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1 | T R A N S P O C A S E D I G E S T S .

PART 1: OVERLAND TRANSPORTATION CHAPTER 1: GENERAL CONCEPTS I. Concept of COMMON CARRIER 1.1 Definition 1) Crisostomo vs Court of Appeals FACTS: A travel agency is not an entity engaged in the business of transporting either passengers or goods and is therefore, neither a private nor a common carrier. Respondent did not undertake to transport petitioner from one place to another since its covenant with its customers is simply to make travel arrangements in their behalf. Respondent’s services as a travel agency include procuring tickets and facilitating travel permits or visas as well as booking customers for tours. It is in this sense that the contract between the parties in this case was an ordinary one for services and not one of carriage. Petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and Tours International, Inc. to arrange and facilitate her booking, ticketing, and accommodation in a tour dubbed “Jewels of Europe”. A 5% discount on the total cost of P74,322.70 which included the airfare was given to the petitioner. The booking fee was also waived because petitioner’s niece, Meriam Menor, was respondent’s ticketing manager. On June 12, 1991, Menor went to her aunt’s residence to deliver petitioner’s travel documents and plane tickets. In return, petitioner gave the full payment for the package tour. Menor then told her to be at the NAIA on Saturday, June 15, 1991, two hours before her flight on board British Airways. Without checking her travel documents, petitioner went to NAIA and to her dismay, she discovered that the flight she was supposed to take had already departed the previous day. She learned that her plane ticket was for the flight scheduled on June 14, 1991. She called up Menor to complain and Menor suggested upon petitioner to take another tour – “British Pageant”. Petitioner was asked anew to pay US$785.00. Petitioner gave respondent US$300 as partial payment and commenced the trip. ISSUE: Whether or not respondent Caravan did not observe the standard of care required of a common carrier when it informed the petitioner wrongly of the flight schedule.

HELD: The petition was denied for lack of merit. The decision of the Court of Appeals was affirmed. A common carrier is defined under Article 1732 of the Civil Code as persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, affecting their services to the public. It is obvious from the above definition that respondent is not an entity engaged in the business of transporting either passengers or goods and is therefore, neither a private nor a common carrier. Respondent did not undertake to transport petitioner from one place to another since its covenant with its customers is simply to make travel arrangements in their behalf. Respondent’s services as a travel agency include procuring tickets and facilitating travel permits or visas as well as booking customers for tours. It is in this sense that the contract between the parties in this case was an ordinary one for services and not one of carriage. The standard of care required of respondent is that of a good father of a family under Article 1173 of the Civil Code. This connotes reasonable care consistent with that which an ordinarily prudent person would have observed when confronted with a similar situation. It is clear that respondent performed its prestation under the contract as well as everything else that was essential to book petitioner for the tour. Had petitioner exercised due diligence in the conduct of her affairs, there would have been no reason for her to miss the flight. Needless to say, after the travel papers were delivered to petitioners, it became incumbent upon her to take ordinary care of her concerns. This undoubtedly would require that she at least read the documents in order to assure herself of the important details regarding the trip.

1.2 Tests and Characteristics

1) De Guzman v. Court of Appeals

2) Calvo v. UCPB General Insurance Co.

FACTS: Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole proprietorship customs broker. Petitioner entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in


Manila to SMC's warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc. The shipment in question, contained in 30 metal vans, arrived in Manila on board "M/V Hayakawa Maru" and, after 24 hours, were unloaded from the vessel to the custody of the arrastre operator, Manila Port Services, Inc. Petitioner then withdrew the cargo from the arrastre operator and delivered it to SMC's warehouse in Ermita, Manila Thereafter, the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-chemical fluting paper were "wet/stained/torn" and 3 reels of kraft liner board were likewise torn. The damage was placed at P93,112.00. SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against petitioner in the Regional Trial Court, Branch 148, Makati City, which, on December 20, 1995, rendered judgment finding petitioner liable to respondent for the damage to the shipment. ISSUE: Whether or not petitioner is a common carrier HELD: Yes. The transportation of goods is an integral part of her business. To uphold petitioner's contention would be to deprive those with whom she contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for her customers, as already noted, is part and parcel of petitioner's business. 3) Loadstar Shipping Corporation v. Sourt of Appeals

Facts: Loadstar received on board its vessel M/V Cherokee an amount of hardwood, tilewood and mouldings worth 6Million. The goods were insured with MIC against various risks including TOTAL LOSS BY TOTAL LOSS OF THE VESSEL. On its way from the port of Agusan Del Norte, the vessel sank off Limasawa Island allegedly due to strong waves brought by 2 typhoons.

MIC paid 6Million to the consignee and was issued a subrogation receipt. MIC then filed a complaint against LOADSTAR alleging that the sinking of the vessel was due to the fault and negligence of LOADSTAR and its employees. LOADSTAR denied any liability for the loss of

the shipper’s goods and claimed that the sinking of its vessel was due to force majeure. LOADSTAR submits that the vessel was a private carrier because it was not issued a certificate of public convenience, it did not have a regular trip or schedule nor a fixed route, and there was only “one shipper, one consignee for a special cargo.”

Issue: 1. WON M/V Cherokee is a private or common carrier?

WON M/V Cherokee is liable?

TC: Loadstar is liable to pay MIC the amount of 6Million.

CA: Loadstar is liable to pay MIC the amount of 6Million. TC Decision affirmed.

SC: 1. M/V Cherokee is a common carrier.

The records do not disclose that the M/V “Cherokee,” on the date in question, undertook to carry a special cargo or was chartered to a special person only. There was no charter party. The bills of lading failed to show any special arrangement, but only a general provision to the effect that the M/V “Cherokee” was a “general cargo carrier.” Further, the bare fact that the vessel was carrying a particular type of cargo for one shipper, which appears to be purely coincidental, is not reason enough to convert the vessel from a common to a private carrier, especially where, as in this case, it was shown that the vessel was also carrying passengers.

Article 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as “a sideline”’. Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the “general public,” i.e., the general community or population, and one who offers services or


solicits business only from a narrow segment of the general population.

2. M/V “Cherokee” was not seaworthy when it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time. “For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. LOADSTAR was at fault or negligent in not maintaining a seaworthy vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any event, it did not sink because of any storm that may be deemed as force majeure, inasmuch as the wind condition in the area where it sank was determined to be moderate.

SYLLABUS: ABANDONMENT

4) First Philippine Industrial v. Court of Appeals

FACTS: Petitioner is a grantee of a pipeline

concession under RA 387 to contract, install and operate oil pipelines. The original pipeline concession was granted in 1967 and was renewed by the Energy Regulatory Board (ERB) in 1992. In January 1995, petitioner applied for a mayor’s permit in Batangas City. Respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year in 1993 pursuant to the Local Government Code before the permit could be issue. In order not to hamper its operations, petitioner paid the tax under protest amounting to ₱ 239,019.01 for the first quarter of 1993. Petitioner filed a letter-protest and states that FPIC is a pipeline operator with a government concession granted engaged in transporting petroleum products from the Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, it is exempt from paying tax on gross receipts. Moreover, Transportation contractors are not included in the enumeration of contractors under Section 131, Paragraph (h) of LGC. City Treasurer denied the protest contending that petitioner cannot be considered engaged in the transportation business, thus it cannot claim exemption.

Petitioner filed with RTC a complaint for tax refund with prayer for writ of preliminary injunction against respondents. Traversing the complaint, respondents argued that petitioner could not be

exempt from taxes as said exemption applies only to transportation contractors and persons engaged in the transportation by hire and common carriers by air, land and water. They also assert that pipelines are not included in the term common carrier which refers solely to ordinary carriers such as trucks, trains, ships and the like. They further posit that common carrier pertains to the mode or manner by which a product is delivered to its destination. TC: Dismissed the complaint. Exemption to tax has become unclear. Tax exemption granted under Sec 133 (j.) encompasses only common carriers so as not to overburden the riding public or commuters with taxes. FPIC is not a common carrier but a special carrier extending its services and facilities to a single specific or special customer under special contract. Moreover, even franchise grantees are taxed as well as contractors. CA: affirming TC’s dismissal of petitioner’s complaint. MFR was also denied. SC: At first, petition was denied. Petitioner moved for a reconsideration which was granted. Petition was reinstated. ISSUE:

Whether or not petitioner is a common carrier. HELD:

A common carrier is one who holds himself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering his services to the public generally. Article 1732 of the Civil Code defines common carrier as any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.

The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier. There is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. As correctly pointed out by petitioner, Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In


fact, in the U.S., oil pipe line operators are considered common carriers.

With regard to the other issue in the case at bar regarding the tax exemption, it is clear that the legislative intent in excluding from the taxing power of the local government unit the imposition of business tax against common carriers is to prevent a duplication of the so-called "common carrier's tax." Petitioner is already paying 3% common carrier's tax on its gross sales/earnings under the National Internal Revenue Code. To tax petitioner again on its gross receipts in its transportation of petroleum business would defeat the purpose of the Local Government Code. NOTES: TEST for determining whether a party is a common carrier of goods:

1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation;

2. He must undertake to carry goods of the kind to which his business is confined;

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

4. The transportation must be for hire.

5) Asia Lighterage and Shipping Inc v. Court of Appeals

PARTIES TO THE CASE:

PETITIONER: carrier tasked to transport goods to brgy. Ugong PRIVATE RESPONDENT: Insurer of said goods.

FACTS: On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk was shipped by Marubeni American Corporation of Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4.The shipment was insured by the private respondent Prudential Guarantee and Assurance, Inc. against loss or damage under Marine Cargo Risk Note RN 11859/90. On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the custody

of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted by the consignee as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong, Pasig City. However, cargo did not reach its destination because said cargo was suspended due to a warning of an incoming typhoon. The petitioner proceeded to pull the barge to Engineering Island off Baseco to seek shelter from the approaching typhoon. A few days after, the barge developed a list because of a hole it sustained after hitting an unseen protuberance underneath the water. Eventually, the said barge completely sank, resulting to the total loss of the remaining cargoes that was not salvaged to the other barges. consignee sent a claim letter to the petitioner, and another letter dated September 18, 1990 to the private respondent for the value of the lost cargo. On July 3, 1991, the private respondent filed a complaint against the petitioner for recovery of the amount of indemnity, attorney's fees and cost of suit.

LOWER COURT’S RULING: The Regional Trial Court ruled in favor of the private respondent. Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no fixed and publicly known route, maintains no terminals, and issues no tickets. It points out that it is not obliged to carry indiscriminately for any person. It is not bound to carry goods unless it consents. In short, it does not hold out its services to the general public.The appellate court affirmed the decision of the trial court with modification.

ISSUE: Is the petitioner a common carrier?

HELD: YES. Art. 1732 defines common carriers as persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public. Article 1732 of the Civil Code makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. The Court also did not distinguish between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. In the case at bar, the principal business of the petitioner is that of lighterage and drayage and it offers its barges to the public for carrying or transporting goods by water for compensation. Petitioner is clearly a common carrier.


DOCTRINE: An entity is a common carrier whether its carrying of goods is done on an irregular rather than scheduled manner, and with an only limited clientele. A common carrier need not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets.

6) FGU Insurance v. GP Sarmiento Trucking Co

Parties of the case:

FGU Insurance Corporation (FGU), insurer of the shipment, petitioner

G.P. Sarmiento Trucking Corporation (GPS), carrier, respondent

Lambert M. Eroles, driver of G.P Sarmiento Trucking Corporation, respondent

Facts:

G.P. Sarmiento Trucking Corporation, respondent, undertook to deliver 30 units of Condura S.D. white refrigerators from the plant site of Concepcion Industries Inc. to Central Luzon Appliances in Quezon City. However, it collided with an unidentified truck, causing it to fall into a deep canal, damaging the cargoes.

FGU Insurance, petitioner and insurer of the shipment paid to Concepcion Carrier the value of the covered cargoes amounting to P204,450. FGU in turn sought reimbursement from GPS and filed a complaint for damages and breach of contract of carriage against GPS and its driver Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. Respondent, GPS, however, asserted that it was the exclusive hauler of Concepcion, that it was not engaged in business as a common carrier and that the cause of the damage was purely accidental. Accordingly, it filed a motion to dismiss.

The RTC of Makati ruled in favour of respondent GPS and granted the motion to dismiss explaining that FGU did not present evidence that would prove that the former is a common carrier. In view of that, the

application of law on common carriers is neither warranted nor is the presumption of fault or negligence on the part of a common carrier in case of loss, damage or deterioration of goods during transport under 1735 of the Civil Code not availing. Consequently, the laws governing the contract between the owner of the cargo to whom the plaintiff was subrogated and the owner of the vehicle which transports the cargo are the laws on obligation and contract of the Civil Code as well as the law on quasi-delicts.

The Court of Appeals rejected the appeal of petitioner-appellant FGU and ruled in favor of GPS contending that because petitioner-appellant insists that the latter can still be considered as a common carrier despite its “limited clientele,” it follows that it has the burden of proving the same. Unfortunately, appellant failed to do so, the dismissal of the complaint by the trial court is justified.

Issue:

Whether or not respondent GPS is a common carrier?

Ruling:

No. The Supreme Court held that GPS being an exclusive contractor and hauler of Concepcion Industries, rendering or offering its services to no other individual or entity cannot be considered a common carrier. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for hire or compensation, offering their services to the public, whether to the public in general or to a limited clientele in particular, but never on an exclusive basis. The true test of a common carrier is the carriage of passengers or goods, providing space for those who opt to avail themselves of its transportation service for a fee. Given accepted standards, GPS scarcely falls within the term “common carrier.” (The Supreme Court affirmed the decision of the Court of Appeals insofar as respondent Eroles is concerned but reversed as to GPS ordering the latter to pay for lost cargoes and damages.)


7) Bascos v. Court of Appeals

Facts: Rodolfo Cipriano, representing CIPTRADE, entered into a hauling contract with Jibfair Shipping Agency Corporation whereby the former bound itself to haul the latter’s 2000m/tons of soya bean meal from Manila to Calamba. CIPTRADE subcontracted with petitioner Estrellita Bascos to transport and deliver the 400 sacks of soya beans. Petitioner failed to deliver the cargo, and as a consequence, Cipriano paid Jibfair the amount of goods lost in accordance with their contract. Cipriano demanded reimbursement from petitioner but the latter refused to pay. Cipriano filed a complaint for breach of contract of carriage. Petitioner denied that there was no contract of carriage since CIPTRADE leased her cargo truck, and that the hijacking was a force majeure. The trial court ruled against petitioner. Issues: (1) Was petitioner a common carrier? (2) Was the hijacking referred to a force majeure? Held: (1) Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the public." The test to determine a common carrier is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted." In this case, petitioner herself has made the admission that she was in the trucking business, offering her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required to prove the same. (2) Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. In those cases where the presumption is applied, the common carrier must

prove that it exercised extraordinary diligence in order to overcome the presumption. The presumption of negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.

8) Fabre v. Court of Appeals

Facts: Petitioners Fabre and his wife were owners of a minibus which they used principally in connection with a bus service for school children which they operated. The couple had a driver, Porfirio Cabil, whom they hired after trying him out for two weeks. His job was to take school children to and from the St. Scholastica’s College. On November 2, 1984, private respondent Word for the World Christian Fellowship Inc. arranged with petitioners for the transportation of 33 members from Manila to La Union and back in consideration of which they paid P3,000 to petitioners. The group left at 8:00 in the evening, petitioner Cabil drove the minibus. The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway, running on a south to east direction. The road was slippery because it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus Escano, then turned over and landed on its left side, coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its front portion. Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and pinned down by a wooden seat which came off after being unscrewed. It took three persons to safely remove her from this position. She was in great pain and could not move.


A case was filed by the respondents against Fabre and Cabil. Amyline Antonio was found to be suffering from paraplegia and is permanently paralyzed from the waist down. The RTC ruled in favor of respondents. Mr. & Mrs. Fabre and Cabil were ordered to pay jointly and severally actual, moral and exemplary damages, and as well as amount of loss of earning capacity of Antonio and attorney’s fees. The Court of Appeals affirmed the decision of the trial court with modification on the award of damages. Issues:

1. Whether or not petitioners were negligent. 2. Whether or not petitioners were liable for the

injuries suffered by private respondents. 3. Whether or not damages can be awarded and

in the positive, up to what extent. Held: SC affirmed the decision of the CA but reverted the amount of the award of damages to that ordered by the RTC. 1. The finding that Cabil drove his bus negligently,

while his employer, the Fabres, who owned the bus, failed to exercise the diligence of a good father of the family in the selection and supervision of their employee is fully supported by the evidence on record. Indeed, it was admitted by Cabil that on the night in question, it was raining, and, as a consequence, the road was slippery, and it was dark. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15 to 30 meters ahead. Given the conditions of the road and considering that the trip was Cabil’s first one outside of Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony that the vehicles passing on that portion of the road should only be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very high speed. Cabil was grossly negligent and should be held liable for the injuries suffered by private respondent Amyline Antonio. Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers, the Fabres, were themselves negligent in the selection and supervision of their employee. Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver’s license. The

employer should also examine the applicant for his qualifications, experience and record of service. In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that Cabil had been driving for school children only, from their homes to the St. Scholastica’s College in Metro Manila. They had hired him only after a two-week apprenticeship.

2. This case involves a contract of carriage. Petitioners, the Fabres, did not have to be engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to them. Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. Neither does Article 1732 distinguish between a carrier offering its services to the “general public,” i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. As common carriers, the Fabres were bound to exercise “extraordinary diligence” for the safe transportation of the passengers to their destination. This duty of care is not excused by proof that they exercised the diligence of a good father of the family in the selection and supervision of their employee. As Art. 1759 of the Code provides:

Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of the former’s employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers.

1.3 Distinguished from Private Carrier, Towage, Arrastre and Stevedoring

1) Home Insurance Co. v. American Steamship

Facts: Consorcio Pasquero Del Perse of South America shipped a freight of 21,740 jute bags of Peruvian fish meal through the SS Crowborough


consigned to the Sam Miguel Brewery and insured by Home Insurance Company for $202,505.00. It arrived in Manila on March 7, 1963 and was loaded into the lighters of Luzon Stevedoring Company. However, it arrived with shortages. Thus SMB demanded that Home Insurance pay the claim of P14,000.00. Home Insurance on the other hand filed for the recovery of the P14,000.00 from Luzon Stevedoring. The Court of First Instance absolved Luzon Stevedoring, but ordered the American Steamship Agencies to reimburse the amount to Home Insurance, basing the ruling on Art. 587 of the Code of Commerce which makes the ship agent civilly liable for damages in favor of third persons due to conduct of carrier’s captain and that the stipulation in the charter party exempting the owner from liability is against public policy under Article 1744 of the New Civil Code. Issue:

Between the provisions of the New Civil Code and the Code of Commerce, which should apply.

Held: The court rules the affirmative as to the non-applicability of the prohibition of the exemption of the carrier from liability. The provisions of our Civil Code on common carriers were taken from Anglo-American Law. Under American Jurisprudence, a common carrier undertakes to carry a special cargo or chartered to a special person only, becomes a private carrier. And thus, as a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy. The reason is that there is no strict public policy applied.

2) Planters Products Inc v Court of Appeals

PARTIES: Planters Products, Inc. Mitsubishi International Corporation – Shipper/Charterer Kyosei Kisen Kabushiki Kaisha (KKKK) – Carrier/Ship-owner Soriamont Steamship Agencies (SSA) – KKKK’s Agent FACTS: Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer which MITSUBISHI shipped in bulk aboard the cargo vessel M/V "Sun Plum" owned by Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union,

Philippines. Prior to its voyage, a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter

was entered into between Mitsubishi

as shipper/charterer and KKKK as ship-owner, in Tokyo, Japan.

Before loading the fertilizer aboard the vessel, 4 of her holds were all inspected by the charterer's representative and found fit to take a load of urea in bulk pursuant to the charter-party. After the Urea fertilizer was loaded in bulk by stevedores hired by and under the supervision of the shipper, the steel hatches were closed with heavy iron lids, covered with 3 layers of tarpaulin then tied with steel bonds. The hatches remained closed and tightly sealed throughout the entire voyage since it can only be opened by the vessel’s boom. Upon arrival, the steel pontoon hatches were opened and unloaded into its steel-bodied dump trucks. The hatches remained open throughout the duration of the discharge. Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before it was transported to the consignee's warehouse located some fifty (50) meters from the wharf. The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable, raining occasionally while the discharge was in progress. It took eleven (11) days for PPI to unload the cargo. A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after discharge. The survey report submitted by CSCI to the consignee (PPI) revealed a shortage in the cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results were contained in a Certificate of Shortage/Damaged Cargo prepared by PPI which showed that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with sand, rust and dirt. Consequently, PPI sent a claim letter to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have been contaminated with dirt. KKKK denied said claim arguing that the strict public policy governing common carriers does not apply to them because they have become


private carriers by reason of the provisions of the charter-party. CFI RULING: CFI of Manila sustained the claim of the PPI against the KKKK for the value of the goods lost or damaged. “A common carrier is presumed negligent in case of loss or damage of the goods it contracts to transport, all that a shipper has to do in a suit to recover for loss or damage is to show receipt by the carrier of the goods and to delivery by it of less than what it received. After that, the burden of proving that the loss or damage was due to any of the causes, which exempt him from liability, is shifted to the carrier, common or private he may be. Even if the provisions of the charter-party are deemed valid, and the defendants considered private carriers, it was still incumbent upon them to prove that the shortage or contamination sustained by the cargo is attributable to the fault or negligence on the part of the shipper or consignee in the loading, stowing, trimming and discharge of the cargo. This they failed to do. By this omission, coupled with their failure to destroy the presumption of negligence against them, the defendants are liable.” CA RULING: On appeal, CA reversed CFI and absolved the carrier from liability for the value of the cargo that was lost or damaged. CA ruled that the cargo vessel M/V "Sun Plum" owned by KKKK was a private carrier and not a common carrier by reason of the time charter-party. Accordingly, the Civil Code provisions on common carriers which set forth a presumption of negligence do not find application in the case at bar. Thus, in the absence of such presumption, it was incumbent upon the PPI to adduce sufficient evidence to prove the negligence of the defendant carrier as alleged in its complaint. It is an old and well-settled rule that if the plaintiff, upon whom rests the burden of proving his cause of action, fails to show in a satisfactory manner the facts upon which he bases his claim; the defendant is under no obligation to prove his exception or defense. But, the record shows that the plaintiff-appellee dismally failed to prove the basis of its cause of action—the alleged negligence of defendant carrier. ISSUES: (1) Does a charter-party between a ship-owner and a charterer transform a common carrier into a private one as to negate the civil law presumption of negligence in case of loss or damage to its cargo? (2) Should the respondents be held liable for damages of the cargo?

SC RULING: (1) NO. A public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. A ship-owner in a time or voyage-charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. This is true in the present case. It is not disputed that KKKK, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When PPI chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of KKKK (the ship-owner) and therefore continued to be under its direct supervision and control. Hardly then can we charge MITSUBISHI (the charterer), a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so. This is evident in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by KKKK (the ship-owner). A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight; Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and, (b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command and possession and consequent control over its navigation, including the master and the crew, who are his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage.

In both cases, the charter-


party provides for the hire of vessel only, either for a determinate period of time or for a single or consecutive voyage, the shipowner to supply the ship's stores, pay for the wages of the master and the crew, and defray the expenses for the maintenance of the ship. Upon the other hand, the distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier. Article 1733 of the New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary diligence in the vigilance over the goods they carry.

In the case of

private carriers, however, the exercise of ordinary diligence in the carriage of goods will suffice. Moreover, in the case of loss, destruction or deterioration of the goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them. On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier. (2) NO. Even requiring the extraordinary diligence of a common carrier, KKKK has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence. Indeed, the bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage. More so, with a variable weather condition prevalent during its unloading. This is a risk the shipper or the owner of the goods has to face. Clearly, KKKK has sufficiently proved the inherent character of the goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its packaging which further contributed to the loss. The evidence of KKKK also showed that it was highly improbable for sea water to seep into the vessel's holds during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was chartered for. If there was loss or contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the dump trucks and finally to the consignee's warehouse. On the other hand, no proof was adduced by the petitioner

showing that the carrier was remise in the exercise of due diligence in order to minimize the loss or damage to the goods it carried.

3) National Steel Corporation v. Court of Appeals

4) Valenzuela Hardwood and Industrial Supply Inc v. Court of Appeals

1.4 Governing Laws

1) Samar Mining Co, Inc v. Nordeutscher Lloyd

2) Eastern Shipping Lines v. IAC

3) National Development Co. v. Court of Appeals

1.5 Government Regulation of Common Carrier’s Cusiness

1.5.1 Nature of Business

1) Fisher v. Yangco Steamship Co.


FC Fisher: stockholder of Yangco Streamship Company

Yangco Steamship Company: Owner of a larger stream vessel, duly licensed to engage in coastwise trade.

J.S. Stanley: Acting Collector of Customs of the Philippines

Facts:

The directors of Yangco Steamship Company adopted a resolution that declares and provides that goods that are to be carried by their vessels shall not include dynamite, powder or other explosives.

J.S Stanley however demanded and required the company to accept to accept and carry such explosives for carriage. That despite the demands of FC Fisher, other managers and agents of the company decline and refuse to cease the carriage of explosives, on the ground that by reason of the severity of the penalties with which they are threatened upon failure to carry such explosives. FC Fisher contends further


that the Acting Collector of Customs erroneously construed the provisions of Act 98 in holding that they require the company to accept and carry such explosives despite the resolution.

Act No. 98 Sec. 2 provides that it shall ne unlawful for common carrier engaged in the transportation of passenger of property to make or give unnecessary or unreasonable preference or advantage to any particular person, company, firm, corporation or locality, or any particular traffic in any respect whatsoever, or to subject any person to any undue and unreasonable prejudice or discrimination.

Fisher prays that a writ of prohibition restraining Yangco Steamship Company from carrying dynamite, powder or other explosive substance in accordance with the resolution of the board of directors and of shareholders of said company and that another writ of prohibition be issued to enjoin Stanley from obligating Yangco to carry such prohibited substances.

Issue:

May Yangco Steamship Company be prohibited from carrying dynamite, powder or other explosives pursuant to the resolution adopted by the directors of the company. And if such prohibition shall cause unnecessary or unreasonable advantage or preference.

Held:

The said provision which provides that no common carrier shall under the pretense whatsoever, fail or refuse to receive for carriage any person or property is not to be construed in its literal sense and without regard to the context, so as to impose an imperative duty to all common carriers to accept and carry all and any kind of freight which may be offered for carriage without regard to their facilities.

The statute more so does not require of a common carrier, as a condition to the continuing in said business, that he must carry anything and everything”, and thereby “renders useless the facilities he may have for the carriage of certain types of freight.

The prayer for petition cannot be granted. It cannot be doubter that the refusal of the said

company, owner of a large number of vessels engaged in trade to receive for carriage such explosives in any of their vessels would subject the traffic of such goods to manifest prejudice and discrimination. Such prejudice and discrimination being unnecessary and unreasonable given the fact that it has not been alleged that “dynamite, gunpowder, and other explosives” cannot be transported with reasonable safety on board a vessel engaged in the business of common carriers. Further, it has not been alleged that the company’s vessels are unsound for such purposes.

The mere fact that violent and destruct can be obtained by the use of dynamite would not be sufficient in itself to justify the refusal of the vessel, duly licensed as common carrier of merchandise to accept if for carriage. If it can not be proven that the condition which it is to be transported offers real danger to the carriage or that there be reasonable fear that the vessel will be exposed to unnecessary risks then such refusal is a violation of the prohibition against discrimination prohibited by the Act.

2) KMU Labor Center v. Garcia, Jr.

1.5.2 Registered Owner Rule

1) Gelisan v. Alday

PARTIES: Gelisan- owner of freight truck; Alday- trucking operator, Espiritu- truck operator; Celso Henson- checker FACTS: In this case, Bienvenido Gelisan is the owner of a freight truck. On January 31, 1962, Gelisan and Roberto Espiritu hired the same freight truck for the purpose of hauling rice, sugar, flour and fertilizer at the price of 18.00 pesos within the limits of the City of Manila provided that the loads shall not exceed 200 sacks. It is also agreed that Espiritu shall bear and pay all the losses and damages attending the carriage of goods to be hauled by him. Benito Alday, a trucking operator, and who owns about 15 freight trucks, had known Roberto Espiritu since 1948 as a truck operator. Alday had a contract to haul the fertilizers of the Atlas Fertilizer Corporation from Pier 4, North Harbor, to its Warehouse in Mandaluyong. Espiritu offered the use of his truck to Alday with the driver and helper at 9 centavos per bag of fertilizer. The offer was accepted. He instructed his checker, Celso Henson to let Espiritu haul the fertilizer. Espiritu made two haul of 200 bags of fertilizer per trip. Espiritu, however, did not deliver


the fertilizer to the Atlas Fertlizer bodega in Mandaluyong. Roberto Espiritu was later arrested and booked for theft. Alday saw the truck in question in Sto. Cristo St. and he notified the Manila Police Department and it was impounded by the police. It was claimed by Bienvenido Gelisan from the Police Department but as he could not produce at the time the registration papers, the police would not release the truck. Alday was compelled to pay the value of 400 bags of fertilizer in the amount of P5, 397.33 to Atlas Fertilizer Corporation. Alday filed a complaint against Roberto Espiritu and Bienvenido Gelisan with the CFI of Manila. Espiritu failed to file an answer. Gelisan, on the other hand, disowned the responsibility. He claimed that he had no contractual relations with Espiritu as regards the delivery of 400 bags of fertilizer mentioned in complaint. In addition, it was expressly provided in the written contract of hire with Espiritu that the latter will bear and pay all losses and damages attending the carriage of goods to be hauled by Roberto Espiritu. LOWER COURT RULING: The CFI Manila ruled that Espiritu alone was liable to Benito Alday since Gelisan was not privy to the contract between Espiritu and Alday. ISSUE: WON Gelisan is likewise liable. HELD: On appeal, the CA found that Gelisan is also liable for being the registered owner of the truck. The lease contract executed by Gelisan and Espiritu is not binding upon Alday for not having been previously approved by the Public Service Commission. It is settled in our jurisprudence that if the property covered by a franchise is transferred or leased to another without obtaining the requisite approval, the transfer is not binding upon the public and third persons. It sentenced Gelisan to pay jointly and severally with Roberto Espiritu, Benito Alday the amount of P5, 397.33 with legal interest and to pay the costs. Roberto Espiritu, in turn, was ordered to pay or refund Gelisan whatever amount the latter may have paid to Benito Alday. Gelisan has a right to be indemnified by Espiritu since the lease contract in question, although not effective against the public for not having been approved by Public Service Commission, is valid and binding between the contracting parties.

2) Benedicto v. IAC

FACTS:

Sometime in May 1980, private respondent bound itself to sell and deliver to Blue Star Mahogany, Inc., ("Blue Star") 100,000 board feet of sawn lumber with the understanding that an initial delivery would be made on 15 May 1980.

1 To effect its first delivery,

private respondent's resident manager in Maddela, Dominador Cruz, contracted Virgilio Licuden, the driver of a cargo truck to transport its sawn lumber to the consignee Blue Star in Valenzuela, Bulacan. This cargo truck was registered in the name of petitioner Ma. Luisa Benedicto, the proprietor of Macoven Trucking.

But the lumber did not reach the consignee and Blue Star was constrained to order from another supplier.

On 25 June 1980, after confirming the above with Blue Star and after trying vainly to persuade it to continue with their contract, private respondent Greenhill's filed Criminal Case No. 668 against driver Licuden for estafa. Greenhills also filed against petitioner Benedicto Civil Case No. D-5206 for recovery of the value of the lost sawn lumber plus damages before the RTC of Dagupan City.

In her answer, 6 petitioner Benedicto denied liability

alleging that she was a complete stranger to the contract of carriage, the subject truck having been earlier sold by her to Benjamin Tee, on 28 February 1980 as evidenced by a deed of sale.

7 She claimed that

the truck had remained registered in her name notwithstanding its earlier sale to Tee because the latter had paid her only P50,000.00 out of the total agreed price of P68,000.00 However, she averred that Tee had been operating the said truck in Central Luzon from that date (28 February 1980) onwards, and that, therefore, Licuden was Tee's employee and not hers.

ISSUE

Is Luisa Benedicto liable for the recovery and damages of the lost sawn lumber?

HELD

The prevailing doctrine on common carriers makes the registered owner liable for consequences flowing from the operations of the carrier, even though the specific vehicle involved may already have been transferred to another person. This doctrine rests upon the principle that in dealing with vehicles registered under the Public Service Law, the public has the right to assume that the registered owner is the actual or lawful owner


thereof It would be very difficult and often impossible as a practical matter, for members of the general public to enforce the rights of action that they may have for injuries inflicted by the vehicles being negligently operated if they should be required to prove who the actual owner is.

11 The registered owner

is not allowed to deny liability by proving the identity of the alleged transferee. Thus, contrary to petitioner's claim, private respondent is not required to go beyond the vehicle's certificate of registration to ascertain the owner of the carrier. In this regard, the letter presented by petitioner allegedly written by Benjamin Tee admitting that Licuden was his driver, had no evidentiary value not only because Benjamin Tee was not presented in court to testify on this matter but also because of the aforementioned doctrine. To permit the ostensible or registered owner to prove who the actual owner is, would be to set at naught the purpose or public policy which infuses that doctrine.

In fact, private respondent had no reason at all to doubt the authority of Licuden to enter into a contract of carriage on behalf of the registered owner. It appears that, earlier, in the first week of May 1980, private respondent Greenhills had contracted Licuden who was then driving the same cargo truck to transport and carry a load of sawn lumber from the Maddela sawmill to Dagupan City.

12 No one came

forward to question that contract or the authority of Licuden to represent the owner of the carrier truck.

3) Philtranco Service Enterprises, Inc v. Court of Appeals

1.5.3 Kabit System

1) Santos v. Sibug

Facts:

Vicente Vidad was a duly authorized passenger jeepney operator. Petitioner Adolfo Santos was the owner of a passenger jeep without a certificate of public convenience. Santos transferred his jeepney to Vidad in an agreement called the “kabit system”, and Vidad executed a re-transfer document presumably to be registered when they decide that the jeepney be withdrawn from the arrangement. On April 26, 1963, private respondent Abraham Sibug was bumped by the jeepney driven by Severo Gragas. Sibug filed a complaint against Vidad and Gragas with Branch XVII of the Court of First Instance in Manila. Judgment was

rendered sentencing the defendants to pay P506.20 as actual damages, P3,000 as moral damages, and P500 as attorney’s fees and costs. On April 10, 1964, the sheriff levied on the motor vehicle and scheduled an auction sale. On April 11, petitioner submitted a third-party complaint, alleging that he was the real owner of the jeepney. Sibug submitted a bond to the sheriff to save the latter from liability if he were to proceed with the sale and the third-party complaint would be ultimately upheld. On April 22, petitioner instituted with CFI Branch X an action for Damages and Injunction, with Preliminary Mandatory Injunction against Sibug, Vidad and the sheriff. The complaint was amended to include the bonding company. On May 11, Branch X issued a restraining order enjoining the sheriff from conducting the auction sale. On October 14, 1965, Branch X upheld petitioner’s ownership. Sibug appealed from the decision of Branch X. The Court of Appeals nullified the appealed decision.

Issues:

(1) Whether the CFI has jurisdiction to issue an injunction restraining the execution sale of the jeepney levied upon by a judgment creditor in another CFI

(2) Whether the third-party claimant has a right to vindicate his claim to the vehicle levied upon through a separate action

Held:

In asserting his rights of ownership to the vehicle in question, SANTOS candidly admitted his participation in the illegal and pernicious practice in the transportation business known as the kabit system. Although SANTOS, as the kabit, was the true owner as against VIDAD, the latter, as the registered owner/operator and grantee of the franchise, is directly and primarily responsible and liable for the damages caused to SIBUG, the injured party, as a consequence of the negligent or careless operation of the vehicle. This ruling is based on the principle that the operator of record is considered the operator of the vehicle in contemplation of law as regards the public and third persons even if the vehicle involved in the accident had been sold to another where such sale had not been approved by the then Public Service Commission.

The levy on execution against said vehicle should be enforced so that the judgment in the BRANCH XVII


CASE may be satisfied, notwithstanding the fact that the secret ownership of the vehicle belonged to another. SANTOS, as the kabit, should not be allowed to defeat the levy on his vehicle and to avoid his responsibilities as a kabit owner for he had led the public to believe that the vehicle belonged to VIDAD. This is one way of curbing the pernicious kabit system that facilitates the commission of fraud against the travelling public. SANTOS' remedy, as the real owner of the vehicle, is to go against VIDAD, the actual operator who was responsible for the accident, for the recovery of whatever damages SANTOS may suffer by reason of the execution. In fact, if SANTOS, as the kabit, had been impleaded as a party defendant in the BRANCH XVII CASE, he should be held jointly and severally liable with VIDAD and the driver for damages suffered by SIBUG, as well as for exemplary damages.

Contrary to the rationale in the Decision of respondent Court, it was appropriate, as a matter of procedure, for SANTOS, as an ordinary third-party claimant, to vindicate his claim of ownership in a separate action under Section 17 of Rule 39. And the judgment rendered in his favor by Branch X, declaring him to be the owner of the property, did not as a basic proposition, constitute interference with the powers or processes of Branch XVII which rendered the judgment, to enforce which the jeepney was levied upon. And this is so because property belonging to a stranger is not ordinarily subject to levy. While it is true that the vehicle in question was in custodia legis, and should not be interfered with without the permission of the proper Court, the property must be one in which the defendant has proprietary interest. Where the Sheriff seizes a stranger's property, the rule does not apply and interference with his custody is not interference with another Court's Order of attachment.

However, as a matter of substance and on the merits, the ultimate conclusion of respondent Court nullifying the Decision of Branch X permanently enjoining the auction sale, should be upheld. Legally speaking, it was not a "stranger's property" that was levied upon by the Sheriff pursuant to the judgment rendered by Branch XVII. The vehicle was, in fact, registered in the name of VIDAD, one of the judgment debtors. And what is more, the aspect of public service, with its effects on the riding public, is involved. Whatever legal technicalities may be invoked, we find the judgment of respondent Court of Appeals to be in consonance with justice.

2) Lita Enterprises, Inc v. Court of Appeals

3) Teja Marketing v. IAC

Facts: On May 9, 1975, the defendant bought from the plaintiff a motorcycle with complete accessories and a sidecar in the total consideration of P8,000.00. Defendant gave a downpayment of P1,700.00 with a promise that he would pay plaintiff the balance within sixty days. The defendant, failed to comply with his promise and so upon his own request, the period of paying the balance was extended to one year in monthly installments until January 1976 when he stopped paying.

The records of the LTC show that the motorcycle sold to the defendant was first mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing and Angel Jaucian are one and the same, because it was made to appear that way only as the defendant had no franchise of his own and he attached the unit to the plaintiff's MCH Line. The agreement also of the parties here was for the plaintiff to undertake the yearly registration of the motorcycle with the Land Transportation Commission.

The plaintiff, however failed to register the motorcycle on that year on the ground that the defendant failed to comply with some requirements such as the payment of the insurance premiums and the bringing of the motorcycle to the LTC for stenciling.

The court finds that defendant purchased the motorcycle in question, particularly for the purpose of engaging and using the same in the transportation business and for this purpose said trimobile unit was attached to the plaintiffs transportation line who had the franchise, so much so that in the registration certificate, the plaintiff appears to be the owner of the unit.

Lower Court Ruling: The City Court rendered judgment in favor of petitioner.

Issue: Whether or not respondent court erred in applying the doctrine of "pari delicto."

Ruling: The parties herein operated under an arrangement, commonly known as the "kabit system" whereby a person who has been granted a certificate of public convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government.


The "kabit system" has been identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices.

Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave both where it finds them.

4) Abelardo Lim v. Court of Appeals

FACTS: On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT "Batman. Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of water. Gelacio Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of the lighter, for loading which was actually begun on the same date by the crew of the lighter under the captain's supervision. When about half of the scrap iron was already loaded, Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown and after a heated argument between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing who sustained injuries. After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron where the lighter was docked. The rest was brought to the compound of NASSCO. Later on Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron. Tumabing sued Ganzon; the latter alleged that the goods have not been unconditionally placed under his custody and control to make him liable. The trial court dismissed the case but on appeal, respondent Court rendered a decision reversing the decision of the trial court and ordering Ganzon to pay damages. ISSUE: Whether or not a contract of carriage has been perfected.

HELD: Yes. By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the petitioner-carrier's extraordinary responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant to Art. 1736, such extraordinary responsibility would cease only upon the delivery, actual or constructive, by the carrier to the consignee, or to the person who has a right to receive them. The fact that part of the shipment had not been loaded on board the lighter did not impair the said contract of transportation as the goods remained in the custody and control of the carrier, albeit still unloaded. Before Ganzon could be absolved from responsibility on the ground that he was ordered by competent public authority to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the power to issue the disputed order, or that it was lawful, or that it was issued under legal process of authority. The appellee failed to establish this. Indeed, no authority or power of the acting mayor to issue such an order was given in evidence. Neither has it been shown that the cargo of scrap iron belonged to the Municipality of Mariveles. What we have in the record is the stipulation of the parties that the cargo of scrap iron was accumulated by the appellant through separate purchases here and there from private individuals. The fact remains that the order given by the acting mayor to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose Advincula to shakedown Tumambing for P5,000.00. The order of the acting mayor did not constitute valid authority for Ganzon and his representatives to carry out.

1.5.4 Boundary System

1) Magboo v. Bernardo

Facts: The petitioners filed an action against the respondent who is the owner of the jeep and who is being claimed to be responsible for the death of the petitioner’s 8 year old child in a vehicular accident. The respondent denies being liable for the death of the said child because he claimed that there was no employer-employee relationship between him and the


driver of the said jeep because of the boundary system that they are following. The respondent claims that only the driver should be liable because the relationship between the two is that of a lessor-lessee. Respondent also claims that he should not be held subsidiary liable because the driver of the jeep pleaded guilty to a criminal case without respondent’s knowledge. Issue:

Whether or not the respondent is liable for the death of the child of the petitioners. Held: The Court held that the respondent should be liable because the lease he made with the driver of the jeep was not approved by the Public Service Commission (PSC). Since the lease was made without such approval, the owner continued to be the operator of the jeep in legal contemplation and such was responsible for the consequences of his operation. The Court also held that the claim of the respondent in stating that he did not know of the plea made by the driver, which prevented him from proving his innocence, was raised too late in the case therefore the respondent is estopped from enforcing any claim regarding to that matter.

Note:

The features which characterize the boundary system are not sufficient to withdraw the relationship between the parties from that of employer and employee. The owner continued to be the operator of the vehicle in legal contemplation and as such, he is responsible for the consequences incident to its operation. To exempt from liability the owner of a public vehicle who operates it under the “boundary system” on the ground that he is a mere lessor would be not only to abet flagrant violations of the Public Service Law but also to place the riding public at the mercy of reckless and irresponsible drivers.

CHAPTER 2: OBLIGATION OF THE PARTIES

2.1 Obligation of the Carrier

2.1.1 Duty to Accept

1) Fisher v. Yangco Steamship Co, supra

2.1.2 Duty to Deliver

(a) Time of Delivery

1) Maersk Line v. Court of Appeals

FACTS: Petitioner Maersk Line is engaged in the transportation of goods by sea, doing business in the Philippines through its general agent Compania General de Tabacos de Filipinas. Private respondent Efren Castillo, on the other hand, is the proprietor of Ethegal Laboratories, a firm engaged in the manufacture of pharmaceutical products. Private respondent ordered from Eli Lilly. Inc. of Puerto Rico through its (Eli Lilly, Inc.'s) agent in the Philippines, Elanco Products, 600,000 empty gelatin capsules for the manufacture of his pharmaceutical products. The capsules were placed in six (6) drums of 100,000 capsules each valued at US $1,668.71. Through a Memorandum of Shipment, the shipper Eli Lilly, Inc.,advised private respondent as consignee that the items were already shipped on board MV "Anders Maerskline" to the Philippines via Oakland, California. In said Memorandum, shipper Eli Lilly, Inc. specified the date of arrival to be April 3, 1977. For reasons unknown, said cargo of capsules were mishipped and diverted to Richmond, Virginia, USA and then transported back Oakland, California. The goods finally arrived in the Philippines on June 10, 1977 or after two (2) months from the date specified in the memorandum. As a consequence, private respondent as consignee refused to take delivery of the goods on account of its failure to arrive on time. Private respondent alleging gross negligence and undue delay in the delivery of the goods, filed an action before the court a quo for rescission of contract with damages against petitioner and Eli Lilly, Inc. as defendants. ISSUE: Whether or not respondent Castillo is entitled to damages resulting from delay in the delivery of the shipment in the absence in the bill of lading of a stipulation on the period of delivery HELD: Yes. While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation to deliver at a given date or time, delivery of shipment or cargo should at least be made within a reasonable time. An examination of the subject bill of lading shows that the subject shipment was estimated to arrive in Manila on April 3, 1977.


While there was no special contract entered into by the parties indicating the date of arrival of the subject shipment, petitioner nevertheless, was very well aware of the specific date when the goods were expected to arrive as indicated in the bill of lading itself. In this regard, there arises no need to execute another contract for the purpose as it would be a mere superfluity. In the case before us, we find that a delay in the delivery of the goods spanning a period of two (2) months and seven (7) days falls was beyond the realm of reasonableness.


(b) Consequences of Delay

(1) Code of Commerce

(2) Abandonment

1) Magellan Manufacturing Marketing Corporation v. Court of Appeals

Facts: Magellan Manufacturers Marketing Corp. (MMMC) entered into a contract with Choju Co. of Yokohama, Japan to export 136,000 Anahaw fans in consideration of $23k. As payment thereof, a letter of credit was issued to plaintiff MMMC by the buyer. Through its president, James Cu, MMMC then contracted F.E. Zuellig, a shipping agent, to ship the anahaw fans through the other appellee, Orient Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of lading and that transshipment is not allowed under the letter of credit.

Thereafter appellant MMMC paid F.E. Zuellig the freight charges and secured a copy of the bill of lading which was presented to Allied Bank. The bank then credited the amount of US$23k covered by the letter of credit to MMMC’s account. However, when MMMC’s president James Cu, went back to the bank later, he was informed that the payment was refused by the buyer allegedly because there was no on-board bill of lading, and there was a transshipment of goods. As a result of the refusal of the buyer to accept, upon appellant's request, the anahaw fans were shipped back to Manila by appellees, for which the latter demanded from appellant payment of P246,043.43. MMMC abandoned the whole cargo and asked appellees for damages.

TC: MMMMC cannot seek damages as it agreed to a transshipment of the goods and is liable for demurrages amounting to P298k incurred in Japan and Manila.

CA: MMMMC cannot seek damages as it agreed to a transshipment of the goods and is liable

for demurrages amounting to P52k incurred in Japan. While the goods arrived in Manila in October 1980, appellant was notified of said arrival only in March 1981. No explanation was given for the delay in notifying appellant.

Issue: WON MMMMC should be liable for P52k when it exercised its option of Abandonment?

SC: No. Private respondents belatedly informed petitioner of the arrival of its goods in Manila and that if it wished to take delivery of the cargo it would have to pay P52k, but with the last paragraph thereof stating as follows:

Please can you advise within 15 days of receipt of this letter whether you intend to take delivery of this shipment, as alternatively we will have to take legal proceedings in order to have the cargo auctioned to recover the costs involved, as well as free the container which are (sic) urgently required for export cargoes.

Clearly, therefore, private respondents offered petitioner the options:

1. paying the shipping and demurrage charges in order to take delivery of the goods;

2. abandoning the same so that private respondents could sell them at public auction and thereafter apply the proceeds in payment of the shipping and other charges.

It will be remembered that in overland transportation, an unreasonable delay in the delivery of transported goods is sufficient ground for the abandonment of goods. By analogy, this can also apply to maritime transportation. Further, with much more reason can petitioner in the instant case properly abandon the goods, not only because of the unreasonable delay in its


delivery but because of the option which was categorically granted to and exercised by it as a means of settling its liability for the cost and expenses of reshipment. And, said choice having been duly communicated, the same is binding upon the parties on legal and equitable considerations of estoppel.

SYLLABUS: DEFENSES IN CARRIAGE OF OTHER PASSENGERS AND 3

RD PERSONS

(3) Right of Passengers in case of Delay

1) Trans-Asia Shipping Lines, Inc. v. Court of Appeals

FACTS: Atty. Renato Arroyo, a public attorney, bought a ticket from Trans-Asia Shipping Lines, Inc., a corporation engaged in inter-island shipping, for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City on November 12, 1991. At around 5:30 pm on the same day, Atty. Arroyo boarded the vessel. At that instance, he noticed that some repair works were being undertaken on the engine of the vessel. The vessel departed at around 11:00 pm with only one engine running. After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor thereat. After an hour of stillness, some passengers demanded that they should be allowed to return to Cebu City for they were no longer willing to continue their voyage. The captain acceded to their request. At Cebu City, those passengers who requested to be brought back to Cebu were allowed to disembark. Thereafter, vessel proceeded to Cagayan De Oro City. Atty. Arroyo, the next day, boarded M/V Asia Japan for its voyage to Cagayan De Oro, likewise a vessel of Trans-Asia Shipping Lines. On Account of this failure of Trans-Asia to transport him to the place of destination on November 12, 1991, Atty. Arroyo filed before TC a complaint for damages against Trans-Asia. In his compliant, Atty. Arroyo alleged that the vessel’s engine conked out in the open sea, and for more than an hour it was stalled and at the mercy of the waves, thus causing fear in the passengers. It sailed back to Cebu after it regained power but passengers were arrogantly told to disembark without necessary precautions against possible injury to them. He further alleged that by reason of petitioner’s wanton, reckless and willful acts, he was unnecessarily exposed to danger and incurred additional expenses and loss of income. In his pre-trial brief, Atty. Arroyo asserted that his complaint was an action for damages

arising from bad faith, breach of contract and from tort, with the former arising from the petitioner’s failure to carry him to his place of destination as contracted. TC: Action was only for breach of contract, with Arts. 1170, 1172, and 1173 of the Civil Code as applicable law. ART. 1170 made a person liable for damages if, in the performance of his obligation, he was guilty of fraud, negligence, or delay, or in any manner contravened the tenor thereof. Pursuant to Art. 2201, to be entitled to damages, the non performance of the obligation must have been tainted not only by fraud, negligence, or delay but also bad faith, malice, and wanton attitude. The complaint was dismissed, it not appearing that atty. Arroyo was left in the Port of Cebu because of the fault, negligence, malice or wanton attitude of the defendant’s employees. Defendant’s counterclaim is likewise dismissed it not appearing that filing was motivated by malice or bad faith. In addition, as early as 3:00 pm, defendant did not hide the fact that the cylinder head cracked. Atty. Arroyo even saw during its repair. If he had doubts as to the capacity of the vessel to sail, he had time yet to take another boat. Ticket could be return and corresponding cash would be return to him. When boat arrived at Cebu Port, there was an announcement that passengers who would like to disembark were given ten minutes only to do so. By this, it could be inferred that the boat will proceed to Cagayan. If Atty. Arroyo entertained doubts, he should have asked a member of the crew the boat or the captain. As admitted by him, he was of the impression only that the boat will not proceed to Cagayan. Hence, he was the one who’s at fault or the ones negligent. It Atty. Arroyo was not able to make the trip that night, it was not because defendant maliciously did it to exclude him from the trip. If he was left, it was because of his fault or negligence. CA: reversed the TC’s decision by applying Arts. 2201, 2208, 2217, and 2232 of the Civil Code and awarded compensatory, moral, and exemplary damages. However, it did not allow the grant of damages for the delay in the performance of the petitioner’s obligation as the requirement of the demand set forth in Art. 1169 of the Civil Code had not been met by private respondent. There was no evidence to prove that contract of carriage provided for liability in case of delay in departure, nor that a designation of the time of departure was the controlling motive for the establishment of the contract. Atty. Arroyo even


admitted he was unaware of the vessel’s departure time, and it was only when he boarded the vessel that he became aware of such. ISSUE: In case of interruption of a vessel’s voyage and the consequent delay in that vessel’s arrival at its port of destination, is the right of a passenger affected thereby to be determined and governed by the vague Civil Code provision on common carriers, or shall it be, in the absence of a specific provision thereon, governed by Art. 698 of the Code of Commerce. HELD: Where the delay in a contracted voyage is incurred after the commencement of such voyage, Art. 698 of the Code of Commerce, not Art. 1169 of the Civil Code , applies. CA did not grant the private respondent actual or compensatory damages because no delay was incurred since there was no demand, as required by Art. 1169 of the Civil Code. This Article finds no application in this case because as found by the Court, there was no delay in the commencement of such voyage, more specifically, when the voyage was subsequently interrupted when the vessel had to stop near Kawit Island after the only functioning engine conked out. As to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent. Where the common carrier fails to observe extraordinary diligence resulting in delay or interruption of the voyage, it shall be liable for any pecuniary loss or loss of profits which the passengers may suffer by reason thereof. This does not suffice for a resolution of the case at bench for the cause of the delay or interruption was the petitioner’s failure to observe extraordinary diligence. The Court also agrees with the CA’s decision that the petitioner is liable for moral and exemplary damages. In allowing its unseaworthy M/V Asia Thailand to leave the port of origin and undertake the contracted voyage, with full awareness that it was exposed to perils of the sea, it deliberately disregarded its solemn duty to exercise extraordinary diligence and obviously acted with bad faith and in a wanton and reckless manner. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. Failure of a common carrier to maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its duty prescribed in Art. 1755 of the Civil Code. Petitioner asserts that the safety of the vessel and passengers was never at stake because the sea

was calm in the vicinity where it stopped as faithfully recorded in the vessel’s log book. Hence, petitioner concludes, the private respondent was merely over-reacting to the situation obtaining then. Court hold that the petitioner’s defense cannot exculpate nor mitigate its liability. Petitioner should not expect its passengers to act in the manner it desired. Becoming alarmed, anxious, or frightened at the stoppage of a vessel at sea in an unfamiliar zone at nighttime is not the sole prerogative of the faint-hearted.

2.1.3 Where and to Whom Delivered

2.1.4 Duty to Exercise Extraordinary Diligence

(a) Presumption of Negligence

(1) Carriage of Goods

1) Belgian Overseas Chartering v. Phil First Insurance Co.


PETITIONER: Owner of M/V Anangel Sky, vessel tasked to deliver Prime Cold Rolled Steel sheets PRIVATE RESPONDENT: Insurer of said cargo

FACTS: CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss. Despite receipt of a formal demand, defendants-appellees refused to submit to the consignee's claim. Consequently, plaintiff-appellant paid the consignee P506,086.50, and was subrogated to the latter's rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to the consignee as insured. Impugning the propriety of the suit against them, defendants-appellees averred that, inter alia, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment, and that their liability, if there be any, should not exceed the limitations of


liability provided for in the bill of lading and other pertinent laws.

LOWER COURT’S RULING: The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof required by law. However, it was subsequently reversed by the Appellate Court. CA ruled that petitioners were liable for the loss or the damage of the goods shipped, because they had failed to overcome the presumption of negligence imposed on common carriers. Hence, this petition.

ISSUE: Whether petitioners have overcome the presumption of negligence of a common carrier.

HELD: NO. Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport. This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract, the riding public enters into a contract of transportation with common carriers. Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. In the present case, Petitioners failed to prove that they observed the extraordinary diligence and precaution which the law requires a common carrier to know and to follow to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery. First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg, Germany. Second, prior to the unloading of the cargo, an Inspection Report prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty. Third, Bad Order Tally Sheet No. 154979 issued by Jardine Davies Transport Services, Inc. (the other petitioner), stated that the four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss or damage. Fourth, the Certificate of Analysis stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet with fresh water. Fifth, petitioners -- in a letter addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted

that they were aware of the condition of the four coils found in bad order and condition.

DOCTRINE: Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held responsible.

2) Tabacalera Insurance Co. v. North Front Shipping Inc

FACTS: Petitioners are insurers of a shipment of sacks of corn grains consigned to Republic Flour Mills Corporation in Manila. The cargo was shipped by North Front Shipping Services, Inc. The consignee was advised of its arrival but the unloading was delayed for six days for unknown reason, and the merchandise was already moldy, rancid and deteriorating. The moisture content and the wetting was due to contact with salt water but the mold growth was only incipient and not sufficient to make the corn grains toxic and unfit for consumption. In fact the mold growth could still be arrested by drying. However, Republic Flour rejected the entire cargo which therefore forced the petitioners to pay the former. Now, as subrogees, they lodged a complaint for damages against respondents claiming that the loss was exclusively attributable to the fault and negligence of the carrier. The Marine Cargo Adjusters hired by the insurance companies conducted a survey and found cracks in the bodega of the barge and heavy concentration of molds on the tarpaulins and wooden boards. They did not notice any seals in the hatches. The tarpaulins were not brand new as there were patches on them, contrary to the claim of North Front Shipping Services, Inc., thus making it possible for water to seep in. They also discovered that the bulkhead of the barge was rusty. The trial court dismissed the complaint and ruled that the contract entered into between North Front Shipping Services, Inc., and Republic Flour Mills Corporation was a charter-party agreement. As such, only ordinary diligence in the care of goods was required. On the other hand, the Court of Appeals ruled that as a common carrier required to observe a higher degree of diligence North Front 777


satisfactorily complied with all the requirements hence was issued a Permit to Sail after proper inspection. ISSUE: Whether or not a charter-party agreement between P and R requires extraordinary diligence. HELD: Yes. The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills Corporation did not in any way convert the common carrier into a private carrier. x x x North Front Shipping Services, Inc., is a corporation engaged in the business of transporting cargo and offers its services indiscriminately to the public. It is without doubt a common carrier. As such it is required to observe extraordinary diligence in its vigilance over the goods it transports. When goods placed in its care are lost or damaged, the carrier is presumed to have been at fault or to have acted negligently. North Front Shipping Services, Inc., therefore has the burden of proving that it observed extraordinary diligence in order to avoid responsibility for the lost cargo. However, we cannot attribute the destruction, loss or deterioration of the cargo solely to the carrier. We find the consignee Republic Flour Mills Corporation guilty of contributory negligence. It was seasonably notified of the arrival of the barge but did not immediately start the unloading operations. No explanation was proffered by the consignee as to why there was a delay of six (6) days. Had the unloading been commenced immediately the loss could have been completely avoided or at least minimized. As testified to by the chemist who analyzed the corn samples, the mold growth was only at its incipient stage and could still be arrested by drying. The corn grains were not yet toxic or unfit for consumption.

3) FGU Insurance v. GP Sarmiento Trucking Corporation, supra


FGU Insurance Corporation (FGU), insurer of the shipment, petitioner

G.P. Sarmiento Trucking Corporation (GPS), carrier, respondent

Lambert M. Eroles, driver of G.P Sarmiento Trucking Corporation, respondent

Facts:

G.P. Sarmiento Trucking Corporation, respondent, undertook to deliver 30 units of Condura S.D. white refrigerators from the plant site of Concepcion Industries Inc. to Central Luzon Appliances in Quezon City. However, it collided with an unidentified truck, causing it to fall into a deep canal, damaging the cargoes.

FGU Insurance, petitioner and insurer of the shipment paid to Concepcion Carrier the value of the covered cargoes amounting to P204,450. FGU in turn sought reimbursement from GPS and filed a complaint for damages and breach of contract of carriage against GPS and its driver Lambert Eroles with the Regional Trial Court, Branch 66, of Makati City. Respondent, GPS, however, asserted that it was the exclusive hauler of Concepcion, that it was not engaged in business as a common carrier and that the cause of the damage was purely accidental. Accordingly, it filed a motion to dismiss.

The RTC of Makati ruled in favour of respondent GPS and granted the motion to dismiss explaining that FGU did not present evidence that would prove that the former is a common carrier. In view of that, the application of law on common carriers is neither warranted nor is the presumption of fault or negligence on the part of a common carrier in case of loss, damage or deterioration of goods during transport under 1735 of the Civil Code not availing. Consequently, the laws governing the contract between the owner of the cargo to whom the plaintiff was subrogated and the owner of the vehicle which transports the cargo are the laws on obligation and contract of the Civil Code as well as the law on quasi-delicts.


The Court of Appeals rejected the appeal of petitioner-appellant FGU and ruled in favor of GPS since petitioner-appellant failed to prove that the respondent-appellee is a common carrier, the presumption would not arise; consequently, the appellant would have to prove that the carrier was negligent.

Issue:

Whether or not respondent GPS may be presumed negligent when the goods it undertook to transport safely were subsequently damaged while in its protective custody and possession?

Held:

Yes. Under culpa contractual, the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered.

In the case at bar, respondent trucking corporation recognizes the existence of a contract of carriage between it and petitioner’s assured, and admits that the cargoes it has assumed to deliver have been lost or damaged while in its custody. In such a situation, a default on, or failure of compliance with, the obligation – in this case, the delivery of the goods in its custody to the place of destination - gives rise to a presumption of lack of care and corresponding liability on the part of the contractual obligor the burden being on him to establish otherwise. GPS has failed to do so.

Q: When there is no direct proof of negligence, does res ipsa loquitur automatically apply? A: No, the doctrine of res ipsa loquitur does not automatically apply. The party invoking the doctrine must first establish that there is no direct proof of negligence AVAILABLE. Only after establishing that may he rely upon the inferences under res ipsa loquitur. Q: Why is the doctrine inapplicable in culpa contractual? A: Because in culpa contractual, the breach of the

contract is already an act of presumed negligence. The contract governs the conduct of the parties so that if there is a breach, all that the plaintiff needs to prove is the existence of the contract and the breach thereof.

(2) Carriage of Passengers

1) Abeto v. PAL

2) BLTB v. IAC

(b) Duration of Duty

(1) Carriage of Goods

1) Saludo v. Court of Appeals

PARTIES: Pomierski and Son Funeral Home of Chicago – Shipper C.M.A.S. (Continental Mortuary Air Services) – Shipper’s Agent Maria Salvacion Saludo – Consignee Trans World Airlines – Carrier Philippine Airlines – Carrier Air Care International – PAL’s Agent SUMMARY OF FACTS: On Oct. 26, 1976 the cargo containing the casketed remains of Crispina Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for Manila on Oct. 27, PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt of delivery of the cargo on Oct. 26, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight scheduled on Oct. 27. It was not until October 28, 1976 that PAL received physical delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer Manifest of the American Airline Freight System and signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date.

FACTS: After the death of Crispina Galdo Saludo, mother of Aniceto G. Saludo, Jr., Maria Salvacion Saludo, Leopoldo G. Saludo and Saturnino G. Saludo, in Chicago Illinois, Pomierski and Son Funeral Home of Chicago, made the necessary preparations and arrangements for the shipment, of the remains from Chicago to the Philippines. The funeral home had the remains embalmed and secured a permit for the disposition of dead human body, Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at the Pomierski & Son Funeral Home, sealed the shipping


case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Saludo Galdo. Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the Chicago airport which made the necessary arrangements such as flights, transfers, etc.; C.M.A.S. is a national service used by undertakers to throughout the US, they furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal. C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care International, with Pomierski F.H. as the shipper and Maria Saludo as the consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued wherein the requested routing was (1) from Chicago to San Francisco on board TWA (Trans World Airlines) Flight 131 of October 27, 1976 and (2) from San Francisco to Manila on board PAL Flight No. 107 of the same date, and (3) from Manila to Cebu on board PAL Flight 149 of October 29, 1976. In the meantime, Maria Salvacion Saludo and Saturnino Saludo, thru a travel agent, were booked with United Airlines from Chicago to California, and with PAL from California to Manila. But they changed reservations to TWA after learning from the director of Pomierski FH and confirming by phone that their mother’s remains should be on that TWA flight. In the airport they saw no body from the lookout area and was informed when they went to the TWA counter that none was on that flight. Reluctantly, they took the TWA flight upon assurance of her cousin, Ani Bantug, that he would look into the matter and inform her about it on the plane or have it radioed to her. But no confirmation from her cousin reached her that her mother was on the West Coast. Upon arrival at San Francisco, Maria inquired to the TWA counter, who was still unaware of her mother’s remains. She informed Pomierski, who immediately called C.M.A.S. It turned out that the casketed human remains that was issued the PAL Airway Bill was not the remains of Crispina Saludo, the casket containing her remains was on a plane to Mexico City, there being two bodies at the terminal, which were somehow switched. Later, C.M.A.S. called saying that they were sending the remains back to California via Texas. The following day October 28, the shipment or remains of Crispina Saludo arrived in San Francisco from Mexico on board American Airlines and was transferred to and/or received by PAL. The shipment was immediately loaded on PAL flight for Manila that same

evening and arrived in Manila on October 30, a day after its expected arrival on October 29. Petitioners’ counsel informed TWA of the misshipment and eventual delay in the delivery of the cargo containing the remains of the late Crispin Saludo, and of the discourtesy of its employees to petitioners Maria Salvacion Saludo and Saturnino Saludo. In a separate letter, addressed to PAL, petitioners stated that they were holding PAL liable for said delay in delivery and would commence judicial action should no favorable explanation be given. Both denied liability. TRIAL COURT AND CA RULING: As earlier stated, the court below absolved the two respondent airlines companies of liability. The Court of Appeals affirmed the decision of the lower court in toto, and in a subsequent resolution, denied herein petitioners' motion for reconsideration for lack of merit. ISSUE: Can respondent airline companies be held liable for the delay in the delivery of the casketed remains of petitioners' mother? HELD: NO. The jurisprudential dictum, both under American and Philippine law, that "(t)he issuance of a bill of lading carries the presumption that the goods were delivered to the carrier issuing the bill, for immediate shipment, and it is nowhere questioned that a bill of lading is prima facie evidence of the receipt of the goods by the carrier. . . . In the absence of convincing testimony establishing mistake, recitals in the bill of lading showing that the carrier received the goods for shipment on a specified date control.” A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport and deliver them at a specified place to a person named or on his order. Such instrument may be called a shipping receipt, forwarder's receipt and receipt for transportation. The designation, however, is immaterial. It has been hold that freight tickets for bus companies as well as receipts for cargo transported by all forms of transportation, whether by sea or land, fall within the definition. Under the Tariff and Customs Code, a bill of lading includes airway bills of lading. The two-fold character of a bill of lading: (1) it is a receipt as to the quantity and description of the goods shipped and (2) a contract to transport the goods to the consignee or other person therein designated, on the terms specified in such instrument.


Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and prima facie, but not conclusive, evidence of delivery to the carrier. Except as modified by statute, it is a general rule as to the parties to a contract of carriage of goods in connection with which a bill of lading is issued reciting that goods have been received for transportation, that the recital being in essence a receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence. Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner exercises the right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the acceptance, of the goods by the consignee or such other person entitled to receive them. And, there is delivery to the carrier when the goods are ready for and have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier has accepted them. Where the carrier has thus accepted such a delivery, the liability of the common carrier commences eo instanti. Hence, while extraordinary diligence statutorily required to be observed by the carrier instantaneously commences upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the contract of carriage. Only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked. The facts in the case at bar belie the averment that there was delivery of the cargo to the carrier on October 26, 1976. Rather, the body intended to be shipped, as agreed upon was really placed in the possession and control of PAL on October 28, and it was from that date that private respondents became responsible for the agreed cargo under their undertakings in PAL Airway Bill No. 079-01180454. Consequently, for the switching of caskets prior thereto which was not caused by them, and subsequent events caused thereby, private respondents cannot be held liable.

It should be noted that, Pomierski F.H., the shipper of Mrs. Saludo's remains, hired C.M.A.S. made all the necessary arrangements such as flights, transfers, etc. — for shipment of the remains of Crispina Saludo. Consequently, when the cargo was received from C.M.A.S. at the Chicago airport terminal for shipment, which was supposed to contain the remains of Crispina Saludo, Air Care International and/or TWA, had no way of determining its actual contents, since the casket was hermetically sealed and in an air pouch, to the effect that they had to rely on the information furnished by the shipper regarding the cargo's content. Neither could open the casket for further verification, since they were not only without authority to do so, but even prohibited. Thus, no fault and/or negligence can be attributed to PAL (even if Air Care International should be considered as an agent of PAL) and/or TWA, the entire fault or negligence being exclusively with C.M.A.S., which had the cargo when the switching occurred. But with its aforestated functions, C.M.A.S. may accordingly be classified as a forwarder, which, by accepted commercial practice, is regarded as an agent of the shipper and not of the carrier. As such, it merely contracts for the transportation of goods by carriers, and has no interest in the freight but receives compensation from the shipper as his agent. The Court is therefore, neither prepared to delve into, much less definitively rule on, the possible liability of C.M.A.S. Nonetheless, the facts show that petitioners' right to be treated with due courtesy in accordance with the degree of diligence required by law to be exercised by every common carrier was violated by TWA and this entitles them, at least, to nominal damages of P40,000.00 from TWA alone.

2) Macam v. Court of Appeals

3) Samar Mining Co. v. Nordeutcher Lloyd, supra

4) Lu Do v. Binamira

5) Republic v. Lorenzo Shipping Corporation

(2) Carriage of Passengers

1) LRTA v. Navidad

Parties to the case:

LRTA

Nicanor Navidad – deceased

Heirs of Nicanor Navidad


Rodolfo Roman – security guard

Prudent Security Agency

Junelito Escartin – train driver

Facts:

Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing token. While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, on-duty security guard approached Navidad. A misunderstand or altercation ensued between the two that led to a fistfight. Later on, Navidad fell on the tracks and was hit by an incoming train operated by Rodolfo Roman. Navidad was killed instantaneously.

The heirs of Nicanor filed a complaint against Escartin, Roman, the LRTA, Metropolitan Transit and Prudent for the death of Nicanor.

Issue: Did LRTA fail to exercise the degree of diligence necessary for common carriers making it liable for the death of Navidad?

Trial court ruling:

The trial court ordered Prudent Security and Escartin to jointly and severally pay the Navidads actual damages, compensatory damages, indemnity for the death of Nicanor, moral damages, attorney’s fees and costs of suit. The court however dismissed the complaint against LRTA and Roman for lack of merit.

The Court of Appeals exonerated Prudent from liability and instead held LRTA and Roman jointly and severally liable.

Held:

A common carrier, both from the nature of its business and for reason of public policy is duty bound to exercise utmost diligence in ensuring the safety of the passengers. Article 1755 provide that a common carrier is bound to varr the passenger safely as far as human care and foresight can provide, using outmost

diligence of a very cautious person, with due regard for all circumstances. Furthermore, Art 1759 of the Civil Code provide that common carriers are liable fot the death and injuries to passengers through the negligence or wilful acts of the former’s employees, although such employees may have acted beyond the scope of their authority ir in violation of the orders of the common carriers.

Such duty is not only during the course of the trip but for so long as the passenger is within the premises and where they ought to be in pursuant to the contract of carriage. In case of such injury or death, a common carrier is presumed to be at fault or negligent, and by simple proof of negligence, the passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its employees and the burden shifts to the carrier to prove the injurt is due to an unforeseen event of force majeure.

The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that contract of carriage by reason of its failure to exercise the diligence required of the common carrier.

2) Dangwa Transportation Co. Inc. v. Court of Appeals

3) La Mallorca v. Court of Appeals

PARTIES: Mariano Beltran and wife- plaintiffs (passengers); Raquel Beltran- passenger, victim; FACTS: On December 20, 1953, plaintiffs husband and wife together with their minor daughters namely, Milagros, 13 years old, Raquel 4 ½ years old, and Fe over 2 years old, boarded the Pambusco Bus no. 352, owned and operated by defendant, at San Fernando, Pampanga bound for Anao, Mexico, Pampanga. At the same time, they were carrying four pieces of baggages containing their personal things. The conductor of the bus, who happened to be a half-brother of Plaintiff Mariano Beltran, issued three tickets. It covered the full fares of plaintiff and their eldest child, Milagros. No fare was charged on Raquel and Fe. After an hour, the plaintiffs and their children was about to get off. Mariano Beltran, then carrying some of their baggages, was the first to get down the bus, followed by his wife and his children. He returned to the bus to get his other bayong which he had left behind, but in so doing, his daughter Racquel followed him, unnoticed by her father. While Mariano is waiting for the conductor to


hand him his bayong, the bus suddenly started moving forward. Mariano Beltran saw people beginning to gather around the body of a child lying prostrate on the ground, her skull crushed, and without life. The child was none other than his daughter Raquel, who was run over by the bus in which she rode earlier together with her parents. For the death of the said child, the plaintiffs commenced the present suit against the defendant seeking to recover an aggregate amount of P16,000 to cover moral damages and actual damages and attorney's fees. LOWER COURT RULING: The trial court found defendant liable for breach of contract of carriage and sentenced to pay P3,000 for the death of the child and P400.00 as compensatory damages representing burial and expenses and costs. ISSUE: WON as to the child, who was already led by the father to a place about 5 meters away from the bus the liability of the carrier for her safety under the contract of carriage also persisted. HELD: The petitioner is liable for damages for the death of the child, Raquel Beltran. There can be no controversy that as far as the father is concerned, when he returned to the bus for his bayong which was not unloaded, the relation of passenger and carrier between him and the petitioner remained subsisting. It has been recognized as a rule that the relation of carrier and passenger does not cease at the moment the passenger alights form the carrier's vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or opportunity to leave the carrier's premises. Thus, a person who, after alighting from a train, walks along the station platform is considered still a passenger. It cannot be claimed that the carrier's agent had exercised the "utmost diligence" of a "very cautious person" required by Article 1755 of the Civil Code. In the first place, the driver, nevertheless did not put off the engine. Secondly, he started to run the bus even before the bus conductor gave him the signal to do so and while the latter was still unloading part of the baggages of the passengers Mariano Beltran. The decision of the Court of Appeals is hereby modified by sentencing, the petitioner to pay to the respondents Mariano Beltran, et.al the sum of P3,000 for the death of the child, Raquel Beltran, and the amount of P400.00 as actual damages.

4) Aboitiz Shipping v. Court of Appeals

FACTS: Anacleto Viana boarded the vessel M/V Antonia, owned by Aboitiz Shipping Corporation, at the port at San Jose, Occidental Mindoro, bound for Manila. After said vessel had landed, the Pioneer Stevedoring Corporation took over the exclusive control of the cargoes loaded on said vessel pursuant to the Memorandum of Agreement between Pioneer and petitioner Aboitiz. The crane owned by Pioneer was placed alongside the vessel and one (1) hour after the passengers of said vessel had disembarked, it started operation by unloading the cargoes from said vessel. While the crane was being operated, Anacleto Viana who had already disembarked from said vessel obviously remembering that some of his cargoes were still loaded in the vessel, went back to the vessel, and it was while he was pointing to the crew of the said vessel to the place where his cargoes were loaded that the crane hit him, pinning him between the side of the vessel and the crane. He was thereafter brought to the hospital where he later died.

Private respondents Vianas filed a complaint for damages against petitioner for breach of contract of carriage. Aboitiz denied responsibility contending that at the time of the accident, the vessel was completely under the control of respondent Pioneer Stevedoring Corporation as the exclusive stevedoring contractor of Aboitiz, which handled the unloading of cargoes from the vessel of Aboitiz. ISSUE: Whether or not Aboitiz is negligent and is thus liable for Vianas’ death. HELD: Yes. x x x [T]he victim Anacleto Viana guilty of contributory negligence, but it was the negligence of Aboitiz in prematurely turning over the vessel to the arrastre operator for the unloading of cargoes which was the direct, immediate and proximate cause of the victim's death. The rule is that the relation of carrier and passenger continues until the passenger has been landed at the


port of destination and has left the vessel owner's dock or premises. 11 Once created, the relationship will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier's conveyance or had a reasonable opportunity to leave the carrier's premises. All persons who remain on the premises a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his departure. 12 The carrier-passenger relationship is not terminated merely by the fact that the person transported has been carried to his destination if, for example, such person remains in the carrier's premises to claim his baggage. It is apparent from the foregoing that what prompted the Court to rule as it did in said case is the fact of the passenger's reasonable presence within the carrier's premises. That reasonableness of time should be made to depend on the attending circumstances of the case, such as the kind of common carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a consideration of the time element per se without taking into account such other factors. It is thus of no moment whether in the cited case of La Mallorca there was no appreciable interregnum for the passenger therein to leave the carrier's premises whereas in the case at bar, an interval of one (1) hour had elapsed before the victim met the accident. The primary factor to be considered is the existence of a reasonable cause as will justify the presence of the victim on or near the petitioner's vessel. We believe there exists such a justifiable cause. It is of common knowledge that, by the very nature of petitioner's business as a shipper, the passengers of vessels are allotted a longer period of time to disembark from the ship than other common carriers such as a passenger bus. With respect to the bulk of cargoes and the number of passengers it can load, such vessels are capable of accommodating a bigger volume of both as compared to the capacity of a regular commuter bus. Consequently, a ship passenger will need at least an hour as is the usual practice, to disembark from the vessel and claim his baggage whereas a bus passenger can easily get off the bus and retrieve his luggage in a very short period of time. Verily, petitioner cannot categorically claim, through the bare expedient of comparing the period of time entailed in getting the passenger's cargoes, that the ruling in La Mallorca is inapplicable to the case at bar.

On the contrary, if we are to apply the doctrine enunciated therein to the instant petition, we cannot in reason doubt that the victim Anacleto Viana was still a passenger at the time of the incident. When the accident occurred, the victim was in the act of unloading his cargoes, which he had every right to do, from petitioner's vessel. As earlier stated, a carrier is duty bound not only to bring its passengers safely to their destination but also to afford them a reasonable time to claim their baggage.

2.1.5 Defenses of Common Carriers

(a) Fortuitious Event

(1) Requisites

1) Schmitz Transport v. Transport Ventures, Inc

2) Yobido v. Court of Appeals

Facts:

Spouses Tito and Leny Tumboy and their minor children boarded at Mangagoy, Surigao del Sur a Yobido Liner bus bound for Davao City. Along Picop Road in, the left front tire of the bus exploded. The bus fell into a ravine and struck a tree. The incident resulted in the death of Tito Tumboy and physical injuries to other passengers.

The winding road was not cemented and was wet due to the rain; it was rough with crushed rocks. The bus which was full of passengers had cargoes on top. Leny testified that it was running fast and she cautioned the driver to slow down but he merely stared at her through the mirror.

However, Salce, the bus conductor, testified that the bus was running speed for only 50-60 kmh. The left front tire that exploded was a brand new Goodyear tire that he mounted on the bus only 5 days before the incident. She stated that all driver applicants in Yobido Liner underwent actual driving tests before they were employed.

The defendant is invoking that the tire blowout was a caso fortuito.

Issue: 1. WON the tire blowout was purely caso fotuito? NO


2. WON the defendant bus liner is liable for damages resulting from the death of Tito? YES

Held:

1.

The explosion of the tire is not in itself a fortuitous event. The cause of the blow-out, if due to a factory defect, improper mounting, excessive tire pressure, is not an unavoidable event. On the other hand, there may have been adverse conditions on the road that were unforeseeable and/or inevitable, which could make the blow-out a caso fortuito. The fact that the cause of the blow-out was not known does not relieve the carrier of liability.

There are human factors involved in the situation. The fact that the tire was new did not imply that it was entirely free from manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact that the tire bought and used in the vehicle is of a brand name noted for quality, resulting in the conclusion that it could not explode within five days’ use. Be that as it may, it is settled that an accident caused either by defects in the automobile or through the negligence of its driver is not a caso fortuito that would exempt the carrier from liability for damages.

2.

A common carrier may not be absolved from liability in case of force majeure or fortuitous event alone. The common carrier must still prove that it was not negligent in causing the death or injury resulting from an accident. Having failed to discharge its duty to overthrow the presumption of negligence with clear and convincing evidence, petitioners are hereby held liable for damages.

Moral damages are generally not recoverable in culpa contractual except when bad faith had been proven. However, the same damages may be recovered when breach of contract of carriage results in the death of a passenger. Because petitioners failed to exercise the extraordinary diligence required of a common carrier, which resulted in the death of Tito Tumboy, it is deemed to have acted recklessly (Art 1756).

(2) Participation of the Carrier

(3) Fire

1) Eastern Shipping Lines c. IAC, supra

(4) Hijacking

1) Gacal v. PAL

(5) Mechanical Defects

1) Necesito v. Paras

Facts: On January 28, 1964, Severina Garces and her one-year old son, Precillano Necesito, carrying vegetables, boarded passenger auto truck or bus No. 199 of the Philippine Rabbit Bus Lines at Agno, Pangasinan. After passing Mangatarem, Pangasinan truck No. 199 entered a wooden bridge, but the front wheels swerved to the right; the driver lost control, and after wrecking the bridge's wooden rails, the truck fell on its right side into a creek where water was breast deep. The mother, Severina Garces, was drowned; the son, Precillano Necesito, was injured.

Lower Court Ruling: After joint trial, the Court of First Instance found that the bus was proceeding slowly due to the bad condition of the road; that the accident was caused by the fracture of the right steering knuckle, which was defective in that its center or core was not compact but "bubbled and cellulous", a condition that could not be known or ascertained by the carrier despite the fact that regular thirty-day inspections were made of the steering knuckle.

The trial court holding that the accident was ex exclusively due to fortuitous event, dismissed both actions. Plaintiffs appealed directly to this Court in view of the amount in controversy.

Issue: Whether or not the carrier is liable for the manufacturing defect of the steering knuckle.

Ruling: The preponderance of authority is in favor of the doctrine that a passenger is entitled to recover damages from a carrier for an injury resulting from a defect in an appliance purchased from a manufacturer, whenever it appears that the defect would have been discovered by the carrier if it had exercised the degree of care which under the circumstances was incumbent upon it, with regard to inspection and application of the necessary tests. For the purposes of this doctrine, the manufacturer is considered as being in law the agent or servant of the carrier, as far as regards the work of constructing the appliance. According to this theory, the good repute of the manufacturer will not relieve the carrier from liability.


The record is to the effect that the only test applied to the steering knuckle in question was a purely visual inspection every thirty days, to see if any cracks developed. It nowhere appears that either the manufacturer or the carrier at any time tested the steering knuckle to ascertain whether its strength was up to standard, or that it had no hidden flaws would impair that strength.

The periodical visual inspection of the steering knuckle as practiced by the carrier's agents did not measure up to the required legal standard of "utmost diligence of very cautious persons" — "as far as human care and foresight can provide", and therefore that the knuckle's failure can not be considered a fortuitous event that exempts the carrier from responsibility.

Due regard for the carrier's obligations toward the traveling public demands adequate periodical tests to determine the condition and strength of those vehicle portions the failure of which may endanger the safe of the passengers.

*Resolution: Defendants-appellees have Submitted a motion asking this Court to reconsider its decision of June 30, 1958, and that the same be modified with respect to its holding the carrier liable for the breakage of the steering knuckle that caused the autobus No. 199 to overturn, whereby the passengers riding in it were injured.

Motion for Reconsideration is denied.

(b) Other Invalid Defenses

(c) Public Enemy

(d) Improper Packing

(e) Order of Public Authority

(f) Defenses in Carriage of Passenger

(1) Employees

1) Maranan v. Perez

FACTS: Rogelio Corachea, a passenger in a taxicab owned and operated by Pascual Perez, was stabbed and killed by the driver, Simeon Valenzuela. Valenzuela was found guilty for homicide by the Court of First Instance and was sentenced to suffer Imprisonment and to indemnify the

heirs of the deceased in the sum of P6000. While pending appeal, mother of deceased filed an action in the Court of First Instance of Batangas to recover damages from Perez and Valenzuela. Defendant Perez claimed that the death was a caso fortuito for which the carrier was not liable. The court a quo, after trial, found for the plaintiff and awarded her P3,000 as damages against defendant Perez. The claim against defendant Valenzuela was dismissed. From this ruling, both plaintiff and defendant Perez appealed to this Court, the former asking for more damages and the latter insisting on non-liability. Defendant-appellant relied solely on the ruling enunciated in Gillaco vs. Manila Railroad Co. that the carrier is under no absolute liability for assaults of its employees upon the passengers. ISSUE: Was the contention of the defendant valid? RULING: No. The attendant facts and controlling law of that case and the one at bar were very different. In the Gillaco case, the passenger was killed outside the scope and the course of duty of the guilty employee. The Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present Civil Code, did not impose upon common carriers absolute liability for the safety of passengers against willful assaults or negligent acts committed by their employees.

The death of the passenger in the Gillaco case was truly a fortuitous event which exempted the carrier from liability. It is true that Art. 1105 of the old Civil Code on fortuitous events has been substantially reproduced in Art. 1174 of the Civil Code of the Philippines but both articles clearly remove from their exempting effect the case where the law expressly provides for liability in spite of the occurrence of force majeure. The Civil Code provisions on the subject of Common Carriers are new and were taken from Anglo-American Law. The basis of the carrier's liability for assaults on passengers committed by its drivers rested either on the doctrine of respondent superior or the principle that it was the carrier's implied duty to transport the passenger safely. Under the second view, upheld by the majority and also by the later cases, it was enough that the assault happens within the course of the employee's duty. It was no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier's orders. The carrier's


liability here was absolute in the sense that it practically secured the passengers from assaults committed by its own employees.

2) Gillaco v. Manila Railroad

(2) Other Passengers and Third Persons

1) Bachelor Express v. Court of Appeals

FACTS: On August 1, 1980, Bus No. 800 owned by Bachelor Express, Inc. and driven by Cresencio Rivera was the situs of a stampede which resulted in the death of passengers Ornominio Beter and Narcisa Rautraut. The bus came from Davao City on its way to Cagayan de Oro City passing Butuan City. While at Butuan City, the bus picked up a passenger. About fifteen (15) minutes later, a passenger at the rear portion suddenly stabbed a PC soldier, causing a commotion and panic among the passengers. When the bus stopped, passengers Ornominio Beter and Narcisa Rautraut were found lying down the road, the former already dead as a result of head injuries and the latter also suffering from severe injuries which caused her death later, as they jumped off the bus due to panic. Thereafter, the heirs of Ornominio Beter and Narcisa Rautraut, filed a complaint for "sum of money" against Bachelor Express, Inc. its alleged owner Samson Yasay and the driver Rivera. In their answer, the petitioners denied liability for the death of Ornominio Beter and Narcisa Rautraut. They alleged that ... the driver was able to transport his passengers safely to their respective places of destination except Ornominio Beter and Narcisa Rautraut who jumped off the bus without the knowledge and consent, much less, the fault of the driver and conductor and the defendants in this case. They stated that the defendant corporation had exercised due diligence in the choice of its employees to avoid as much as possible accidents. Such was an incident or event very much beyond the control of the defendants. Defendants were not parties to the incident complained of as it was an act of a third party who is not in any way connected with the defendants and of which the latter have no control and supervision. The trial dismissed the complaint. The Court of Appeals set aside the decision. Hence, this present petition. ISSUE: Whether or not petitioner is liable for the death of Beter and Rautraut, as such was caused by a third person

HELD: The running amuck of the passenger was the proximate cause of the incident as it triggered off a commotion and panic among the passengers such that the passengers started running to the sole exit shoving each other resulting in the falling off the bus by passengers Beter and Rautraut causing them fatal injuries. The sudden act of the passenger who stabbed another passenger in the bus is within the context of force majeure. However, in order that a common carrier may be absolved from liability in case of force majeure, it is not enough that the accident was caused by force majeure. The common carrier must still prove that it was not negligent in causing the injuries resulting from such accident. In the light of the foregoing, the negligence of the common carrier, through its employees, consisted of the lack of extraordinary diligence required of common carriers, in exercising vigilance and utmost care of the safety of its passengers, exemplified by the driver's belated stop and the reckless opening of the doors of the bus while the same was travelling at an appreciably fast speed. At the same time, the common carrier itself acknowledged, through its administrative officer, Benjamin Granada, that the bus was commissioned to travel and take on passengers and the public at large, while equipped with only a solitary door for a bus its size and loading capacity, in contravention of rules and regulations provided for under the Land Transportation and Traffic Code (RA 4136 as amended). The petition was dismissed.

2) Pilapil v. Court of Appeals

Petitioner-plaintiff Jose Pilapil, a paying passenger, boarded respondent-defendant's bus bearing No. 409 at San Nicolas, Iriga City on 16 September 1971 at about 6:00 P.M. While said bus No. 409 was in due course negotiating the distance between Iriga City and Naga City, upon reaching the vicinity of the cemetery of the Municipality of Baao, Camarines Sur, an unidentified man hurled a stone at the left side of the bus, which hit petitioner above his left eye. Private respondent's personnel lost no time in bringing the petitioner to the provincial hospital in Naga City where he was confined and treated.


Considering that the sight of his left eye was impaired, petitioner was taken to Dr. Malabanan of Iriga City where he was treated for another week. Since there was no improvement in his left eye's vision, petitioner went to V. Luna Hospital, Quezon City where he was treated by Dr. Capulong. Despite the treatment accorded to him by Dr. Capulong, petitioner lost partially his left eye's vision and sustained a permanent scar above the left eye.Thereupon, petitioner instituted before the Court of First Instance of Camarines Sur an action for recovery of damages sustained as a result of the stone-throwing incident.

Issue: WON Alatco is liable for the act of a stranger?

TC: Alatco Transportation Co., Inc. is liable!

CA: Alatco Transportation Co., Inc. is not liable!

SC: Alatco is not liable. While as a general rule, common carriers are bound to exercise extraordinary diligence in the safe transport of their passengers, it would seem that this is not the standard by which its liability is to be determined when intervening acts of strangers directly caused the injury:

Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission.

Clearly under the above provision, a tort committed by a stranger which causes injury to a passenger does not accord the latter a cause of action against the carrier. The negligence for which a common carrier is held responsible is the negligent omission by the carrier's employees to prevent the tort from being committed when the same could have

been foreseen and prevented by them. Further, under the same provision, it is to be noted that when the violation of the contract is due to the willful acts of strangers, as in the instant case, the degree of care essential to be exercised by the common carrier for the protection of its passenger is only that of a good father of a family.

Although the suggested precaution of using mesh grills could have prevented the injury complained of, the rule of ordinary care and prudence is not so exacting as to require one charged with its exercise to take doubtful or unreasonable precautions to guard against unlawful acts of strangers. The carrier is not charged with the duty of providing or maintaining vehicles as to absolutely prevent any and all injuries to passengers. Where the carrier uses cars of the most approved type, in general use by others engaged in the same occupation, and exercises a high degree of care in maintaining them in suitable condition, the carrier cannot be charged with negligence in this respect.

SYLLABUS: EXTRAORDINARY DILIGENCE IN CARRIAGE BY AIR

3) Fortune Express v. Court of Appeals

FACTS: Petitioner is a bus company in northern Mindanao. Private respondent Paulie Caorong is the widow of Atty. Caorong, while private respondents Yasser King, Rose Heinni, and Prince Alexander are their minor children. On November 18, 1989, a bus of petitioner figured in an accident with a jeepney in Kauswagan, Lanao del Norte, resulting in the death of several passengers of the jeepney, including two Maranaos. Crisanto Generalao, a volunteer field agent of the Constabulary Regional Security Unit No. X, conducted investigation found that the owner of the jeepney was a Maranao and that certain Maranaos were planning to take revenge on the petitioner by burning some of its buses. Generalao rendered a report to Sgt. Reynaldo Bastasa. Upon instruction of Sgt. Bastasa, he went to see Diosdado Bravo, operations manager of petitioner. Bravo assured him


that the necessary precautions to insure the safety of lives and property would be taken. At about 6:45pm on November 22, 1989, three armed Maranaos who pretended to be passengers, seized a bus of petitioner at Linamon, Lanao del Norte while on its way to Iligan City. Amoing the passengers was Atty. Caorong. Bashier Mananggolo, leader, ordered the driver, Godofredo Cabatuan, to stop the bus on the side of the highway. Mananggolo then ordered the passenger to get off the bus. HOWEVER, Atty. Caorong returned to the bus to retrieve something from the overhead rack. At that time, one of the armed men to spare the driver as he was innocent of any wrong doing and was only trying to make a living. The armed men were adamant as they repeated their warning that they were going to burn the bus along with the driver. During this exchange between Caorong and assailants, Cabatuan climbed out of the left window of the bus and crawled to the canal on the opposite side of the highway. Driver heard shots from inside the bus. Larry de la Cruz, one of the passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the passengers were able to pull Atty. Caorong out of the burning bus and rush him to the Mercy Community Hospital but he died while undergoing operation. Private respondents brought this suit for breach of contract of carriage in the RTC. TC: Dismissed the complaint. The fact that defendant, through Operations Manager Diosdado Bravo, was informed of the rumors that the Moslems intended to take revenge by burning five buses of defendant is established since the latter also utilized Crisanto Generalao as a witness. Yet despite this information, the plaintiffs charge, defendant did not take proper precautions. Plaintiffs now fault the defendant for ignoring the report. Their position is that the defendant should have provided its buses with security guards. The court hold that the diligence demanded by law does not include the posting of security guards in buses. It is an obligation that properly belongs to the State. The presence of a security guard is not a guarantee that the killing of Atty. Caorong would have been definitely avoided. Failure of defendant to accord faith and credit to the report of Mr. Generalao and the fact that it did not provide security to its buses cannot be characterized as negligence. Evidence shows that the assailants did not have the least intention of harming any of the passengers. The death of Atty. Arroyo was solely due to the willful acts of the lawless which defendant could neither prevent nor stop.

CA: On appeal, CA reversed. Given the circumstances obtaining in the case at bar, appellee has failed to exercise the degree of diligence required of common carriers. Hence, appellee must be adjudged liable. ISSUE: Whether or not the petitioner was guilty of a breach of the contract of carriage HELD:

Yes, Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of wilfull acts of other passengers, if the employees of the common carrier could have prevented the act through the exercise of the diligence of a good father of a family. In the present case, it is clear that because of the negligence of petitioner's employees, the seizure of the bus by Mananggolo and his men was made possible. Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on the petitioner by burning some of its buses and the assurance of petitioner's operation manager, Diosdado Bravo, that the necessary precautions would be taken, petitioner did nothing to protect the safety of its passengers. Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of gasoline with them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before allowing them on board could have been employed without violating the passenger's constitutional rights. The acts of Maranaos could not be considered as caso fortuito because there was already a warning by the PC. No contributory negligence could be attributed to the deceased. The assailant's motive was to retaliate for the loss of life of two Maranaos as a result of the collision between petitioner's bus and the jeepney in which the two Maranaos were riding. The armed men actually allowed deceased to retrieve something from the bus. What apparently angered them was his attempt to help the driver of the bus by pleading for his life. NOTES: ARTICLE 1174 of the Civil Code defines fortuitous event as an occurrence which could not be foreseen or which though foreseen, is inevitable. To be considered as force majeure, it is necessary that:


1. The cause of the breach of the obligation must be independent of the human will;

2. The event must be either unforeseeable or unavoidable;

3. The occurrence must be such as to render it impossible for the debtor to fulfill the obligation in a normal manner; and

4. The obligor must be free of participation in, or aggravation of, the injury to the creditor.

The absence of any of the requisites would prevent obligor from being excused from liability.

(g) Passenger’s Baggages

1) Quisumbing Sr. v. Court of Appeals

2) Pan-Am v. Rapadas

Parties to the Case:

Pan American World Airways, Inc- petitioner, common carrier

Jose K. Rapadas- respondent, passenger

Court of Appeals- respondent

Facts:

Private respondent held Passenger Ticket and Baggage Claim Check for petitioner's Flight with the route from Guam to Manila. While standing in line to board the flight at the Guam airport, Rapadas was ordered by petitioner's handcarry control agent to check-in his Samsonite attache case. Rapadas protested pointing to the fact that other co-passengers were permitted to handcarry bulkier baggages. He stepped out of the line only to go back again at the end of it to try if he can get through without having to register his attache case. However, the same man in charge of handcarry control did not fail to notice him and ordered him again to register his baggage. For fear that he would miss the plane if he insisted and argued on personally taking the valise with him, he acceded to checking it in. He then gave his attache case to his brother who happened to be around and who checked it in for him, but without declaring its contents or the value of its contents.

Upon arriving in Manila, Rapadas claimed and was given all his checked-in baggages except the attache case. He sent his son, Jorge Rapadas to request for the search of the missing luggage. The petitioner exerted efforts to locate the luggage through the Pan American World Airways-Manila International Airport (PAN AM-MIA) Baggage Service. Rapadas received a letter from the petitioner's counsel offering to settle the claim for the sum of $160.00 representing the petitioner's alleged limit of liability for loss or damage to a passenger's personal property under the contract of carriage between Rapadas and PAN AM. Refusing to accept this kind of settlement, Rapadas filed the instant action for damages.

The lower court ruled in favor of Rapadas after finding no stipulation giving notice to the baggage liability limitation. On appeal, the Court of Appeals affirmed the trial court decision. Hence, this petition.

Issue:

Whether or not a passenger is bound by the terms of a passenger ticket declaring the limitations of carrier’s liability

Held:

Yes. The Warsaw Convention, as amended, specifically provides that it is applicable to international carriage which it defines in Article 1, par. 2 as follows:

(2) For the purposes of this Convention, the expression "international carriage" means any carriage in which, according to the agreement between the parties, the place of departure and the place of destination, whether or not there be a breach 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 the territory of another State, even if that State is not a High Contracting Party. Carriage between two points within the territory of a single High Contracting Party without an agreed stopping place within the territory of another State is not international carriage for the purposes of this Convention. ("High Contracting Party" refers to a state


which has ratified or adhered to the Convention, or which has not effectively denounced the Convention [Article 40A(l)]).

Nowhere in the Warsaw Convention, as amended, is such a detailed notice of baggage liability limitations required. Nevertheless, it should become a common, safe and practical custom among air carriers to indicate beforehand the precise sums equivalent to those fixed by the Convention. The Convention governs the availment of the liability limitations where the baggage check is combined with or incorporated in the passenger ticket. In the case at bar, the baggage check is combined with the passenger ticket in one document of carriage. The passenger ticket complies with Article 3, which provides:

(c) a notice to the effect that, if the passenger's journey involves an ultimate destination or stop in a country other than the country of departure, the Warsaw Convention may be applicable and that the Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss of or damage to baggage.

What the petitioner is concerned about is whether or not the notice, which it did not fail to state in the plane ticket and which it deemed to have been read and accepted by the private respondent will be considered by this Court as adequate under the circumstances of this case. As earlier stated, the Court finds the provisions in the plane ticket sufficient to govern the limitations of liabilities of the airline for loss of luggage. The passenger, upon contracting with the airline and receiving the plane ticket, was expected to be vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence to overcome the stipulations, he cannot avoid the application of the liability limitations.

The facts show that the private respondent actually refused to register the attache case and chose to take it with him despite having been ordered by the PANAM agent to check it in. In attempting to avoid registering the luggage by going back to the line, private respondent manifested a disregard of airline rules on allowable handcarried baggages. Prudence of a reasonably careful person also dictates that cash and jewelry should be removed from checked-in-luggage

and placed in one's pockets or in a handcarried Manila-paper or plastic envelope.

The alleged lack of enough time for him to make a declaration of a higher value and to pay the corresponding supplementary charges cannot justify his failure to comply with the requirement that will exclude the application of limited liability.

3) British Airways v. Court of Appeals

Facts: On April 6, 1989, Mahtani decided to visit his

relative in Bombay, India. In anticipation of his visit, he obtained the services of a certain Mr. Gemar to prepare his travel plan. Since british Airways had no ticket flights from Manila to Bombay, Maktani had to take a connecting flight to Bombay on board British Airways. Prior to his departure, Maktani checked in the PAL counter in Manila his two pieces of luggage containing his clothing and personal effects, confident that upon reaching Hong Kong, the same would be transferred to the BA flight bound for Bombay, Unfortunately, when Maktani arrived in Bombay, he discovered that his luggage was missing and that upon inquiry from the BA representatives, he was told that the same might have been diverted to London. After plaintiff waiting for his luggage for one week, BA finally advised him to file a claim accomplishing the property. Issue:

Whether or not defendant BA is liable for compulsory damages and attorney’s fee, as well as the dismissal of its third party complaint against PAL

Held: The contract of transportation was exclusively between Maktani and BA. The latter merely endorsing the Manila to Hong Kong log of the former’s journey to PAL, as its subcontractor or agent. Conditions of contacts was one of continuous air transportation from Manila to Bombay. The Court of Appeals should have been cognizant of the well-settled rule that an agent is also responsible for any negligence in the performance of its function and is liable for damages which the principal may suffer by reason of its negligent act. Since the instant petition was based on breach of contract of carriage, Maktani can only sue BA and not PAL, since the latter was not a party in the contract.


4) Tan v. Northwest

Facts: On 31 May 1994, Priscilla L. Tan and Connie Tan boarded Northwest Airlines Flight 29 in Chicago, USA bound for the Philippines, with a stop-over at Detroit, USA. They arrived at the Ninoy Aquino International Airport (NAIA) on 1 June 1994 at about 10:40 p.m. Upon their arrival, Tan and her companion Connie Tan found that their baggages were missing. They returned to the airport in the evening of the following day and they were informed that their baggages might still be in another plane in Tokyo, Japan. On 3 June 1994, they recovered their baggages and discovered that some of its contents were destroyed and soiled. Claiming that they “suffered mental anguish, sleepless nights and great damage” because of Northwest’s failure to inform them in advance that their baggages would not be loaded on the same flight they boarded and because of their delayed arrival, they demanded from Northwest Airlines compensation for the damages they suffered. On 15 June 1994 and 22 June 1994, Tan sent demand letters to Northwest Airlines, but the latter did not respond. Hence, the filing of the case with the RTC. After due trial, on 10 June 1996, the trial court rendered decision finding Northwest Airlines, Inc. liable for damages (P15,000 as actual damages, P100,000 as moral damages, P50,000 as exemplary damages, P30,000 as and for attorney’s fees and Costs). Northwest Airlines, Inc. appealed from the trial court’s decision to the Court of Appeals contending that the court a quo erred in finding it guilty of breach of contract of carriage and of willful misconduct and awarded damages which had no basis in fact or were otherwise excessive. On 30 September 1998, the Court of Appeals promulgated its decision partially granting the appeal by deleting the award of moral and exemplary damages and reducing the attorney’s fees to P10,000; without pronouncement as to costs. Hence, the appeal. The Supreme Court denied the petition for lack of merit, and affirmed the decision of the Court of Appeals deleting, however, the award of attorney’s fees.

1. No willful misconduct to allow award of moral and exemplary damages For willful misconduct to exist there must be a showing that the acts complained of were impelled by an intention to violate the law, or were in persistent disregard of one’s rights. It must be evidenced by a flagrantly or shamefully wrong or improper conduct. There was nothing in the conduct of Northwest Airlines which showed that they were motivated by malice or bad faith in loading her baggages on another plane. Due to weight and balance restrictions, as a safety measure, the airline had to transport the baggages on a different Transportation Law, 2004 ( 532 ) Haystacks (Berne Guerrero) flight, but with the same expected date and time of arrival in the Philippines. Northwest Airlines was not guilty of willful misconduct. 2. No malice; Airline did not act in bad faith It is admitted that Northwest Airlines failed to deliver Tan’s luggages on time. However, there was no showing of malice in such failure. By its concern for safety, the airline had to ship the baggages in another flight with the same date of arrival. The Airline did not act in bad faith. Bad faith does not simply connote bad judgment or negligence, it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty through some motive or interest or ill-will that partakes of the nature of fraud.” 3. Liability arising from breach of contract of carriage, without fraud or bad faith, does not include moral and exemplary damages Where in breaching the contract of carriage the defendant airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of obligation which the parties had foreseen or could have reasonably foreseen. In that case, such liability does not include moral and exemplary damages.

5) Sarkies Tours v. Court of Appeals

FACTS: On August 31, 1984, Fatima boarded petitioners De Luxe Bus No. 5 in Manila on her way to Legazpi City. Her brother Raul helped her load three pieces of luggage containing all of her optometry review books, materials and equipment, trial lenses, trial contact lenses, passport and visa, as well as her


mother Marisols U.S. immigration (green) card, among other important documents and personal belongings. Her belongings was kept in the baggage compartment of the bus, but during a stopover at Daet, it was discovered that all but one bag remained in the open compartment. Fatima immediately reported the loss to her mother who, in turn, went to petitioners office in Legazpi City and later at its head office in Manila. The latter, however, merely offered her P1,000.00 for each piece of luggage lost, which she turned down. Marisol also reported the incident to the National Bureau of Investigations field office in Legazpi City, and to the local police. On September 20, 1984, respondents, through counsel, formally demanded satisfaction of their complaint from petitioner. In a letter dated October 1, 1984, the latter apologized for the delay and said that (a) team has been sent out to Bicol for the purpose of recovering or at least getting the full detail

1 of the incident. After more than nine months of

fruitless waiting, respondents decided to file the case below to recover the value of the remaining lost items, as well as moral and exemplary damages, attorneys fees and expenses of litigation. They claimed that the loss was due to petitioners failure to observe extraordinary diligence in the care of Fatimas luggage and that petitioner dealt with them in bad faith from the start. Petitioner, on the other hand, disowned any liability for the loss on the ground that Fatima allegedly did not declare any excess baggage upon boarding its bus. LOWER COURT’S RULING: court a quo adjudged the case in favor of herein respondents, ordering inter alia to pay to the former sum of P30,000.00 equivalent to the value of the personal belongings of plaintiff etc. less the value of one luggage recovered to be paid by defendant Sarkies Tours Philippines, Inc. to the plaintiffs within 30 days from receipt of the Decision. On appeal, the appellate court affirmed the trial courts judgment, but deleted the award of moral and exemplary damages. ISSUE: Is the Petitioner Company not liable for damages against the baggage lost by private respondents? HELD: NO. In its letter dated October 1, 1984, petitioner tacitly admitted its liability by apologizing to respondents and assuring them that efforts were being made to recover the lost items. The records also reveal that respondents went to great lengths just to salvage their loss. The incident was reported to the police, the

NBI, and the regional and head offices of petitioner. Private respondent even sought the assistance of Philtranco bus drivers and the radio stations. To expedite the replacement of her mothers lost U.S. immigration documents, Fatima also had to execute an affidavit of loss. Clearly, they would not have gone through all that trouble in pursuit of a fancied loss. The cause of the loss in the case at bar was petitioners negligence in not ensuring that the doors of the baggage compartment of its bus were securely fastened. As a result of this lack of care, almost all of the luggage was lost, to the prejudice of the paying passengers. Petition dismissed. DOCTRINE: Where the common carrier accepted its passengers baggage for transportation and even had it placed in the vehicle by its own employee, its failure to collect the freight charge is the common carriers own lookout.

2.2 Obligation of the Shipper, Consignee and Passenger

2.2.1 Negligence of Shipper or Passenger

(a) Last Clear Chance

1) Philippine Rabbit v. IAC

PARTIES: Catalina Pascua, Caridad Pascua, Adelaida Estomo, Erlinda Meriales, Mercedes Lorenzo, Alejandro Morales and Zenaida Parejas – Jeepney Passengers Isidro Mangune and Guillerma Carreon – Jeepney Owner Tranquilino Manalo – Jeepney Driver Filriters Guaranty Assurance Corporation, Inc. – Jeepney Insurer Philippine Rabbit Bus Lines, Inc. – Bus Owner Tomas delos Reyes – Bus Driver FACTS: About 11:00 A. M., Catalina Pascua, Caridad Pascua, Adelaida Estomo, Erlinda Meriales, Mercedes Lorenzo, Alejandro Morales and Zenaida Parejas boarded the jeepney owned by spouses Isidro Mangune and Guillerma Carreon and driven by Tranquilino Manalo at Dau, Mabalacat, Pampanga bound for Carmen, Rosales, Pangasinan to spend Christmas at their respective homes paying Manalo P24.00 for the trip. Although they usually ride in buses, they had to ride in a jeepney that day because the buses were full. The passengers’ testimonial evidence on this contractual relationship was not controverted

http://www.chanrobles.com/scdecisions/jurisprudence1997/oct1997/108897.php#_edn1


by Mangune, Carreon and Manalo, nor by Filriters Guaranty Assurance Corporation, Inc., the insurer of the jeepney, with contrary evidence. Mangune jeepney was "running fast" that its passengers cautioned driver Manalo to slow down but did not heed the warning. Upon reaching barrio Sinayoan, San Manuel, Tarlac, the right rear wheel of the jeepney was detached causing the jeepney to run to the eastern shoulder of the road then back to the concrete pavement, running in an unbalanced position. Manalo applied the brakes after which the jeepney made a U-turn (half-turn) in such a manner that it inverted its direction making it face South (from where it came) instead of north (towards where it was going). The jeepney practically occupied and blocked the greater portion of the western lane, which is the right of way of Bus No. 753 of Philippine Rabbit Bus Lines, Inc. driven by Tomas delos Reyes, which bumped from behind the right rear portion of the jeepney. As a result of the collision, three passengers of the jeepney (Catalina Pascua, Erlinda Meriales and Adelaida Estomo) died while the other jeepney passengers sustained physical injuries. At the time and in the vicinity of the accident, the weather condition was fair and there were no vehicles following the jeepney (running more or less 50kph), neither were there oncoming vehicles, except the bus (running 80 to 90kph). After investigation, the police filed with the Municipal Court of San Manuel, Tarlac a criminal complaint against the two drivers for Multiple Homicide. At the preliminary investigation, a probable cause was found with respect to the case of Manalo, thus, his case was elevated to the CFI. However, finding no sufficiency of evidence as regards the case of delos Reyes, the Court dismissed it. Manalo was convicted and sentenced to suffer imprisonment. Not having appealed, he served his sentence. CFI RULING: Trial court found jeepney driver Manalo negligent. Hence, Isidro Mangune, Guillerma Carreon and Tranquilino Manalo thru their negligence were found in breach of their contract of carriage with their passengers and/or their heirs, and were ordered, jointly and severally, to pay the plaintiffs for indemnity and damages, and cross-claimant Phil. Rabbit Bus Lines, Inc. actual damages for loss of its earning. IAC RULING: IAC; applying primarily (1) the doctrine of last clear chance, (2) the presumption that drivers who bump the rear of another vehicle guilty and the cause

of the accident unless contradicted by other evidence, and (3) the substantial factor test; reversed the CFI decision and found bus driver delos Reyes negligent and ordered the Philippine Rabbit Bus Lines, Inc. and its driver to pay the jointly and severally damages in amounts awarded for the death of Catalina Pascua, Florida Sarmiento Estomo and Erlinda Arcega Meriales, the parents and/or heirs and for the physical injuries suffered by Caridad Pascua. ISSUE: Who is liable for the death and physical injuries suffered by the passengers of the jeepney? HELD: The jeepney. The IAC was not able to properly appreciate the evidence and misapplied the laws that warrant a reversal of the decision.

The doctrine of last clear chance is applicable in a suit between the owners and drivers of the two colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations. For it would be inequitable to exempt the negligent driver of the jeepney and its owners on the ground that the other driver was likewise guilty of negligence. On the presumption of guilt on one who bumps the rear end of another vehicle, the spirit behind it is for the driver following a vehicle to be at all times prepared of a pending accident, giving the rear vehicle the responsibility of avoiding a collision with the front vehicle for it is the rear vehicle who has full control of the situation as it is in a position to observe the vehicle in front of it. Said presumption is not applicable in this case present contradictory evidence, the undisputed fact that the U-turn made by the jeepney was abrupt which bus driver delos Reyes could not have anticipated. Under the substantial factor test, the rule is that if the actor's conduct is a substantial factor in bringing about harm to another, the fact that the actor neither foresaw nor should have foreseen the extent of the harm or the manner in which it occurred does not prevent him from being liable. The SC was not convinced in applying the rule. The Court held that it cannot fault delos Reyes for not having avoided the collision because of the sudden U-turn of the jeepney, having little time to react to the situation. Aside from the time element involved, there were no options available to him. Evidence clearly showed that bus driver de los Reyes veered his Rabbit bus to its right (western lane) in an attempt to avoid hitting the


Mangune's jeepney but was unsuccessful due to limitations of space and time. And the alternative of swerving to its left (eastern lane), run a greater risk of running smack in the Mangune jeepney either head on or broadside considering the time element involved, for moments before that, the Mangune jeepney was crossing that very eastern lane at a sharp angle. After a minute scrutiny of the factual matters and duly proven evidence, the Court found that the proximate cause of the accident was the negligence of Manalo and spouses Mangune and Carreon. They all failed to exercise the precautions that are needed precisely pro hac vice. In culpa contractual, the moment a passenger dies or is injured, the carrier is presumed to have been at fault or to have acted negligently, and this disputable presumption may only be overcome by evidence that he had observed extra-ordinary diligence as prescribed in Articles 1733, 1755 and 1756 of the NCC or that the death or injury of the passenger was due to a fortuitous event. The negligence of Manalo was proven and in an action for damages against the carrier for his failure to safely carry his passenger to his destination, an accident caused either by defects in the automobile or through the negligence of its driver, is not a caso fortuito, which would avoid the carriers’ liability for damages. The trial court was therefore right in finding that Manalo and spouses Mangune and Carreon were negligent. However, the driver cannot be held jointly and severally liable with the carrier in case of breach of the contract of carriage, since a contract of carriage is between the carrier and the passenger, and in the event of contractual liability, the carrier is exclusively responsible therefore to the passenger, even if such breach be due to the negligence of his driver. In other words, the carrier can neither shift his liability on the contract to his driver nor share it with him, for his driver's negligence is his. Also in making the driver jointly and severally liable with the carrier, that would make the carrier's liability personal instead of merely vicarious and consequently, entitled to recover only the share which corresponds to the driver.

2) Bustamante v. Court of Appeals

(b) Assumption of Risk

1) Japan Airlines v. Court of Appeals

2) Calalas v. Court of Appeals

3) PNR v. Court of Appeals

4) Isaac v. Al Ammen Tranportation Co.

2.2.2 Freight

2.2.3 Demurrage

CHAPTER 3: Extraordinary Diligence

3.1 Rationale

3.2 How Duty is Complied With

3.3 Effect of Stipulation

(a) Goods

(b) Passengers

(1) Gratuitous Passengers

1) Lara v. Valencia

Parties:

Demetrio Lara, Jr

Lourdes Lara

Brigido

Facts:

Demetrio was an inspector of the Bureau of Forestry stationed in Davao, Valencia is engaged in the business of exporting logs from his lumber concession in Cotabato. Lara went to the said concession upon instructions of his chief to classify the logs of defendant. During the work, which lasted for six days, he contracted malaria fever. Lara then asked defendant if he could take him in his pick-up as there was then no other means of transportation, to which defendant agreed, and in the same morning left from Parang to Davao.

Before leaving Parang, defendant invited Lara to sit beside him in the front seat but Lara declined. It was their understand that upon reaching Cotabato, the passengers were to alight and take a bus bound for Davao. Upon arrival however, almost all the passengers requested that they ride with him up to


Davao. During the trip, Lara accidentally fell from the pick-up and as a result suffered serious injuries. Valencia stopped and brought Lara to the nearest place where they could find a doctor, not being able to find one, they transferred him to another clinic but was already dead when they arrived.

Issue:

Is the defendant liable for the death of Lara despite the latter being in a sick condition when he met the accident and despite the fact that the defendant merely accommodated them?

Trial Court:

The defendant is liable for the death of Lara, for having failed to exercise the ordinary diligence in transporting Lara from Parang to Davao.

Held:

The facts are not sufficient to show defendant has failed to take precaution necessary to conduct his passenger safely to their place of destination. It should be noted that Lara has contracted malaria in the course of the performance of his duty. The defendant was also not duty bound to take the deceased to Davao. Such accommodation was made because of his feverish condition and upon his request their respective seats were also their own choice. The deceased desired to seat at the back and travel in a reclining position.

The unfortunate happening was due to an unforeseen accident occurred by the fact that at the time the deceased was half-asleep and must have fallen from the pick-up when it ran into some stones.

3.4 Extraordinary Diligence in Carriage by Sea

3.4.1 Seaworthiness

1) Delsan Transport v. Court of Appeals

2) Caltex v. Sulpicio Lines

PARTIES: Caltex- charterer; Vector Shipping Corporation- owner and actual operator of MT Vector; Sulpicio Lines- owner of MV Doña Paz FACTS: On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to Masbate, loaded with 8,800 barrels of petroleum products shipped by petitioner Caltex. MT Vector is a tramping motor tanker owned and operated by Vector Shipping Corporation, engaged in the business of transporting fuel products suchs as gasoline, kerosene, diesel and crude oil. On December 20, 1987 at about 6:30 a.m., the passenger ship MV Doña Paz left the port of Tacloban heade for Manila with a comlement of 59 crew members including the master and his officers, and passengers totaling 1, 493 as indicated in the Coast Guard Clearance. The MV Doña Paz is a passnger and cargo vessel owned and operated by Sulpicio Lines. At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea within the vicinity of Dumali point between Marinduque and Oriental Mindoro. All the crewmembers of MV Doña Paz died while the two survivors from MT Vector claimed that they were sleeping at the time of the incident. Only 24 passengers of the MV Doña Paz survived the tragedy. Among those who perished were public school teacher Sebastian Cañezal (47 years old) and his daughter Corazon Cañezal (11 years old). Teresita Cañezal and Sotera E. Cañezal, Sebastian's wife and mother filed with the RTC Branch 8 of Manila a complaint against Sulpicio Lines. Sulpicio, in turn, filed a third party complaint against Francisco Soriano, Vector shipping Corporation and Caltex. LOWER COURT RULING: On September 15, 1992, the trial court rendered decision dismissing, the third party complaint against petitioner. ISSUE: WON Caltex, a charterer of a sea vessel, liable for damages resulting from a collision between the chartered vessel and passenger ship. HELD: Petitioner and Vector entered into a contract of affreightment also known as a voyage charter.

A charter party is a contract by which an entire sip or some principal part thereof, is let by the owner to another person for a specified time or use;

a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of good, on a


particular voyage, in consideration of the payment of freight. A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage.

Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence.

If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship. Although a charter party may transform a common carrier into a private one, the same however is not true in a contract of affreightment. A common carrier is a person or corporation whose regular business is to carry passengers or property for all persons who may choose to employ and to remunerate him. MT Vector fits the definition of a common carrier under Article 1732 of the Civil Code.

Under the Carriage of Goods by Sea Act :

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to —

(a) Make the ship seaworthy;

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

Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code. Because of the implied warranty of seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire into the vessels's seaworthiness, genuineness of its licenses and

compliance with all maritime laws. Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years before the tragic incident occurred in 1987. Past services rendered showed no reason for Caltex to observe a higher degree of diligence. Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was convinced of its seaworthiness. All things considered, we find no legal basis to hold petitioner liable for damages.

3.4.2 Overloading

1) Negros Navigation v. Court of Appeals

FACTS:

In April of 1980, private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four special cabin tickets (#74411, 74412, 74413 and 74414) for his wife, daughter, son and niece who were going to Bacolod City to attend a family reunion. The tickets were for Voyage No. 457-A of the M/V Don Juan, leaving Manila at 1:00 p.m. on April 22, 1980.

The ship sailed from the port of Manila on schedule.

At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned by the Philippine National Oil Company (PNOC) and the PNOC Shipping and Transport Corporation (PNOC/STC). As a result, the M/V Don Juan sank. Several of her passengers perished in the sea tragedy. The bodies of some of the victims were found and brought to shore, but the four members of private respondents’ families were never found.

Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of Manila, Branch 34, against the Negros Navigation, the Philippine National Oil Company (PNOC), and the PNOC Shipping and Transport Corporation (PNOC/STC), seeking damages for the death of Ardita de la Victoria Miranda, 48, Rosario V. Miranda, 19, Ramon V. Miranda, Jr., 16, and Elfreda de la Victoria, 26.

ISSUE:

Is Negros Navigation liable for the death of the relatives of Ramon Miranda?


HELD:

Yes.

In finding petitioner guilty of negligence and in failing to exercise the extraordinary diligence required of it in the carriage of passengers, both the trial court and the appellate court relied on the findings of this Court in Mecenas v. Intermediate Appellate Court, which case was brought for the death of other passengers. In that case it was found that although the proximate cause of the mishap was the negligence of the crew of the M/T Tacloban City, the crew of the M/V Don Juan failed to take steps to prevent the collision or at least delay the sinking of the ship and supervise the abandoning of the ship.

Petitioner Negros Navigation was found equally negligent in tolerating the playing of mahjong by the ship captain and other crew members while on board the ship and failing to keep the M/V Don Juan seaworthy so much so that the ship sank within 10 to 15 minutes of its impact with the M/T Tacloban City.

In addition, the Court found that the Don Juan was overloaded. The Certificate of Inspection, dated August 27, 1979, issued by the Philippine Coast Guard Commander at Iloilo City stated that the total number of persons allowed on the ship was 864, of whom 810 are passengers, but there were actually 1,004 on board the vessel when it sank, 140 persons more than the maximum number that could be safely carried by it.

Taking these circumstances together, and the fact that the M/V Don Juan, as the faster and better-equipped vessel, could have avoided a collision with the PNOC tanker, this Court held that even if the Tacloban City had been at fault for failing to observe an internationally-recognized rule of navigation, the Don Juan was guilty of contributory negligence.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification and petitioner is ORDERED to pay private respondents damages.

SO ORDERED.

3.4.3 Proper Storage

1) Belgian Overseas Chartering v. Phil First Insurance Co., supra


PETITIONER: Owner of M/V Anangel Sky, vessel tasked to deliver Prime Cold Rolled Steel sheets PRIVATE RESPONDENT: Insurer of said cargo

FACTS: CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss. Despite receipt of a formal demand, defendants-appellees refused to submit to the consignee's claim. Consequently, plaintiff-appellant paid the consignee P506,086.50, and was subrogated to the latter's rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to the consignee as insured. Impugning the propriety of the suit against them, defendants-appellees averred that, inter alia, in any event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment, and that their liability, if there be any, should not exceed the limitations of liability provided for in the bill of lading and other pertinent laws.

LOWER COURT’S RULING: The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof required by law. However, it was subsequently reversed by the Appellate Court. CA ruled that petitioners were liable for the loss or the damage of the goods shipped, because they had failed to overcome the presumption of negligence imposed on common carriers. Hence, this petition.

ISSUE: Whether petitioners have overcome the presumption of negligence of a common carrier.

HELD: NO. Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport. This strict requirement is justified by the fact that, without a hand or a voice in the


preparation of such contract, the riding public enters into a contract of transportation with common carriers. Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. In the present case, Petitioners failed to prove that they observed the extraordinary diligence and precaution which the law requires a common carrier to know and to follow to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery. First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg, Germany. Second, prior to the unloading of the cargo, an Inspection Report prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and rusty. Third, Bad Order Tally Sheet No. 154979 issued by Jardine Davies Transport Services, Inc. (the other petitioner), stated that the four coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss or damage. Fourth, the Certificate of Analysis stated that, based on the sample submitted and tested, the steel sheets found in bad order were wet with fresh water. Fifth, petitioners -- in a letter addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted that they were aware of the condition of the four coils found in bad order and condition.

DOCTRINE: Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held responsible.

3.4.4 Negligence of Captain and Crew

1) Mecenas v. Court of Appeals

Facts:

M/T "Tacloban City," a barge-type oil tanker owned by the Philippine National Oil Company (PNOC) and operated by the PNOC Shipping and Transport Corporation (PNOC Shipping), having unloaded its cargo, left for Negros Occidental when it collided with a carrier ship named Don Juan. When the collision

occurred, the sea was calm, the weather fair and visibility good. As a result of this collision, the M/V "Don Juan" sank and hundreds of its passengers perished. Among the ill-fated passengers were the parents of petitioners, the spouses Perfecto Mecenas and Sofia Mecenas, whose bodies were never found despite intensive search by petitioners.

Issue: Whether or not the respondents were negligent?

Held:

Yes, the behaviour of the captain of the "Don Juan" in tills instance-playing mahjong "before and up to the time of collision constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and welfare of at least seven hundred fifty (750) passengers had been entrusted. Whether or not Capt. Santisteban was "off-duty" or "on-duty" at or around the time of actual collision is quite immaterial; there is, both realistically speaking and in contemplation of law, no such thing as "off-duty" hours for the master of a vessel at sea that is a common carrier upon whom the law imposes the duty of extraordinary diligence.

The record shows that the "Don Juan" sank within ten (10) to fifteen (15) minutes after initial contact with the "Tacloban City. While the failure of Capt. Santisteban to supervise his officers and crew in the process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking of his vessel after collision, did not cause the collision by themselves, such failures doubtless contributed materially to the consequent loss of life and, moreover, were indicative of the kind and level of diligence exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to actual contact between the two (2) vessels. The officer-on-watch in the "Don Juan" admitted that he had failed to inform Capt. Santisteban not only of the "imminent danger of collision" but even of "the actual collision itself " There is also evidence that the "Don Juan" was carrying more passengers than she had been certified as allowed to carry.

Under these circumstances, a presumption of gross negligence on the part of the vessel (her officers and crew) and of its ship-owner arises.

3.4.5 Deviation and Transhipment

3.5 Extraordinary Diligence in Carriage by Land


3.5.1 Condition of Vehicle

1) Bayasen v. Court of Appeals

FACTS: Bayasen was the rural health physician in Sagada, Mt. Province. He went to barrio Ambasing to visit a patient, whiletwo nurses, Awichen and Balcita, upon their request rode with him. The jeep went over a precipice about 8 feet below the road, it was blocked by a pine tree. The three were thrown out of the jeep. Elena was found lying in acreek further below. Among other injuries, she suffered a skull fracture which caused her death. Bayasen wascharged with Homicide thru Reckless Imprudence. He was found guilty by the trial court and the CA. The CA saidhe was driving at an unreasonable speed. ISSUE:Whether or not petitioner was negligent in driving at an unreasonable speed. HELD: NO. A careful examination of 'he evidence introduced by the prosecution shows no "legally sufficient" proof that the accused was negligent in driving his jeep. The star witness of the prosecution, Dolores Balcita who was oneof the passengers in the jeep, testified that the accused-petitioner, Saturnino Bayasen was driving his jeepmoderately just before the accident and categorically stated that she did not know what caused the jeep to fall intothe precipice.When asked whether the jeep hit anything before it fell into the precipice, the witness answered that she did not feelany bump or jolt. Her testimony on this point reads. It is clear from the last part of the testimony of the witness, thatthere was no conversation between the passengers in the jeep that could have distracted the attention of the accusedwhile driving the jeep. As to the condition of the jeep itself, the same witness testified that she "did not noticeanything wrong" with it from the time they drove from Sagada to Ambasing, and from there to the place where the jeep fell off the road. Regarding the road, she said that it was fair enough to drive on, but that it was moist or wet,and the weather was fair, too. As to whether the accused-petitioner was under the influence of liquor at the time of the accident, she testified that he was not. In the light of the testimony of Dolores Balcita, the eyewitness of theaccident presented by the prosecution, there is absolutely no evidence on record to show that the accused wasnegligent in driving his jeep.The petitioner testified that before reaching the portion of the road where the jeep fell he noticed that

the rear wheelskidded, while driving from 8 to 10 kilometers per hour; that as a precautionary measure, he directed the jeeptowards the side of mountain, along the side of the mountain, but not touching the mountain; that while doing so,the late Elena Awichen suddenly held the steering wheel and he felt that her foot stepped on his right foot which was pressed then on the accelerator; and that immediately after, the jeep suddenly swerved to the right and went off.From the testimony of Dolores Balcita, it is apparent that she "did not see" what Elena Awichen suddenly did, andshe "did not feel any movement from (her) side". These answers of Dolores Balcita are all in the negative andequivocal. They do not deny or preclude the truth of the positive testimony of the accused. As held by this Court:The testimony of a credible witness that he saw or heard at a particular time and place is morereliable than that of an equally credible witness who with the same opportunities, testified that hedid not see or hear the same thing at the same time and place.Hence as to the relative weight to be given to the positive and consistent testimony of the accused and to thenegative and equivocal answers of Dolores Balcita, the former is more worthy of credence . Then mayor of Sagada also who found the jeep at second gear when he examined it not long after the incident. Suchfact shows that the accused-petitioner could not have been driving the jeep at a fast rate of speed.It is obvious that the proximate cause of the tragedy was the skidding of the rear wheels of the jeep and not the"unreasonable speed" of the petitioner because there is no evidence on record to prove or support the finding that the petitioner was driving at "an unreasonable speed". It is a well known physical tact that cars may skid on greasy or slippery roads, as in the instant case, without fault on account of the manner of handling the car. Skidding means partial or complete loss of control of the car under circumstances not necessarily implying negligence. It may occur without fault. No negligence as a matter of law can, therefore, be charged to the petitioner. In fact, the moment he felt that the rear wheels of the jeep skidded, he promptly drove it to the left hand side of the road, parallel to the slope of themountain, because as he said, he wanted to play safe and avoid the embankment.Under the particular circumstances of the instant case, the petitioner- driver who skidded could not be regarded asnegligent, the skidding being an unforeseen event, so that the petitioner had a valid excuse for his departure from hisregular course. The negligence of the petitioner not having been sufficiently established, his guilt of the crimecharged


has not been proven beyond reasonable doubt. He is, therefore,

3.5.2 Traffic Rules

1) Mallari v. Court of Appeals

Facts: On 14 October 1987, at about 5:00 o'clock in the morning, the passenger jeepney driven by petitioner Alfredo Mallari Jr. and owned by his co-petitioner Alfredo Mallari Sr. collided with the delivery van of respondent Bulletin Publishing Corp. (BULLETIN, for brevity) along the National Highway in Barangay San Pablo, Dinalupihan, Bataan. Petitioner Mallari Jr. testified that he went to the left lane of the highway and overtook a Fiera which had stopped on the right lane. Before he passed by the Fiera, he saw the van of respondent BULLETIN coming from the opposite direction. The sketch of the accident showed that the collision occurred after Mallari Jr. overtook the Fiera while negotiating a curve in the highway. The impact caused the jeepney to turn around and fall on its left side resulting in injuries to its passengers one of whom was Israel Reyes who eventually died due to the gravity of his injuries.

Lower Court Ruling: The trial court found that the proximate cause of the collision was the negligence of Felix Angeles, driver of the Bulletin delivery van, considering the fact that the left front portion of the delivery truck driven by Felix Angeles hit and bumped the left rear portion of the passenger jeepney driven by Alfredo Mallari Jr.

Issue: Whether or not the Court of Appeals erred in finding that the collision was caused by the sole negligence of petitioner Mallari, Jr.

Ruling: Petitioner Mallari Jr. overtook a vehicle in front of it while traversing a curve on the highway. This act of overtaking was in clear violation of Sec. 41, pars. (a) and (b), of RA 4136 as amended, otherwise known as The Land Transportation and Traffic Code which provides:

Sec. 41. Restrictions on overtaking and passing. — (a) The driver of a vehicle shall not drive to the left side of the center line of a highway in overtaking or passing another vehicle proceeding in the same direction, unless such left side is clearly visible and is free of oncoming traffic for a sufficient

distance ahead to permit such overtaking or passing to be made in safety.

(b) The driver of a vehicle shall not overtake or pass another vehicle proceeding in the same direction when approaching the crest of a grade, nor upon a curve in the highway, where the driver's view along the highway is obstructed within a distance of five hundred feet ahead except on a highway having two or more lanes for movement of traffic in one direction where the driver of a vehicle may overtake or pass another vehicle: Provided That on a highway, within a business or residential district, having two or more lanes for movement of traffic in one direction, the driver of a vehicle may overtake or pass another vehicle on the right.

Clearly, the proximate cause of the collision resulting in the death of Israel Reyes, a passenger of the jeepney, was the sole negligence of the driver of the passenger jeepney, petitioner Alfredo Mallari Jr., who recklessly operated and drove his jeepney in a lane where overtaking was not allowed by traffic rules. Under Art. 2185 of the Civil Code, unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the time of the mishap he was violating a traffic regulation.

2) Pestano v. Sumayang

3.5.3 Duty to Inspect

1) Nocum v. Laguna Tayabas Bus Co v. Court of Appeals

Facts: Herminio L. Nocum, a passenger in Laguna Tayabas Bus Co.’s Bus 120, which was then making a trip within the barrio of Dita, Municipality of Bay, Laguna, was injured as a consequence of the explosion of firecrackers, contained in a box, loaded in said bus and declared to its conductor as containing clothes and miscellaneous items by a co-passenger. Nocum filed a case against Laguna Tayabas Bus for damages. The CFI of Batangas (Civil Case 834) sentenced Laguna Tayabas to pay Nocum the sum of P1,351.00 for actual damages and P500.00 as attorney’s fees, with legal interest from the filing of the complaint plus costs. Laguna Tayabas appealed. The Supreme Court reversed the appealed judgment of the trial court, and dismissed the case, without costs.


1. Article 1733 NCC Article 1733 of the Civil Code provides that “Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756. 2. Article 1755 NCC Article 1755 of the Civil Code provides that “A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. 3. Article 1756 NCC Article 1756 of the Civil Code provides that “In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.” 4. Article 1733 NCC not too exacting; Carrier not mandated to require opening of baggage Before the box containing the firecrackers were allowed to be loaded in the bus by the conductor, inquiry was made with the passenger carrying the same as to what was in it, since its “opening was folded and tied with abaca.” According to the judge of the lower court, “if proper and rigid inspection were observed by the defendant, the contents of the box could have been discovered and the accident avoided. Refusal by the passenger to have the package opened was no excuse because, as stated by Dispatcher Cornista, employees should call the police if there were packages containing articles against company regulations.” Even it that may be true, the law does not require as much. Article 1733 is not as unbending, for it reasonably qualifies the extraordinary diligence required of common carriers for the safety of the passengers transported by them to be “according to all the circumstances of each case.” “In fact, Article 1755 repeats this same qualification: “A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost

diligence of very cautious persons, with due regard for all the circumstances.” 5. Passengers presumed that a passenger that will not take with him anything dangerous While it is true the passengers of Laguna Tayabas’ bus should not be made to suffer for something over which they had no control, fairness demands that in measuring a common carrier’s duty towards its passengers, allowance must be given to the reliance that should be reposed on the sense of responsibility of all the passengers in regard to their common safety. It is to be presumed that a passenger will not take with him anything dangerous to the lives and limbs of his co-passengers, not to speak of his own. 6. Right to privacy Not to be lightly considered be the right to privacy to which each passenger is entitled. He cannot be subjected to any unusual search, when he protests the innocuousness of his baggage and nothing appears to indicate the contrary, as in the case at bar. In other words, inquiry may be verbally made as to the nature of a passenger’s baggage when such is not outwardly perceptible, but beyond this, constitutional boundaries are already in danger of being transgressed. Calling a policeman to his aid in compelling the passenger to submit to more rigid inspection, after the passenger had already declared that the box contained mere clothes and other miscellanies, could not have justified invasion of a constitutionally protected domain. Police officers acting without judicial authority secured in the manner provided by law are not beyond the pale of constitutional inhibitions designed to protect individual human rights and liberties. Withal, what must be importantly considered is not so much the infringement of the fundamental sacred rights of the particular passenger involved, but the constant threat any contrary ruling would pose on the right of privacy of all passengers of all common carriers, considering how easily the duty to inspect can be made an excuse for mischief and abuse. 7. Proper understanding of the service manual issued by Laguna Tayabas When there are sufficient indications that the representations of the passenger regarding the nature of his baggage may not be true, in the interest of the common safety of all, the assistance of the police authorities may be solicited, not necessarily to force the passenger to open his baggage, but to conduct the needed investigation consistent with the rules of


propriety and, above all, the constitutional rights of the passenger. It is in this sense that the service manual issued by Laguna Tayabas Bus Co. to its conductors must be understood.

3.6 Extraaordinary Diligence in Carriage by Air

1) Korean Airlines v. Court of Appeals

FACTS: Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted for employment in Jeddah, Saudi Arabia, for a period of one year through Pan Pacific Overseas Recruiting Services, Inc. Lapuz was supposed to leave on November 8, 1980, via Korean Airlines. Initially, he was "wait-listed," which meant that he could only be accommodated if any of the confirmed passengers failed to show up at the airport before departure. When two of such passengers did not appear, Lapuz and another person by the name of Perico were given the two unclaimed seats. According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the check-in counter of KAL. He passed through the customs and immigration sections for routine check-up and was cleared for departure as Passenger No. 157 of KAL Flight No. KE 903. Together with the other passengers, he rode in the shuttle bus and proceeded to the ramp of the KAL aircraft for boarding. However, when he was at the third or fourth rung of the stairs, a KAL officer pointed to him and shouted "Down! Down!" He was thus barred from taking the flight. When he later asked for another booking, his ticket was canceled by KAL. Consequently, he was unable to report for his work in Saudi Arabia within the stipulated 2-week period and so lost his employment. ISSUE: Whether or not KAL is liable for damages HELD: Yes. The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name was entered in the passenger manifest of KAL for its Flight No. KE 903. His clearance through immigration and customs clearly shows that he had indeed been confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the contract of carriage between them when it failed to bring Lapuz to his destination. This Court has held that a contract to transport passengers is different in kind and degree from any other contractual relation.

3 The business of

the carrier is mainly with the traveling public. It invites people to avail themselves of the comforts and advantages it offers. The contract of air carriage generates a relation attended with a public duty. Passengers have the right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses from such employees.

4 So it is

that any discourteous conduct on the part of these employees toward a passenger gives the latter an action for damages against the carrier. The breach of contract was aggravated in this case when, instead of courteously informing Lapuz of his being a "wait-listed" passenger, a KAL officer rudely shouted "Down! Down!" while pointing at him, thus causing him embarrassment and public humiliation. WHEREFORE, the appealed judgment is AFFIRMED, but with the modification that the legal interest on the damages awarded to private respondent should commence from the date of the decision of the trial court on November 14, 1990. The parties shall bear their own costs.

2) PAL v. Court of Appeals

3) Zalamea v. Court of Appeals

Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and their daughter, Liana Zalamea, purchased 3 airline tickets from the Manila agent of respondent TransWorld Airlines, Inc. for a flight from New York to Los Angeles on June 6, 1984. The tickets of petitioners-spouses were purchased at a discount of 75% while that of their daughter was a full fare ticket. All three tickets represented confirmed reservations.

While in New York, on June 4, 1984, petitioners received notice of the reconfirmation of their reservations for said flight. On the appointed date, however, petitioners checked in at 10:00 a.m., an hour earlier than the scheduled flight at 11:00 a.m. but were placed on the wait-list because the number of passengers who had checked in before them had already taken all the seats available on the flight. Liana Zalamea appeared as the No. 13 on the wait-list while the two other Zalameas were listed as "No. 34. Out of the 42 names on the wait list, the first 22 names were eventually allowed to board the flight to Los Angeles,


including petitioner Cesar Zalamea. The two others being ranked lower than 22, were not able to fly.

As it were, those holding full-fare tickets were given first priority among the wait-listed passengers. Mr. Zalamea, who was holding the full-fare ticket of his daughter, was allowed to board the plane; while his wife and daughter, who presented the discounted tickets were denied boarding. According to Mr. Zalamea, it was only later when he discovered the he was holding his daughter's full-fare ticket.

Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter, could not be accommodated because it was also fully booked. Thus, they were constrained to book in another flight and purchased two tickets from American Airlines at a cost of Nine Hundred Eighteen ($918.00) Dollars. Upon their arrival in the Philippines, petitioners filed an action for damages based on breach of contract of air carriage before the Regional Trial Court of Makati, Metro Manila, Branch 145.

Issue: WON Transworld is liable for damages?

TC: Transworld is liable for reimbursement of the price of the new and original tickets, attorney’s fees and moral and exemplary damages.

CA: Transworld is liable for reimbursement and attorney’s fees only. There should be no moral and exemplary damages since it is a matter of record that overbooking of flights is a common and accepted practice of airlines in the United States and is specifically allowed under the Code of Federal Regulations by the Civil Aeronautics Board. Thus, no fraud nor bad faith could be imputed on respondent TransWorld Airlines.

SC: Transworld is liable for reimbursement for the new tickets, attorney’s fees and moral and exemplary damages. That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to board their flight for Los Angeles in spite of confirmed tickets cannot be disputed. The U.S. law or

regulation allegedly authorizing overbooking has never been proved.

Even if the claimed U.S. Code of Federal Regulations does exist, the same is not applicable to the case at bar in accordance with the principle of lex loci contractus which require that the law of the place where the airline ticket was issued should be applied by the court where the passengers are residents and nationals of the forum and the ticket is issued in such State by the defendant airline.

Since the tickets were sold and

issued in the Philippines, the applicable law in this case would be Philippine law.

Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the passengers concerned to an award of moral damages.

When an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage. Where an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their seats in case all of them would show up for the check in. For the indignity and inconvenience of being refused a confirmed seat on the last minute, said passenger is entitled to an award of moral damages. A contract to transport passengers is quite different in kind and degree from any other contractual relation. This is so, for a contract of carriage generates a relation attended with public duty — a duty to provide public service and convenience to its passengers which must be paramount to self-interest or enrichment.

CHAPTER 4: BILL of LADING and OTHER FORMALITIES

4.1 Concepts


(a) Definition

1) Macondray and Co Inc v. Acting Commissioner of Customs

FACTS: On November 2, 1962, the vessel S/S “TAI

PING”, of which petitioner is the local agent, arrived at the port of Manila from San Francisco, California, U.S.A., conveying various shipments of merchandise, among which was a shipment of one (1) coil carbon steel, one (1 bundle carbon steel flat and one (1) carbon containing carbon tool holders carbide cutters, ground, all of which appeared in the Bill of Lading No. 22, consigned to Bogo Medellin Millings Co., Inc. The shipment, except the one (1) coil carbon steel was not reflected in the Inward Cargo Manifest as required by Section 1005 in relation to Section 2521 of the Tariff and Custom Code of the Philippines. Allied Brokerage Corporation, acting for and in behalf of Bogo Medellin Milling Co. requested petitioner Macondray & Co., agent of the vessel S/S “TAI PING”, to correct the manifest of the steamer so that it may take delivery of the goods at Customs House. Collector of Custom required petitioner to explain and show cause why no administrative fine should be imposed upon said vessel. The fine of ₱ 1,000.00 was paid by petitioner under protest. Hearing of the protest proceeded thereafter. Collector of Customs of the Port of Manila ordered the dismissal of said protest for lack of merit. On appeal to the Commissioner of Customs the latter sustained the Collector of Customs. Petitioner filed a petition for review with the Court of Tax Appeals. The CTA affirmed the decision of the Collector of Customs as affirmed by the Commissioner of Customs. ISSUE: Whether or not the Collector of Customs erred in imposing a fine on vessel, S/S TAI PING, for alleged violation of Section 1005 in relation to Section 2521 of the Tariff and Customs Code for landing unmanifested cargo at the port of Manila. HELD: The inclusion of the unmanifested cargoes in the Bill of Lading does not satisfy the requirement of the aforequoted sections of the Tariff and Customs Code. It is to be noted that nowhere in the said sections is the presentation of a Bill of Lading required required, but only the presentation of a Manifest containing a true and accurate description of the cargoes. This is for the simple reason that while a

manifest is a declaration of the entire cargo, a bill of lading is but a declaration of a specific part of the cargo and is a matter of business convenience based exclusively on a contract. The Court cannot accept or place an implied imprimatur on the contention of petitioner that the entries in the bill of lading adequately supplied the deficiency of the manifest and cured its infirmity. The mandate of the law is clear and Court cannot settle for less. The law imposes the absolute obligation, under penalty for failure, upon every vessel from a foreign port to have on board complete written or typewritten manifests of all her cargo, signed by the master. Where the law requires a manifest to be kept or delivered, it is not complied with unless the manifest is true and accurate. Amendment of cargo manifest even if later approved by customs authorities does not relieve carrying vessel of liability of fine incurred prior to its correction. The philosophy and purpose behind the law authorizing amendment, under paragraph 3 of Section 1005 of the Tariff and Customs Code, is to protect innocent importers or consignees from the mistake or unlawful acts of the master. DISTINCTIONS BETWEEN A BILL OF LADING AND A CARGO MANIFEST Manifest is a declaration of the entire cargo Bill of Lading is but a declaration of a specific part of the cargo and is a matter of business convenience based exclusively on a contract. The object of a manifest is to:

- Furnish the customs officers with a list to check against;

- Inform our revenue officers what goods are being brought into the country; and

- Provide a safeguard against goods being brought into this country on a vessel and then smuggled ashore.

While a Bill of Lading is ordinarily merely a convenient commercial instrument designed to protect the importer or consignee, a manifest of the cargo is absolutely essential to the exportation or importation of property in all vessels, the evident intent and object of which is to impose upon the owners and officers of such vessel an imperative obligation to submit lists of the entire loading of the ship in the prescribed form, to facilitate the labors of the customs and immigration officers and to defeat any attempt to make use of such vessels to secure the unlawful entry of persons or things into the country.


(b) Kinds

1) Magellan Manufacturing Mktg Corp, supra

FACTS:

Choju Co., Ltd purchased from Magellan Manufacturers Marketing Corp. (MMMC) 136,000 anahaw fans for $23,220

MMMC contracted with F.E. Zuellig, a shipping agent of Orient Overseas Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of lading and that transhipment is not allowed under the letter of credit

MMMC paid F.E. Zuellig the freight charges and secured a copy of the bill of lading which was presented to Allied Bank. The bank then credited the amount of US$23,220 covered by the letter of credit to MMMC

When MMMC's President James Cu, went back to the bank later, he was informed that the payment was refused by the buying for lack of bill of lading and there was a transhipment of goods

The anahaw fans were shipped back to Manila through OOCL who are demanding from MMMC P246,043.43 (freight charges from Japan to Manila, demurrage incurred in Japan and Manila from October 22, 1980 up to May 20, 1981 and charges for stripping the container van of the Anahaw fans on May 20, 1981)

MMMC abandoned the whole cargo and asked OOCL for damages

o OOCL: bill of lading clearly shows that there will be a transhipment and that petitioner was well aware that MV (Pacific) Despatcher was only up to Hongkong where the subject cargo will be transferred to another vessel for Japan

RTC: favored OOCL: o consented because the bill of lading

where it is clearly indicated that there will be transhipment

o MMMC was the one who ordered the reshipment of the cargo from Japan to Manila

CA: Affirmed with modification of excluding demurrage in Manila

ISSUE: W/N the bill of lading which reflected the transhipment against the letter of credit is consented by MMMC HELD: YES. CA Affirmed with modification

Transhipment o act of taking cargo out of one ship

and loading it in another o the transfer of goods from the vessel

stipulated in the contract of affreightment to another vessel before the place of destination named in the contract has been reached

o transfer for further transportation from one ship or conveyance to another

the fact of transhipment is not dependent upon the ownership of the transporting ships or conveyances or in the change of carriers, as the petitioner seems to suggest, but rather on the fact of actual physical transfer of cargo from one vessel to another

appears on the face of the bill of lading the entry "Hong Kong" in the blank space labeled "Transhipment," which can only mean that transhipment actually took place

bill of lading o operates both as a receipt and as a

contract receipt for the goods

shipped contract to transport and

deliver the same as therein stipulated

names the parties, which includes the consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights and obligations assumed by the parties

law between the parties who are bound by its terms and conditions provided that these


are not contrary to law, morals, good customs, public order and public policy

GR: acceptance of the bill without dissent raises the presumption that all the terms therein were brought to the knowledge of the shipper and agreed to by him and, in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such term

There clearly appears on the face of the bill of lading under column "PORT OF TRANSHIPMENT" an entry "HONGKONG'

On board bill of lading vs. received for shipment bill of lading:

o on board bill of lading stated that the goods have

been received on board the vessel which is to carry the goods

o received for shipment bill of lading stated that the goods have

been received for shipment with or without specifying the vessel by which the goods are to be shipped

issued whenever conditions are not normal and there is insufficiency of shipping space

certification of F.E. Zuellig, Inc. cannot qualify the bill of lading, as originally issued, into an on board bill of lading as required by the terms of the letter of credit issued in favor of petitioner - it is a received for shipment bill of lading

o issued only on July 19, 1980, way beyond the expiry date of June 30, 1980 specified in the letter of credit for the presentation of an on board bill of lading

Demurrage o compensation provided for in the

contract of affreightment for the detention of the vessel beyond the time agreed on for loading and unloading

o claim for damages for failure to accept delivery

before it could be charged for demurrage charges it should have been notified of the arrival of the goods first

Since abandon option was communicated, the same is binding upon the parties on legal and equitable considerations of estoppel

4.2 Nature of Bill of Lading

4.3 When Effective

4.4 BOL as Contract

(a) Contract of Adhrsion

(b) Parol Evidence Rule

(c) BOL as Evidence

(d) BOL as Actionable Document

(e) Basic Stipulations

(f) Prohibited and Limiting Stipulations

1) Ysmael v. Barretto


JUAN YSMAEL & CO., INC.- plaintiff-appellee, domestic corporation

GABINO BARRETTO & CO., LTD., ET AL., defendants

ANDRES H. LIMGENGCO and VICENTE JAVIER, appellants

Facts :

Juan Ysmael & Co. Inc., a domestic corporation, seeks to recover from Gabino Barretto, et. al. P9,940.95, the alleged value of four cases of merchandise which it delivered to the steamship Andres on 25 October 1922, at Manila to be shipped to Surigao, but which were never delivered to Salomon Sharuff, the consignee, or returned to Juan Ysmael & Co. Juan Ysmael made its claim of loss within 7 days after receipt of information that 160 cases only were delivered. Its second claim was made on 29 December 1922, in which it said that, if the claim was not paid before 3 January 1923, it would be placed in the hands of attorneys for collection. On 3 January 1923, Gabino Barretto & Company advised Juan Ysmael that it would


not pay the claim. The original complaint was filed on 17 April 1923, or a little less than 6 months after the shipment was made, and was later amended to include Gabino Barretto and P. E. Soon as members of the limited partnership of Gabino Barretto & Co., Ltd. In their amended answers Barretto, et. al. make a specific denial of all of the material allegations of the complaint, and as a special defense allege that the four cases of merchandise in question were never delivered to them, and that under the provisions of paragraph 7 of the printed conditions appearing on the back of the bill of lading, Juan Ysmael’s right of action is barred for the reason that it was not brought within 60 days from the time the cause of action accrued.

The evidence was taken upon such issues, and the lower court rendered judgment for Juan Ysmael for the full

amount of its claim, from which Andres H. Limgengco and Vicente Javier appealed.

Issue:

Whether or not the stipulation in the bill of lading limiting the liability of defendant of not more than P300 is valid.

Held:

No, the stipulation is not valid. A common carrier cannot lawfully stipulate for exemption from liability, unless such exemption is just andreasonable and the contract is freely and fairly made.

A common carrier cannot lawfully stipulate for the exemption from liability, unless such exemption is just and reasonable. The carrier cannot limit its liability for injury to or loss of goods shipped if such was caused by its own negligence.

Based upon the findings of fact of the trial court which are sustained by the evidence, the plaintiff delivered to the defendants 164 cases of silk consigned and to be delivered by the defendants to Salomon Sharuff in Surigao. Four of such cases were never delivered to the consignee, and the evidence shows that their value is

the alleged in the complaint. Also, the goods in question were shipped from Manila on October 25, 1922, to be delivered to Salomon Sharuff in Surigao, Plaintiff's original complaint was filed on April 17, 1923, or a little less than six months after the shipment was made. The lower court also points out that the conditions in question "are not printed on the triplicate copies which were delivered to the plaintiff," and that by reason thereof they "are not binding upon the plaintiff." The clause in question provides that the carrier shall not be liable for loss or damage from any cause or for any reason to an amount in excess of P300 "for any single package of silk or other valuable cargo."

The evidence shows that 164 "cases" were shipped, and that the value of each case was very near P2,500. In this situation, the limit of defendants' liability for each case of silk "for loss or damage from any cause or for any reason" would put it in the power of the defendants to have taken the whole cargo of 164 cases of silk at a valuation of P300 for each case, or less than one-eight of its actual value. If that rule of law should be sustained, no silk would ever be shipped from one island to another in the Philippines. Such a limitation of value is unconscionable and void as against public policy. There is no merit in the appeal. The judgment of the lower court is affirmed.

2) Shewaram v. PAL

Facts: Shewaram, a paying passenger on defendant's aircraft flight from Zamboanga City bound for Manila. He checked in three pieces of baggages, a suitcase and two other pieces. When plaintiff Parmanand Shewaram arrived in Manila, his suitcase did not arrive with his flight because it was sent to Iligan. It was found out that it was mistagged by defendant’s personnel. The station agent of the PAL in Iligan caused the baggage to be sent to Manila for delivery to plaintiff. Defendant admitted that the two items (Transistor Radio and the Rollflex Camera) could not be found inside the suitcase. An action for damages was instituted against PAL. RTC ruled that the loss of the articles was due to the negligence of the employees of PAL. PAL however was ordered to pay damages of P100.00 only, as this was its limited liability as stated in the ticket. (“The liability, if any, for loss or damage to checked baggage or for delay in the delivery thereof is limited to its value and, unless the passenger declares in advance a higher valuation and pay an additional charge therefor, the value shall be conclusively


deemed not to exceed P100.00 for each ticket.”). An appeal was then brought up by plaintiff.

Issue: Whether or not the limited liability rule applies.

Held: No. The limited liability rule shall not apply. The requirements provided in Article 1750 of the New Civil Code must be complied with before a common carrier can claim a limitation of its pecuniary liability in case of loss, destruction or deterioration of the goods it has undertaken to transport. In the case before us We believe that the requirements of said article have not been met. It can not be said that the appellee had actually entered into a contract with the appellant, embodying the conditions as printed at the back of the ticket. The fact that those conditions are printed at the back of the ticket stub in letters so small that they are hard to read would not warrant the presumption that the appellee was aware of those conditions such that he had "fairly and freely agreed" to those conditions.

Shewaram did not agree to the stipulation on the ticket, as manifested by the fact that Shewaram did not sign the ticket.

3) Ong Yiu v. Court of Appeals

Facts: On 26 August 1967, Augusto B. Ong Yiu was a fare paying passenger of Philippine Air Lines, Inc. (PAL), on board Flight 463-R, from Mactan, Cebu, bound for Butuan City. He was scheduled to attend the trial of Civil Case 1005 and Special Proceedings 1125 in the Court of First Instance, Branch II, set for hearing on August 28-31, 1967. As a passenger, he checked in one piece of luggage, a blue “maleta” for which he was issued Claim Check 2106-R. The plane left Mactan Airport, Cebu, at about 1:00 p.m., and arrived at Bancasi airport, Butuan City, at past 2:00 p.m., of the same day. Upon arrival, Ong Yiu claimed his luggage but it could not be found. According to Ong Yiu, it was only after reacting indignantly to the loss that the matter was attended to by the porter clerk, Maximo Gomez, which, however, the latter denies. At about 3:00 p.m., PAL Butuan, sent a message to PAL, Cebu inquiring about the missing luggage, which message was, in turn, relayed in full to the Mactan Airport teletype operator at 3:45 p.m. It must have been transmitted to Manila immediately, for at 3:59 p.m., PAL Manila wired PAL Cebu advising that the luggage had been overcarried to Manila aboard Flight 156 and that it would be forwarded to Cebu on Flight 345 of the same day. Instructions

were also given that the luggage be immediately forwarded to Butuan City on the first available flight. At 5:00 p.m. of the same afternoon, PAL Cebu sent a message to PAL Butuan that the luggage would be forwarded on Flight 963 the following day, 27 August 1967. However, this message was not received by PAL Butuan as all the personnel had already left since there were no more incoming flights that afternoon. In the meantime, Ong Yiu was worried about the missing luggage because it contained vital documents needed for trial the next day. At 10:00 p.m., Ong Yiu wired PAL Cebu demanding the delivery of his baggage before noon the next day, otherwise, he would hold PAL liable for damages, and stating that PAL’s gross negligence had caused him undue inconvenience, worry, anxiety and extreme embarrassment. This telegram was received by the Cebu PAL supervisor but the latter felt no need to wire Ong Yiu that his luggage had already been forwarded on the assumption that by the time the message reached Butuan City, the luggage would have arrived. Early in the morning of the next day, 27 August 1967, Ong Yiu went to the Bancasi Airport to inquire about his luggage. He did not wait, however, for the morning flight which arrived at 10:00 a.m., and which carried the missing luggage. The porter clerk, Maximo Gomez, paged Ong Yiu, but the latter had already left. A certain Emilio Dagorro, a driver of a “colorum” car, who also used to drive for Ong Yiu, volunteered to take the luggage to Ong Yiu. As Maximo Gomez knew Dagorro to be the same driver used by Ong Yiu whenever the latter was in Butuan City, Gomez took the luggage and placed it on the counter. Dagorro examined the lock, pressed it, and it opened. After calling the attention of Maximo Gomez, the “maleta” was opened, Gomez took a look at its contents, but did not touch them. Dagorro then delivered the “maleta” to Ong Yiu, with the information that the lock was open. Upon inspection, Ong Yiu found that a folder containing certain exhibits, transcripts and private documents in Civil Case No. 1005 and Sp. Procs. No. 1126 were missing, aside from two gift items for his parents-in-law. Ong Yiu refused to accept the luggage. Dagorro returned it to the porter clerk, Maximo Gomez, who sealed it and forwarded the same to PAL Cebu. Meanwhile, Ong Yiu


asked for postponement of the hearing of Civil Case 1005 due to loss of his documents, which was granted by the Court. Ong Yiu returned to Cebu City on 28 August 1967. In a letter dated 29 August 1967 addressed to PAL, Cebu, Ong Yiu called attention to his telegram, demanded that his luggage be produced intact, and that he be compensated in the sum of P250,000.00 for actual and moral damages within 5 days from receipt of the letter, otherwise, he would be left with no alternative but to file suit. On 31 August 1967, Messrs. de Leon, Navarsi, and Agustin, all of PAL Cebu, went to Ong Yiu’s office to deliver the “maleta”. In the presence of Mr. Jose Yap and Atty. Manuel Maranga, the contents were listed and receipted for by Ong Yiu. On 5 September 1967, Ong Yiu sent a tracer letter to PAL Cebu inquiring about the results of the investigation which Messrs. de Leon, Navarsi and Agustin had promised to conduct to pinpoint responsibility for the unauthorized opening of the “maleta”. On 13 September 1967, Ong Yiu filed a Complaint against PAL for damages for breach of contract of transportation with the CFI of Cebu (Branch V, Civil Case R-10188), which PAL traversed. After due trial, the lower Court found PAL to have acted in bad faith and with malice and declared petitioner entitled to moral damages in the gum of P80,000.00, exemplary damages of P30,000.00, attorney’s fees of P5,000.00, and costs. Both parties appealed to the Court of Appeals. On 22 August 1974, the Court of Appeals, finding that PAL was guilty only of simple negligence, reversed the judgment of the trial Court granting Ong Yiu moral and exemplary damages, but ordered PAL to pay Ong Yiu the sum of P100.00, the baggage liability assumed by it under the condition of carriage printed at the back of the ticket. Hence, the Petition for Review by Certiorari, filed on 2 May 1975. On 16 July 1975, the Supreme Court gave due course to the Petition. The Supreme Court denied the petition for lack of merit, and affirmed the judgment sought to be reviewed in toto; without costs. 1. Bad faith defined Bad faith means a breach of a known duty through some motive of interest or ill will. It was the duty of PAL to look for Ong Yiu’s luggage which had been miscarried; and PAL exerted due diligence in complying with such duty. PAL had not acted in bad faith.

2. Failure of PAL Cebu to reply to Ong Yiu’s rush telegram does not indicate bad faith The failure of PAL Cebu to reply to Ong Yiu’s rush telegram is not indicative of bad faith. The telegram was dispatched by petitioner at around 10:00 p.m. of 26 August 1967. The PAL supervisor at Mactan Airport was notified of it only in the morning of the following day. At that time the luggage was already to be forwarded to Butuan City. There was no bad faith in the assumption made by said supervisor that the plane carrying the bag would arrive at Butuan earlier than a reply telegram. Had Ong Yiu waited or caused someone to wait at the Bancasi airport for the arrival of the morning flight, he would have been able to retrieve his luggage sooner. 3. Article 2217 NCC Article 2217 of the Civil Code provides that “Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant’s wrongful act of omission.” 4. Article 2220 NCC Article 2220 of the Civil Code provides that “Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.” 5. Ong Yiu not entitled to moral damages, nor exemplary damages In the absence of a wrongful act or omission or of fraud or bad faith, Ong Yiu is not entitled to moral damages. Ong Yu is neither entitled to exemplary damages. In contracts, as provided for in Article 2232 of the Civil Code, exemplary damages can be granted if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner, which has not been proven in the present case. 6. Condition of carriage printed at back of plane ticket The pertinent Condition of Carriage printed at the back of the plane ticket reads “8. BAGGAGE LIABILITY . . . The total liability of the Carrier for lost or damaged baggage of the passenger is LIMITED TO P100.00 for each ticket unless a passenger declares a higher valuation in excess of P100.00, but not in


excess, however, of a total valuation of P1,000.00 and additional charges are paid pursuant to Carrier’s tariffs.” 7. Contract of adhesion While it may be true that Ong Yiu had not signed the plane ticket, he is nevertheless bound by the provisions thereof. “Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter’s lack of knowledge or assent to the regulation”. It is what is known as a contract of “adhesion”, in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the present case, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. 8. Limitation of liability to agreed valuation not contrary to law; Randolph vs. American Airlines And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans World Airlines, Inc., 349 S.W. 2d 483, “a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence.” 9. No declaration of greater value nor payment of tariff for value of luggage The liability of PAL for the loss, in accordance with the stipulation written on the back of the ticket is limited to P100.00 per baggage. Ong Yiu not having declared a greater value, and not having called the attention of PAL on its true value and paid the tariff therefor. The validity of the stipulation is not questioned by Ong Yiu. They are printed in reasonably and fairly big letters, and are easily readable. Moreover, Ong Yiu had been a frequent passenger of PAL from Cebu to Butuan City and back, and he, being a lawyer and businessman, must be fully aware of these conditions. Considering, therefore, that Ong Yiu had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P100.00. Besides, passengers are advised not to place valuable items inside their baggage but “to avail of our V-cargo service.” It is likewise to be noted that there is nothing in the evidence to show the actual value of the goods allegedly lost by Ong Yiu.

10. Technicality yields to the interests of substantial justice On 24 October 1974 or two months after the promulgation of the Decision of the appellate Court, Ong Yiu’s widow filed a Motion for Substitution claiming that Ong Yiu died on 6 January 1974 and that she only came to know of the adverse Decision on 23 October 1974 when Ong Yiu’s law partner informed her that he received copy of the Decision on 28 August 1974. Attached to her Motion was an Affidavit of Ong Yiu’s law partner reciting facts constitutive of excusable negligence. The appellate Court noting that all pleadings had been signed by Ong Yiu himself allowed the widow “to take such steps as she or counsel may deem necessary.” She then filed a Motion for Reconsideration over the opposition of PAL which alleged that the Court of Appeals Decision, promulgated on 22 August 1974, had already become final and executory since no appeal had been interposed therefrom within the reglementary period. Under the circumstances, considering the demise of Ong Yiu himself, who acted as his own counsel, it is best that technicality yields to the interests of substantial justice. Besides, in the last analysis, no serious prejudice has been caused PAL.

4) Aboitiz Shipping Corporation v. Court of Appeals

FACTS: Anacleto Viana boarded the vessel M/V Antonia, owned by Aboitiz Shipping Corporation, at the port at San Jose, Occidental Mindoro, bound for Manila. After said vessel had landed, the Pioneer Stevedoring Corporation took over the exclusive control of the cargoes loaded on said vessel pursuant to the Memorandum of Agreement between Pioneer and petitioner Aboitiz. The crane owned by Pioneer was placed alongside the vessel and one (1) hour after the passengers of said vessel had disembarked, it started operation by unloading the cargoes from said vessel. While the crane was being operated, Anacleto Viana who had already disembarked from said vessel obviously remembering that some of his cargoes were still loaded in the vessel, went back to the vessel, and it was while he was pointing to the crew of the said vessel to the place where his cargoes were loaded that the crane hit him, pinning him between the side of the


vessel and the crane. He was thereafter brought to the hospital where he later died.

Private respondents Vianas filed a complaint for damages against petitioner for breach of contract of carriage. Aboitiz denied responsibility contending that at the time of the accident, the vessel was completely under the control of respondent Pioneer Stevedoring Corporation as the exclusive stevedoring contractor of Aboitiz, which handled the unloading of cargoes from the vessel of Aboitiz. ISSUE: Whether or not Aboitiz is negligent and is thus liable for Vianas’ death. HELD: Yes. x x x [T]he victim Anacleto Viana guilty of contributory negligence, but it was the negligence of Aboitiz in prematurely turning over the vessel to the arrastre operator for the unloading of cargoes which was the direct, immediate and proximate cause of the victim's death. The rule is that the relation of carrier and passenger continues until the passenger has been landed at the port of destination and has left the vessel owner's dock or premises. 11 Once created, the relationship will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier's conveyance or had a reasonable opportunity to leave the carrier's premises. All persons who remain on the premises a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his departure. 12 The carrier-passenger relationship is not terminated merely by the fact that the person transported has been carried to his destination if, for example, such person remains in the carrier's premises to claim his baggage. It is apparent from the foregoing that what prompted the Court to rule as it did in said case is the fact of the passenger's reasonable presence within the carrier's premises. That reasonableness of time should be made to depend on the attending circumstances of the case,

such as the kind of common carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a consideration of the time element per se without taking into account such other factors. It is thus of no moment whether in the cited case of La Mallorca there was no appreciable interregnum for the passenger therein to leave the carrier's premises whereas in the case at bar, an interval of one (1) hour had elapsed before the victim met the accident. The primary factor to be considered is the existence of a reasonable cause as will justify the presence of the victim on or near the petitioner's vessel. We believe there exists such a justifiable cause. It is of common knowledge that, by the very nature of petitioner's business as a shipper, the passengers of vessels are allotted a longer period of time to disembark from the ship than other common carriers such as a passenger bus. With respect to the bulk of cargoes and the number of passengers it can load, such vessels are capable of accommodating a bigger volume of both as compared to the capacity of a regular commuter bus. Consequently, a ship passenger will need at least an hour as is the usual practice, to disembark from the vessel and claim his baggage whereas a bus passenger can easily get off the bus and retrieve his luggage in a very short period of time. Verily, petitioner cannot categorically claim, through the bare expedient of comparing the period of time entailed in getting the passenger's cargoes, that the ruling in La Mallorca is inapplicable to the case at bar. On the contrary, if we are to apply the doctrine enunciated therein to the instant petition, we cannot in reason doubt that the victim Anacleto Viana was still a passenger at the time of the incident. When the accident occurred, the victim was in the act of unloading his cargoes, which he had every right to do, from petitioner's vessel. As earlier stated, a carrier is duty bound not only to bring its passengers safely to their destination but also to afford them a reasonable time to claim their baggage.

5) Sea Land Services Inc v. IAC

PARTIES:

Seaborne Trading Company

Sea-Land Service, Inc. - Carrier

Sen Hiap Hing (owned by Paulino Cue) - Consignee


FACTS: Sea-Land Service, Inc., a foreign shipping and forwarding company licensed to do business in the Philippines, received from Seaborne Trading Company in Oakland, California a shipment consigned to Sen Hiap Hing, a wholesale and retail trade business of Paulino Cue, which operated out of an establishment located on Borromeo and Plaridel Streets, Cebu City. The shipper not having declared the value of the shipment, no value was indicated in the bill of lading. Based on volume measurements Sea-land charged the shipper the total amount of US$209.28 for freight age and other charges. The shipment was loaded on board the MS Patriot, a vessel owned and operated by Sea-Land, for discharge at the Port of Cebu. The shipment arrived in Manila and discharged into the custody of the arrastre contractor and the customs and port authorities. After the shipment had been transferred, along with other cargoes to containers in South Harbor, Manila, awaiting trans-shipment to Cebu, it was stolen by pilferers and has never been recovered.

Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the lost shipment allegedly amounting to P179,643.48. Sea-Land offered to settle for US$4,000.00 or P30,600.00, asserting that said amount represented its maximum liability for the loss of the shipment under the package limitation clause in the covering bill of lading. Cue rejected the offer and thereafter brought suit for damages against Sea-Land in the then CFI of Cebu, Branch X.

CFI RULING: CFI rendered judgment in favor of Cue, sentencing Sea-Land to pay him P186,048.00, the Philippine currency value of the lost cargo, P55,814.00 for unrealized profit with one (1%) percent monthly interest from the filing of the complaint until fully paid, P25,000.00 for attorney's fees and P2,000.00 as litigation expenses. Upon appeal, the IAC affirmed said decision, pronouncing that COGSA has no application in this case.

ISSUE: Can Sea-Land be held liable for the loss of the shipment in any amount beyond the limit of US$600.00 per package stipulated in the bill of lading?

HELD: No. The stipulation in the bill of lading limiting Sea-Land's liability for loss of or damage to the shipment covered by said bill to US$500.00 per package is held valid and binding on Cue. A consignee in a bill of lading has the right to recover from the carrier or shipper for loss of, or damage to, goods being transported under said bill, although only the consignor and the carrier without the intervention of the consignee may have drawn up that document. Sea-Land is therefore liable in the aggregate amount of P32,000.00, the equivalent in Philippine currency of US$4,000.00 at the conversion rate of P8.00 to $1.00 (rate at the time of first offer to pay).

Since the liability of a common carrier for loss of or damage to goods transported by it under a contract of carriage is governed by the laws of the country of destination and the goods in question were shipped from the United States to the Philippines, the liability of Sea-Land to the consignee Cue is governed primarily by the Civil Code, and as ordained by the said Code, suppletorily, in all matters not determined thereby, by the Code of Commerce and special laws. One of these suppletory special laws is the Carriage of Goods by Sea Act (COGSA), U.S. Public Act No. 521 which was made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade by Commonwealth Act No. 65, which provides that “[n]either the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or… per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. xxx”

There can be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and inserts it into said contract or bill. Even if COGSA did not exist, the validity and binding effect of the liability limitation clause in the bill of lading is still fully sustainable since not only is there nothing in the Civil Code which absolutely prohibits agreements between


shipper and carrier limiting the latter's liability for loss of or damage to cargo shipped under contracts of carriage; it is also quite clear that said Code in fact has agreements of such character in contemplation in providing that: ART. 1749 A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. ART. 1750 A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. The justices of such stipulation is implicit in its giving the owner or shipper the option of avoiding accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading.

Furthermore, the Court also ruled that COGSA is applicable up to the final port of destination and that the fact that transshipment was made on an inter-island vessel (offloading the shipment in question in Manila for transshipment to Cebu City, the port of destination stipulated in the bill of lading) did not remove the contract of carriage of goods from the operation of said Act. At any rate, it has already been held that the provisions of COGSA on package limitation [sec 4(5) of the Act] are as much a part of a bill of lading as though actually placed therein by agreement of the parties.

6) Citadel Lines Inc v. Court of Appeals

7) Everett Steamship Corp v. Court of Appeals

8) British Airways v. Court of Appeals

9) H.E. Heacock Co v. Macondray & Co.

10) Sweet Lines v. Teves

(1) Civil Code

(2) Carriage of Goods by Sea Act (COGSA)

(3) International Air Transportation

1) Alitalia v. IAC

Parties:

Dr. Felipa Pablo

ALITALIA

Fact:

Dr. Felipa Pablo, an associate professor in the University of the Philippines was invited to take part in the meeting if the United Nations in Ispra, Italy. She accepted the invitation and booked a passage with petitioner airline, Alitalia.

She arrived in Milan on the day before the meeting in accordance with the itinerary set for her by Alitalia. The Alitalia personnel told her that her luggage would be transported by succeeding flights from Rome to Milan. She was told however, that the other flights from Rome did not have her baggage on board.

Feeling desperate, she went to Rome to try to locate her bags herself. Despite efforts of locating her baggage, her baggage cannot be found. She returned to Manila without attending the meeting. As reparation she was offered free airline tickets, she however rejected the offer.

As it turned out, her baggage was forwarded on the day after her scheduled appearance. In Manila, the suitcase were not actually restored only until 11 months later and 4 months after the institution of her action.

Issue:

Whether the Warsaw Convention should have been applied to limit the liability of Alitalia.

Trial Court:

Alitalia was ordered to pay for nominal damages to Dr. Pablo. The trial court found the defendant negligent and shall be made liable for the frustration and disappointment of not carrying out his mission as well as the embarrassment and humiliation she suffered from the academic community.

Held:


The Warsaw Convention provided that all carrier shall be made liable for damages for the delay in the transportation by air passengers, luggage and goods. The convention purport to limit the liability of the carrier: 1) that in the contract of carrier for each passenger is limited to the sum of 250,000 francs. Nevertheless, by special contract, the carrier and the passenger may agree to higher limit or liability; 2) and in case of loss, damage or delay on the part of registered baggage or cargo or of any object contained therein, the weight sum shall be taken in consideration.

The Convention denies the availment of the carrier of provisions which exclude or limit its liability, if the damage is caused by wilful conduct default on his part or if the damage is caused by any agent of the carrier within the scope of his employment. The Hague Protocol amended the Warsaw Convention by removing the provision that if the airline took all the necessary steps to avoid the damage, it would exculpate itself completely. The Convention do not exclude liability for other breaches of contract of carrier or misconduct of its officers and employees or for some particular or exceptional type of damage.

In the case at bar, no bad faith or otherwise improper conduct may be attributed to the employees of the petitioner airline, and Dr. Pablo’s luggage was returned, belatedly but without any appreciable damage. Nevertheless, there is a breach of contract of carriage for its failure to deliver the baggage to her at the time appointed, resulting to Dr, Pablo’s failure to read the paper and make the scientific presentation that she has painstakingly worked for.

Certainly, the compensation for the injury suffered by Dr, Pablo cannot be restricted to that presented by the Warsaw Convention for the delay in the transport of baggage.

She is not, of course, entitled to be compensated for the loss or damage of her luggage.

2) Pan American Airways v. IAC

3) China Airlines v. Chiok

PARTIES: China Airlines- ticket issuer; Philippine Airlines- agent; Chiok- passenger and director of Philippine Polysterene Paper Corporation FACTS: On September 18, 1981, Daniel Chiok purchased from China Airlines, Ltd. (CAL) airline

passenger ticket number 297:4402:004:278:5 for air transportation covering Manila-Taipei-Hongkong-Manila. Said ticket was exclusively endorseable to Philippine Airlines (PAL).On November 21, 1981, Chiok took his trip from Manila to Taipei using the CAL ticket. When he arrived in Taipei, he went to the CAL office and confirmed his Hongkong to Manila trip on board PAL Flight no. PR311. The CAL office attached a yellow sticker appropriately indicating that his flight status was OK. On November 24, 1981, Chiok proceeded to Hongkong International Airport for his return trip to Manila however, it was cancelled because of a typhoon in Manila. He was then informed that ticket holders of the same flight were automatically booked for its next flight. He informed PAL personnel that, being the founding director of the Philippine Polysterene Paper Corporation, he had to reach Manila on November 25, 1981 because of a business option which he had to execute on said date. On November 25, 1981, Chiok went to the airport. Cathay Pacific stewardess Lok Chan received Chiok's plane ticket and his luggage. However, Carmen Chan, PAL's terminal supervisor, informed Chiok that his name did not appear in PAL's computer list of passengers and thus cannot be permitted to board the PAL flight. Chiok sought to recover his luggage but found only two. Chiok proceeded to PAL's Hongkong office and confronted PAL's reservation officer, Carie Chao, who previously confirmed his flight back to Manila. In the ensuing commotion, Chiok lost his clutch bag containing the following, to wit: (a) $2,000.00; (b) HK$2,000.00; (c) Taipei $8,000.00; (d) P2,000.00; (e) a three-piece set of gold (18 carats) cross pens valued at P3,500; (f) a Cartier watch worth about P7,500.00; (g) a tie clip with a garnet birthstone and diamond worth P1,800.00; and (h) a [pair of] Christian Dior reading glasses. LOWER COURT RULING: The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and severally liable to respondent. On PAL’s appeal, the appellate court held that the carrier had reneged on its obligation to transport respondent when, in spite of the confirmations he had secured for Flight PR 311, his name did not appear in the computerized list of passengers. Ruling that the airline’s negligence was the proximate cause of his excoriating experience, the appellate court sustained the award of moral and exemplary damages. The CA, however, deleted the RTC’s award of actual damages amounting to HK$14,128.80 and US$2,000.00, because the lost piece of luggage and


clutch bag had not actually been "checked in" or delivered to PAL for transportation to Manila. ISSUE: WON CAL is liable for damages. HELD: It is significant to note that the contract of air transportation was between petitioner and respondent, with the former endorsing to PAL the Hong Kong-to-Manila segment of the journey. Such contract of carriage has always been treated in this jurisdiction as a single operation. Decision followed our ruling in Lufthansa German Airlines v. Court of Appeals, in which we had held that the obligation of the ticket-issuing airline remianed and did not cease, regardless of the fact that another airline had undertaken to carry the passengers to one of their destinations. In the instant case, we also rule that CAL cannot evade liability to respondent, even though it may have been only a ticket issuer for the Hongkong- Manila sector.

4) Santos III v. Northwest

FACTS: Petitioner is a minor and a resident of the Philippines. Private respondent Nortwest Orient Airlines (NOA) is a foreign corporation with principal office in Minnesota, U.S.A. and licensed to do business and maintain a branch office in the Philippines. The petitioner purchased from NOA a round-trip ticket in San Francisco, U.S.A. In December 19, 1986, the petitioner checked in the at the NOA counter in the San Francisco airport for his departure to Manila. Despite a previous confirmation and re-confirmation, he was informed that he had no reservation for his flight for Tokyo to Manila. He therefore had to be wait-listed. On March 12, 1987, the petitioner sued NOA for damages in RTC Makati. NOA moved to dismiss the complaint on the ground of lack of jurisdiction. ISSUE:

Whether or not Article 28 (1) of the Warsaw Convention is in accordance with the constitution so as to deprive the Philippine Courts jurisdiction over the case

HELD: Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of one of the

High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or where he has a place of business through which the contract has been made, or before the court at the place of destination. Constitutionality of the Warsaw Convention The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November 9, 1950. The Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto. "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof." The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of law in this country. Does the Warsaw Convention apply in this case? By its own terms, the Convention applies to all international transportation of persons performed by aircraft for hire. International transportation is defined in paragraph (2) of Article 1 as follows: (2) For the purposes of this convention, the expression "international transportation" shall mean any transportation in which, according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the transportation or a transshipment, are situated [either] within the territories of two High Contracting Parties . . . Whether the transportation is "international" is determined by the contract of the parties, which in the case of passengers is the ticket. When the contract of carriage provides for the transportation of the passenger between certain designated terminals


"within the territories of two High Contracting Parties," the provisions of the Convention automatically apply and exclusively govern the rights and liabilities of the airline and its passenger. Since the flight involved in the case at bar is international, the same being from the United States to the Philippines and back to the United States, it is subject to the provisions of the Warsaw Convention, including Article 28(1), which enumerates the four places where an action for damages may be brought. Does Article 28(1) refer to Jurisdiction or Venue? ...where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept. 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. This second question shall be governed by the law of the court to which the case is submitted. Was the case properly filed in the Philippines, since the plaintiff’s destination was Manila? The place of destination, within the meaning of the Warsaw Convention, is determined by the terms of the contract of carriage or, specifically in this case, the ticket between the passenger and the carrier. Examination of the petitioner's ticket shows that his ultimate destination is San Francisco. Although the date of the return flight was left open, the contract of carriage between the parties indicates that NOA was bound to transport the petitioner to San Francisco from Manila. Manila should therefore be considered merely an agreed stopping place and not the destination. Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is the "destination" and not an "agreed stopping place" that controls for purposes of ascertaining jurisdiction under the Convention. The contract is a single undivided operation, beginning with the place of departure and ending with the ultimate destination. The use of the singular in this expression indicates the understanding of the parties to the Convention that every contract of carriage has

one place of departure and one place of destination. An intermediate place where the carriage may be broken is not regarded as a "place of destination." WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.

5) United Airlines v. Uy

4.5 Bill of Lading as Receipt

1) Saludo v. Court of Appeals

PARTIES: Pomierski and Son Funeral Home of Chicago – Shipper C.M.A.S. (Continental Mortuary Air Services) – Shipper’s Agent Maria Salvacion Saludo – Consignee Trans World Airlines – Carrier Philippine Airlines – Carrier Air Care International – PAL’s Agent SUMMARY OF FACTS: On Oct. 26, 1976 the cargo containing the casketed remains of Crispina Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for Manila on Oct. 27, PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt of delivery of the cargo on Oct. 26, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight scheduled on Oct. 27. It was not until October 28, 1976 that PAL received physical delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer Manifest of the American Airline Freight System and signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date.

FACTS: After the death of Crispina Galdo Saludo, mother of Aniceto G. Saludo, Jr., Maria Salvacion Saludo, Leopoldo G. Saludo and Saturnino G. Saludo, in Chicago Illinois, Pomierski and Son Funeral Home of Chicago, made the necessary preparations and arrangements for the shipment, of the remains from Chicago to the Philippines. The funeral home had the remains embalmed and secured a permit for the disposition of dead human body, Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina Saludo Galdo. Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the Chicago airport which made the necessary arrangements such as flights, transfers, etc.;


C.M.A.S. is a national service used by undertakers to throughout the US, they furnish the air pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal. C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care International, with Pomierski F.H. as the shipper and Maria Saludo as the consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued wherein the requested routing was (1) from Chicago to San Francisco on board TWA (Trans World Airlines) Flight 131 of October 27, 1976 and (2) from San Francisco to Manila on board PAL Flight No. 107 of the same date, and (3) from Manila to Cebu on board PAL Flight 149 of October 29, 1976. In the meantime, Maria Salvacion Saludo and Saturnino Saludo, thru a travel agent, were booked with United Airlines from Chicago to California, and with PAL from California to Manila. But they changed reservations to TWA after learning from the director of Pomierski FH and confirming by phone that their mother’s remains should be on that TWA flight. In the airport they saw no body from the lookout area and was informed when they went to the TWA counter that none was on that flight. Reluctantly, they took the TWA flight upon assurance of her cousin, Ani Bantug, that he would look into the matter and inform her about it on the plane or have it radioed to her. But no confirmation from her cousin reached her that her mother was on the West Coast. Upon arrival at San Francisco, Maria inquired to the TWA counter, who was still unaware of her mother’s remains. She informed Pomierski, who immediately called C.M.A.S. It turned out that the casketed human remains that was issued the PAL Airway Bill was not the remains of Crispina Saludo, the casket containing her remains was on a plane to Mexico City, there being two bodies at the terminal, which were somehow switched. Later, C.M.A.S. called saying that they were sending the remains back to California via Texas. The following day October 28, the shipment or remains of Crispina Saludo arrived in San Francisco from Mexico on board American Airlines and was transferred to and/or received by PAL. The shipment was immediately loaded on PAL flight for Manila that same evening and arrived in Manila on October 30, a day after its expected arrival on October 29. Petitioners’ counsel informed TWA of the misshipment and eventual delay in the delivery of the cargo containing the remains of the late Crispin Saludo, and of the discourtesy of its employees to petitioners

Maria Salvacion Saludo and Saturnino Saludo. In a separate letter, addressed to PAL, petitioners stated that they were holding PAL liable for said delay in delivery and would commence judicial action should no favorable explanation be given. Both denied liability. TRIAL COURT AND CA RULING: As earlier stated, the court below absolved the two respondent airlines companies of liability. The Court of Appeals affirmed the decision of the lower court in toto, and in a subsequent resolution, denied herein petitioners' motion for reconsideration for lack of merit. ISSUE: Whether or not he bill of lading operated as a receipt of the delivery of the goods. HELD: YES. The jurisprudential dictum, both under American and Philippine law, that "(t)he issuance of a bill of lading carries the presumption that the goods were delivered to the carrier issuing the bill, for immediate shipment, and it is nowhere questioned that a bill of lading is prima facie evidence of the receipt of the goods by the carrier. . . . In the absence of convincing testimony establishing mistake, recitals in the bill of lading showing that the carrier received the goods for shipment on a specified date control.” A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport and deliver them at a specified place to a person named or on his order. Such instrument may be called a shipping receipt, forwarder's receipt and receipt for transportation. The designation, however, is immaterial. It has been hold that freight tickets for bus companies as well as receipts for cargo transported by all forms of transportation, whether by sea or land, fall within the definition. Under the Tariff and Customs Code, a bill of lading includes airway bills of lading. The two-fold character of a bill of lading: (1) it is a receipt as to the quantity and description of the goods shipped and (2) a contract to transport the goods to the consignee or other person therein designated, on the terms specified in such instrument. Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and prima facie, but not conclusive, evidence of delivery to the carrier. Except as modified by statute, it is a general rule as to the parties to a contract of carriage of goods in connection with which a bill of lading is issued reciting that goods have been received for transportation, that the recital


being in essence a receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence.

4.6 Bill of Lading as Contract

(a) Negotiability

(b) How Negotiated

(c) Effects of Negotiation

CHAPTER 5: ACTIONS and DAMAGES in CASE OF BREACH

5.1 Distinctions

5.2 Concurrent Causes of Action

1) Fabre v. Court of Appeals, supra

Facts: Petitioners Fabre and his wife were owners of a minibus which they used principally in connection with a bus service for school children which they operated. The couple had a driver, Porfirio Cabil, whom they hired after trying him out for two weeks. His job was to take school children to and from the St. Scholastica’s College. On November 2, 1984, private respondent Word for the World Christian Fellowship Inc. arranged with petitioners for the transportation of 33 members from Manila to La Union and back in consideration of which they paid P3,000 to petitioners. The group left at 8:00 in the evening, petitioner Cabil drove the minibus. The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway, running on a south to east direction. The road was slippery because it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus

Escano, then turned over and landed on its left side, coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its front portion. Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and pinned down by a wooden seat which came off after being unscrewed. It took three persons to safely remove her from this position. She was in great pain and could not move. A case was filed by the respondents against Fabre and Cabil. Amyline Antonio was found to be suffering from paraplegia and is permanently paralyzed from the waist down. The RTC ruled in favor of respondents. Mr. & Mrs. Fabre and Cabil were ordered to pay jointly and severally actual, moral and exemplary damages, and as well as amount of loss of earning capacity of Antonio and attorney’s fees. The Court of Appeals affirmed the decision of the trial court with modification on the award of damages. Issues:

4. Whether or not petitioners were negligent. 5. Whether or not petitioners were liable for the

injuries suffered by private respondents. 6. Whether or not damages can be awarded and

in the positive, up to what extent. Held: SC affirmed the decision of the CA but reverted the amount of the award of damages to that ordered by the RTC. 3. The finding that Cabil drove his bus negligently,

while his employer, the Fabres, who owned the bus, failed to exercise the diligence of a good father of the family in the selection and supervision of their employee is fully supported by the evidence on record. Indeed, it was admitted by Cabil that on the night in question, it was raining, and, as a consequence, the road was slippery, and it was dark. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15 to 30 meters ahead. Given the conditions of the road and considering that the trip was Cabil’s first one outside of Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony that the vehicles passing on that portion of the road should only be running 20 kilometers per hour, so that at


50 kilometers per hour, Cabil was running at a very high speed. Cabil was grossly negligent and should be held liable for the injuries suffered by private respondent Amyline Antonio. Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers, the Fabres, were themselves negligent in the selection and supervision of their employee. Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver’s license. The employer should also examine the applicant for his qualifications, experience and record of service. In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that Cabil had been driving for school children only, from their homes to the St. Scholastica’s College in Metro Manila. They had hired him only after a two-week apprenticeship.

4. This case involves a contract of carriage. Petitioners, the Fabres, did not have to be engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to them. Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity. Neither does Article 1732 distinguish between a carrier offering its services to the “general public,” i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. As common carriers, the Fabres were bound to exercise “extraordinary diligence” for the safe transportation of the passengers to their destination. This duty of care is not excused by proof that they exercised the diligence of a good father of the family in the selection and supervision of their employee. As Art. 1759 of the Code provides:

Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of

the former’s employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers

2) Air France v. Carrascoso

3) Tiu v. Arriesgado

Facts: A t a b o u t 1 0 : 0 0 p . m . o f M a r c h 1 5 , 1 9 8 7 , t h e c a r g o t r u c k m a r k e d "Condor Ho l lo w B lock s and G enera l M erchand is e" b ear in g p late numb er GB P- 67 5 was load ed w ith f i r ew ood in Bogo, C eb u and le f t for Cebu C i ty . Upon reaching Sitio Aggies, Poblacion, Compostela, Cebu, just as the truckp a s s e d o v e r a b r i d g e , o n e o f i t s r e a r t i r e s e x p l o d e d . T h e d r i v e r , S e r g i o P e d r a n o , t h e n p a r k e d a l o n g t h e r i g h t s i d e o f t h e n a t i o n a l h i g h w a y a n d removed the damaged tire to have it vulcanized at a nearby shop, about 700meters away. Pedrano left his helper, Jose Mitante, Jr. to keep watch over thestalled vehicle, and instructed the latter to place a spare tire six fathoms awaybeh ind the sta l l ed t ruck to s er ve a s a warn in g f or onc om ing veh ic le s . Th e trucks tail lights were also left on. It was about 12:00 a.m., March 16, 1987 At about 4:45 a.m., D Rough Riders passen ger bus with plate number PBP -72 4 dr i ven by V i rg i l io Te La sp iña s wa s cru i s in g a long the nat iona l highway of Sitio Aggies, Poblacion, Compostela, Cebu. The passenger buswas a l so bound for C ebu C i ty , and had com e f rom Maya, Daanbantayan , Cebu. A mon g i t s pas sen ger s w er e the Spouse s P edro A. Arr i e sgado and Felisa Pepito Arriesgado, who were seated at the right side of the bus, aboutthree (3) or four (4) places from the front seat.

As the bus was approaching the bridge, Laspiñas saw the stalled truck,which wa s then about 25 met er s a way . H e ap p l ied th e br eak s and t r ied to s w e r v e t o t h e l e f t t o a v o i d h i t t i n g t h e t r u c k . B u t i t w a s t o o l a t e ; t h e b u s rammed into the trucks left rear. The impact damaged the right side of the busand left several passengers injured. Pedro Arriesgado lost consciousness andsu ff er ed a f ra ctur e in h i s r ight co l le s . H i s w i f e , Fe l i s a , wa s brou ght to the Danao City Hospital. She was later transferred


to the Southern Island MedicalCenter where she died shortly thereafter.R esp o ndent P edro A . Arr i e sgado then f i led a co mpla int for breach o f contract of carriage, damages and attorneys fees before the Regional TrialCourt of Cebu City, Branch 20, against the petitioners, D Rough Riders busoperator William Tiu and his driver, Virgilio Te Laspiñas on May 27, 1987. Therespondent alleged that the passenger bus in question was cruising at a fastand high speed along the national road, and that petitioner Laspiñas did nottake precautionary measures to avoid the accident.

The petitioners, for their part, filed a Third -Party Complaint against thefollowing: respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII),petitioner Tiu’s insurer; respondent Benjamin Condor, the registered owner of the cargo truck; and respondent Sergio Pedrano, the driver of the truck. Theyalleged that petitioner Laspiñas was negotiating the uphill climb along thenational highway of Sitio Aggies, Poblacion, Compostela, in a moderate andnormal speed. It was further alleged that the truck was parked in a slantedmanner, its rear portion almost in the middle of the highway, and that no earlywarn ing dev ic e wa s d i sp lay ed . Pet i t i oner La sp i ña s prompt ly app l i ed the brakes and swerved to the left to avoid hitting the truck head-on, but despiteh i s e f f o r t s t o a v o i d d a m a g e t o p r o p e r t y a n d p h y s i c a l i n j u r i e s o n t h e passengers, the right side portion of the bus hit the cargo truck’s left rear.

Held:

The rules which common carriers should observe as to the safety of their p a s s e n g e r s a r e s e t f o r t h i n t h e C i v i l C o d e , A r t i c l e s 1 7 3 3 , 1 7 5 5 a n d 1 7 5 6 . I t i s u n d i s p u t e d t h a t t h e r e s p o n d e n t a n d h i s w i f e w e r e n o t s a f e l y t r a n s p o r t e d t o t h e destination agreed upon. In actions for breach of contract, only the existence of suchc o n t r a c t , a n d t h e f a c t t h a t t h e o b l i g o r , i n t h i s c a s e t h e c o m m o n c a r r i e r , f a i l e d t o transport his passenger safely to his destination are the matters that need to be proved.T h i s i s b e c a u s e u n d e r t h e s a i d c o n t r a c t o f c a r r i a g e , t h e p e t i t i o n e r s a s s u m e d t h e express obligation to transport the respondent and his wife to their destination safelyand to observe extraordinary diligence with due

regard for all circumstances. Anyinjury suffered by the passengers in the course thereof is immediately attributable tothe negligence of the carrier. Upon the happening of the accident, the presumption of negligence at once arises, and it becomes the duty of a common carrier to prove thathe observed extraordinary diligence in the care of his passengers. It must be stressedthat in requiring the highest possible degree of diligence from common carriers and increating a presumption of negligence against them, the law compels them to curb therecklessness of their drivers. While evidence may be submitted to overcome such presumption of negligence, it must be shown that the carrier observed the requiredextraordinary diligence, which means that the carrier must show the utmost diligenceof very cautious persons as far as human care and foresight can provide, or that thea c c i d e n t w a s c a u s e d b y f o r t u i t o u s e v e n t . A s c o r r e c t l y f o u n d b y t h e t r i a l c o u r t , p e t i t i o n e r T i u f a i l e d t o c o n c l u s i v e l y r e b u t s u c h p r e s u m p t i o n . T h e n e g l i g e n c e o f petitioner Laspiñas as driver of the passenger bus is, thus, binding against petitioner Tiu, as the owner of the passenger bus engaged as a common carrier ***Spouses Arriesgado were passengers of a bus owned by the petitioner. The respondents sustained injures when the bus collided with a cargo truck. In its defense, petitioner invoked the defense of last clear chance. The SC held that Doctrine of last clear chance applies to a suit involving the owners of the two colliding vehicle. It does not apply to a suit involving breach for a contract of carriage.

5.3 Notice of Claim and Prescriptive Period

5.3.1 Overland Transportation of Goods and Coastwise Shipping

1) Phil. American General Insurance v. Sweet Lines

FACTS: It is a maritime suit wherein petitioners were seeking recovery of the cost of lost or damaged shipment plus exemplary damages, attorney's fees and costs allegedly due to defendants' negligence. Of said shipment totalling 7,000 bags, originally contained in


175 pallets, only a total of 5,820 bags were delivered to the consignee in good order condition, leaving a balance of 1,080 bags. Before trial, a compromise agreement was entered into between petitioners, as plaintiffs, and defendants S.C.I. Line and F.E. Zuellig, upon the latter's payment of P532.65 in settlement of the claim against them. Whereupon, the trial court in its order of August 12, 1981 granted plaintiffs' motion to dismiss grounded on said amicable settlement and the case as to S.C.I. Line and F.E. Zuellig was consequently "dismissed with prejudice and without pronouncement as to costs." The trial court thereafter rendered judgment in favor of the plaintiff Philippine General American Insurance Company Inc. and against the remaining defendants, Sweet Lines Inc. and Davao Veterans Arrastre Inc. However, Court of Appeals reversed the trial court's decision on the ground of prescription, in effect dismissing the complaint of herein petitioners, and the denial of their motion for reconsideration petitioners filed the instant petition for review on certiorari. The petitioners contend that it was error for the Court of Appeals to reverse the appealed decision on the supposed ground of prescription when SLI failed to adduce any evidence in support thereof and that the bills of lading said to contain the shortened periods for filing a claim and for instituting a court action against the carrier were never offered in evidence. Considering that the existence and tenor of this stipulation on the aforesaid periods have allegedly not been established, petitioners maintain that it is inconceivable how they can possibly comply therewith. In refutation, SLI avers that it is standard practice in its operations to issue bills of lading for shipments entrusted to it for carriage and that it in fact issued bills of lading numbered MD-25 and MD-26 therefor with proof of their existence manifest in the records of the case. For its part, DVAPSI insists on the propriety of the dismissal of the complaint as to it due to petitioners' failure to prove its direct responsibility for the loss of and/or damage to the cargo. On this point, in denying petitioner's motion for reconsideration, the Court of Appeals resolved that although the bills of lading were not offered in evidence, the litigation obviously revolves on such bills of lading which are practically the documents or contracts sued upon, hence, they are inevitably involved and their provisions cannot be disregarded in

the determination of the relative rights of the parties thereto. ISSUE: Whether or not the bill of lading shall be considered evidence even if it has not been formally offered as evidence. RULING: Respondent court correctly passed upon the matter of prescription, since that defense was so considered and controverted by the parties. This issue may accordingly be taken cognizance of by the court even if not inceptively raised as a defense so long as its existence is plainly apparent on the face of relevant pleadings. In the case at bar, prescription as an affirmative defense was seasonably raised by SLI in its answer, except that the bills of lading embodying the same were not formally offered in evidence, thus reducing the bone of contention to whether or not prescription can be maintained as such defense and, as in this case, consequently upheld on the strength of mere references thereto. As petitioners are suing upon SLI's contractual obligation under the contract of carriage as contained in the bills of lading, such bills of lading can be categorized as actionable documents which under the Rules must be properly pleaded either as causes of action or defenses, and the genuineness and due execution of which are deemed admitted unless specifically denied under oath by the adverse party. The rules on actionable documents cover and apply to both a cause of action or defense based on said documents. In the present case and under the aforestated assumption that the time limit involved is a prescriptive period, respondent carrier duly raised prescription as an affirmative defense in its answer setting forth paragraph 5 of the pertinent bills of lading which comprised the stipulation thereon by parties, to wit: 5. Claims for shortage, damage, must be made at the time of delivery to consignee or agent, if container shows exterior signs of damage or shortage. Claims for non-delivery, misdelivery, loss or damage must be filed within 30 days from accrual. Suits arising from shortage, damage or loss, non-delivery or misdelivery shall be instituted within 60 days from date of accrual


of right of action. Failure to file claims or institute judicial proceedings as herein provided constitutes waiver of claim or right of action. In no case shall carrier be liable for any delay, non-delivery, misdelivery, loss of damage to cargo while cargo is not in actual custody of carrier. 21 In their reply thereto, herein petitioners, by their own assertions that — 2. In connection with Pars. 14 and 15 of defendant Sweet Lines, Inc.'s Answer, plaintiffs state that such agreements are what the Supreme Court considers as contracts of adhesion (see Sweet Lines, Inc. vs. Hon. Bernardo Teves, et al., G.R. No. L-37750, May 19, 1978) and, consequently, the provisions therein which are contrary to law and public policy cannot be availed of by answering defendant as valid defenses. thereby failed to controvert the existence of the bills of lading and the aforequoted provisions therein, hence they impliedly admitted the same when they merely assailed the validity of subject stipulations. Petitioners' failure to specifically deny the existence, much less the genuineness and due execution, of the instruments in question amounts to an admission. Judicial admissions, verbal or written, made by the parties in the pleadings or in the course of the trial or other proceedings in the same case are conclusive, no evidence being required to prove the same, and cannot be contradicted unless shown to have been made through palpable mistake or that no such admission was made. Moreover, when the due execution and genuineness of an instrument are deemed admitted because of the adverse party's failure to make a specific verified denial thereof, the instrument need not be presented formally in evidence for it may be considered an admitted fact. Even granting that petitioners' averment in their reply amounts to a denial, it has the procedural earmarks of what in the law on pleadings is called a negative pregnant, that is, a denial pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied. It is in effect an admission of the averment it is directed to. 25 Thus, while petitioners objected to the validity of such agreement for being contrary to public policy, the existence of the bills of lading and said stipulations were nevertheless impliedly admitted by them. SC finds merit in respondent court's comments that

petitioners failed to touch on the matter of the non-presentation of the bills of lading in their brief and earlier on in the appellate proceedings in this case, hence it is too late in the day to now allow the litigation to be overturned on that score, for to do so would mean an over-indulgence in technicalities. Hence, for the reasons already advanced, the non-inclusion of the controverted bills of lading in the formal offer of evidence cannot, under the facts of this particular case, be considered a fatal procedural lapse as would bar respondent carrier from raising the defense of prescription. Petitioners' feigned ignorance of the provisions of the bills of lading, particularly on the time limitations for filing a claim and for commencing a suit in court, as their excuse for non-compliance therewith does not deserve serious attention. It is to be noted that the carriage of the cargo involved was effected pursuant to an "Application for Delivery of Cargoes without Original Bill of Lading" issued on May 20, 1977 in Davao City 26 with the notation therein that said application corresponds to and is subject to the terms of bills of lading MD-25 and MD-26. It would be a safe assessment to interpret this to mean that, sight unseen, petitioners acknowledged the existence of said bills of lading. By having the cargo shipped on respondent carrier's vessel and later making a claim for loss on the basis of the bills of lading, petitioners for all intents and purposes accepted said bills. Having done so they are bound by all stipulations contained therein. Verily, as petitioners are suing for recovery on the contract, and in fact even went as far as assailing its validity by categorizing it as a contract of adhesion, then they necessarily admit that there is such a contract, their knowledge of the existence of which with its attendant stipulations they cannot now be allowed to deny. ACCORDINGLY, on the foregoing premises, the instant petition is DENIED and the dismissal of the complaint in the court a quo as decreed by respondent Court of Appeals in its challenged judgment is hereby AFFIRMED. SO ORDERED.

5.3.2 COGSA

1) Dole Philippines v. Maritime Co. of the Phil

2) Maritime Agencies v. Court of Appeals


5.4 Recoverable Damages

5.4.1 Extent of Recovery

5.4.2 Kinds of Damages

(a) Actual or Compensatory Damages

1) Zulueta v. Pan Am

Dear Classmates please read the full text ng facts. Mahaba at baka may itanong si ma’m. Promise. Walang kwenta i-digest dahil maraming facts na hindi pwedeng tanggalin. Pag nabasa niyo maiintindihan niyo. Pati ang HELD niya ay based sa history of jurisprudence kaya halus hindi pwede i-digest ang kaso na ito. Okay? Pakitiis ang haba. Maiintindihan niyo rin kung bakit kailangan basahin full text sa kasong ito. THANKYOU! (Adi Aumentado) Facts: Zuleta with his wife and daughter were passengers of a PANAM plane on a flight from Honolulu to Manila, the first leg of which was Wake Island. Landing on the island stopover the passengers were given 30 minutes to disembark of which plaintiff relieved himself not at the men’s comfort room inside the terminal building but at the beach which was a 100 yards away. Meanwhile, the flight was called and when the passengers had boarded the plane, plaintiff's absence was noticed. The take-off was, accordingly, delayed and a search for him was conducted by his family and other persons. Minutes later, plaintiff was seen walking back from the beach towards the terminal. Heading towards the ramp of the plane, plaintiff remarked, "You people almost made me miss your flight. You have a defective announcing system and I was not paged." An altercation ensued and Zulueta was off loaded at Wake Island while his wife and daughter were allowed to continue with the flight minus their baggage due to a bomb scare tipped off allegedly by an unidentified State Department informant. Issue: 1. WON Respondent should be held liable? LOWER COURT: Respondent is liable for P1Million as Moral damages, P400k as

exemplary damages and P100k Attorney’s fees.

Issue: 2. WON the award of P1Million as moral damages P400k exemplary damages

was proper? SC: Respondent is liable for damages but the amount should be reduced to half.

1. As regards the moral and exemplary damages claimed by the plaintiffs, our Civil Code provides:

ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.

ART. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of defendant's wrongful act or omission.

ART. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate liquidated or compensatory damages.

ART. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

The records amply establish plaintiffs' right to recover both moral and exemplary damages. Indeed, the rude and rough reception plaintiff received at the hands of Sitton or Captain Zentner when the latter met him at the ramp ("what in the hell do you think you are? Get


on that plane"); the menacing attitude of Zentner or Sitton and the supercilious manner in which he had asked plaintiff to open his bags ("open your bag," and when told that a fourth bag was missing, "I don't give a damn"); the abusive language and highly scornful reference to plaintiffs as monkeys by one of PANAM's employees (who turning to Mrs. Zulueta and Miss Zulueta remarked, "will you pull these three monkeys out of here?"); the unfriendly attitude, the ugly stares and unkind remarks to which plaintiffs were subjected, and their being cordoned by men in uniform as if they were criminals, while plaintiff was arguing with Sitton; the airline officials' refusal to allow plaintiff to board the plane on the pretext that he was hiding a bomb in his luggage and their arbitrary and high-handed decision to leave him in Wake; Mrs. Zulueta's having suffered a nervous breakdown for which she was hospitalized as a result of the embarrassment, insults and humiliations to which plaintiffs were exposed by the conduct of PANAM's employees; Miss Zulueta's having suffered shame, humiliation and embarrassment for the treatment received by her parents at the airport

6- all these justify an award for

moral damages resulting from mental anguish, serious anxiety, wounded feelings, moral shock, and social humiliation thereby suffered by plaintiffs.

Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with kindness, respect, courtesy and due consideration. They are titled to be protected against personal misconduct, injurious language, indignities and abuses from such employees. So it is, that any rude or discourteous conduct on the part of employees towards a passenger gives the latter an action for damages against the carrier.

A carrier of passengers is as much bound to protect them from humiliation and insult as from physical injury. It is held in nearly all jurisdictions, if not universally, that a carrier is liable to a passenger for humiliation and mental suffering caused by abusive or insulting language directed at such passenger by an employee of the carrier.

Where a conductor uses language to a passenger which is calculated to insult, humiliate, or wound the

feelings of a person of ordinary feelings and sensibilities, the carrier is liable, because the contract of carriage impliedly stipulates for decent, courteous, and respectful treatment, at hands of the carrier's employees.

2. The question is whether the award of P1,000,000 as moral damages was proper and justified by the circumstances. It has been held that the discretion in fixing moral damages lies in the trial court. Among the factors courts take into account in assessing moral damages are the professional, social, political and financial standing of the offended parties on one hand, and the business and financial position of the offender on the other.

In comparatively recent cases in this jurisdiction, also involving breach of contract of air carriage, this Court awarded the amount of P25,000, where plaintiff, a first-class passenger in an Air France plane from Manila to Rome was, in Bangkok, forced by the manager of the airline company to leave his first class accommodation after he was already seated because there was a white man who, the manager alleged, had a "better right" to the seat;the amount of P200,000, where plaintiffs, upon confirmation of their reservation in defendant airline's flight from Tokyo to San Francisco were issued first class tickets, but upon arrival in Tokyo were informed that there was no accommodation for them in the first class compartment and told they could not go unless they took the tourist class

- in both of which cases the Court

found the airline companies to have acted in bad faith, or in a wanton, reckless and oppressive manner, justifying likewise the award of exemplary damages.

None of the passengers involved in said cases was, however, off-loaded, much less in a place as barren and isolated as Wake Island, with the prospect of being stranded there for a week. The aforementioned passengers were merely constrained to take a tourist or third class accommodation in lieu of the first class passage they were entitled to. Then, also, in none of said cases had the agents of the carrier acted with the degree of malice or bad faith of those of PANAM in the case at bar, or caused to the offended passengers a


mental suffering arising from injuries to feelings, fright and shock due to abusive, rude and insulting language used by the carrier's employees in the presence and within the hearing of others, comparable to that caused by PANAM's employees to plaintiffs herein

To some extent, however, plaintiff had contributed to the gravity of the situation because of the extreme belligerence with which he had reacted on the occasion. We do not over-look the fact that he justly believed he should uphold and defend his dignity and that of the people of this country that the discomfort, the difficulties, and, perhaps, the ordeal through which he had gone to relieve himself - which were unknown to PANAM's agents - were such as to put him in no mood to be understanding of the shortcoming of others; and that said PANAM agents should have first inquired, with an open mind, about the cause of his delay instead of assuming that he was at fault and of taking an arrogant and overbearing attitude, as if they were dealing with an inferior. Just the same, there is every reason to believe that, in all probability, things would not have turned out as bad as they became had he not allowed himself, in a way, to be dragged to the level or plane on which PANAM's personnel had placed themselves.

In view of this circumstance, We feel that the moral and exemplary damages collectible by the plaintiffs should be reduced to one-half of the amounts awarded by the lower court, that is, to P500,000 for moral damages, and P200,000 for exemplary damages, aside from the attorney's fees which should, likewise, be reduced to P75,000.

2) Gatchalian v. Delim

FACTS: At noon time on July 11, 1973, Gatchalian boarded, as a paying passenger, respondent’s “Thames” minibus at a point in San Eugenio, Aringay, La Union, bound for Bauang, of the same province. While the bus was running along the highway in Barrio Payocpoc, Bauang, La Union, “a snapping sound” was suddenly heard at one part of the bus and, shortly thereafter, the vehicle bumped a cement flower pot on

the side of the road, went off the road, turned turtle and fell into a ditch. Several passengers, including petitioner Gatchalian, were injured and were promptly taken to Bethany Hospital at San Fernando, La Union, for medical treatment. Mrs. Adela Delim, wife of respondent, visited them and later paid for their hospitalization and medical expenses. She also gave them ₱ 12.00 with which to pay her transportation expense in going home from the hospital. However, before Mrs. Delim left, she had the injured passengers, including petitioner, sign an already prepared Joint Affidavit stating that they will no longer file a complaint, criminal or civil against the said driver and owner of the said Thames because it was an accident and the said driver and owner of the said Thames have gone to the extent of helping petitioner to be treated upon petitioners injuries. Notwithstanding this document, Gatchalian filed with the then CFI of La Union an action extra contractu to recover compensatory and moral damages. TC: Dismissed the complaint upon the ground that when petitioner Gatchalian signed the Joint Affidavit, she relinquished any right of action that she may have had against respondent and the driver of the mini-bus. CA: Reversed the TC’s conclusion that there had been a valid waiver, but affirmed the dismissal of the case by denying petitioner’s claim for damages. ISSUE: Is petitioner entitled to actual and compensatory damages?; and Whether or not private respondent has successfully proved that he had exercised extraordinary diligence to prevent the mishap involving his mini-bus HELD: Damages may not be awarded on the basis of speculation or conjecture. The CA found that at the time of the accident, she was no longer employed in a public school since being a casual employee and not a Civil Service eligible, she had been laid off. Her employment as substitute teacher was occasional and episodic, contingent upon the availability of vacancies for substitute teachers. In view of her employment status as such, the CA held that she could not be said to have in fact lost any employment after and by reason of the accident. Such was the factual finding of the CA, a finding entitled to due respect from the Court. Petitioner Gatchalian has not submitted any basis for overturning the finding of the fact, and she


may not be awarded damages on the basis of speculation or conjecture. A person is entitled to the physical integrity of his or her body; if that integrity is violated or diminished actual injury is suffered for which actual or compensatory damages are due and assessable. Petitioner’s claim for the cost of plastic surgery for removal of the scar on her forehead, is another matter. Gatchalian is entitled to be placed as nearly as possible in the condition that she was before the mishap. A scar, especially one on the face of the woman, resulting from the infliction of injury upon her, is a violation of bodily integrity, giving raise to a legitimate claim for restoration to her condition ante. If the scar is relatively small and does not grievously disfigure the victim, the cost of surgery may be expected to be correspondingly modest.

The record yields affirmative evidence of fault or negligence on the part of respondent common carrier. The driver did not stop to check if anything had gone wrong with the bus when the snapping sound was heard and made known to him by the passengers, instead told them that it was normal. The driver's reply necessarily indicated that the same "snapping sound" had been heard in the bus on previous occasions. This could only mean that the bus had not been checked physically or mechanically to determine what was causing the "snapping sound" which had occurred so frequently that the driver had gotten accustomed to it. Such a sound is obviously alien to a motor vehicle in good operating condition, and even a modicum of concern for life and limb of passengers dictated that the bus be checked and repaired. The obvious continued failure of respondent to look after the roadworthiness and safety of the bus, coupled with the driver's refusal or neglect to stop the mini-bus after he had heard once again the "snapping sound" and the cry of alarm from one of the passengers, constituted wanton disregard of the physical safety of the passengers, and hence gross negligence on the part of respondent and his driver.

Because what is involved here is the liability of a common carrier for injuries sustained by passengers in respect of whose safety a common carrier must exercise extraordinary diligence, we must construe any such purported waiver most strictly against the common carrier. For a waiver to be valid and effective, it must not be contrary to law, morals, public policy or good customs. A cursory examination of the purported waiver will readily show that appellees did not actually waive their right to claim damages from appellant for the latter's failure to comply with their contract of

carriage. All that said document proves is that they expressed a "desire" to make the waiver which obviously is not the same as making an actual waiver of their right. A waiver of the kind invoked by appellant must be clear and unequivocal.

3) Marchan v. Mendoza


PETITIONER: Driver of the passenger bus No. 141 of the Philippine Rabbit Bus Lines, bearing Plate No. TPU 708

PRIVATE RESPONDENT: Passenger of said bus

FACTS: Respondent boarded defendants-appellants' bus bearing No. 141 of the Philippine Rabbit Bus Lines with Plate No. TPU-708 bound for Manila. They paid their corresponding fares. Said bus was traveling at a high rate of speed without due regard to the safety of the passengers. Even increased his speed while approaching a six-by-six truck which was then parked ahead, apparently for the purpose of passing the said parked truck and to avoid collision with the incoming vehicle from the opposite direction. But, when appellant Silverio Marchan veered his truck to resume position over the right lane, the rear tires of said truck skidded because of his high rate of speed, thereby causing said truck to fall into a ditch. Substantially, the happening of the accident' resulting to the multiple injuries of plaintiffs-appellees, Mendoza, his wife and child who were then inside the bus as passengers were thrown out to the ground. Plaintiff Arsenio Mendoza suffered the most serious injuries which damaged his vertebrae causing the paralysis of his lower extremities which up to the time when this case was tried he continued to suffer. Consequently the driver of said bus Silverio Marchan was prosecuted for serious, less serious and slight physical injuries through reckless imprudence before the Justice of the Peace Court of Polo Bulacan, and thereafter convicted as charged. Plaintiffs-appellees Arsenio Mendoza, his wife and child sought to recover damages against defendant-appellant Arsenio Marchan, then the driver of bus No. 141 of the Philippine Rabbit Bus Lines, and from defendants-appellants Bienvenido P. Buan and Natividad Paras in their capacity as administrator and administratix, respectively of the estate of the late Florencio P. Buan, doing business under the style name of the Philippine Rabbit Bus Lines, predicated not only


on a breach of contract of carriage for failure of defendants operator as well as the defendant driver to safely convey them to their destination, but also on account of a criminal negligence on the part of defendant Silverio Marchan resulting to plaintiff-appellee's multiple physical damages.

LOWER COURT’S RULING: The Court of Appeals in the decision under review found that there was a preponderance of evidence in favor of respondents and subsequently granted gave way to their complaint.

ISSUE: Was there an implied contract of carriage between petitioner and respondent?

HELD: YES. It is clear from the above Civil Code provision that common carriers cannot escape liability "for the death of or injuries to passengers through the negligence and willful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders. the invariable holding has been the responsibility for breach of the contract of carriage on the part of the carrier. According to the facts as above disclosed, which this Court cannot disturb, the applicability of Article 1759 is indisputable. Hence, the total absence of merit of the first assignment of error.

DOCTRINE: The riding public is not expected to inquire from time to time before they board the passenger bus whether or not the driver who is at the steering wheel of said bus was authorized to drive said vehicle or that said driver is acting within the scope of his authority and observing the existing rules and regulations required of him by the management. To hold otherwise would in effect render the aforequoted provision of law (Article 1759) ineffective.

4) De Caliston v. Court of Appeals


GLORIA DARROCHA DE CALISTON, petitioner

THE HONORABLE COURT OF APPEALS, respondent

GERONIMO DALMACIO, respondent

Facts :

While driving a passenger bus in Bacolod City, private respondent Geronimo Dalmacio ran over Juana Sonza Vda. de Darrocha (a USVA pensioner) who died

instantly, survived by her only child, Gloria Darrocha de Caliston, the herein petitioner.

Prosecuted for homicide thru reckless imprudence, Dalmacio was convicted by the Court of First Instance of Negros Occidental, sentenced to imprisonment and ordered to pay the herein petitioner P15,000.00 for the death of the victim, P5,000.00 as moral damages, P5,000.00 for burial expenses and P10,000.00 for loss of pension which the deceased had failed to receive.

On appeal, the former Court of Appeals modified the CFI decision by absolving Dalmacio from the payment of the P10,000.00 for loss of pension and credited him for the amount of P5,000.00 previously paid to the herein petitioner under a vehicular insurance policy obtained by the bus owner.

Issue:

Whether or not the deletion of the P10,000.00 awarded for loss of pension is justified?

Held:

The deletion of the P10,000.00 awarded for loss of pension is unjustified. Under Article 2206 of the Civil Code: The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition:

(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter.

The pension of the decedent being a sure income that was cut short by her death for which Dalmacio was responsible, the surviving heir of the former is entitled to the award of P 10,000.00 which is just equivalent to the pension the decedent would have received for one year if she did not die.


On the other hand, the P5,000.00 paid to the herein petitioner by the insurer of the passenger bus which figured in the accident may be deemed to have come from the bus owner who procured the insurance. Since the civil liability (ex-delicto) of the latter for the death caused by his driver is subsidiary and, at bottom, arises from the same culpa, the insurance proceeds should be credited in favor of the errant driver.

(b) Moral Damages

1) Transworld Airlines v. Court of Appeals

Trans World Airlines v. Court of Appeals 165 SCRA 143 Facts: Atty. Vinluan purchased a first class ticket from the petitioner. Such ticket was twice confirmed and yet the petitioner abruptly told the respondent that there were no longer any available seats in the first class and that he will be downgraded to the economy class. When he protested an employee of the petitioner arrogantly threatened the respondent. In addition, he also saw that several Caucasians who arrived much later were accommodated in the first class when the other passengers did not show up. The respondent then sued the petitioner for damages. Issue:

Whether or not the petitioner is liable for damages. Held: The Court held that the petitioner is liable for moral and exemplary damages. The discrimination in this case is obvious and the humiliation brought to the respondent is indisputable. The petitioner showed lack of care in accommodating the respondent in the class that the latter contracted. In addition, the petitioner rudely informed the respondent of such downgrading of class. Such awarding of damages would serve as an example and a discouragement to carriers who may repeat such oppressive and discriminatory acts.

(c) Nominal Damages

(d) Temperate or Moderate Damages

(e) Exemplary or Corrective Damages

1) Prudenciado v. Alliance Transport

Facts:

At about 2:05 p.m. of May 11, 1960, Dra. Sofia L. Prudenciado was driving her own Chevrolet Bel Air car along Arroceros Street with the intention of crossing Taft Avenue in order to turn left, to go to the Philippine Normal College Compound where she would hold classes. She claimed that she was driving her car at the rate of 10 kmph; that before crossing Taft Ave. she stopped her car and looked to the right and to the left and not noticing any on-coming vehicle on either side she slowly proceeded on first gear to cross the same, but when she was almost at the center, near the island thereof, Jose Leyson who was driving People's Taxicab owned and operated by Alliance Transport System, Inc., suddenly bumped and struck Dra. Prudenciado's car, thereby causing physical injuries in different parts of her body, suffering more particularly brain concussion which subjected her to several physical examinations and to an encephalograph test while her car was damaged to the extent of P2,451.27. The damage to the taxicab amounted to P190.00

After due hearing, the Court of First Instance of Rizal, Quezon City, found Jose Leyson guilty of negligence in the performance of his duties as taxicab driver which is the proximate cause of the accident in question. On the other hand, defendant Alliance Transport System, Inc. failed to prove to the satisfaction of the court that it had exercised the required diligence of a good father of the family in the selection, supervision and control of its employees including defendant Leyson. Consequently, both defendants were held jointly and severally liable for the physical injuries suffered by the plaintiff Dra. Sofia L. Prudenciado as well as for the damage to her car, in addition to the other consequential damages prayed for.

Issue:

Whether the petitioner is entitled to moral and exemplary damages, and to what extent

Held:

A careful review of the records makes it readily apparent that the injuries sustained by Dra. Prudenciado are not as serious or extensive as they were claimed to be, to warrant the damages awarded by the trial court. In fact, a closer scrutiny of the


exhibits showing a moderate damage to the car can by no stretch of the imagination produce a logical conclusion that such disastrous effects of the accident sought to be established, actually took place, not to mention the fact that such were not supported by the medical findings presented. Unquestionably, therefore, the damages imposed' by the lower court should be reduced to more reasonable levels. On the other hand, it will be observed that the reduction of the damages made by the Court of Appeals is both too drastic and unrealistic, to pass the test of reasonableness, which appears to be the underlying basis to justify such reduction. While the damages sought to be recovered were not satisfactorily established to the extent desired by the petitioner, it was nonetheless not disputed that an accident occurred due to the fault and negligence of the respondents; that Dra. Prudenciado suffered a brain concussion which although mild can admittedly produce the effects complained of by her and that these symptoms can develop after several years and can lead to some, serious handicaps or predispose the patient to other sickness. Being a doctor by profession, her fears can be more real and intense than an ordinary person. Otherwise stated, she is undeniably a proper recipient of moral damages which are proportionate to her suffering.

The findings of the trial court in the case at bar which became the basis of the award of exemplary damages are to the effect that it is more apparent from the facts, conditions and circumstances obtaining in the record of the case that respondent driver was running at high speed after turning to the right along Taft Ave. coming from Ayala Boulevard, considering that the traffic was clear. Failing to notice petitioner's car, he failed to apply his brakes and did not even swerve to the right to avoid the collision. The Court of Appeals conforms with aforesaid findings of the trial court but is not prepared to accept that there was gross negligence on the part of the driver to justify the imposition of exemplary damages. However, a driver running at full speed on a rainy day, on a slippery road in complete disregard of the hazards to life and limb of other people cannot be said to be acting in anything less than gross negligence. The frequent incidence of accidents of this nature caused by taxi drivers indeed demands corrective measures

PART II: MARITIME LAW

CHAPTER 6: GENERAL CONCEPTS

6.1 Maritime Law

6.2 Real and Hypothecary MNature

1) Yangco v. Laserna

(a) Limited Liability Rule

1) Chua Yek Hong v. IAC

PARTIES:

Chua Yek Hong

Mariono Guno and Dominador Olit – Ship-owners

FACTS: Chua Yek Hong is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro, while are the owners of the vessel, "M/V Luzviminda I." Chua Yek Hong loaded 1,000 sacks of copra, valued at P101,227.40 on board the vessel "M/V Luzviminda I," a common carrier engaged in coastwise trade from the different ports of Oriental Mindoro to the Port of Manila owned by Mariano Guno and Dominador Olit. Cargo was to be shipped from Puerta Galera, Oriental Mindoro, to Manila but did not reach Manila because somewhere between Cape Santiago and Calatagan, Batangas, the vessel capsized and sank with all its cargo.

Chua Yek Hong filed a complaint for damages based on breach of contract of carriage against Guno and Olit before the CFI of Oriental Mindoro. But Guno and Olit averred that even assuming that the alleged cargo was truly loaded aboard their vessel, their liability had been extinguished by reason of the total loss of said vessel.

CFI RULING: The Trial Court decided in favor of Chua Yek Hong ordering Guno and Olit, jointly and severally, to pay the sum of P101,227.40, the value of the cargo lost; P65,550.00, miscellaneous expenses on lost cargo; P5,000.00 as attorney’s fees and to pay the costs of the suit.


IAC RULING: IAC ruled to the contrary and applied the Doctrine of Limited liability under Article 587 of the Code of Commerce as expounded in Yangco vs. Lasema and held that ship-owners’ liability for the loss of the cargo is merely co-extensive with their interest in the vessel such that a total loss thereof results in its extinction.

ISSUE: Can the ship owners be held liable?

HELD: NO. The Court held that the ship agent's or ship owner's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction, and none of the exceptions to the rule on limited liability being present, the liability of private respondents for the loss of the cargo of copra must be deemed to have been extinguished. There is also no showing that the vessel was insured in this case.

Art. 587, the Code of Commerce: The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all the equipments and the freight it may have earned during the voyage.

The term "ship agent" as used in the foregoing provision is broad enough to include the ship owner. Pursuant to said provision, therefore, both the ship owner and ship agent are civilly and directly liable for the indemnities in favor of third persons, which may arise from the conduct of the captain in the care of goods transported, as well as for the safety of passengers transported.

However, under the same Article, this direct liability is moderated and limited by the ship agent's or ship owner's right of abandonment of the vessel and earned freight. This expresses the universal principle of limited liability under maritime law. The most

fundamental effect of abandonment is the cessation of the responsibility of the ship agent/owner. It has thus been held that by necessary implication, the ship agent's or ship owner's liability is confined to that which he is entitled as of right to abandon the vessel with all her equipment and the freight it may have earned during the voyage," and "to the insurance thereof if any." In other words, the ship owner's or agent's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. "No vessel, no liability" expresses in a nutshell the limited liability rule. The total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it can attach.

The rationale therefor is that the real and hypothecary nature of the liability of the ship owner or agent embodied in the provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to encourage shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the owner or agent. Without the principle of limited liability, a ship owner and investor in maritime commerce would run the risk of being ruined by the bad faith or negligence of his captain, and the apprehension of this would be fatal to the interest of navigation.

As evidence of this real nature of the maritime law we have (1) the limitation of the liability of the agents to the actual value of the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention of the vessel even in cases where the ordinary civil law would not allow more than a personal action against the debtor or person liable. It will be observed that these rights are correlative, and naturally so, because if the agent can exempt himself from liability by abandoning the vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is also just that his maritime creditor may for any reason attach the vessel itself to secure his claim without waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person.


The limited liability rule, however, is not without exceptions, namely: (1) where the injury or death to a passenger is due either to the fault of the ship owner, or to the concurring negligence of the ship owner and the captain; (2) where the vessel is insured; and (3) in workmen's compensation claims. In this case, there is nothing in the records to show that the loss of the cargo was due to the fault of the private respondent as ship-owners, or to their concurrent negligence with the captain of the vessel.

Considering the "real and hypothecary nature" of liability under maritime law, the Civil Code would not have any effect on the principle of limited liability for ship owners or ship agents. The primary law is the Civil Code and in default thereof, the Code of Commerce and other special laws are applied. 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, it is the provisions of the Code of Commerce, more particularly Article 587, that govern in this case.

2) Heirs of Amparo de los Santos v. Court of Appeals

CHAPTER 7: VESSELS

7.1 General Concepts

1) Philippine Refining Corporation v. Jarque

7.2 Ownership

CHAPTER 8: PERSONS WHO TAKE PART IN MARITIME COMMERCE

8.1 Ship Owners and Ship Agents; Captains and Masters of Vessels; Officers and Crew, Supercargoes

1) Chua Yek Hong v. IAC, supra

PARTIES:

Chua Yek Hong

Mariono Guno and Dominador Olit – Ship-owners

FACTS: Chua Yek Hong is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro, while are the owners of the vessel, "M/V Luzviminda I." Chua Yek Hong loaded 1,000 sacks of copra, valued at P101,227.40 on board the vessel "M/V Luzviminda I," a common carrier engaged in coastwise trade from the different ports of Oriental Mindoro to the Port of Manila owned by Mariano Guno and Dominador Olit. Cargo was to be shipped from Puerta Galera, Oriental Mindoro, to Manila but did not reach Manila because somewhere between Cape Santiago and Calatagan, Batangas, the vessel capsized and sank with all its cargo.

Chua Yek Hong filed a complaint for damages based on breach of contract of carriage against Guno and Olit before the CFI of Oriental Mindoro. But Guno and Olit averred that even assuming that the alleged cargo was truly loaded aboard their vessel, their liability had been extinguished by reason of the total loss of said vessel.

CFI RULING: The Trial Court decided in favor of Chua Yek Hong ordering Guno and Olit, jointly and severally, to pay the sum of P101,227.40, the value of the cargo lost; P65,550.00, miscellaneous expenses on lost cargo; P5,000.00 as attorney’s fees and to pay the costs of the suit.

IAC RULING: IAC ruled to the contrary and applied the Doctrine of Limited liability under Article 587 of the Code of Commerce as expounded in Yangco vs. Lasema and held that ship-owners’ liability for the loss of the cargo is merely co-extensive with their interest in the vessel such that a total loss thereof results in its extinction.

ISSUE: Can the ship owners be held liable?

HELD: NO. The Court held that the ship agent's or ship owner's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its


extinction, and none of the exceptions to the rule on limited liability being present, the liability of private respondents for the loss of the cargo of copra must be deemed to have been extinguished. There is also no showing that the vessel was insured in this case.

Art. 587, the Code of Commerce: The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all the equipments and the freight it may have earned during the voyage.

The term "ship agent" as used in the foregoing provision is broad enough to include the ship owner. Pursuant to said provision, therefore, both the ship owner and ship agent are civilly and directly liable for the indemnities in favor of third persons, which may arise from the conduct of the captain in the care of goods transported, as well as for the safety of passengers transported.

However, under the same Article, this direct liability is moderated and limited by the ship agent's or ship owner's right of abandonment of the vessel and earned freight. This expresses the universal principle of limited liability under maritime law. The most fundamental effect of abandonment is the cessation of the responsibility of the ship agent/owner. It has thus been held that by necessary implication, the ship agent's or ship owner's liability is confined to that which he is entitled as of right to abandon the vessel with all her equipment and the freight it may have earned during the voyage," and "to the insurance thereof if any." In other words, the ship owner's or agent's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. "No vessel, no liability" expresses in a nutshell the limited liability rule. The total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it can attach.

The rationale therefor is that the real and hypothecary nature of the liability of the ship owner or agent embodied in the provisions of the Maritime Law, Book III, Code of Commerce, had its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to encourage shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the owner or agent. Without the principle of limited liability, a ship owner and investor in maritime commerce would run the risk of being ruined by the bad faith or negligence of his captain, and the apprehension of this would be fatal to the interest of navigation.

As evidence of this real nature of the maritime law we have (1) the limitation of the liability of the agents to the actual value of the vessel and the freight money, and (2) the right to retain the cargo and the embargo and detention of the vessel even in cases where the ordinary civil law would not allow more than a personal action against the debtor or person liable. It will be observed that these rights are correlative, and naturally so, because if the agent can exempt himself from liability by abandoning the vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is also just that his maritime creditor may for any reason attach the vessel itself to secure his claim without waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person.

The limited liability rule, however, is not without exceptions, namely: (1) where the injury or death to a passenger is due either to the fault of the ship owner, or to the concurring negligence of the ship owner and the captain; (2) where the vessel is insured; and (3) in workmen's compensation claims. In this case, there is nothing in the records to show that the loss of the cargo was due to the fault of the private respondent as ship-owners, or to their concurrent negligence with the captain of the vessel.

Considering the "real and hypothecary nature" of liability under maritime law, the Civil Code would not


have any effect on the principle of limited liability for ship owners or ship agents. The primary law is the Civil Code and in default thereof, the Code of Commerce and other special laws are applied. 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, it is the provisions of the Code of Commerce, more particularly Article 587, that govern in this case.

2) Phil. American General Insurance Co. v. Court of Appeals

Parties:

Coca-Cola Bottlers Philippines

Felman Shipping Lines: Owner of MV Asilda

Philippine American General Insurance Co. Inc (Philamgen)

Facts:

Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a vessel owned and operated by respondent Felman Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transported from Zamboanga City to Cebu City for consignee Coca-Cola Bottlers Philippines, Inc., Cebu.

The shipment was insured with petitioner

Philippine American General Insurance Co., Inc. "MV Asilda" left the port of Zamboanga in fine weather at eight o'clock in the evening and at around eight forty-five the following morning, the vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.

The consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with respondent FELMAN for recovery of damages it sustained as a result of the loss of its softdrink bottles that sank with "MV Asilda." Respondent denied the claim thus prompting the consignee to file an insurance claim with PHILAMGEN which paid its claim of P755,250.00.

Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which disclaimed any liability for the loss.

In its complaint PHILAMGEN alleged that the sinking and total loss of "MV Asilda" and its cargo were due to the vessel's unseaworthiness as she was put to sea in an unstable condition. It further alleged that the vessel was improperly manned and that its officers were grossly negligent in failing to take appropriate measures to proceed to a nearby port or beach after the vessel started to list.

Issue:

Whether "MV Asilda" was seaworthy when it left the port of Zamboanga.

Trial court ruling:

The trial court rendered judgment in favor of FELMAN.

It ruled that "MV Asilda" was seaworthy

when it left the port of Zamboanga as confirmed by certificates issued by the Philippine Coast Guard and the shipowner's surveyor attesting to its seaworthiness. Thus the loss of the vessel and its entire shipment could only be attributed to either a fortuitous event, in which case, no liability should attach unless there was a stipulation to the contrary, or to the negligence of the captain and his crew.

Held:

"MV Asilda" was unseaworthy when it left the port of Zamboanga. In a joint statement, the captain as well as the chief mate of the vessel confirmed that the weather was fine when they left the port of Zamboanga. According to them, the vessel was carrying 7,500 cases of 1-liter Coca-Cola softdrink bottles, 300 sacks of seaweeds, 200 empty CO2 cylinders and an undetermined quantity of empty boxes for fresh eggs. They loaded the empty boxes for eggs and about 500 cases of Coca-Cola bottles on deck.

The captain was informed him that the vessel had hit a floating log. At that time he noticed that the weather had deteriorated with strong southeast winds inducing big waves. After thirty minutes he observed that the vessel was listing slightly to starboard and would not correct itself despite the heavy rolling and pitching. He then ordered his crew to shift the cargo from starboard to portside until the vessel was balanced. At about seven o'clock in the morning, the master of the vessel stopped the engine because the


vessel was listing dangerously to portside. He ordered his crew to shift the cargo back to starboard. The shifting of cargo took about an hour afterwhich he rang the engine room to resume full speed.

At around eight forty-five, the vessel suddenly listed to portside and before the captain could decide on his next move, some of the cargo on deck were thrown overboard and seawater entered the engine room and cargo holds of the vessel. At that instance, the master of the vessel ordered his crew to abandon ship. Shortly thereafter, "MV Asilda" capsized and sank. He ascribed the sinking to the entry of seawater through a hole in the hull caused by the vessel's collision with a partially submerged log.

The proximate cause of the sinking of "MV Asilda" was its being top-heavy. It is settled that carrying a deck cargo raises the presumption of unseaworthiness unless it can be shown that the deck cargo will not interfere with the proper management of the ship. However, in this case it was established that "MV Asilda" was not designed to carry substantial amount of cargo on deck. The inordinate loading of cargo deck resulted in the decrease of the vessel's metacentric height thus making it unstable. The strong winds and waves encountered by the vessel are but the ordinary vicissitudes of a sea voyage and as such merely contributed to its already unstable and unseaworthy condition.

3) Sweet Lines v. Court of Appeals

8.2 Arrastre Operator

1) Fireman’s Fund Insurance Co v. Metro Port Services

Parties:

Vulcan Industrial and Mining Corporation

SS Albert Maersk, SS Maersk Tempo

Maersk Line

Compania General de Tabacos de Filipinas – Carrier

E. Razon/Metro Port Service Inc: Arrastre

Danilo Librando

Facts:

Vulcan Industrial and Mining Corporation imported from theUnited States several machineries and equipment which were loaded on board the SIS Albert Maersk at the port of Philadelphia, U.S.A., and transhipped for Manila through the vessel S/S Maersk Tempo.

The cargo which was covered by a clean bill of lading issued by Maersk Line and c consisted of core drills and steel tubings.

The shipment was turned over complete and in good condition to the arrastre operator E. Razon (Metro Port Service Inc). Danilo Librando, tractor operator and employee of E. Razpn was ordered to transport the shipment to the Equipment Yard at Pier 3. While Librando was maneuvering the tractor (owned and provided by Maersk Line) to the left, the cargo fell from the chassis and hit one of the container vans of American President Lines. It was discovered that there were no twist lock at the rear end of the chassis where the cargo was loaded.

There was heavy damage to the cargo as the parts of the machineries were broken, denied, cracked and no longer useful for their purposes. Fireman’s Fund Insurance paid the value of the damages to Vulcan Industrial and Mining Corporation. The former now filed a suit against Maersk Line, Compania General de Tabacos de Filipinas and E. Razon for the coverage of the insurance policy.

Issue:

May E. Razon/Metro Port Service be held liable for the damage of the Cargo since the damage was caused while it was in their custody and that the tractor operator was their employee.

RTC Ruling:

Judgment is rendered in favor of Fireman’s Fund Insurance against Maersk Line, Compania General de Tabacos de Filipinas and E. Razon ordering them to pay in solidary the amount of damages, attorney’s fee and costs of suit.


CA Ruling:

E. Razon/Metro Port Service appealed, and the CA reversed the decision of the trial court.

Held:

The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator. Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with and obligated to deliver the goods in good condition to the consignee.

To carry out its duties, the ARRASTRE is required to provide cargo handling equipment which includes among others trailers, chassis for containers. In some cases, however, the shipping line has its own cargo handling equipment. The records reveal that Maersk Line provided the chassis and the tractor which carried the carried the subject shipment. It merely requested the ARRASTRE to dispatch a tractor operator to drive the tractor inasmuch as the foreign shipping line did not have any truck operator in its employ. Such arrangement is allowed between the ARRASTRE and the CARRIER pursuant to the Management Contract. It was clearly one of the services offered by the ARRASTRE. It was the arrastre that had the sole discretion and prerogative to hire and assign Librando to operate the tractor.

Since the arrastre offered its delivery for the operation drivers for the operation of tractors in the handling of cargo and equipment, then the ARRASTRE should see to it that the drivers under its employ must exercise due diligence in the performance of their work. Whether or not the twist lock can be seen by the naked eye when the cargo has been loaded on the chassis, an efficient and diligent tractor operator must nevertheless check if the cargo is securely loaded on the chassis.

Therefore, Metro Port Service Inc. is solidarily liable in the instant case for the negligence of its employee.

2) ICTSI v. Prudential

8.3 Pilots

1) Far Eastern Shipping v. Court of Appeals

PARTIES: Gavino- compulsory pilot; FACTS: On June 20, 1980, the M/V PAVLODAR, flying under the flagship of the USSR, owned and operated by the Far Eastern Shipping Company (FESC for brevity's sake), arrived at the Port of Manila from Vancouver, British Columbia at about 7:00 o'clock in the morning.The vessel was assigned Berth 4 of the Manila International Port, as its berthing space. Captain Roberto Abellana was tasked by the Philippine Port Authority to supervise the berthing of the vessel. Appellant Senen Gavino was assigned by the Appellant Manila Pilots' Association (MPA for brevity's sake) to conduct docking maneuvers for the safe berthing of the vessel to Berth No. 4. Gavino boarded the vessel at the quarantine anchorage and stationed himself in the bridge, with the master of the vessel, Victor Kavankov, beside him. After the briefing, the vessel proceeded to Manila International Port. When the vessel reachd the landmark one-half mile from the pier, Gavino ordered the engine stopped. Gavino ordered the anchor dropped. However, the anchor did not take hold as expected. Victor Kavankov also noticed that the anchor did not take hold. Gavino thereafter gave the "full-astern" code. Before the right anchor and additional shackles could be dropped, the bow of the vessel rammed into the apron of the pier causing considerable damage to the pier. On January 10, 1983, the Philippine Ports Authority (PPA, for brevity), through the Solicitor General, filed before the Regional Trial Court of Manila, Branch 39, a complaint for a sum of money against Far Eastern Shipping Co., Capt. Senen C. Gavino and the Manila Pilots' Association. LOWER COURT RULING: In a decision dated August 1, 1985, the trial court ordered the defendants therein jointly and severally to pay the PPA the amount of P1,053,300.00 representing actual damages and the costs of suit. ISSUE: WON Gavino is liable for damages. HELD: Capt. Gavino was assigned to pilot MV Pavlodar into Berth 4 of the Manila International Port. Upon assuming such office as compulsory pilot, Capt. Gavino is held to the universally accepted high standards of care and diligence required of a pilot, whereby he assumes to have skill and knowledge in respect to navigation in the particular waters over which his license extends superior to and more to be trusted


than that of the master.The negligence on the part of Capt. Gavino is evident; but Capt. Kabancov is no less responsible for the allision. His unconcerned lethargy as master of the ship in the face of troublous exigence constitutes negligence. Our own evaluation is that Capt. Kabankov's shared liability is due mainly to the fact that he failed to act when the perilous situation should have spurred him into quick and decisive action as master of the ship. In the face of imminent or actual danger, he did not have to wait for the happenstance to occur before countermanding or overruling the pilot. By his own admission, Capt. Kabankov concurred with Capt. Gavino's decisions, and this is precisely the reason why he decided not to countermand any of the latter's orders. Inasmuch as both lower courts found Capt. Gavino negligent, by expressing full agreement therewith Capt. Kabankov was just as negligent as Capt. Gavino.

CHAPTER 9: CHARTER PARTIES (Article 652-718)

9.1 Definition and Concept

9.2 Different Kinds of Charter Parties

1) Litonjua Shipping Co. v. NSB

FACTS Petitioner is the duly appointed local crewing managing office of the Fairwind Shipping Corporation. On September 11, 1976 M/V Dufton Bay an ocean-going vessel of foreign registry owned by the R.D. Mullion ship broking agency under charter by Fairwind, while in the port of Cebu contracted the services (among others) of Gregorio Candongo as Third Engineer for 12 months with a monthly wage of US$500.00. The agreement was executed before the Cebu Area Manning Unit of the NSB, after which respondent boarded the vessel. On December 28, 1976 before the expiration of contract, respondent was required to disembark at Port Kilang, Malaysia. Describe in his seaman’s handbook is the reason “by owner’s arrange.” Condongo filed a complaint against Mullion (Shipping company) for violation of contract and against Litonjua as agent of shipowner.

On February 1977, NSB rendered a judgment by default for failure of petitioners to appear during the initial hearing, rendering the same to pay Candongo because there was no sufficient or valid cause for the respondents to terminate the service of the complainant. Litonjua’s defense: Contends that the shipowner, nor the charterer, was the employer of private respondent; and that liability for damages cannot be imposed upon petitioner which was a mere agent of the charterer. ISSUE Whether or not Litonjua may be held liable to the private respondent on the contract of employment? HELD YES. The first basis is the charter party which existed between Mullion, the shipowner, and Fairwind, the charterer. It is well settled that in a demise or bare boat charter, the charterer is treated as owner pro hac vice of the vessel, the charterer assuming in large measure the customary rights and liabilities of the shipowner in relation to third persons who have dealt with him or with the vessel. In such case, the Master of the vessel is the agent of the charterer and not of the shipowner. The charterer or owner pro hac vice, and not the general owner of the vessel, is held liable for the expenses of the voyage including the wages of the seamen Treating Fairwind as owner pro hac vice, petitioner Litonjua having failed to show that it was not such, we believe and so hold that petitioner Litonjua, as Philippine agent of the charterer, may be held liable on the contract of employment between the ship captain and the private respondent. There is a second and ethically more compelling basis for holding petitioner Litonjua liable on the contract of employment of private respondent. The charterer of the vessel, Fairwind, clearly benefitted from the employment of private respondent as Third Engineer of the Dufton Bay, along with the ten (10) other Filipino crewmembers recruited by Captain Ho in Cebu at the same occasion.


In so doing, petitioner Litonjua certainly in effect represented that it was taking care of the crewing and other requirements of a vessel chartered by its principal, Fairwind.

Last, but certainly not least, there is the circumstance that extreme hardship would result for the private respondent if petitioner Litonjua, as Philippine agent of the charterer, is not held liable to private respondent upon the contract of employment.

9.3 Effect of Charter on Character of Carrier

1) Planters Products v. Court of Appeals, supra

2) Caltex v. Sulpicio Lines

Facts:

On December 20, 1987, motor tanker MV Vector, carrying petroleum products of Caltex, collided in the open sea with passenger ship MV Doña Paz, causing the death of all but 25 of the latter’s passengers. Among those who died were Sebastian Canezal and his daughter Corazon Canezal. On March 22, 1988, the board of marine inquiry found that Vector Shipping Corporation was at fault. On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal’s wife and mother respectively, filed with the Regional Trial Court of Manila a complaint for damages arising from breach of contract of carriage against Sulpicio Lines. Sulpicio filed a third-party complaint against Vector and Caltex. The trial court dismissed the complaint against Caltex, but the Court of Appeals included the same in the liability. Hence, Caltex filed this petition.

Issue:

Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a passenger ship?

Held:

First: The charterer has no liability for damages under Philippine Maritime laws.

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

A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ship’s store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship.

Second: MT Vector is a common carrier

The charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyage charter, which retains the character of the vessel as a common carrier. It is imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. A common carrier is a person or corporation whose regular business is to carry passengers or property for all persons who may choose to employ and to remunerate him. 16 MT Vector fits the definition of a common carrier under Article 1732 of the Civil Code.

The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety of the passengers, especially because with the modern development of science and invention, transportation has become more rapid, more


complicated and somehow more hazardous. For these reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness.

Third: Is Caltex liable for damages under the Civil Code?

The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with all legal requirements. The duty rests upon the common carrier simply for being engaged in "public service." The relationship between the parties in this case is governed by special laws. Because of the implied warranty of seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire into the vessel’s seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in general is concerned. Such a practice would be an absurdity in a business where time is always of the essence. Considering the nature of transportation business, passengers and shippers alike customarily presume that common carriers possess all the legal requisites in its operation.

9.4 Persons Who Make Charter

9.5 Requisites

9.6 Freight

9.7 Demurrage and Deadfreight

9.8 Rights and Obligations

9.9 Effect of Bill of Lading

9.10 Code of Commerce Provisions

CHAPTER 10: LOAN ON RESPONDENTIA and BOTTOMRY (Articles 719-736)

CHAPTER 11: AVERAGES

11.1 Proof and Liquidation of Averages (Articles 846-869)

CHAPTER 12: COLLISIONS

1) Williams v. Yatco

2) Smith and Bell Co. v. Court of Appeals

3) National Development Corporation v. Court of Appeals, supra

4) Mecenas v. Court of Appeals, supra

Facts:

M/T "Tacloban City," a barge-type oil tanker owned by the Philippine National Oil Company (PNOC) and operated by the PNOC Shipping and Transport Corporation (PNOC Shipping), having unloaded its cargo, left for Negros Occidental when it collided with a carrier ship named Don Juan. When the collision occurred, the sea was calm, the weather fair and visibility good. As a result of this collision, the M/V "Don Juan" sank and hundreds of its passengers perished. Among the ill-fated passengers were the parents of petitioners, the spouses Perfecto Mecenas and Sofia Mecenas, whose bodies were never found despite intensive search by petitioners.

Issue: Whether or not the respondents were negligent?

Held:

Yes, the behaviour of the captain of the "Don Juan" in tills instance-playing mahjong "before and up to the time of collision constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and welfare of at least seven hundred fifty (750) passengers had been entrusted. Whether or not Capt. Santisteban was "off-duty" or "on-duty" at or around the time of actual collision is quite immaterial; there is, both realistically speaking and in contemplation of law, no such thing as "off-duty" hours for the master of a vessel at sea that is a common carrier upon whom the law imposes the duty of extraordinary diligence.

The record shows that the "Don Juan" sank within ten (10) to fifteen (15) minutes after initial contact with the "Tacloban City. While the failure of Capt. Santisteban to supervise his officers and crew in the process of abandoning the ship and his failure to avail


of measures to prevent the too rapid sinking of his vessel after collision, did not cause the collision by themselves, such failures doubtless contributed materially to the consequent loss of life and, moreover, were indicative of the kind and level of diligence exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to actual contact between the two (2) vessels. The officer-on-watch in the "Don Juan" admitted that he had failed to inform Capt. Santisteban not only of the "imminent danger of collision" but even of "the actual collision itself " There is also evidence that the "Don Juan" was carrying more passengers than she had been certified as allowed to carry.

Under these circumstances, a presumption of gross negligence on the part of the vessel (her officers and crew) and of its ship-owner arises.

5) Aboitiz Shipping v. General Accident Fire and Life Insurance Corporation

FACTS: Before this Court are three consolidated petitions involving the issue of whether the real and hypothecary doctrine may be invoked by the shipowner in relation to the loss of cargoes occasioned by the sinking of M/V P. Aboitiz. Respondent Malayan Insurance Company, Inc. filed five separate actions against several defendants for the collection of the amounts of the cargoes allegedly paid by Malayan under various marine cargo policies issued to the insurance claimants. In the five consolidated cases, Malayan sought the recovery of amounts totaling P639,862.02. Aboitiz raised the defenses that M/V P. Aboitiz was seaworthy, that it exercised extraordinary diligence and that the loss was caused by a fortuitous event. ISSUE: WHETHER OR NOT THE REAL AND HYPOTHECARY DOCTRINE MAY BE INVOKED BY THE SHIPOWNER TO LIMIT ITS LIABILITY. HELD: The principal issue common to all three petitions is whether Aboitiz can avail limited liability on the basis of the real and hypothecary doctrine of maritime law. Corollary to this issue is the determination of actual negligence on the part of Aboitiz. In the 1993 GAFLAC case, the Court applied the limited liability rule in favor of Aboitiz based on the trial court's finding therein that Aboitiz was not negligent. The Court explained, thus: x x x In the few instances when the matter was considered by this Court, we have been consistent in this jurisdiction in holding that the only time the Limited Liability Rule

does not apply is when there is an actual finding of negligence on the part of the vessel owner or agent. A careful reading of the decision rendered by the trial court in Civil Case No. 144425 as well as the entirety of the records in the instant case will show that there has been no actual finding of negligence on the part of petitioner. 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. "No vessel, no liability" expresses in a nutshell the limited liability rule. In this jurisdiction, the limited liability rule is embodied in Articles 587, 590 and 837 under Book III of the Code of Commerce, thus: Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipment and thefreight it may have earned during the voyage. Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their interests in the common fund for the results of the acts of the captain referred to in Art. 587. Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him.


Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall be understood as limited to the value of the vessel with all its appurtenances and freightage served during the voyage. 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. 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. However, despite the total loss of the vessel, its insurance answers for the damages for which a shipowner or agent may be held liable. Nonetheless, there are exceptional circumstances wherein the ship agent could still be held answerable despite the abandonment of the vessel, as where the loss or injury was due to the fault of the shipowner and the captain. 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. 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. There is a categorical finding of negligence on the part of Aboitiz. For instance, the captain of M/V P. Aboitiz was negligent in failing to take a course of action that would prevent the vessel from sailing into the typhoon. Aboitiz failed to show that it had exercised the required extraordinary diligence in steering the vessel before, during and after the storm.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. 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. The instant petitions cannot be spared from the application of the exception to the doctrine of limited liability in view of the unanimous findings of the courts below that both Aboitiz and the crew failed to ensure the seaworthiness of the M/V P. Aboitiz. WHEREFORE, the petitions are DENIED.

6) Philippine American General Insurance Co. v. Court of Appeals

Parties:

Coca-Cola Bottlers Philippines

Felman Shipping Lines: Owner of MV Asilda

Philippine American General Insurance Co. Inc (Philamgen)

Facts:

Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a vessel owned and operated by respondent Felman Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transported from Zamboanga City to Cebu City for consignee Coca-Cola Bottlers Philippines, Inc., Cebu.

The shipment was insured with petitioner

Philippine American General Insurance Co., Inc. "MV Asilda" left the port of Zamboanga in fine weather at eight o'clock in the evening and at around eight forty-five the following morning, the vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.

The consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with respondent FELMAN for recovery of damages it sustained as a result of the loss of its softdrink bottles that sank with "MV Asilda." Respondent denied the claim thus prompting the consignee to file an insurance claim with PHILAMGEN which paid its claim of P755,250.00.

Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which disclaimed any liability for the loss.

In its complaint PHILAMGEN alleged that the sinking and total loss of "MV Asilda" and its cargo were due to the vessel's unseaworthiness as she was put to sea in an unstable condition. It further alleged that the vessel was improperly manned and that its officers were grossly negligent in failing to take appropriate measures to proceed to a nearby port or beach after the vessel started to list.

Issue:


Whether "MV Asilda" was seaworthy when it left the port of Zamboanga.

Trial court ruling:

The trial court rendered judgment in favor of FELMAN.

It ruled that "MV Asilda" was seaworthy

when it left the port of Zamboanga as confirmed by certificates issued by the Philippine Coast Guard and the shipowner's surveyor attesting to its seaworthiness. Thus the loss of the vessel and its entire shipment could only be attributed to either a fortuitous event, in which case, no liability should attach unless there was a stipulation to the contrary, or to the negligence of the captain and his crew.

Held:

"MV Asilda" was unseaworthy when it left the port of Zamboanga. In a joint statement, the captain as well as the chief mate of the vessel confirmed that the weather was fine when they left the port of Zamboanga. According to them, the vessel was carrying 7,500 cases of 1-liter Coca-Cola softdrink bottles, 300 sacks of seaweeds, 200 empty CO2 cylinders and an undetermined quantity of empty boxes for fresh eggs. They loaded the empty boxes for eggs and about 500 cases of Coca-Cola bottles on deck.

The captain was informed him that the vessel had hit a floating log. At that time he noticed that the weather had deteriorated with strong southeast winds inducing big waves. After thirty minutes he observed that the vessel was listing slightly to starboard and would not correct itself despite the heavy rolling and pitching. He then ordered his crew to shift the cargo from starboard to portside until the vessel was balanced. At about seven o'clock in the morning, the master of the vessel stopped the engine because the vessel was listing dangerously to portside. He ordered his crew to shift the cargo back to starboard. The shifting of cargo took about an hour afterwhich he rang the engine room to resume full speed.

At around eight forty-five, the vessel suddenly listed to portside and before the captain could decide on his next move, some of the cargo on deck were thrown overboard and seawater entered the engine room and cargo holds of the vessel. At that instance, the master of the vessel ordered his crew to abandon ship. Shortly thereafter, "MV Asilda" capsized and sank. He ascribed the sinking to the entry of seawater through a hole in the hull caused by the vessel's collision with a partially submerged log.

The proximate cause of the sinking of "MV Asilda" was its being top-heavy. It is settled that carrying a deck cargo raises the presumption of unseaworthiness unless it can be shown that the deck cargo will not interfere with the proper management of the ship. However, in this case it was established that "MV Asilda" was not designed to carry substantial amount of cargo on deck. The inordinate loading of cargo deck resulted in the decrease of the vessel's metacentric height thus making it unstable. The strong winds and waves encountered by the vessel are but the ordinary vicissitudes of a sea voyage and as such merely contributed to its already unstable and unseaworthy condition.

CHAPTER 13: ARRIVAL UNDER STRESS and SHIPWRECKS

CHAPTER 14: SALVAGE

1) Erlanger v. Swedish East Asiatic

2) Barrios v. Go Thong

FACTS At about 8pm on May 1, 1958, petitioner Honorio Barrios, captain of MV Henry I- vessel owned by William Lines Inc., received a distress signal or S.O.S. from MV Don Alfredo owned and operated by respondent Carlos A. Go Thong. The MV Henry I, therefore, altered its course and headed to MV Don Alfredo which was experiencing engine failure and the loss of her propeller. The MV Don Alfredo was tied to MV Henry I and in tow proceeded in the direction of Dumaguete City and later the tow lines were released upon the arrival of the MV Lux, sister ship of MV Don Alfredo. Petitioner Captain claimed for remuneration for the salvage of the ship. ISSUE W/N the service rendered by petitioner to respondent constituted salvage or towage and whether petitioner may recover from defendant compensation for such service? Towage and no compensation.


RULING Petitioner bases his claim upon the provisions of the Salvage Law wherein it is provided that a ship which is lost or abandoned at sea is considered a derelict and therefore a proper subject of salvage. SC said that MV Don Alfredo was not a lost ship, nor was it abandoned. This is gleaned from the following facts: -it did not drift too far from the place where it was at the time it had an engine failure -the weather was fair -there was no danger of the vessel capsizing -the vessel had a motor launch and two lifeboats -the distress signal was not authorized by the captain, rather what was intended for the radio operator to convey was a general call. No remuneration is due to the captain. Salvage has been defined as “the compensation allowed to persons by whose assistance a ship or her cargo has been saved, in whole or in part, from impending peril in the sea, or in recovering such property from actual loss, as in case of shipwreck, derelict, or recapture.” To be a valid salvage claim there must be : (1) a marine peril (2) service voluntarily rendered when not required as an existing duty or from a special contract, and (3) success in whole or in part, or that the service rendered contributed to such success. In the case at had, there was no marine peril. With regard to compensation, since the contract created is one of towage, then only the owner of the towing vessel, to the exclusion of the crew of the said vessel, may be entitled to remuneration. However, as the vessel-owner William Lines Inc. had expressly waived its claim for compensation, it is clear the captain is not entitled to payment for the towage service.

CHAPTER 15: CARRIAGE OF GOODS BY SEA ACT (COGSA)

1) Elser Inc. v. Court of Appeals

2) Ang v. Compania Maritima

3) Dole Philippines v. Maritime Co. of the Phil, supra

4) Sea Land Services Inc. v. IAC, supra

PARTIES: Paulino Cue- consignee FACTS: On or about January 8, 1981, Sea-Land Service, Inc., a foreign shipping and forwarding company licensed to do business in the Philippines, received from Seaborne Trading Company in Oakland, California a shipment consigned to Sen Hiap Hing the business name used by Paulino Cue in the wholesale and retail trade located on Borromeo and Plaridel Streets, Cebu city. The shipper not having declared the value of the shipment, no value was indicated in the bill of lading. The shipment arrived in Manila on February 12, 1981 and there discharged in Container no. 310996 into the custody of the arrastre contractor and the customs and port authorities. However, after the shipment has been transferred, it was stolen by pilferers and has never been recovered. Paulino Cue, the consignee, made a formal claim upon Sea-Lan for the value of the lost shipment allegedly amounting to P179,643.48. Sea-Land offered to settle for P30,600.oo asserting that said amount represented its maximum liability for the loss of the shipment under the package limitation clause in the covering bill of lading. LOWER COURT RULING: The Court of First Instance of Cebu rendered judgment in favor of Cue, sentencing Sea-Land to pay him P186,048.00 representing the value of the lost cargo. Sea-Land appealed to the Intermediate Appellate Court but the Court affirmed the decision of the Trial Court. ISSUE: WON the consignee of seaborne freight is bound by stipulations in the covering bill of lading limiting to a fixed amount the liability of the carrier for loss or damage to the cargo where its value is not declared in the bill. HELD: Since the liability of a common carrier for loss or damage to goods transported by it under a contract of carriage is governed by the laws of the country of destination and the goods in question were shipped from the United States to the Philippines, the liability of petitioner is governed primarily by the Civil Code. The Court ruled that “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.

ART. 1749 A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of


lading, unless the shipper or owner declares a greater value, is binding.

ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.

That said stipulation is just and reasonable is arguable from the fact that it echoes Article 1750 itself in providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to questioning the justness and fairness of the law itself, and this, the private respondent does not pretend to do. There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and inserts it into said contract or bill.

5) Maritime Agencies v. Court of Appeals

Facts: Transcontinental Fertilizer Company of London chartered from Hongkong the motor vessel named “Hongkong Island” for the shipment of 8073.35 MT (gross) bagged urea from Novorossisk, Odessa, USSR, to the Philippines, the parties signing for this purpose a UniformGeneral Charter dated 9 August 1979. Of the total shipment, 5,400.04 MT was for the account of Atlas Fertilizer Company as consignee, 3,400.04 to be discharged in Manila and the remaining2,000 MT in Cebu. The goods were insured by the consignee with the Union Insurance Societyof Canton, Ltd. for P6,779,214.00 against all risks. Maritime Agencies & Services, Inc. wasappointed as the charterer’s agent and Macondray Company, Inc. as the owner’s agent. Thevessel arrived in Manila on 3 October 1979, and unloaded part of the consignee’s goods, then proceeded to Cebu on 19 October 1979, to discharge the rest of the cargo. On 31 October 1979,the consignee filed a formal claim against Maritime, copy furnished Macondray, for the amount of P87,163.54, representing C & F value of the 1,383 shortlanded bags. On 12 January 1980, theconsignee

filed another formal claim, this time against Viva Customs Brokerage, for the amountof P36,030.23, representing the value of 574 bags of net unrecovered spillage. These claimshaving been rejected, the consignee then went to Union, which on demand paid the totalindemnity of P113,123.86 pursuant to the insurance contract.As subrogee of the consignee, Union then filed on 19 September 1980, a complaint for reimbursement of this amount, with legal interest and attorney’s fees, against Hongkong IslandCompany, Ltd., Maritime Agencies & Services, Inc. and/or Viva Customs Brokerage. On 20April 1981, the complaint was amended to drop Viva and implead Macondray Company, Inc. asa new defendant. On 4 January 1984, after trial, the trial court rendered judgment, ordering (a)Hongkong Island Co., Ltd., and its local agent Macondray & Co., Inc. to pay Union the sum of P87,1 63.54 plus 12% interest from 20 April 1981 until the whole amount is fully paid,P1,000.00 as attorney’s fees and to pay ½ of the costs; and (b) Maritime Agencies & Services,Inc., to pay Union the sum of P36,030.23, plus 12% interest from 20 April 1981 until the wholeamount is fully paid, P600.00 as attorney’s fees and to pay ½ of the costs.Maritime Agencies & Services appealed the decision to the Court of Appeals, which rendered adecision on 28 November 1986, modifying the decision appeal from, finding the charterer Transcontinental Fertilizer Co., Ltd. represented by its agent Maritime Agencies & Services, Inc.liable for the amount of P87,163.54 plus interest at 12% plus attorney’s fees of P1,000.00.Hongkong Island Cos. Ltd. represented by Macondray Co., Inc. were accordingly exempted fromany liability. Maritime and Union filed separate motions for reconsideration which were bothdenied. Hence, the petitions.These two cases were consolidated and given due course, the parties being required to submitsimultaneous memoranda. All complied, including Hongkong Island Company, Ltd., andMacondray Company, Inc., although they pointed out that they were not involved in the petitions. The Supreme Court set aside the decision of the appellate court, and reinstated that of the trial court as modified; and further holding that the parties shall bear their respective costs. 1. Factual Findings of the trial court

In his decision dated 4 January 1984, Judge Artemon de Luna of the Regional Trial Court of Manila held that the Court, on the basis of the evidence, finds nothing to disprove the finding of the marine and cargo surveyors that of the 66,390 bags of urea fertilizer, 65,547 bags were“discharged ex-vessel” and there


were shortlanded” “1,383 bags,” valued at P87,163.54. Thissum should be the principal and primary liability and responsibility of the carrying vessel. Under the contract for the transportation of goods, the vessel’s responsibility commence upon the actualdelivery to, and receipt by the carrier or its authorized agent, until its final discharge at the portof Manila.

6) Mayer Steel Pipe v. Court of Appeals


MAYER STEEL PIPE CORPORATION- petitioner

HONGKONG GOVERNMENT SUPPLIES DEPARTMENT-petitioner

COURT OF APPEALS, SOUTH SEA SURETY AND INSURANCE CO., INC. and the CHARTER INSURANCE CORPORATION, respondents.

Facts:

Hong Kong Government Supplies Department contracted Mayer Steel Pipe Corporation to manufacture and supply various steel pipes and fittings. Prior to the shipping, Mayer insured these pipes and fittings against all risks with South Sea Surety and Insurance Co., Inc. and Charter Insurance Corp., with Industrial Inspection Inc. appointed as third-party inspector. After examining the pipes and fittings, Industrial Inspection certified that they are in good order condition. However, when the goods reached Hong Kong, it was discovered that a substantial portion thereof was damaged. The trial court found in favor of the insured. However, when the case was elevated to the CA, it set aside the decision of the trial court and dismissed the complaint on the ground of prescription. It held that the action was barred under Sec. 3(6) of the Carriage of Goods by Sea Act (COGSA) since it was filed only on April 17, 1986, more than two years from the time the goods were unloaded from the vessel.

Issue:

W/N Section 3(6) of the Carriage of Goods by Sea also applies to insurer.

Held:

NO. Petition is granted. CA reversed. RTC reinstated

Sec. 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered. Under this provision, only the carrier’s liability is extinguished if no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer’s liability is based not on the contract of carriage but on the contract of insurance. An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify another for loss or damage which he may suffer from a specified peril. An “all risks” insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the insured. Thus, when private respondents issued the “all risks” policies to Mayer, they bound themselves to indemnify the latter in case of loss or damage to the goods insured. Such obligation prescribes in ten years, in accordance with Article 1144 of the New Civil Code.

PART III: PUBLIC UTILITIES

CHAPTER 16: PUBLIC SERVICE REGULATIONS

16.1 1987 Constitution, Art XII

1) Luzon Stevedoring v. Public Service Commission

(This case is almost the same as the De Guzman case – first case sa syllabus)

Facts: Respondents are corporations mainly engaged in the stevedoring or lighterage and harbor towage business. At the same time, they are engaged in interisland service which consists of hauling cargoes such as sugar, oil, fertilizer and other commercial commodities which are loaded in their barges and towed by their tugboats from Manila to various points in the Visayan Islands, particularly in the Provinces of Negros Occidental and Capiz, and from said places to Manila. For this service respondents


charge freightage on a unit price with rates ranging from P0.50 to P0.62 1/2 per bag or picul of sugar loaded or on a unit price per ton in the case of fertilizer or sand. There is no fixed route in the transportation of these cargoes, the same being left at the indication of the owner or shipper of the goods. The barge and the tugboats are manned by the crew of respondents and, in case of damage to the goods in transit caused by the negligence of said crews, respondents are liable therefor. The service for which respondents charge freightage covers the hauling or carriage of the goods from the point of embarkation to the point of disembarkation either in Manila or in any point in the Visayan Islands, as the case may be.

The Philippine Shipowners' Association filed a complaint with the PSC charging that petitioners were engaged in the transportation of cargo in the Philippines for hire or compensation without authority or approval of the Commission. They have adopted, filed and collected freight charges at the rate of P0.60 per bag or picul, particularly sugar, loaded and transported in their lighters and towed by their tugboats between different points in the Province of Negros Occidental and Manila, which said rates resulted in ruinous competition with complainant.

Thereafter, the Public Service Commission restrained petitioner from further operating their to transport goods for hire or compensation between points in the Philippines until the rates they propose to charge are approved by this Commission.

Issue: WON petitioners are covered under the term public service?

Held: Yes.

Law: Section 13(b) of the Public Service Law (Commonwealth Act No. 146) defines public service:

"The term 'public service' includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes any common carrier, railroad, street railway, traction railway, subway, motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries, and small water craft, engaged in the transportation of passengers and freight, shipyard, marine railway, marine repair shop, warehouse, wharf or dock, ice plant, ice-refrigeretion plant, canal, irrigation system, sewerage, gas, electric light, heat and power, water supply and power, petroleum, sewerage system, telephone, wire or wireless telegraph system and broadcasting radio stations."

It is not necessary, under this definition, that one holds himself out as serving or willing to serve the public in order to be considered public service. It can scarcely be denied that the contracts between the owners of the barges and the owners of the cargo at bar were ordinary contracts of transportation and not of lease. Petitioners' watercraft was manned entirely by crews in their employ and payroll, and the operation of the said craft was under their direction and control, the customers assuming no responsibility for the goods handled on the barges. The great preponderance of the evidence contradicts the assertion that there was any physical or symbolic conveyance of the possession of the tugboats and barges to the shippers. Whether the agreements were written or verbal, the manner of payment of freight charges, the question who loaded and unloaded the cargo, the propriety of the admission of certain receipts in evidence, etc., to all of which the parties


have given much attention these are matters of form which do not alter the essential nature of the relationship of the parties to the transactions as revealed by the fundamental facts of record. It is contended that "if the Public Service Act were to be construed in such manner as to include private lease contracts, said law would be unconstitutional," seemingly implying that, to prevent the law from being in contravention of the Constitution, it should be so read as to embrace only those persons and companies that are in fact engaged in public service" with its corresponding qualification of an offer to serve indiscriminately the public." It has been already shown that the petitioners' lighters and tugboats were not leased, but used to carry goods for compensation at a fixed rate for a fixed weight. At the very least, they were hired, hired in the sense that the shippers did not have direction, control, and maintenance thereof, which is a characteristic feature of lease.

Just as the legislature may not "declare a company or enterprise to be a public utility when it is not inherently such," a public utility may not evade control and supervision of its operation by the government by selecting its customers under the guise of private transactions.

2) San Pablo v. Pantranco

FACTS: The Pantranco South Express, Inc.,

PANTRANCO, is a domestic corporation engaged in the land transportation business with PUB service for passengers and freight and various certificates for public conveniences CPC to operate passenger buses from Metro Manila to Bicol Region and Eastern Samar. On March 27,1980 PANTRANCO through its counsel wrote to Maritime Industry Authority (MARINA) requesting authority to lease/purchase a vessel named M/V "Black Double" "to be used for its project to operate a ferryboat service from Matnog, Sorsogon and Allen, Samar that will provide service to company buses and freight trucks that have to cross San Bernardo Strait. In a reply of April 29,1981 PANTRANCO was informed by MARINA that it cannot

give due course to the request on the basis of the following observations: 1. The Matnog-Allen run is adequately serviced by Cardinal Shipping Corp. and Epitacio San Pablo; MARINA policies on interisland shipping restrict the entry of new operators to Liner trade routes where these are adequately serviced by existing/authorized operators; 2. Market conditions in the proposed route cannot support the entry of additional tonnage; vessel acquisitions intended for operations therein are necessarily limited to those intended for replacement purposes only.

PANTRANCO nevertheless acquired the vessel MV "Black Double" on May 27, 1981 for P3 Million pesos. It wrote the Chairman of the Board of Transportation (BOT) that it proposes to operate a ferry service to carry its passenger buses and freight trucks between Allen and Matnog in connection with its trips to Tacloban City. It claims that it can operate a ferry service in connection with its franchise for bus operation in the highway from Pasay City to Tacloban City "for the purpose of continuing the highway, which is interrupted by a small body of water, the said proposed ferry operation is merely a necessary and incidental service to its main service and obligation of transporting its passengers from Pasay City to Tacloban City. Such being the case, there is no need to obtain a separate certificate for public convenience to operate a ferry service between Allen and Matnog to cater exclusively to its passenger buses and freight trucks.

Without awaiting action on its request, it started to operate said ferry service. Acting Chairman Jose C. Campos, Jr. of BOT ordered PANTRANCO not to operate its vessel until the application for hearing and enjoined them from operating the MV "Black Double" otherwise it will be cited to show cause why its CPC should not be suspended or the pending application denied. Epitacio San Pablo (now represented by his heirs) and Cardinal Shipping Corporation, franchise holders of the ferry service in this area interposed their opposition. BOT’s Decision:

Let the original Certificate of public convenience granted to Pantranco South Express Co., Inc. be amended to embody the grant of authority to operate a private ferry boat service as one of the conditions for the grant of the certificate subject to the


condition that the ferryboat shall be for the exclusive use of Pantranco buses, its passengers and freight trucks, and should it offer itself to the public for hire other than its own passengers, it must apply for a separate certificate of public convenience as a public ferry boat service, separate and distinct from its land transport systems. ISSUE:

The corollary issue is whether a land transportation company can be authorized to operate a ferry service or coastwise or interisland shipping service along its authorized route as an incident to its franchise without the need of filing a separate application for the same. HELD:

No. Considering the environmental circumstances of the case, the conveyance of passengers, trucks and cargo from Matnog to Allen is certainly not a ferry boat service but a coastwise or interisland shipping service. Under no circumstance can the sea between Matnog and Allen be considered a continuation of the highway. While a ferry boat service has been considered as a continuation of the highway when crossing rivers or even lakes, which are small body of waters - separating the land, however, when as in this case the two terminals, Matnog and Allen are separated by an open sea it can not be considered as a continuation of the highway. Respondent PANTRANCO should secure a separate CPC for the operation of an interisland or coastwise shipping service in accordance with the provisions of law. Its CPC as a bus transportation cannot be merely amended to include this water service under the guise that it is a mere private ferry service.

The contention of private respondent PANTRANCO that its ferry service operation is as a private carrier, not as a common carrier for its exclusive use in the ferrying of its passenger buses and cargo trucks is absurd. PANTRANCO does not deny that it charges its passengers separately from the charges for the bus trips and issues separate tickets whenever they board the MV "Black Double" that crosses Matnog to Allen, PANTRANCO cannot pretend that in issuing tickets to its passengers it did so as a private carrier and not as a common carrier. The Court does not see any reason why inspite of its amended franchise to operate a private ferry boat service it cannot accept walk-in passengers just for the purpose of crossing the sea between Matnog and Allen. Indeed evidence to this effect has been submitted. Considering that the

authority granted to PANTRANCO is to operate a private ferry, it can still assert that it cannot be held to account as a common carrier towards its passengers and cargo. Such an anomalous situation that will jeopardize the safety and interests of its passengers and the cargo owners cannot be allowed.

Court holds that the water transport service between Matnog and Allen is not a ferry boat service but a coastwise or interisland shipping service. Before private respondent may be issued a franchise or CPC (Certificate of Public Convenience) for the operation of the said service as a common carrier, it must comply with the usual requirements of filing an application, payment of the fees, publication, adducing evidence at a hearing and affording the oppositors the opportunity to be heard, among others, as provided by law. NOTES:

The BOT resolved the issue of whether a ferry service is an extension of the highway and thus is a part of the authority originally granted PANTRANCO in the following manner:

A ferry service, in law, is treated as a continuation of the highway from one side of the water over which passes to the other side for transportation of passengers or of travellers with their teams vehicles and such other property as, they may carry or have with them. It maybe said to be a necessary service of a specially constructed boat to carry passengers and property across rivers or bodies of water from a place in one shore to a point conveniently opposite on the other shore and continuation of the highway making a connection with the thoroughfare at each terminal. It comprises not merely the privilege of transportation but also the use for that purpose of the respective landings with outlets therefrom.

A ferry service maybe a public ferry or a private ferry.

PUBLIC FERRY service is one which all the public have the right to resort to and for which a regular fare is established and the ferryman is a common carrier be inbound to take an who apply and bound to keep his ferry in operation and good repair.

A ferry (PRIVATE) service is mainly for the use of the owner and though he may take pay for ferriage, he does not follow it as a business. His ferry is not open to the public at its demand and he may or may not keep it in operation.


In Javellana this Court recited the following definition of FERRY : -implied the continuation by means of boats, barges, or rafts, of a highway or the connection of highways located on the opposite banks of a stream or other body of water. -necessarily implies transportation for a short distance, almost invariably between two points, which is unrelated to other transportation. -often employed to denote the right or franchise granted by the state or its authorized mandatories to continue by means of boats, an interrupted land highway over the interrupting waters and to charge toll for the use thereof by the public; -as a privilege, a liberty, to take tolls for transporting passengers and goods across a lake or stream or some other body of water, with no essential difference from a bridge franchise except as to the mode of transportation. -a public highway or thoroughfare across a stream of water or river by boat instead of a bridge. -often employed to denote the right or franchise granted by the state or its authorized mandatories to continue by means of boats, an interrupted land highway over the interrupting waters and to charge toll for the use thereof by the public. -is service necessity for common good to reach point across a stream lagoon, lake, or bay. -means a place of transit across a river or arm of the sea, but in law it is treated as a franchise; and -as the exclusive right to carry passengers across a river, or arm of the sea, from one vill to another, or to connect a continuous line of road leading from township or vill to another. In Javellana, made clear distinction between a ferry service and coastwise or interisland service by holding that:

FERRY means service either by barges or rafts, even by motor or steam vessels, between the banks of a river or stream to continue the highway which is interrupted by the body of water, or in some cases to connect two points on opposite shores of an arm of the sea such as bay or lake which does not involve too great a distance or too long a time to navigate. But where the line or service involves crossing the open

sea like the body of water between the province of Batangas and the island of Mindoro which the oppositors describe thus "the intervening waters between Calapan and Batangas are wide and dangerous with big waves where small boat barge, or raft are not adapted to the service," then it is more reasonable to regard said line or service as more properly belonging to INTERISLAND OR COASTWISE TRADE.

3) Manzanal v. Ausejo

4) Cogeo-Cubao Operator’s and Driver’s Association v. Court of Appeals


PETITIONER: registered as a non-stock, non-profit organization with the Securities and Exchange Commission with the main purpose of representing for whatever contract and/or agreement it will have regarding the ownership of units, and the like, of the members of the Association

PRIVATE RESPONDENT: owner of a certificate of public convenience to operate a jeepney service to ply he Cogeo-Cubao route

FACTS: A certificate of public convenience to operate a jeepney service was ordered to be issued in favor of Lungsod Silangan to ply the Cogeo-Cubao route sometime in 1983. Perturbed by plaintiffs' Board Resolution No. 9 adopting a Bandera' System under which a member of the cooperative is permitted to queue for passenger at the disputed pathway in exchange for the ticket worth twenty pesos, the proceeds of which shall be utilized for Christmas programs of the drivers and other benefits, and on the strength of defendants' registration as a collective body with the Securities and Exchange Commission, defendants-appellants, led by Romeo Oliva decided to form a human barricade on November 11, 1985 and assumed the dispatching of passenger jeepneys. This development as initiated by defendants-appellants gave rise to the suit for damages. Defendant-Association's Answer contained vehement denials to the insinuation of take over and at the same time raised as a defense the circumstance that the organization was formed not to compete with plaintiff-cooperative. It, however, admitted that it is not authorized to transport passengers.


LOWER COURT’S RULING: Trial court rendered a decision in favor of respondent Lungsod Corp. Not satisfied with the decision, petitioner Association appealed with the Court of Appeals. On May 27, 1991, respondent appellate court rendered its decision affirming the findings of the trial court.

ISSUE: petitioner is whether or not the petitioner usurped the property right of the respondent.

HELD: YES. Under the Public Service Law, a certificate of public convenience is an authorization issued by the Public Service Commission for the operation of public services for which no franchise is required by law. certification of public convenience is included in the term "property" in the broad sense of the term. Under the Public Service Law, a certificate of public convenience can be sold by the holder thereof because it has considerable material value and is considered as valuable asset. Hence, insofar as the interest of the State is involved, a certificate of public convenience does not confer upon the holder any proprietary right or interest or franchise in the route covered thereby and in the public highways. However, with respect to other persons and other public utilities, a certificate of public convenience as property, which represents the right and authority to operate its facilities for public service, cannot be taken or interfered with without due process of law. In the case at bar, the trial court found that petitioner association forcibly took over the operation of the jeepney service in the Cogeo-Cubao route without any authorization from the Public Service Commission and in violation of the right of respondent corporation to operate its services in the said route under its certificate of public convenience. No compelling reason exists to justify the reversal of the ruling of the respondent appellate court in the case at bar.

5) KMU Labor Center v. Garcia, supra

Facts: The following memoranda, circulars and/or orders are sought to be nullified by the instant petition, viz:

(a) DOTC Memorandum Order 90-395, dated June 26, 1990 relative to the implementation of a fare range scheme for provincial bus services in the country, allowing provincial bus operators to charge passengers

rates within a range of 15% above and 15% below the LTFRB official rate for a period of one year.

LTFRB Chairman, Fernando, finding the MO not legally feasible submitted a memorandum to DOTC Secretary Orbos as it contravenes the Public Service Act for the following reasons:

i. the rates to be approved should be proposed by public service operators

ii. there should be a publication and notice to concerned or affected parties in the territory affected

iii. a public hearing should be held for the fixing of the rates

The chairman added that to allow bus operators to charge fares 15% above the present LTFRB fares in the wake of the devastation, death and suffering caused by the July 16 earthquake will not be socially warranted and will be politically unsound.

Provincial Bus Operators Association of the Philippines, Inc. (PBOAP) filed an application for an across-the-board fare increase of P0.085 per kilometer. It was opposed by Philippine Consumers Foundation, Inc. and Perla C. Bautista alleging that the proposed rates were exorbitant and unreasonable. The said increase was granted by LTFRB.

(b) DOTC Department Order No.92-587, dated March 30, 1992, defining the policy framework on the regulation of transport services;

Among the salient provisions of which include: “In determining public need, the presumption of need for a service shall be deemed in favor of the applicant. The burden of proving that there is no need for a proposed service shall be with the oppositor(s).”

(c) DOTC Memorandum dated October 8, 1992, laying down rules and procedures to implement Department Order No. 92-587;


(d) LTFRB Memorandum Circular No. 92-009, providing implementing guidelines on the DOTC Department Order No. 92-587; and

(e) LTFRB Order dated March 24, 1994 in Case No. 94-3112.

Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy of the DOTC allowing provincial bus operators to collect plus 20% and minus 25% of the prescribed fare without first having filed a petition for the purpose and without the benefit of a public hearing, announced a fare increase of 20% percent of the existing fares.

Petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares. LTFRB dismissed the petition hence the present one.

Issue: Whether or not the assailed orders/circulars are valid.

Held: While the authority of the DOTC and the LTFRB to issue administrative orders to regulate the transport sector is recognized, the Court found that they committed grave abuse of discretion in issuing DOTC Department Order No. 92-587 and LTFRB Memorandum Circular No. 92-009 promulgating the implementing guidelines on DOTC Department Order No. 92-587, the said administrative issuances being amendatory and violative of the Public Service Act and the Rules of Court.

Fare Range Scheme: The 20% fare increase imposed by PBOAP without the benefit of a petition and a public hearing is null and void and of no force and effect.

Presumed Public Need: A CPC is an authorization granted by the LTFRB for the operation of land transportation services for public use as required by law. Pursuant to Section 16(a) of the Public Service Act, as amended, the following requirements must be met before a CPC may be granted, to wit: (i) the applicant must be a citizen of the Philippines, or a

corporation or co-partnership, association or joint-stock company constituted and organized under the laws of the Philippines, at least 60 % of its stock or paid-up capital must belong entirely to citizens of the Philippines; (ii) the applicant must be financially capable of undertaking the proposed service and meeting the responsibilities incident to its operation; and (iii) the applicant must prove that the operation of the public service proposed and the authorization to do business will promote the public interest in a proper and suitable manner. It is understood that there must be proper notice and hearing before the PSC can exercise its power to issue a CPC.

While adopting the foregoing requisites for the issuance of a CPC, LTFRB Memorandum Circular No. 92-009, Part IV, provides for yet incongruous and contradictory policy guideline on the issuance of a CPC. The guidelines states:

“The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public need for a service shall be deemed in favor of the applicant, while the burden of proving that there is no need for the proposed service shall be the oppositor's.”

By its terms, public convenience or necessity generally means something fitting or suited to the public need. As one of the basic requirements for the grant of a CPC, public convenience and necessity exists when the proposed facility or service meets a reasonable want of the public and supply a need which the existing facilities do not adequately supply. The existence or non-existence of public convenience and necessity is therefore a question of fact that must be established by evidence, real and/or testimonial; empirical data; statistics and such other means necessary, in a public hearing conducted for that purpose. The object and purpose of such procedure, among other things, is to look out for, and protect, the interests of both the public and the existing transport operators.

No grave abuse of discretion however was committed in the issuance of DOTC Memorandum Order No. 90-395 and DOTC Memorandum dated


October 8, 1992, the same being merely internal communications between administrative officers.

6) Tatad v. Garcia

Facts: DOTC planned to construct a light railway transit line along EDSA referred to as EDSA Light Rail Transit III (EDSA LRT III). Then President Aquino, signed into law the Build-Operate-Transfer (BOT) Law. After prequalifying the bidders for the construction of the said transit, it was found that out of all the applicants, only the EDSA LRT Consortium met the requirements. DOTC and respondent EDSA LRT Corporation, Ltd. (a private corporation organized under the laws of HongKong) in substitution of the EDSA LRT Consortium, entered into an "Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" under the terms of the BOT Law.

DOTC sought the approval of the President but the same was denied. Thus, DOTC, represented by Secretary Garcia, and private respondent entered into a supplemental agreement—“Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" so as to clarify their respective rights and responsibilities and to submit Supplemental Agreement to the President.

Petitioners, in their capacity as Senators and taxpayers, question the constitutionality of the two agreements between DOTC and private respondent. They contend that it grants EDSA LRT Corp., Ltd., a foreign corporation, the ownership of EDSA LRT III which is a public utility. Secretary Garcia and private respondent on the other hand, contend that the nationality requirement for public utilities mandated by the Constitution does not apply to private respondent.

Issue: Does the fact that EDSA LRT Corporation, Ltd., a foreign corporation, own the facilities and equipment of the LRT III mean it also own the LRT III as a public utility?

Held: No. What private respondent owns are the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power plant, not a public utility. While a franchise is needed to operate these facilities

to serve the public, they do not by themselves constitute a public utility. As ruled in Iloilo Ice & Cold Storage Co. v. Public Service Board, what constitutes a public utility is not their ownership but their use to serve the public.

In law, there is a clear distinction between the "operation" of a public utility and the ownership of the facilities and equipment used to serve the public. The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof. One can own said facilities without operating them as a public utility, or conversely, one may operate a public utility without owning the facilities used to serve the public. The devotion of property to serve the public may be done by the owner or by the person in control thereof who may not necessarily be the owner thereof.

In the case at bar, private respondent and DOTC agreed that on completion date, private respondent will immediately deliver possession of the LRT system by way of lease for 25 years, during which period DOTC shall operate the same as a common carrier and private respondent shall provide technical maintenance and repair services to DOTC. Clearly, private respondent will not run the light rail vehicles and collect fees from the riding public. It will have no dealings with the public and the public will have no right to demand any services from it. It is DOTC which shall operate the EDSA LRT III. Therefore, private respondent, EDSA LRT Corp., Ltd. does not own EDSA LRT III as a public utility.

7) PAL v. CAB

CAPTER 17: POWERS of the ADMINISTRATIVE AGENCIES

transpo digest pool

Documents

world christian

lanao del

sen hiap hing

belgian overseas

chua yek hong

partially

gp sarmiento

philippine