. For damages caused to the vessel or to the cargo by
reason of force majeure; but he shall always be
liable for those damages arising through his own
fault, no agreement to the contrary being valid
b. For the obligations he may have contracted for the
repair, equipment, and provisioning of the vessel
which shall devolve upon the ship agent, unless the
former has expressly bound himself personally or
has signed a bill of exchange or promissory note in
his name (Art. 620)
Force majeure
 In order to claim exemption due to force majeure, which
should be the proximate cause, the vessel must be
seaworthy (When is a vessel seaworthy? When it is
adequately equipped for the voyage and manned with
competent and sufficient officers and crew)
 Effect of negligence when there is force majeure – The
captain will still be liable because there is still the
presumption that the captain was at fault or acted
negligently in case of loss, destruction or deterioration
of the goods unless he proves the observance of the
diligence required
2. Transshipment – If transshipment could not be made or
there is ground to believe that such could not be made
because of the condition of the cargo will render it
inadvisable to transship, the captain must make such other
advantageous disposition of the property of the absent
shipper as circumstances will permit
When: within a reasonable time in which to decide what
course he will adopt as to the disposition of the cargo after
entering a port of refuge
3. Vessel has gone through a hurricane – Art. 624 – Where the
captain believes that cargo suffered damages or averages

a. The captain must make a protest thereon before the
competent authority at the first port he touches
b. Such protest must be made within 24 hours following arrival
c. The captain must ratify within the same period when he arrives
at the destination;
d. He must immediately proceed with proof of facts
Unless these steps have been done, the captain may not open
hatches
4. Vessel is shipwrecked – Art. 624 (pars. 2 and 3) – Where the
captain is saved alone or with part of his crew:
a. He must make a protest thereon before the nearest
competent authority
b. Such protest must be made within 24 hours following arrival
c. He shall make a sworn statement of the facts
d. The authority or consul abroad shall verify the said facts,
receiving the sworn statement of the members of the crew and
passengers saved
e. Such authority shall take such other steps as may help in
arriving at the facts
f. Such authority shall also make a statement of what may be the
result of the proceedings of the captain, stamped and folioed,
with a memorandum of the folios, which he must rubricate
(arrange, write or print as a rubric or a short commentary or
explanation covering the short subject)
g. The captain must ratify the protest at his port of destination
within 24 hours following the arrival and present the original
records to the judge or court
4. Other officers of the vessel
a. Sailing mate or First mate – second in command and takes
over in case of disability of the captain (absence, sickness
or death)
The sailing mate cannot prevail over the captain’s decisions at
to the course to be taken if a change thereof is desired. If there
is a conflict, the sailing mate must state to the captain his proper
observations in the presence of other officers and if the captain
disagrees, the sailing mate shall make the proper protest signed
by him and one other officer in the log book. The sailing mate
shall then obey the captain
b. Second mate – third in command and takes over in the event
of the inability or disqualification of the captain and the sailing
mate
c. Marine engineers – shall be considered as officers of the
vessel but have no authority or intervention except in matters
referring to the motor apparatus
d. Crew – the aggregate of seamen who man a ship of the ship’s
company. The captain may make up the crew of his vessel with
such number of men as he may consider proper.
e. Supercargo – Art. 649 – those persons who discharge on
board the vessel the administrative duties which the ship agent
or the shippers may have assigned to them. They keep an
account and record of their transactions in a book as required in
the accounting book of the captain
c v r b P a g e | 22
They may also be agents of the owner of goods shipped as
cargo on a vessel, who has charge of the cargo on board, sells
the same to the best advantage in the foreign market, buys
cargo to the brought back on the return voyage of the ship and
comes home with it
f. Pilot – in maritime law, a person who is duly qualified and
licensed to conduct a vessel into or out of ports, or in certain
waters
The pilot supersedes the master for the time being in the
command and navigation of the ship, and his orders must be
obeyed in all matters connected with her navigation. He
becomes the master pro hac vice and should give all directions
as to speed, course, stopping and reversing, anchoring, towing
and the like. The master does not surrender his vessel to the
pilot. It is the master who is command of the vessel
notwithstanding the presence of a pilot
Harbor pilot – a duly licensed master mariner who is not part of
the regular complement of the vessel and who is taken on board
at a particular place and tasked to efficiently and effectively
perform pilotage service within a specific pilotage district
Pilotage – act of conducting, navigating or maneuvering a vessel
to or from berth or anchorage, along rivers, channels and
estuaries, including all related activities
Compulsory pilotage – refers to the requirement that a vessel
shall be operated by a licenses pilot unless that vessel falls into
an exempted class. It is the requirement that every vessel
entering a harbor and anchoring thereat, or passing through
rivers or straits within a pilotage district, and docking and
undocking at any pier or wharf, or shifting from one berth to
another, should be conducted or maneuvered to or from berth
or anchorage by a licensed master mariner called a harbor pilot
All of these officers are known as complement of a vessel
Art. 648 - Complement – All persons on board, from the captain
to the cabin boy, necessary for the management, maneuvers
and service. The complement includes the crew, the sailing
mates, engineers, stokers and other employees on board not
having specific designations but it shall not include passengers
or the persons whom the vessel is transporting
Just causes for revocation of voyage
Art. 640 – Just causes for revocation of voyage:
1. A declaration of war or interdiction of commerce with the
power to whose territory the vessel was bound
2. The blockade of the port of its destination, or the breaking out
of an epidemic after the agreement
3. The prohibition to receive in said port the goods which make
up the cargo of the vessel
4. The detention or embargo of the same by order of the
government, or for any other reason independent of the will of
the ship agent
5. The inability of the vessel to navigate
Interdiction of commerce – refers to a governmental prohibition
of commercial intercourse intended to bring about an entire
cessation for the time being of all trade whatsoever; also
referred to as “interdiction of commercial intercourse”

Embargo – proclamation or order of a state, usually issued in the
time of war or threatened hostilities, prohibiting the departure of
ships or goods from some or al the ports of such state until
further order
Blockade – a sort of circumvallation of a place by which all
foreign connection and correspondence is, as far as human
power can effect it, to be cut off. The actual investment of a port
or place by hostile force, fully competent under ordinary
circumstances, to cut of all communications thereto, so arranged
or disposed as to be able to apply its force to every point of
practicable access or approach to the port of place so invested
CASES
EASTERN SHIPPING LINES, INC v. BPI/MS INSURANCE
CORP., & MITSUI SUMITOMO INSURANCE CO., LTD
G.R. No. 182864, January 12, 2015
Facts
Sumitomo Corporation shipped on board ESLI’s vessel
22 coils of various Steel Sheet for transportation to and delivery
at the port of Manila in favor of consignee Calamba Steel located
in Laguna as evidenced by a Bill of Lading. The declared value
of the shipment was US$83,857.59. The shipment was insured
with the respondents BPI/MS and Mitsui against all risks under
Marine Policy. Upon withdrawal of the shipment by the Calamba
Steel’s representative, it was found out that part of the shipment
was damaged and was in bad order condition. It was found out
that the damage amounted to US$4,598.85 prompting Calamba
Steel to reject the damaged shipment for being unfit for the
intended purpose.
Sumitomo Corporation again shipped on board ESLI’s
vessel 50 coils in various Steel Sheet weighing 383,532
kilograms in good order and condition for transportation to and
delivery at the port of Manila, in favor of the Calamba Steel as
evidenced by a Bill of Lading. The shipment was insured with
the BPI/MS and Mitsui against all risks under Marine Policy.
ESLI’s vessel with the second shipment arrived at the port of
Manila partly damaged and in bad order.
Calamba Steel rejected the damaged shipment for being unfit
for the intended purpose. BPI/MS and Mitsui filed a Complaint3
before the RTC of Makati City against ESLI and ATI to recover
actual damages.
Issue
Is ESLI liable for damages?
Held:
Yes. The extraordinary responsibility of the common
carrier lasts from the time the goods are unconditionally placed
in the possession of, and received by the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person
who has a right to receive them. In maritime transportation, a
bill of lading is issued by a common carrier as a contract, receipt
and symbol of the goods covered by it. If it has no notation of
any defect or damage in the goods, it is considered as a “clean
c v r b P a g e | 23
bill of lading.” A clean bill of lading constitutes prima facie
evidence of the receipt by the carrier of the goods as therein
described.
Here, based on the bills of lading issued, it is
undisputed that ESLI received the two shipments of coils from
Sumitomo Corporation in good condition. However, upon arrival
at the port of Manila, some coils from the two shipments were
partly dented and crumpled Mere proof of delivery of the goods
in good order to a common carrier and of their arrival in bad
order at their destination constitutes a prima facie case of fault
or negligence against the carrier. If no adequate explanation is
given as to how the deterioration, loss, or destruction of the
goods happened, the transporter shall be held responsible.61
From the foregoing, the fault is attributable to ESLI hence liable
for damages.
According to the NCC, the law of the country to which
the goods are to be transported shall govern the liability of the
common carrier for their loss, destruction or deterioration.67
The New Civil Code provides that a stipulation limiting a
common carrier’s liability to the value of the goods appearing in
the bill of lading is binding, unless the shipper or owner declares
a greater value.69 In addition, a contract fixing the sum that may
be recovered by the owner or shipper for the loss, destruction,
or deterioration of the goods is valid, if it is reasonable and just
under the circumstances, and has been fairly and freely agreed
upon. COGSA (Section 4 Subsection 5) that an amount
recoverable in case of loss or damage shall not exceed
US$500.00 per package or per customary freight unless the
nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading. Here,
ESLI admitted the existence and due execution of the two Bills
of Lading78 together with the Invoice on the second shipment.
MOF COMPANY, INC., v. SHIN YANG BROKERAGE
CORPORATION
G.R. NO. 172822 : December18, 2009
Facts
Halla Trading Co., a company based in Korea, shipped
to Manila secondhand cars and other articles on board the
vessel Hanjin Busan. The bill of lading covering the shipment
which was prepared by the carrier Hanjin, named Shin Yang as
the consignee and indicated that payment was on a "Freight
Collect" MOF, Hanjin's exclusive general agent in the
Philippines, repeatedly demanded the payment of ocean freight,
documentation fee and terminal handling charges from Shin
Yang. The latter, however, failed and refused to pay contending
that it did not cause the importation of the goods, that the
ultimate consignee did not endorse in its favor the original bill of
lading and that the bill of lading was prepared without its
consent. MOF filed a case for sum of money before the MeTC.
Issue
WON a consignee, who is not a signatory to the bill of
lading, is bound by the stipulations thereof
Held

The bill of lading is oftentimes drawn up by the
shipper/consignor and the carrier without the intervention of the
consignee. However, the latter can be bound by the stipulations
of the bill of lading when a) there is a relation of agency between
the shipper or consignor and the consignee or b) when the
consignee demands fulfillment of the stipulation of the bill of
lading which was drawn up in its favor.12In Keng Hua Paper
Products Co., Inc. v. Court of Appeals,13 once the bill of lading
is received by the consignee who does not object to any terms
or stipulations contained therein, it constitutes as an acceptance
of the contract and of all of its terms and conditions, of which the
acceptor has actual or constructive notice.
EDGAR COKALIONG SHIPPING LINES, INC vs. UCPB
GENERAL INSURANCE COMPANY, INC
G.R. No. 146018 June 25, 2003
Facts
Angelia (S and C) delivered to petitioner (now
Cokaliong Shipping Lines cargo consisting of one carton of
Christmas décor and two sacks of plastic toys, to be transported
on board the M/V scheduled to depart from Cebu City for
Tandag, Surigao del Sur. [Petitioner] issued Bill of Lading No.
58 and 59 Legaspi insured the cargo, covered by Bill of Lading
No. 59, with [respondent against all risks’ under Open Policy for
which she was issued Marine Risk Note. She also insured the
cargo covered by Bill of Lading No. 58.
When the vessel left port, it had thirty-four passengers
and assorted cargo on board. After the vessel had passed by
the Bridge, fire ensued in the engine room, and, despite earnest
efforts of the officers and crew of the vessel, the fire engulfed
and destroyed the entire vessel resulting in the loss of the vessel
and the cargoes therein. Shortly thereafter, Legaspi filed a claim,
with [respondent], for the value of the cargo insured under
Marine Risk Note No. 18409 and covered by Bill of Lading No.
59.
Issue
Is petitioner liable for the loss of the goods?
Held
Yes. In Eastern Shipping Lines, Inc. v. Intermediate
Appellate Court, 15 Fire arises almost invariably from some act
of man. It does not fall within the category of an act of God
unless caused by lighting or by other natural disaster or
calamity. "As the peril of fire is not comprehended within the
exceptions in Article 1734, supra, Article 1735 of the Civil Code
provides that in all cases other than those mentioned in Article
1734, the common carrier shall be presumed to have been at
fault unless it proves that it has observed the extraordinary
diligence required by law." Where loss of cargo results from the
failure of the officers of a vessel to inspect their ship frequently
so as to discover the existence of cracked parts, that loss cannot
be attributed to force majeure, but to the negligence of those
officials.16 Ensuring the seaworthiness of the vessel is the first
step in exercising the required vigilance. Petitioner did not
present sufficient evidence showing what measures it had
undertaken to ensure the seaworthiness of the vessel. It failed
to show when the last inspection and care of the auxiliary engine
c v r b P a g e | 24
fuel oil service tank was made, what the normal practice was for
its maintenance, or some other evidence to establish that it had
exercised extraordinary diligence. Necessarily, in accordance
with Article 173517 of the Civil Code, we hold petitioner
responsible for the loss of the goods covered by Bills of Lading
Nos. 58 and 59.
In Everett Steamship Corporation v. Court of Appeals,
A stipulation (limited liability clause) in the bill of lading limiting
the common carrier’s liability for loss or destruction of a cargo to
a certain sum, unless the shipper or owner declares a greater
value, is sanctioned by law, particularly Articles 1749 and 1750
of the Civil Code. In Sea-Land Service, Inc. vs. Intermediate
Appellate Court, ‘It seems clear that even if said section 4 (5) of
the Carriage of Goods by Sea Act did not exist, the validity and
binding effect of the liability limitation clause in the bill of lading
here are nevertheless fully sustainable on the basis alone of the
cited Civil Code Provisions. "Pursuant to the afore-quoted
provisions of law, it is required that the stipulation limiting the
common carrier’s liability for loss must be ‘reasonable and just
under the circumstances, and has been freely and fairly agreed
upon. Concededly, the purpose of the limiting stipulation in the
Bill of Lading is to protect the common carrier. Hence, a
shipper/consignee that undervalues the real worth of the goods
it seeks to transport does not only violate a valid contractual
stipulation, but commits a fraudulent act when it seeks to make
the common carrier liable for more than the amount it declared
in the bill of lading.
Here, the stipulation limiting petitioner’s liability is not
contrary to public policy. In fact, its just and reasonable
character is evident. The shippers/consignees may recover the
full value of the goods by the simple expedient of declaring the
true value of the shipment in the Bill of Lading. In fact, they
committed fraud against the common carrier by deliberately
undervaluing the goods in their Bill of Lading, thus depriving the
carrier of its proper and just transport fare.
G.R. No. 181683, October 07, 2015
LORENZO SHIPPING CORPORATION v. NATIONAL
POWER CORPORATION
G.R. No. 184568
NATIONAL POWER CORPORATION v. LORENZO
SHIPPING CORPORATION
Facts
Power Barge 104 was berthed and stationed at the
Makar Wharf when the MV Lorcon Luzon "hit and rammed
Power Barge 104." At the time of the incident, Captain Villarias
served as the Master of the MV. However, the MV was then
being piloted by Captain Yape, a Harbor Pilot from the GenSan
City pilotage district as it was mandatory to yield navigational
control to the Harbor Pilot while docking.12 Following this
incident, Homena, Plant Manager of Power Barge 104, filed a
Marine Protest before the Board of Marine Inquiry. Captain
Villarias also filed his own Marine Protest. For his part, Captain
Yape filed a Marine Accident Report. The Board of Marine
Inquiry conducted joint hearings on the Marine Protests and
Captain Yape's report.18To forestall the prescription of its cause
of action for damages, National Power Corporation filed before

the Quezon City Regional Trial Court a Complaint for Damages
against Lorenzo Shipping.
Issue
WON Lorenzo Shipping Corporation is liable for the
damage sustained by Power Barge 104
Held
In Yu Con v. Ipil, The name of captain or master is
given, according to the kind of vessel, to the person in charge of
it. "Captain are those who govern vessels that navigate the high
seas or ships of large dimensions and importance, although they
be engaged in the coastwise trade. "Masters are those who
command smaller ships engaged exclusively in the coastwise
trade. They are both chiefs or commanders of ships. Likewise,
in Inter-Orient Maritime Enterprises, Inc. v. National Labor
Relations CommissionA captain commonly performs three (3)
distinct roles: (1) he is a general agent of the shipowner; (2) he
is also commander and technical director of the vessel; and (3)
he is a representative of the country under whose flag he
navigates. Of these roles, by far the most important is the role
performed by the captain as commander of the vessel. The ship
captain, as agent of the shipowner, has legal authority to enter
into contracts with respect to the vessel and the trading of the
vessel. Clearly, the captain is vested with both management
and fiduciary functions. But Section 8 of Philippine Ports
Authority (PPA) Administrative Order No. 03-85 enumerates
instances when vessels are subjected to compulsory pilotage:
For entering a harbor and anchoring thereat, or passing through
rivers or straits within a pilotage district, as well as docking and
undocking at any pier/wharf, or shifting from one berth or
another, every vessel engaged in coastwise and foreign trade
shall be under compulsory pilotage. However, in the Ports of
Manila and Cebu, Ship Captains may pilot their vessels engaged
in coastwise trade provided they meet / comply with the following
minimum qualifications / requirements:
a) Must be properly licensed as a Harbor Pilot by the Philippine
Coast Guard for Manila, Cebu and other authorized ports;
b) Must have been a Master of an interisland vessel for at least
three (3) years prior to his application with the PPA;
c) Must be certified by a government physician as physically and
mentally fit.
The second paragraph of Section 8 identifies an
instance when control of a vessel need not be yielded to a pilot.
Section 9 further enumerates exceptions to compulsory pilotage:
a. Vessels engaged in coastwise trade undocking at all
ports, except at the ports of Manila, Cebu, Iloilo, Tacloban,
Davao, Zamboanga, Pulupandan, Masinloc, and San Fernando,
b. Government vessels,
c. Vessels of foreign governments entitled to courtesy,
d. Vessels that are authorized by BOT to engage in daily
ferry service plying between two places within a port or between
two ports,
c v r b P a g e | 25
e. Phil. Flag vessels engaged in coastwise trade that
depart from an anchorage,
f. Vessels calling at private ports whose owners have
formally waived the requirements of compulsory pilotage.53
Section 32(f) of PPA Administrative Order No. 03-85
specifies the foremost responsibility of a Harbor Pilot, A pilot
shall be held responsible for the direction of a vessel from the
time he assumes his work as a pilot thereof until he leaves it
anchored or berthed safely; Provided, however, that his
responsibility shall cease at the moment the Master neglects or
refuses to carry out his order.54 Harbor Pilots are liable only to
the extent that they can perform their function through the
officers and crew of the piloted vessel.56 Where there is failure
by the officers and crew to adhere to their orders, Harbor Pilots
cannot be held liable.
Here, contrary to Lorenzo Shipping's assertion, the MV
Lorcon Luzon's having been piloted by Captain Yape at the time
of the ramming does not automatically absolve Lorenzo
Shipping of liability. Clearing it of liability requires a
demonstration of how the Master, Captain Villarias, conducted
himself in those moments when it became apparent that the MV
Lorcon Luzon's engine had stopped and Captain Yape's orders
to go "slow astern" and "full astern" were not being heeded.
ABOITIZ SHIPPING CORPORATION v. CA, MALAYAN
INSURANCE COMPANY, INC., COMPAGNIE MARITIME
DES CHARGEURS REUNIS, and F.E. ZUELLIG (M), INC.
[G.R. NO. 121833 : October 17, 2008]
Facts
Malayan filed five separate actions against defendants
for the collection of the amounts of the cargoes allegedly paid
by Malayan under various marine cargo policies2 issued to the
insurance claimants. In the five consolidated cases, Malayan
sought the recovery of amounts totaling P639,862.02. Aboitiz
raised the defenses of lack of jurisdiction, lack of cause of action
and prescription. It also claimed that M/V P. Aboitiz was
seaworthy, that it exercised extraordinary diligence and that the
loss was caused by a fortuitous event.
Issue
WON Aboitiz can avail limited liability on the basis of
the real and hypothecary doctrine of maritime law.
Held
No. The ruling in the 1993 GAFLAC case cited the real
and hypothecary doctrine in maritime law that the shipowner or
agent's liability is merely co-extensive with his interest in the
vessel such that a total loss thereof results in its extinction.34 In
this jurisdiction, the limited liability rule is embodied in Articles
587, 590 and 837 under Book III of the Code of
Commerce.These articles precisely intend to limit the liability of
the shipowner or agent to the value of the vessel, its
appurtenances and freightage earned in the voyage, provided
that the owner or agent abandons the vessel.35 When the
vessel is totally lost in which case there is no vessel to abandon,

abandonment is not required. Because of such total loss the
liability of the shipowner or agent for damages is
extinguished.36 However, despite the total loss of the vessel, its
insurance answers for the damages for which a shipowner or
agent may be held liable.37 The international rule is to the effect
that the right of abandonment of vessels, as a legal limitation of
a shipowner's liability, does not apply to cases where the injury
or average was occasioned by the shipowner's own fault.38
Likewise, the shipowner may be held liable for injuries to
passengers notwithstanding the exclusively real and
hypothecary nature of maritime law if fault can be attributed to
the shipowner.39
In 1993 GAFLAC case, the Court applied the doctrine
of limited liability The circumstances in the 1993 GAFLAC case,
however, are not obtaining in the instant petitions. There is a
categorical finding of negligence on the part of Aboitiz. Aboitiz's
contention, that with the sinking of M/V P. Aboitiz, its liability to
the cargo shippers and shippers should be limited only to the
insurance proceeds of the vessel absent any finding of fault on
the part of Aboitiz, is not supported by the record. Thus, Aboitiz
is not entitled to the limited liability rule and is, therefore, liable
for the value of the lost cargoes as so duly alleged and proven
during trial.
Doctrine of the real and hypothecary nature of maritime
law: As a general rule, a ship owner's liability is merely co-
extensive with his interest in the vessel, except where actual
fault is attributable to the shipowner. Thus, as an exception to
the limited liability doctrine, a shipowner or ship agent may be
held liable for damages when the sinking of the vessel is
attributable to the actual fault or negligence of the shipowner or
its failure to ensure the seaworthiness of the vessel.
FEDERAL PHOENIX ASSURANCE CO., LTD v. FORTUNE
SEA CARRIER, INC
G.R. No. 188118, November 23, 2015
Facts
Fortune Sea agreed to lease its vessel M/V Ricky Rey
to Northern Transport. The Time Charter Party agreement
executed by the parties provides that the vessel shall be leased
to Northern Transport for 90 days to carry bags of cement to
different ports of destination. Later on, the parties extended the
period of lease for another 90 days.6 Northern Transport
ordered 2,069 bales of abaca fibers to be shipped on board M/V
Ricky Rey by shipper Manila Hemp Trading Corporation, for
delivery to consignee Newtech. The shipment was covered by
Bill of Lading No. 1 and was insured by petitioner Federal
Phoenix.7 Upon arrival of M/V Ricky Reythe stevedores noticed
smoke coming out of the cargo haul. Immediately, the lire was
put off" by Fire Department. Upon investigation, it was
discovered that 60 bales of abaca were damaged.8
Issue
WON CA erred in declaring that Fortune Sea was
converted into a private carrier by virtue of the charter party
agreement it entered into with Northern Transport.
Held
c v r b P a g e | 26
Yes. The decisive factor in evaluating an agreement is
the intention of the parties not necessarily by the terminology
used in the contract but by their conduct, words, actions and
deeds prior to, during and immediately alter executing the
agreement."14
Here, M/V Ricky Rey was converted into a private
carrier notwithstanding the existence of the Time Charter Party
agreement with Northern Transport since the said agreement
was not limited to the ship only but extends even to the control
of its crew. Despite the denomination as Time Charter by the
parties, their agreement undoubtedly reflected that their
intention was to enter into a Bareboat Charter Agreement.
Northern Transport eflectively subjected not only the ship but
including its crew under its own exclusive control. Moreover,
although the master and crew of the vessel were those of the
shipowner, records show that at the time of the execution of the
charter party, Fortune Sea had completely relinquished
possession, command, and navigation of M/V Ricky Rey to
Northern Transport. As such, the master and all the crew of the
ship were all made subject to the direct control and supervision
of the charterer. In fact, the instructions on the voyage and other
relative directions or orders were handed out by Northern
Transport. Thus, the CA correctly ruled that the nature of the
vessel's charter is one of bareboat or demise charter.
SANTIAGO LIGHTERAGE CORPORATION vs. CA, C-
SQUARE CONSOLIDATED MINES and MANUEL A.
PELAEZ
G.R. No. 139629 June 21, 2004
Facts
Pelaez as sole proprietor of the firm M.A.P. Trading
offered to plaintiff "MV Christine Gay" for the use of the latter in
shipping and exporting its milled chromite ores in bulk to South
Korea. Pelaez assured that the "MV Christine Gay" was
seaworthy. Because it needed a vessel to transport its milled
chromite ores to its buyer in South Korea, plaintiff accepted the
offer of Pelaez and it entered into a [Voyage] Charter Agreement
with Pelaez, it being specifically agreed upon that the [Voyage]
Charter Agreement shall "automatically be considered
rescinded and inoperative" if the "(v)essel is found not
seaworthy to undertake a safe voyage to Korea" or if the
defendant should fail to "(g)et the necessary permits and/or
shipping documents to allow said voyage to Korea."
From the time they started their voyage from Manila to
Masinloc, Engineer Panaguiton observed that the engine of the
vessel was not in good condition because heavy smoke was
going out from the exhaust manifold. He however, allowed the
vessel to make the voyage to Zambales, because he was
assured that the vessel will be repaired in Masinloc. The engines
of the vessel suddenly stopped, thus, making the vessel stop in
the middle of the sea.
Issue
WON CA could validly ignore the provisions of the
Charter Agreement between petitioner and respondent.11
Held
 c v r b P a g e | 27

Yes. We affirm the trial and appellate courts’ finding

that MV Christine Gay was unseaworthy for the purpose
intended in the bareboat charter agreement. We hold petitioner
liable to Pelaez for ₱3,133,031.15 as actual damages and
₱50,000 as attorney’s fees. The rule in civil procedure is that
courts of justice have no jurisdiction to decide a question not in
issue.24