TRANSPORTATION & PUBLIC SERVICE LAW Prof. Benjamin A. Cabrido Jr.

USJ-R College of Law Chapter 1 GENERAL CONCEPTS IN TRANSPORTATION LAW Contract of Transportation There is contract of transportation where a person obligates himself to transport persons or property from one place to another for a consideration. The contract may therefore involve carriage of passengers or carriage of goods. The person who obligates himself to transport the goods or passengers may be a common carrier or a private carrier. Parties in a contract of carriage Passenger one who travels in a public conveyance by virtue of contract, express or implied, with the carrier as to the payment of fare or that which is accepted as an equivalent thereof (Nueca v. Manila Railroad Co., G.R. 31731-R, Jan. 30, 1968) Common Carrier one that holds itself out as ready to engage in the transportation of goods for hire as a public employment and not as a casual occupation. (De Guzman v. CA, G.R. L-47822, Dec. 22, 1988) Baliwag Transit v. CA, G.R. 80447, Jan. 31, 1989 Facts: The parents of George, who is already of legal age filed a case against Baliwag for breach of contract alleging that because of the negligent manner by its driver, George was thrown off the bus as a result of which the latter sustained multiple serious physical injuries. His parents was seeking reimbursement of their medical expenses and other incidental expenses incurred by them due to hospitalization of George. While the case was pending, George signed a waiver of claim in favor of Baliwags insurer, Fortune Insurance. Ruling: Since the suit is one for breach of contract of carriage, the release of claims executed by Georg, as the injured party, discharging Fortune Insurance and Baliwag from any and all liability is valid. is valid. Significantly, the contact of carriage was actually between George, as the paying passenger, and Baliwag, as the common carrier. x x x x Since the contract may be violated only by the parties thereto, as against each other, in an action upon that contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said contract. In the absence of any contract of carriage between Baliwag and Georges parents, the latter are not real parties in interest in an action for breach of that contract. Parties in Carriage of Goods Shipper is the person who delivers the goods to the carrier for transportation. He is the person who pays the consideration or on whose behalf payment is made. Consignee is the person to whom the goods are to be delivered. The consignee may be the shipper himself or a third person who is not actually party to the contract. Carrier (Ibid) Everett Steamship Corp. v. CA G.R. 122494, Oct. 8, 1998

Facts: Hernandez Trading imported three crates of bus spare parts from Japan. The crates were shipped onboard "ADELFAEVERETTE," a vessel owned by petitioner's principal, Everett Orient Lines. Upon arrival at the port of Manila, it was discovered that one of the crates was missing. The loss was confirmed and admitted by Everett. .. However, Everett offered to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability of petitioner. Hernandez rejected. The trial found in favor of Hernandez. On appeal, Everett argued that consent of the consignee to the terms and conditions of the bill of lading is necessary to make such stipulations binding upon it. Ruling: When Hernandez formally claimed reimbursement for the missing goods from Everett and subsequently filed a case against the it based on the very same bill of lading, it accepted the provisions of the contract and thereby made itself a party thereto, or at least has come to court to enforce it. However, the liability of the carrier under the limited liability clause stands, which is limited to One Hundred Thousand (Y100,000.00) Yen. Perfection of Contract involving Carriage In General If contract to carry, i.e. an agreement to carry the passenger at some future date, perfection takes place upon mere consent since such contract is consensual in nature. If contract of carriage, which is a real contract, perfection takes place when the carrier is actually used and the latter has assumed its obligation as a carrier. Specific Perfections of Contract of Carriage: AIRCRAFT If contract to carry, there is perfection even if no tickets have been issued provided there was meeting of minds with respect to the subject matter and the consideration. If contract of carriage, there is perfection if it was established that the passenger had CHECKED IN at the departure counter, passed through customs and immigration, boarded the shuttle bus and proceeded to the ramp of the aircraft. Specific Perfections of Contract of Carriage: BUSES, JEEPNEYS, STREET CARS Once the bus or jeepney stops, it is in effect making a continuous offer to the passengers. Hence, it is the duty of the driver to stop their conveyances for a reasonable length of time in order to afford passengers an opportunity to board and enter. If passenger is injured upon boarding, liability based on contract of carriage already attaches to the common carrier since the passenger was deemed to be accepting the offer when he attempted to board. The contract is perfected from that precise moment. Specific Perfections of Contract of Carriage: TRAINS

Perfection takes place when a person, with bona fide intention to use the facilities of the carrier and possessing sufficient fare with which to pay for his passage, has presented himself to the carrier for transportation in the place and manner that he will be transported. Where a person has already purchased a LRT token and while waiting on the platform designated for boarding fell thereon and hit by the train, he was deemed a passenger. British Airways v. CA, G.R. 92288, Feb. 9, 1993 Facts: On two occasions, private respondent recruitment agency was not able to send its workers to Saudi Arabia despite the fact that its principal there had already purchased pre-paid tickets because petitioners computers broke down. Private respondent thereafter filed a case on breach of contract of carriage. Petitioner argued that there was no perfected contract. Ruling: Petitioner's repeated failures to transport private respondent's workers in its flight despite confirmed booking of said workers clearly constitutes breach of contract and bad faith on its part. There is no dispute as to the Petitioners consent to the said contract "to carry" its contract workers from Manila to Jeddah. The appellant's consent thereto, on the other hand, was manifested by its acceptance of the PTA or prepaid ticket advice that ROLACO Engineering has prepaid the airfares of the Petitioner's contract workers advising the appellant that it must transport the contract workers on or before the end of March, 1981 and the other batch in June, 1981. Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage imposing reciprocal obligations on both parties. Common Carrier Defined Art. 1732. Common carriers are persons, corporation, firms or associations engaged in the business of carrying or transporting passengers or good or both by land, water, or air, for compensation, offering their services to the public. A common carrier is also defined as one that holds itself out as ready to engage in the transportation of goods for hire as a public employment and not as a casual occupation, (De Guzman v. CA, G.R. L-47822, Dec. 22, 1988) Concept of Common Carrier analogous to Public Service Public Service includes every person that now or hereafter may own, operate, manage, or control int he Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental. 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. ..

Whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft. Engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. Sorita v. Public Service Commission, G.R. L-20965, Oct. 29, 1966 Held: In drawing the line between "steamboats, motorships, and steamship lines" on one side and pontines, ferries, and water crafts" on the other, Congress apparently means to accept the view that "boat, craft and watercraft" are usually applied to small vessels, while larger vessels are usually referred to by the terms "steamer, steamship or vessel" Test in determining whether a party is a common carrier of goods He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation He must undertake to carry goods of the kind to which his business is confined. He must undertake to carry by the method by which his business is conducted and over his established roads. .. The transportation must be for hire. [First Philippine Industrial Corp. v. CA, G.R. 125948, Dec. 29, 1998] Provided it has space, for all who opt to avail themselves of its transportation service for a fee [National Steel Corp. v. CA, G.R. No. 112287, Dec. 12, 1997, quoting Mendoza v. PAL, 90 Phil. 836] Common Carrier: Basic Rules STILL A COMMON CARRIER: Even if hauling is only ancillary. Even if clientele is limited. Even if it has no fixed and publicly known route, maintains no terminals and issues not tickets. Even if means transportation is not through motor vehicle.

Ancillary Activity Immaterial Art. 1732 makes no distinction between one whose principal business activity is carrying of persons or goods or both, and one who does such carrying only as an ancillary, nor does it make distinctions between one who offers the service to the general public or a narrow segment of the general population. Therefore, a party who back-hauled goods for other merchants from Manila to Pangasinan, even when such activity was only periodical or occasional and was not its principal line of business would be subject to the responsibilities and obligations of a common carrier. [See De Guzman v. CA, G.R. L-47822, Dec. 22, 1988] Limited Clientele Not a Defense Facts: Petitioner entered into a contract with SMC for the transfer of paper and kraft board from the port area to SMCs warehouse. Held: She is still a common carrier although she does not indiscriminately hold her services out to the public but offers the same to select parties with whom she may contract in the conduct of her business. [Virgines Calvo v. UCPB General Insurance Co., G.R. 148496, Mar. 19, 2002] Facts: Respondent shipping company transported the 75,000bags of cement to Petitioner in its barge. The bags of cement perished after its barge sank while being towed by a tug boat. Held: Respondent is a common carrier because it was engaged in the business of carrying goods for others for a fee. The regularity of its activities in the area indicates more than just a casual activity on its part. Neither can the concept of a common carrier change merely because individual contracts are executed or entered into with the patrons of the carrier. [Phil. American General Insurance Co., et al. v. PKS ShippingCo., G.R. 149038, Apr. 9, 2003] No fixed route, No terminal, No Ticket issued also not a Defense Facts: Petitioner is involved in the business of carrying goods through its barges. It has no fixed and publicly known route, maintains no terminals, and issues no tickets. Held: Petitioner is still a common carrier because its principal business is that of lighterage and drayage and it offers its barges to the public for carrying or transporting by water for compensation. [Asia Lighterage and Shipping, Inc. v. CA, G.R. 147246, Aug. 19, 2003] Drayage service is usually provided by a national trucking/shipping company or an International shipment brokerage firm in addition to the transportation of the freight to and from the exhibit site. Drayage service provides for: -Completing inbound carrier's receiving documents;

-Unloading and delivery of the goods to your booth/stand space from the receiving dock; -Storing of empty cartons/crates and extra products at aon/near-site warehouse; -Pickup of the goods from your booth/stand space to the receiving dock and loading back into the carrier; or -Completing outbound carrier's shipping documents. Means used in transporting not material [First Philippine Industrial Corp. v. CA, G.R. 147246, Aug. 19, Issue: Are pipeline operators common carriers as to subject them to business taxes on common carriers? Held: Yes. The Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the US, oil pipe line operators are considered common carriers. Also under the Petroleum Act of the Philippines (RA 387). Effect when Common Carrier enters into a charter party If only by contract of affreightment, whether voyage or time charter, it remains a common carrier. If by bareboat or demise charter, a common carrier is transformed into a private carrier. Planters Products Inc. v. CA, G.R. 101503, Sept. 15, 1993 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. Common Carrier v. Private Carrier (National Steel Corp. v. CA, supra) The true nature of a common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its transportation service for a fee. As a general rule, private carriage is undertaken by special agreement and carrier does not hold himself out to carry goods for the general public. In private carriage, the rights and obligations of parties, including liabilities for damage to cargo, are determined primarily by stipulations in their contract of carriage or charter party (demise or bareboat. In such case, the burden of proof is on the other party to show that the private carrier was responsible for the loss of, or injury to the cargo. FGU Insurance v. G.P. Sarmiento Trucking, G.R. 141910, Aug. 6, 2002 Facts:

 GPS, as the exclusive hauler of Conception Industries, undertook to deliver thirty (30) units of Condura refrigerators from latters plant in Alabang to Dagupan City. While the truck was traversing the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes. Petitioner FGU as subrogee to Concepcion Industries filed a complaint for damages and breach of contract of carriage gainst GPS and its driver. Issue No. 1: WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER. Held: GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its services to no other individual or entity, cannot be considered a common carrier. The above conclusion nothwithstanding, GPS cannot escape from liability. In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. The remedy serves to preserve the interests of the promisee that may include his: Expectation interest," which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed; or ..Reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made; or Restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party .. The effect of every infraction is to create a new duty, that is, to make recompense to the one who has been injured by the failure of another to observe his contractual obligation unless he can show extenuating circumstances, like proof of his exercise of due diligence(normally that of the diligence of a good father of a family or, exceptionally by stipulation or by law such as in the case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous event, to excuse him from his ensuing liability. . In this case, the delivery of the goods in its custody to the place of destination -gives rise to a presumption of lack of care and corresponding liability on the part of the contractual obligor the burden being on him to establish otherwise. GPS has failed to do so. Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage between petitioners principal and defendant, may not be held liable under the agreement. A contract can only bind the parties who have entered into it or their successors who have assumed their personality or their juridical position.

 Consonantly with the axiom res inter alios acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third person. Petitioners civil action against the driver can only be based on culpa aquiliana, which, unlike culpa contractual, would require the claimant for damages to prove negligence or fault on the part of the defendant.

Issue No. 2: WHETHER THE DOCTRINE OF RES IPSA LOQUITURIS APPLICABLE IN THE INSTANT CASE. Held: Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant liable where the thing which caused the injury complained of is shown to be under the latter?s management and the accident is such that, in the ordinary course of things, cannot be expected to happen if those who have its management or control use proper care. It affords reasonable evidence, in the absence of explanation by the defendant, that the accident arose from want of care It is not a rule of substantive law and, as such, it does not create an independent ground of liability. Instead, it is regarded as a mode of proof, or a mere procedural convenience since it furnishes a substitute for, and relieves the plaintiff of, the burden of producing specific proof of negligence. The maxim simply places on the defendant the burden of going forward with the proof. Resort to the doctrine, however, may be allowed only when (a) the event is of a kind which does not ordinarily occur in the absence of negligence; (b) other responsible causes, including the conduct of the plaintiff and third persons, are sufficiently eliminated by the evidence; and (c) the indicated negligence is within the scope of the defendant's duty to the plaintiff. Thus, it is not applicable when an unexplained accident may be attributable to one of several causes, for some of which the defendant could not be responsible. Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists between the plaintiff and the defendant, for the inference of negligence arises from the circumstances and nature of the occurrence and not from the nature of the relation of the parties. Nevertheless, the requirement that responsible causes other than those due to defendants conduct must first be eliminated, for the doctrine to apply, should be understood as being confined only to cases of pure (noncontractual) tort since obviously the presumption of negligence in culpa contractual, as previously so pointed out, immediately attaches by a failure of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action is predicated on culpa acquiliana, while he admittedly can be said to have been in control and management of the vehicle which figured in the accident, it is not equally shown, however, that the accident could have been exclusively due to his negligence, a matter that can allow, forthwith, res ipsa loquitur to work against him. Common Carrier v. Towage

 In towage, one vessel is hire to bring another vessel to another place. Thus, a tugboat may be hired by a common carrier to bring the vessel to a port. In this case, the operator of the tugboat cannot be considered a common carrier. In maritime law, towage refers to a service rendered to a vessel by towing for the mere purpose of expediting her voyage without reference to any circumstances of danger. It usually confined to vessels that have received no injury or damage. Common Carrier v. Arrastre An Arrastre operator performs the following functions: Receive, handle, care for, and deliver all merchandise imported and exported, upon or passing over Government-owned wharves and piers in the port; Record or check all merchandise which may bedelivered to said port at shipside; In general, furnish light, and water services and other incidental services in order to undertake its arrastre service Hence, the functions of an arrastre operator has nothing to do with the trade and business of navigation, nor to the use or operation of vessels. An arrastre operator is like a depositary or warehouseman. Even if the arrastre service depends on, assists, or furthers maritime transportation, it may be deemed merely incidental and does not make its service maritime Common Carrier v. Stevedoring The function of stevedores involve the loading and unloading of coastwise vessels calling at the port. Governing Laws on Common Carrier COASTWISE SHIPPING: -New Civil Code (Arts. 1732-1766) -Code of Commerce CARRIAGE FROM FOREIGN PORTS TO PHIL PORTS: -New Civil Code (primary) -Code of Commerce (suppletory) -Carriage of Goods by Sea Act [COGSA] (suppletory) .. CARRIAGE FROM PHIL PORT TO FOREIGN PORTS: -The laws of the country to which the goods are to be transported. OVERLAND TRANSPORTATION: -Civil Code (primary) -Code of Commerce (suppletorily) -R.A. 4136 [The Land Transportation and Traffic Code] AIR TRANSPORTATION: -Civil Code (primary) -Code of Commerce (suppletorily) -For international carriage Warsaw Convention [Convention for the Unification of Certain Rules Relating to the International Carriage by Air]

Nature of Business of Common Carriers, KMU V. Garcia, GR 115381, Dec. 23, 1994 Common carriers are public utilities within the contemplation of the public service law. Public utilities are privately owned and operated businesses whose services are essential to the general public. They are enterprises which specially cater to the needs of the public and conduce to their comfort and convenience. When, one devotes his property to a use in which the public has an interest, he, in effect grants to the public an interest in that use, and must submit to the control by the public for the common good, to the extent of the interest he has thus created. Salient Provisions in R.A. 4136 on Registration of Vehicles Motor vehicle defined: Any vehicle propelled by any power other than muscular power using the public highways, but excepting road rollers, trolley cars, streetsweepers, sprinklers, lawn mowers, bulldozers, graders, fork-lifts, amphibian trucks, and cranes if not used on public highways, vehicles which run only on rails or tracks, and tractors, trailers and traction engines of all kinds used exclusively for agricultural purposes. Trailers having any number of wheels, when propelled or intended to be propelled by attachment to a motor vehicle, shall be classified as separate motor vehicle with no power rating. The distinction between "passenger truck" and "passenger automobile" shall be that of common usage: Provided, That a motor vehicle registered for more than nine passengers shall be classified as "truck": And Provided, further, That a "truck with seating compartments at the back not used for hire shall be registered under special "S" classifications. In case of dispute, the Commissioner of Land Transportation shall determine the classification to which any special type of motor vehicle belongs. Articulated vehicle -means any motor vehicle with a trailer having no front axle and so attached that part of the trailer rests upon motor vehicle and a substantial part of the weight of the trailer and of its load is borne by the motor vehicle. Such a trailer shall be called as "semitrailer." Professional driver -means every and any driver hired or paid for driving or operating a motor vehicle, whether for private use or for hire to the public. Any person driving his own motor vehicle for hire is a professional driver. Owner -The actual legal owner of a motor vehicle, in whose name such vehicle is duly registered with the Land Transportation Commission. .. The "owner" of a government-owned motor vehicle is the head of the office or the chief of the Bureau to which the said motor vehicle belongs. Parking or parked -A motor vehicle is "parked" or "parking" if it has been brought to a stop on the shoulder or proper edge of a highway, and remains inactive in that place or close thereto for an appreciable period of time. A motor vehicle which properly stops merely to discharge a passenger or to take in a waiting passenger, or to load or unload a small quantity of freight with reasonable dispatch shall not be considered as "parked", if the motor vehicle again moves away without delay.

 Sec. 5(a) -No motor vehicle shall be used or operated on or upon any public highway of the Philippines unless the same is properly registered for the current year in accordance with the provisions of this Act. Sec. 5(e) Encumbrances of motor vehicles. Mortgages, attachments, and other encumbrances of motor vehicles, in order to be valid, must be recorded in the Land Transportation Commission and must be properly recorded on the face of all outstanding copies of the certificates of registration of the vehicle concerned. Section 16. Suspension of registration certificate. -If on inspection, as provided in paragraph (6) of Section four hereof, any motor vehicle is found to be unsightly, unsafe, overloaded, improperly marked or equipped, or otherwise unfit to be operated, or capable of causing excessive damage to the highways, or not conforming to minimum standards and specifications, the Commissioner may refuse to register the said motor vehicle, or if already registered, may require the number plates thereof to be surrendered to him, and upon seventy-two hours notice to the owner of the motor vehicle, suspend such registration until the defects of the vehicle are corrected and/or the minimum standards and specifications fully complied with. Section 21. Operation of motor vehicles by tourists. -Bona fide tourist and similar transients who are duly licensed to operate motor vehicles in their respective countries may be allowed to operate motor vehicles during but not after ninety days of their sojourn in the Philippines. After ninety days, any tourist or transient desiring to operate motor vehicles shall pay fees and obtain and carry a license as hereinafter provided. If any accident involving such tourist or transient occurs, which upon investigation by the Commissioner or his deputies indicates that the said tourist or transient is incompetent to operate motor vehicles, the Commissioner shall immediately inform the said tourist or transient in writing that he shall no longer be permitted to operate a motor vehicle. Speed Restrictions Section 35(a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard for the traffic, the width of the highway, and of any other condition then and there existing; and No person shall drive any motor vehicle upon a highway at such a speed as to endanger the life, limb and property of any person, nor at a speed greater than will permit him to bring the vehicle to a stop within the assured clear distance ahead.

20 km. per hour 20 km. per hour 4. Through crowded streets, approaching intersections at "blind corners," passing school zones, passing other vehicles which are stationery, or for similar dangerous circumstance 30 km. per hour 30 km. per hour 3. On city and municipal streets, with light traffic, when not designated through streets 30 km. per hour 40 km. per hour 2. On "through streets" or boulevards, clear of traffic, with no " blind corners, when so designated. 50 km. per hour 80 km. per hour 1. On open country roads, with no "blinds corners" not closely bordered by habitations Motor trucks and buses Passengers Cars and Motorcycle MAXIMUM ALLOWABLE SPEEDS 20 km. per hour 20 km. per hour 4. Through crowded streets, approaching intersections at "blind corners," passing school zones, passing other vehicles which are stationery, or for similar dangerous circumstance 30 km. per hour 30 km. per hour 3. On city and municipal streets, with light traffic, when not designated through streets 30 km. per hour 40 km. per hour 2. On "through streets" or boulevards, clear of traffic, with no " blind corners, when so designated. 50 km. per hour 80 km. per hour 1. On open country roads, with no "blinds corners" not closely bordered by habitations Motor trucks and buses Passengers Cars and Motorcycle MAXIMUM ALLOWABLE SPEEDS

Exceptions to Rate Speed A physician or his driver when the former responds to emergency calls; The driver of a hospital ambulance on the way to and from the place of accident or other emergency; Any driver bringing a wounded or sick person for emergency treatment to a hospital, clinic, or any other similar place; The driver of a motor vehicle belonging to the Armed Forces while in use for official purposes in times of riot, insurrection or invasion; The driver of a vehicle, when he or his passengers are in pursuit of a criminal; A law-enforcement officer who is trying to overtake a violator of traffic laws; and The driver officially operating a motor vehicle of any fire department, provided that exemption shall not be construed to allow useless or unnecessary fast driving of drivers aforementioned. Section 36. Speed limits uniform throughout the Philippines. No provincial, city or municipal authority shall enact or enforce any ordinance or resolution specifying maximum allowable speeds other than those provided in this Act. Correct Driving Pass to the right when meeting persons or vehicle s coming toward him. Pass left when overtaking persons or vehicles going the same direction. Conduct to the right of the center of the intersection of the highway when turning left. Applicable every person operating a motor vehicle or ananimal-drawn vehicle. Exceptions: Different course of action is required in the interest of the safety and the security of life, person or property; or Because of unreasonable difficulty of operation in its compliance. Overtaking a vehicle [Sec. 39] Pass at a safe distance to the left; Not again drive to the right side of the highway until safety is clear of such overtaken vehicle. Exceptions: Passing at right allowed On highways with two or more lanes; or When to be overtaken vehicle is turning left.

Duty of Driver of Vehicle to be Overtaken [Sec. 40] To give way to the overtaking vehicle on suitable and audible signal being given by the driver of the overtaking vehicle; and Not to increase the speed of his vehicle until completely passed by the overtaking vehicle. Restrictions on overtaking and passing [Sec. 41] Do 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. Do not overtake: when approaching the crest of a grade; upon a curve in the highway; driver's view along the highway is obstructed within a distance of five hundred feet ahead. Exception: When 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, Exception to exception: On a highway within a business or residential district, having two or more lanes for movement of traffic in one direction, overtaking or passing at right is allowed.

Do not overtake: Do not overtake: at any railway grade crossing; at any intersection of highways unless such intersectionor crossing is controlled by traffic signal, or unlesspermitted to do so by a watchman or a peace officer. Exception: On a highway having two or more lanes formovement of traffic in one direction where the driver of a vehicle may overtake or pass another vehicle on theright. Nothing in this section shall be construed to prohibit adriver overtaking or passing upon the right anothervehicle which is making or about to make a left turn.

Do not overtake, pass or attempt to pass: between any points indicated by the placing of official temporary warning or caution signs indicating that men are working on the highway; in any "no-passing or overtaking zone."

Right of way [Sec. 42] When two vehicles approach or enter an intersection at approximately the same time: Driver of the vehicle on the left to yield the right of way to the vehicle on the right; Driver of vehicle traveling at an unlawful speed forfeits right of way.

Driver of a vehicle approaching but not having enteredan intersection: To yield right of way to a vehicle within suchintersection or turning therein to the left across the line oftravel of such first-mentioned vehicle; Provided, driver of the vehicle turning left has given aplainly visible signal of intention to turn.

Driver of any vehicle upon a highway within a businessor residential district: To yield right of way to a pedestrian crossing such highway within a crosswalk; Exception: at intersections where the movement of traffic is being regulated by a peace officer or by traffic signal. Every pedestrian crossing a highway within a businessor residential district, at any point other than a crosswalkshall yield the right of way to vehicles upon thehighway.

When about to approach through highway or raildroad crossing: Full stop before traversing; Provided, That when it is apparent that no hazard exists, the vehicle may be slowed down to five miles per hour instead of bringing it to a full stop.

Exception to the right of way rule [Sec. 43] Yield right of way to all vehicles approaching whenentering a highway from a private road or drive; Yield to police or fire department vehicles andambulances when such vehicles are operated on officialbusiness and the drivers thereof sound audible signal oftheir approach;

 Yield to all vehicles approaching from either directionwhen entering a "through highway" or a "stopintersection. Provided, That nothing in this subsection shall beconstrued as relieving the driver of any vehicle beingoperated on a "through highway" from the duty ofdriving with due regard for the safety of vehiclesentering such "through highway" nor as protectingthe said driver from the consequence of an arbitraryexercise off such right of way.

NO PARKING (a) Within an intersection (b) On a crosswalk (c) Within six meters of the intersection of curb lines. (d) Within four meters of the driveway entrance toand fire station. (e) Within four meters of fire hydrant (f) In front of a private driveway (g) On the roadway side of any vehicle stopped orparked at the curb or edge of the highway (h) At any place where official signs have been erected prohibiting parking.

Reckless driving [Sec. 48]

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

Right of way for police & other emergency vehicles [Sec. 49] Upon the approach of any police or fire departmentvehicle, or of an ambulance giving audible signal, The driver of every other vehicle shall immediatelydrive the same to a position as near as possible andparallel to the right-hand edge or curb of thehighway Clear of any intersection of highways, and Shall stop and remain in such position, unlessotherwise directed by a peace officer, until suchvehicle shall have passed.

Vehicle Tampering [Sec. 50] No unauthorized person shall sound the horn, handle the levers or set in motion or in any way tamper with a damage or deface any motor vehicle.

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

Prohibition on Sidewalk Driving or Parking [Sec. 52] No person shall drive or park a motor vehicle upon or along any sidewalk, path or alley not intended for vehicular traffic or parking.

Driving Under The Influence [Sec.53] No person shall drive a motor vehicle while under the influence of liquor or narcotic drug.

Obstruction of Traffic [Sec. 54] No person shall drive his motor vehicle in such a manner as to obstruct or impede the passage of any vehicle; Nor, while discharging or taking on passengers or loading or unloading freight, obstruct the free passage of other vehicles on the highway.

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

.. No driver of a motor vehicle concerned in a vehicular accident shall leave the scene of the accident without aiding the victim, except under any of the followingcircumstances: 1. If he is in imminent danger of being seriouslyharmed by any person or persons by reason of theaccident; 2. If he reports the accident to the nearest officer ofthe law; or 3. If he has to summon a physician or nurse to aidthe victim.

Traffic Violations For registering later than seven days after acquiringtitle to an unregistered motor vehicle or afterconversion of a registered motor vehicle requiringlarger registration fee than that for which it wasoriginally registered, or for renewal of a delinquentregistration. For failure to sign driver's license or to carry samewhile driving.

 Driving a vehicle with a delinquent or invalid driver's license Driving a motor vehicle with delinquent, suspended or invalid registration, or without registration or without the proper license plate for the current year Driving a motor vehicle without first securing a driver's license

 Driving a motor vehicle while under the influence of liquor or narcotic drug. Violation of Section thirty-two, thirty-four (a), (b) and (b1), thirty-five and forty-six Violations of Sections forty-nine, fifty and fifty-two.

 For making, using or attempting to make or use adriver's license, badge, certificate or registration, numberplate, tag or permit in imitation or similitude of thoseissued under this Act, or intended to be used as or for alegal license, badge, certificate, plate, tag or permit orwith intent to sell or otherwise dispose of the same toanother, or false or fraudulently represent as valid andin force any driver's license, badge, certificate, plate, tagor permit issued under this Act which is delinquent orwhich has been suspended or revoked

 For using private passenger automobiles, private trucks, private motorcycles, and motor wheel attachments for hire, in violation of Section seven, subsections (a), (b), and (c), of this Act For permitting, allowing, consenting to, or tolerating the use of a privately-owned motor vehicle for hire in violation of Section seven, subsections (a), (b), and (c), of this Act,

 For violation of any provisions of this Act or regulationspromulgated pursuant hereto, not hereinbeforespecifically punished In the event an offender cannot pay any fine imposedpursuant to the provisions of this Act, he shall be madeto undergo subsidiary imprisonment as provided for inthe Revised Penal Code.

 If, as the result of negligence or reckless or unreasonable fast driving, any accident occurs resulting in death or injury of any person, the motor vehicle operator at fault shall, upon conviction, be punished under the provisions of the Revised Penal Code.

Presumption of Negligence Art. 2185, Civil Code It is presumed that a person driving a motor vehicle is negligent if at the time of the mishap, he was violating any traffic regulation, unless the contrary.

Registered Owner Rule The person who is the registered owner of a vehicle isliable for any damage caused by the negligentoperation of the vehicle although the same wasalready sold or conveyed to another person at thetime of the accident. This is subject to the right of recourse by theregistered owner against the transferee or buyer. The registered owner rule is applicable whenever thepersons involved are engaged in what is known asthe kabit system.

CLASSIFICATIONS OF MOTOR REGISTRABLE VEHICLES [Sec. 7] CLASSIFICATIONS OF MOTOR REGISTRABLE VEHICLES [Sec. 7] a) Private passengerautomobiles; b) Private trucks; c) Private motorcycles, scooters, or motor wheel attachments d) Public utilityautomobiles; e) Public utility trucks; f) Taxis and auto-calesas g) Garage automobiles h) Garage trucks i) Hire trucks; j) Trucks owned bycontractors and customs brokers and customs agents; k) Undertakes; l) Dealers; m) Government automobiles n) Government trucks; o) Government motorcycles; p) Motor vehicles oftourists [for 90 days]; q) Special

.. Vehicles registered under classification under (a), (b) & (c) cannot be used for hire under any circumstances andcannot be used to solicit, accept, or be used to transportpassengers or freight for pay. Laborers necessary to handle freight in private trucksmay ride on it (but not to exceed 10 laborers) Dealers vehicle can be operated only for the purpose of transporting the vehicle itself from the pier or factory to the warehouse or sales room or for delivery to a prospective purchaser or for test or demonstration

CONCLUSIVE PRESUMPTION OF A VEHICLE IS FOR HIRE A vehicle habitually used to carry freight not belonging to the registered owner thereof, or passengers not related by consanguinity or affinity within the fourth civil degree to such owner, shall be conclusively presumed to be "for hire."

KABIT SYSTEM It is an arrangement whereby a person who has beengranted a certificate of public convenience allowsother persons who own motor vehicles to operatethem under his license, sometime for a fee or percentage of earning. Such arrangement is void for being contrary to publicpolicy [Abelardo Lim, et al. v. CA, GR 125817, Jan. 16,2002]

PARTIES IN KABIT SYSTEM COVERED BY IN PARI DELICTO RULE Ex pact illicito non oritur action No action arises out of an illicit bargain. Having entered into an illegal contract, parties to the kabit system cannot seek relief from the courts, and each must bear the consequences of his acts.

Teja Marketing v. IAC, GR 65510, Mar. 9, 1987 Facts: Petitioner was constrained to file an action for damages because private respondent allegedly failedto pay the balance of the purchase price of itsmotorcycle sold. The motorcycle which was used forsidecar remained under the name of petitioner andoperated under its franchise under an arrangementcalled kabit system. Held: Dismissal of case sustained. Both parties are in pari delicto. The court will not aid either party to enforce an illegal contract.

Chapter 2 OBLIGATIONS OF THE PARTIES

OBLIGATION OF CARRIER: Duty to Accept; Duty to Deliver Goods On Time; Duty to Deliver Goods at the Place and to the person named in the BL; and Duty to Exercise Due Diligence

OBLIGATION OF SHIPPER OR PASSENGER Duty to exercise due diligence. Duty to pay the amount of freight or passage on time.

1. Carriers Duty to Accept A common carrier granted CPC is duty bound to accept passengers or cargo without any discrimination. Exceptions: Dangerous objects or substances including dynamites and other explosives; Unfit for transportation; Acceptance would result in overloading;

 Contrabands or illegal goods; Goods are injurious to health; Good will likely be exposed to untoward danger like flood, capture by enemies and the like; Livestock with disease or exposed to disease; Strike; and Failure to tender goods on time

Rule on Hazardous and Dangerous Substances A carrier may be granted authority to carry goods that are by nature dangerous and hazardous. A carrier specially designed to carry dangerous chemicals and goods may be granted CPC for such purpose. All other carriers may validly refuse to accept such cargoes.

MARINA Memorandum Circular No. 105, Apr. 6, 1995 Documentary Requirements for Special Permit to Carry Dangerous/Hazardous Cargoes and Goods in Packaged Form: Letter of Intent PPA Clearance on packaging, marking and labeling of cargoes or goods in packaged forms Cargo Stowage Plan

Classification of Dangerous or Hazardous Goods Under MC 105 Class 1 Explosives Class 2 Gases: Compressed, liquefied or dissolvedunder pressure Class 3 Inflammable Liquids Class 4 Inflammable Solids or Substances: a) Inflammable Solid; b) Inflammable Solids, or Substancesliable to spontaneous combustion; and c) InflammableSolids, or Substances which in contact with waters emitinflammable gases;

 Class 5 a) Oxidizing Substances; b) OrganicPeroxide Class 6 -a) Poisonous (toxic) substances; b) Infectious Substances Class 7 Radioactive Substances Class 8 Corrosives Class 9 Miscellaneous Dangerous Substances

MARINA Memorandum Circular No. 147 Rules on carriage of vehicles, animals, forest products, fish and aquatic products, minerals and mineral products & toxic and hazardous materials on board vessels: Master to accept only if these are covered by necessary clearance from appropriate agencies; Non-compliance will subject the shipowner and master administrative penalties without prejudice to criminal or civil suits

2. Carriers Duty to Deliver The Goods General Rule: Carrier is not an insurer against delay in transportation of goods. Exception: When there is agreement as to the time of delivery

When delay is deemed reasonable Ordinary Goods 2 months [Maersk Line v. CA, May 17, 1993] Perishable Goods 2 to 3 days [Dissenting: Tan Chiong Sian v. Inchausti, GR 6092, Mar. 8, 1912]

Rules on Delay on Overland Transportation (Code of Commerce) Art. 358, Code of Commerce: If there is no period fixed for the delivery of the goods the carrier shall be bound to forward them in the first shipment of the same or similar goods which he may make to the point of delivery; and should he not do so, the damages caused by the delay should be for his account.

Delay When Period Is Fixed Art. 370. If a period has been fixed for the delivery of the goods, it must be made within such time, and, for failure to do so, the carrier shall pay the indemnity stipulated in the bill of lading, neither the shipper nor the consignee being entitled to anything else. If no indemnity has been stipulated and the delay exceeds the time fixed in the BL, the carrier shall be liable for the damages which the delay may have caused.

Procedure in Abandonment by Consignee In Case of Delay (Type 2) Art. 371. In case of delay through the fault of thecarrier referred to in the preceding articles, theconsignee may leave the goods transported in thehands of the former, advising him thereof in writingbefore their arrival at the point of destination. When this abandonment takes place, the carrier shallpay the full value of the goods as if they had been lostor mislaid.

 If the abandonment is not made, the indemnification for the losses and damages by reason of the delaycannot exceed the current price which the goodstransported would have had on the day and at theplace in which they should have been delivered; thissame rule is to be observed in all other cases in which this indemnity may be due.

FIVE TYPES OF ABANDONMENT UNDER MERCANTILE LAW WHEN DAMAGE IS SO GREAT [Art. 365, Code ofCommerce] WHEN GOODS ARRIVE BEYOND THE DATE AGREED ON [Art. 371, Code of Commerce] ABANDONMENT BY SHIPOWNER WHEN LIABILITY EXCEEDS VALUE OF VESSEL [Art. 578, Code of Commerce] DAMAGE TO GOODS IN LIQUID FORM [Sec. 687, Code of Commerce] CONSTRUCTIVE LOSS UNDER THE INSURANCE CODE [Sec. 138, Insurance Code of the Phil.]

1st Type: WHEN DAMAGE IS SO GREAT Where the shipper ships goods and goods arrive indamaged condition and damage is so great thatshipper may not use goods for the purpose for whichthey have been shipped, the shipper may exerciseright of abandonment. NOTICE TO THE CARRIER IS SUFFICIENT consent of carrier is not necessary and once perfected, the ownership over damaged goods passes to thecarrier and carrier must pay the shipper market valueof goods at point of destination.

2nd Type: WHEN GOODS ARRIVE BEYOND DATE AGREE ON Under this set-up, shipper and carrier agreed in advance that cargo must arrive on a certain date. The date has passed but the cargo has not yet arriveddue to carriers fault. Shipper/consignee may exercise the right of abandonment by NOTIFYING the carrier. Once carrier has been notified, ownership over thegoods undelivered passes to carrier. But carrier must pay shipper market value of thegoods at the point of destination.

3rd Type: ABANDONMENT BY SHIPOWNER WHEN LIABILITY EXCEEDS VALUE OF VESSEL Reflects the hypothecary nature of maritime transactions. Instances when vessel carries goods and goods are damaged. Liability of the carrier over the damage goods exceedsthe value of the vessel. Shipowner of ship agent may exercise right of abandonment by simply NOTIFYING TO THE SHIPPER. Liability of the shipowner is now limited to the value ofthe vessel.

4th Type: DAMAGE TO GOODS IN LIQUID FORM Charterers and shippers may abandon the merchandise damaged if cargo should consist of liquids; The contents have leaked out; What remains in the container is but of its content; The cause was on account of inherent defect or fortuitous event.

5th Type: CONSTRUCTIVE LOSS UNDER THE INSURANCE CODE

Shipowners right of abandonment for constructive loss; Takes place when vessel suffers damage in excess of of its insured value; Notice to Insurer from the insured is sufficient; Thereafter, ownership over the damaged vessel passes to the insurer; and Insurer must pay insured as if it were an ACTUAL LOSS.

Characteristics of Abandonment It is unilateral right; It is perfected by mere notice; Once perfected, ownership over damaged goods passes to carrier; and Carrier must pay the shipper market value of goods at the point of destination

Bar, Mercantile Law [1979] Problem: A, in Manila, shipped on board a vessel of B, chairs tobe used in the moviehouse of consignee C in Cebu. No date for delivery or indemnity for delay wasstipulated. The chairs, however, were not claimedpromptly by C and were shipped by mistake back toManila, where it was discovered and re-shipped toCebu. By the time the chairs arrived, the date ofinauguration of the moviehouse passed by and it hadto be postponed. C brings an action for damagesagainst B claiming loss of profits during theChristmas season when he expected the moviehouseto be opened. Decide the case with reason

Suggested Answer: C may sue B for the loss of his profits provided that ample proof thereof are presented in court. The carrier is obligated to transport the goods without delay. The carrier is liable if he is guilty of delay in the shipment of cargo, causing damages to the consignee.

Mora in Civil Law distinguished from Mora in Mercantile Law Under Art. 1169, Civil Code requires demand by the creditor in order that delay may exist. Exceptions: Obligation or law expressly so provides; Time is of the essence; and Demand would be useless.

 BUT under the Code of Commerce, demand, as a generalrule, is not necessary in commercial contracts in order forthe obligor to incur delay [Arts. 61, 62 & 63, Code ofCommerce]. Exceptions: a) When fixed by contract, b) when recognized or allowed by law. In commercial contracts, time is always of the essence.

Code of Commerce Provisions on Mora [Arts. 61, 62,& 63] Art. 61. Day of grace, courtesy or others which underany name whatsoever defer the fulfillment ofcommercial obligations, shall not be recognized, except those which the parties may have previouslyfixed in contract or which are based on a definite provision of law. Art. 62. Obligations which do not have a periodpreviously fixed by the parties or by the provisions ofthis Code, shall be demandable ten days after havingbeen contracted if they give rise only to an ordinaryaction, and on the next day if they involve immediateexecution.

..Art. 63. The effect of default in the performance ofcommercial obligation shall commence: 1. In contracts with a day for performance fixed bythe will of the parties or by the law, on the day followingtheir maturity; 2. In those which do not have such day fixed, fromthe day on which the creditor makes judicial demand onthe debtor or notifies him of protest of loss and damagesmade against him before a judge, notary or other publicofficial authorized to admit the same.

SUMMARY: When Debtor incurs Delay in Commercial Contracts

If period of performance is fixed, debtor incurs delaythe day following the day fixed, without need ofdemand; If no period fixed, ten (10) days from execution ofcontract and on 11th day, debtor incurs delay without need of demand; Potestative period (e.g. when the debtor desires) debtor in delay from date of demand. Note: distinguish from a potestative condition, e.g. ifthe debtor desires. Under the Civil Code and Code of Commerce, such condition is void.

KINDS OF DELAY UNDER CIVIL CODE Mora solvendi Delay of an obligor to deliver or toperform an obligation: a. Mora solvendi ex re delay when the obligation is to give or to deliver; b. Mora solvendi ex persona delay when the obligationis to do or to perform a personal service. Mora accipiendi Delay of an obligee in accepting thedelivery of the thing due; Compensatio morae Delay in reciprocal obligations(Art. 1169, last par.). Neither party is in default unlessthe other is ready to comply with his obligation.

UNDER CIVIL CODE: DEMAND NECESSARY FOR DELAY In Compania General de Tabacos vs. Araza, 7 Phil. 455, held: The contract does not provide for the payment of any interest. There is no provision in it declaring expressly that the failure to pay when due should put the debtor in default. There was therefore no default which would make him liable for interest until a demand was made. There was no evidence of any demand prior to the presentation of the complaint. The plaintiff is therefore entitled to interest only from the commencement of the action.

DEEMED MERCHANCE UNDER THE CODE OF COMMERCE Those who, having legal capacity to engage in commerce, habitually devote themselves thereto [Art. 1] Legal presumption of habituality: From the moment a person who intends to engage in commerce announces through circulars, newspapers, handbills, posters exhibited to the public, or in any manner whatsoever, an establishment which has for its object some commercial operation [Art. 3]

COMMERCIAL CONTRACTS GOVERNED BY CODE OF COMMERCE Art. 50. Commercial contracts, in everything relativeto their requisites, modifications, exceptions, interpretations, and extinction and to the capacity oftheir contracting parties, shall be governed in allmatters not expressly provided for in this Code or inspecial laws, by the general rules of civil law. HIERARCHICAL APPLICABILITY OF LAWS TO COMMERCIAL TRANSACTIONS: 1. Code of Commerce 2. Commercial customs (in the absence of #1); and 3. Civil Code (in the absence of 1 & 2)

PERFECTION OF COMMERCIAL CONTRACTS BY CORRESPONDENCE Art. 54. Contracts entered into by correspondence shall be perfected from the moment an ANSWER IS MADE ACCEPTING THE OFFER OR THE CONDITIONS by which the latter may be modified. Above is in contrast to Art. 1319, NCC where negotiated contracts by correspondence are perfected only FROM THE TIME THE OFFEROR HAS ACTUAL KNOWLEDGE OF ACCEPTANCE

PERFECTION OF COMMERCIAL CONTRACTS BY AGENT OR BROKER Art. 55. Contracts in which an agent or broker intervenes shall be perfected WHEN THE CONTRACTING PARTIES SHALL HAVE ACCEPTED HIS OFFER. Compare Art. 1989, NCC: If the agent contracts in thename of the principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall bevoid if the party with whom the agent contracted is awareof the limits of the powers granted by the principal. In thiscase, however, the agent is liable if he undertook to securethe principals ratification.

CONSEQUENCE OF DELAY Art. 1740, NCC: If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility. Art. 1747: If the common carrier, without just cause, delays the transportation of the goods or changes the stipulated or usual route, the contract limiting the common carriers liability cannot be availed of in case of the loss, destruction or deterioration of the goods

RIGHT OF PASSENGER IN CASE OF DELAY Code of Commerce: Art. 698 In case a voyage already begun has been interrupted; Passengers to pay the fare in proportion to the distance covered; No right to recover for losses and damages if interruption is due to fortuitous event or force majeure;

 Except when interruption was caused by the Captainexclusively. If interruption is due to disability of the vessel andpassenger agrees to await the repair; He is not required to pay any increased price of passage; BUT HIS LIVING EXPENSES DURING THE STAY FOR HIS OWN ACCOUNT. (But see MARINA MC112)

MARINA MEMORANDUM CIRCULAR NO. 112 In case the vessel cannot continue or complete her voyage FOR ANY CAUSE; Carrier is under obligation to transport the passenger to his/her destination AT THE EXPENSE OF THE CARRIER including FREE MEALS and LODGING before said passenger is transported to his destination.

 A passenger may opt to have his ticket refunded in full if the cause of the unfinished voyage is due to the negligence of the carrier; or To an amount that will suffice to defray transportation cost at the shortest possible route towards his destination if the cause is fortuitous event.

 If arrival is delayed, carrier shall provide for meals, freeof charge, during mealtime. If departure is delayed due to carriers negligence, carrier is also under the obligation to provide meals, freeof charge, during meal time to TICKETEDPASSENGERS for the particular voyage. If departure is delayed due to fortuitous event, thecarrier is under no obligation to serve free meals to the passengers.

3. CARRIERS DUY TO DELIVER GOODS AT THE PLACE DESIGNATED AND TO PERSON NAME IN BL Art. 360 (Code of Commerce): The shipper may change the consignment of goods, without necessarily changing the place of delivery; But must, at the time of ordering the change of consigneein the BL signed by the carrier; Return the BL to the carrier in lieu of another BL containing the novated contract. Expenses of the change of consignee at the expense ofthe shipper.

Bar, Mercantile Law [1975] Bar Question: If a shipper, without changing the place of delivery changes the consignment of consignee of the goods (after said goods had been delivered to the carrier), under what condition will the carrier be required to comply with the new order of the shipper?

Suggested Answer: Art. 360 of the Code of Commerce provides that if the shipper should change the consignee of the goods without changing their destination, the carrier shall comply with the new order provided the shipper RETURNS TO THE CARRIER the bill of lading and a new one is issued shoving the novation of the contract. However, all expenses for the change must be paid by the shipper.

4. CARRIER DUTY TO EXERCISE EXTRAORDINARY DILIGENCE Art. 1733 (NCC). Common carriers, from the nature oftheir business and for reasons of public policy, arebound to observe extraordinary diligence in the vigilanceover the goods and for the safety of the passengerstransported by them, according to all the circumstancesof each case.

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

 Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances.

 The foregoing provisions in the Civil Code modify Arts. 363, 364 & 365 of the Code of Commerce: Art. 363 on the requirement of the carrier to deliver thegoods shipped in the same condition where they werefound at the time they were received; and Art. 364 on when damage is merely diminution in thevalue of the goods, carriers liability shall be reduced tothe payment of the amount constituting the difference invalue determined by experts.

 Art. 365 on instance when goods are rendered useless for sale and consumption for the purposes they are destined, consignee may not receive them and may demand only their value at the current price of the day.

PRESUMPTION OF NEGLIGENCE In case of loss of effects or cargo; or In case of death or injury of passenger; Common carrier is presumed to be at fault; Unless, it can prove that it had observed extraordinary diligence in the vigilance thereof.

BATANGAS TRANSPORT CO. v. CAGUIMBAL, ET AL., G.R. L-22985, Jan. 24, 1968 In an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought; It is sufficient that plaintiff shows: a) there exist a contract between the passenger or the shipper and the common carrier; and b) the loss, deterioration, injury or death took place during the subsistence of the contract.

MRASOL v. THE ROBERT DOLLAR COMPANY, G.R. L-29721, Mar. 27, 1929 Facts: Mirasol is consignee of two cases of Encyclopedia Britannica books that he ordered from New York, shipped in good order and condition on board MS President Garfield, principal defendant company. The books arrived in bad order and condition. There was total loss of one case and partial loss on the other, all in all amounting to P2,080.

Held: Defendant having received the two boxes in goodcondition, its legal duty was to deliver them to theplaintiff in the same condition in which it received them. As the boxes were damaged while in transit, the burdenof proof then shifted, and it devolved upon thedefendant to both allege and prove that the damage wascaused by reason of some fact which exempted it fromliability.

 As to how the boxes were damaged, was a matter peculiarly and exclusively within the knowledge of the defendant. To require plaintiff to prove as to when and how the damage was caused would force him to call and rely upon the employees of the defendants ship. That is not the law.

 The evidence for the defendant shows that the damagewas largely caused by sea water, from which itcontends that it is exempt. Damage by sea water, standing alone and within itself, is not evidence that they were damaged by force majeureor for a cause beyond defendants control. The words perils of the sea apply to all kinds of marine casualties, such as shipwreck, foundering, stranding, etc. Where the peril is the proximate cause of the loss, theshipowner is excused. But something fortuitous and outof the ordinary must be involved in both words peril oraccident

DURATION OF DUTY TO EXERCISE EXTRAORDINARY DILIGENCE [Carriage of Goods] Art. 1736, NCC: The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or the person who has a right to receive them, without prejudice to the provisions of Art. 1738.

Art. 1737 (NCC): Art. 1737 (NCC): The common carriers duty to observe extraordinarydiligence over the goods remains in full force and effecteven when they are temporarily unloaded or stored intransit, unless the shipper or owner has made use of theright of stoppage in transitu. Note: Right to stoppage in transitu is the right of theunpaid seller who has parted with the possession of thegoods, when the buyer is or becomes insolvent, to stopthem and resume possession while they are in transit. The unpaid seller will become entitled to the same rigthsto the goods, as if he had never parted with possession. [Art. 1530, NCC]

Art. 1738 (NCC): The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them.

ART. 1736 CONSTRUED [Macam v. CA, G.R. 125524, Aug. 25, 199] Facts: Ben-Mac Enterprises shipped on board MV NenJiang, represented by local agent Wallem Shipping, 3,500 boxes of watermelons valued at $5,950 and 1,611 boxed of fresh mangoes valued at $14,273 withPakistan Bank (Hongkong) as consignee and GreatProspect Co., Hongkong as Notify Party. In the BL, it was stipulated that One of the Bills ofLading must be surrendered duly endorsed inexchange for the goods or delivery order.

 As per letter of credit requirement, copies of the BL and commercial invoices were submitted by Ben-Mac to SolidBank. The latter then paid Ben-Mac the total value of the shipment. Upon arrival in Hongkong, the shipment was delivereddirectly to GPC, not to Pakistan Bank and without therequired BL having been surrendered.

 GPC failed to pay Pakistan Bank. Pakistan Bank refused to pay Ben-Mac through Solidbank. Since SolidBank already pre-paid Ben-Mac the value of the shipment, it demanded payment from Wallem but was refused. Ben-Mac was forced to refund SolidBank.

Held: Held: We emphasize that the extraordinary responsibility ofthe common carriers lasts until actual or constructive delivery of the cargoes to the consignee or TO THEPERSON WHO HAS A RIGHT TO RECEIVE THEM. Pakistan Bank was indicated in the BL as consigneewhereas GPC was the notify party. However, in theexport invoices GPC was clearly named asbuyer/importer. Ben-Mac also referred to GPC as suchin his demand letter to Wallem. This premise draws us to conclude that the delivery toGPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receivethem was proper.

DURATION OF DUTRY TO EXERCISE DILIGENCE [Carriage of Passengers] For Trains: Starts from the moment the person whopurchases the ticket (or token or card) from the carrierpresents himself at the proper place and in a propermanner to be transported with bona fide intent to ridethe coach. Same for Ships & Aircrafts. For jeepneys/buses: Starts from the time the person stepson the platform.

WHEN CONTRACT OF CARRIAGE ENDS The relation of carrier does not cease at the moment the passenger alights from the carriers vehicle but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carriers premises.

La Mallorca v. CA, G.R. L-20761, July 27, 1966 Facts: Plaintiffs, as husband and wife boarded PambuscoBus No. 352 together with their (3) minor daughtersfrom San Fernando, Pampanga to Anao, Mexico, Pampanga. All alighted at the designated place of unloading butMariano, the father had to return to the bus to get oneof his bayong left under his seat. Unknown to him, her daughter Raquel followed him. She was ran over by the bus when it started to runagain.

Held: There can be no controversy that as far as the father isconcerned, when he returned to the bus for his bayongwhich was not unloaded, the relation of passenger andcarrier does not necessarily cease where the latter, afteralighting from the car, aids the carriers conductor inremoving his baggage.

 The issue to be determined here is whether as to the child, who was already led by the father to a place about5 meters away from the bus, the liability of the carrier forher safety under the contract of carriage also persisted. In the present case, the father returned to the bus to getone of his baggages which was not unloaded when theyalighted from the bus. Raquel, the child that she was, must have followed thefather.

 However, although the father was still on the runningboard of the bus awaiting for the conductor to hand himthe bag or bayong, the bust started to run, so the eventhe father had to ump down from the moving vehicle. It was at this instance that the child, who must be near the bus, was run over and killed. In the circumstances, it cannot be claimed that the carriers agent had exercisedthe utmost diligence required under Art. 1755. The presence of said passengers near the bus was notunreasonable and they are, therefore, to be consideredstill as passengers of the carrier, entitled to the protectionunder their contract.

ABOITIZ SHIPPING v. CA, G.R. 84458, Nov. 6, 1989 Facts: Anacleto was a passenger of MV Antonia from SanJose, Mindoro to Manila. Upon reaching Pier 4, NorthHarbor, he disembarked from the ship by jumpingfrom the 3rd deck which is at level with the pier. After 1 hour when all the passengers have alreadydisembarked and the crane started unloading thecargoes, Anacleto went back to the vessel afterrealizing that he left some of his cargoes there. It was while he was pointing to the crew the placewhere his cargoes were loaded that the crane hit him. He later died. His heir sued Aboitiz for breach of contract of carriage.

Held: Held: In consonance with common shipping procedure as tothe minimum time of 1 hr. allowed for the passengers todisembark, it may be presumed that the victim had justgotten off the vessel when he went to retrieve hisbaggage. Yet, even if he had already disembarked an hour earlier, his presence in petitioners premises was not withoutcause. The victim had to claim his baggage which waspossible only one (1) hour after the vessel arrived since itwas admittedly standard procedure in the case ofpetitioners vessels that the unloading operations shallstart only after that time. Consequently, the victim Anacleto is still deemed passenger at the time of his tragic death.

1. Flood, storm, earthquake, lightning, or other naturaldisaster or calamity; DEFENSES OF COMMON CARRIERS [Art. 1734, NCC] 2. Act of public enemy in war, whether internationalor civil; 3. Act or omission of the shipper or owner of thegoods; 4. The character of the goods or defects in the packingor in the containers; and 5. Order or act of competent public authority. Note: The enumeration is exclusive; no other defensemay be raised by the CC.

DEFENSE NO. 1: FORTUITOUS EVENT Requisites: Independent of human will; Impossible to foresee or if it can be foreseen, impossible to avoid; Must be such as to render it impossible for the obligorto fulfill the obligation in a normal manner; and Obligor must be free from any participation in or theaggravation of the injury [Lasam v. Smith, No. 19495, Feb. 2, 1924]

For fortuitous event to be a valid defense: It must be the PROXIMATE AND ONLY CAUSE OF THE LOSS; Carrier must be free from any participation in causingthe damage or injury; It must exercise due diligence to prevent or minimize theloss BEFORE, DURING AND AFTER the fortuitous event. [Art. 1739, NCC]

TAN CHIONG SIAN v. INCHAUSTI, G.R. No. 6092, March 8, 1921 Justice Moreland speaking: An act of God cannot be urged for the protection of aperson who has been guilty of gross negligence in nottrying to avert its results. One who has accepted responsibility for pay can notweakly fold his hands and say that he was preventedfrom meeting that responsibility by an act of God, whenthe exercise of the ordinary care and prudence wouldhave averted the results flowing from that act.

 One who has placed the property of another, intrusted tohis care, in an unseaworthy craft, upon dangerouswaters, cannot absolve himself by crying, an act of God, when every effect which a typhoon produced upon thatproperty could have been avoided by the exercise ofcommon care and prudence. When the negligence of the carrier concurs with an act ofGod producing a loss, the carrier is not expempted fromliability by showing that the immediate cause of thedamage was the act of God, or, as it has been expressed, when the loss is caused by the act of God, if thenegligence of the carrier mingles with it as an active andcooperative cause, he is still liable.

FIRE NOT A NATURAL DISASTER OR CALAMITY [Cokaliong v. UCPB Gen. Insurance, G.R. 146018, June 25, 2003] Facts: M/V Tandag sank after a crack from her auxiliary engines fuel tank caused the spurt of fuel towards the heating exhaust manifold ignited a fire in the engine room

Held: Fire is not considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of man or by human means. It does not fall within the category of an act of God unless caused by lighting or by other natural disaster or calamity.

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

BATANGAS TRANS. v. CAGUIMBAL, 22 SCRA 171 (1967) Problem: A BLTB Bus going north stopped on thehighway because a passenger wanted to alight. Another bus was going south fast and recklessly, trying to pass a carretela. In trying to overtake thecarretela, the driver of the approaching bus made amiscalculation and hit the bus of BLTB. The passenger who was then alighting was thrown outand killed. The heirs of the victim sought recovery. BLTB raised the defense of fortuitous event.

 Answer: BLTB is still liable. In civil law, where a fortuitous event concurs with negligence, liability is not extinguished. The BLTB bus was then in a stop position but since it did not stop on the shoulder of the road at the time the passenger was alighting, the same can be considered negligence that concurred with fortuitous event and did not operate to extinguish the liability.

Facts: FIRECRACKERS EXPLODING FROM PASSENGER BAGGAGE: CARRIER EXCUSED (Nocum v. LTD, 30 SCRA 69) One of the bus passengers had firecrackers inside hisbag. They exploded after another passenger smokedcigarettes causing injuries to another passenger. Theinjure passenger sought to recover from the carrier. Held: Carrier not liable. The carrier cannot be expected toexamine and search each and every piece of baggageof passengers, otherwise the bus may not all togetherbe able to leave. This is only true so long as the cause of the accidentwas not apparent and the carrier or its employees arenot guilty of negligence.

RULE ON MECHANICAL DEFECTS Facts: [Necesito v. Paras, 104 Phil. 75] A Phil. Rabbit Bus was traveling fast. During the tripthe driver sensed that the wheels did not respond tothe movement of the steering wheel. The bus hit a rut (pothole) and it turned turtle, killing a passenger. The mechanic of the bus company discovered that theworn-out gear of the steering wheel had a crack, which could not be seen by the naked eye from theoutside. The bus company proved that the defect wasattributable to General Motors, manufacturer of thebus and that the defect could not have been discovered by expert mechanics.

Held: As a rule, a passenger is entitled to recover damagesfrom a carrier for injury resulting from a defect in anappliance purchased from a manufacturer PROVIDEDIT APPEARS THAT THE DEFECT WOULD HAVE BEEN DISCOVERED BY THE CARRIER IF IT HAD EXERCISED THE DEGREE OF CARE WITH REGARD TO INSPECTION AND APPLICATION OF THE NECESSARY TESTS. When the defect is LATENT, i.e. cannot be discovered bythe application of any known tests, then it qualifies as afortuitous event to exempt the common carrier fromliability.

YOBIDO v. CA, G.R. 113003, Oct. 17, 1997 Held: The explosion of a new tire cannot by itself beconsidered a fortuitous event to exempt the commoncarrier from liability in the absence of showing on thepart of the carrier that other human factors that couldhave intervened to cause the blowout of the new tire did not in fact occur. Moreover, a common carrier may not be absolvedfrom liability in case of force majeure or fortuitous event alone. It must still prove that it was notnegligent in causing the death or injury resultingfrom the accident.

PESTANO v. SUMAUYANG, 346 SCRA 870 (2000) Held: The fact that the driver was able to use a bus with a faulty speedometer shows that theemployer was remiss in the supervision of itsemployees and in the proper care of itsvehicles. Under Arts. 2180 and 2176 of the Civil Code, owners and managers areresponsible for damages caused by theiremployees.

SPS. LANDINGAN v. PANTRANCO, 33 SCRA 284 Facts: A married couple with two children werepassengers in a bus going to Baguio. Whilenegotiating Kennon Road, the motor suddenlystopped and the bus backed down. The driverexpertly guided the bus to rest on the mountainsideof the road. But because of the noise, the two childrenbecame frightened and they jumped out of the busand were killed. Held: The bus when it stopped, was not in perfectrunning condition. It is the carriers duty to see to itthat the bus is always in perfect condition. Here, thedefect was not latent.

TRANS-ASIA v. CA, 254 SCRA 260 (1996) Held: Before commencing the contracted voyage, the carrierundertook some repairs on one of the vessels twoengines, but even before it could finish these repairs, it allowed the vessel to leave the port of origin ononly one functioning engine, instead of two. Moreover, even the lone functioning engine was notin perfect condition as sometime after it had run itscourse, it conked out. Plainly, the vessel wasunseaworthy even before the voyage began.

 For a vessel to be seaworthy, it must be adequatelyequipped for the voyage and manned with a sufficientnumber of competent officers and crew. The failure of common carrier to maintain in seaworthycondition its vessel is clear breach of its duty prescribedunder Art. 1755 of the Civil Code, which binds thecarrier to carry the passengers safely as far as humancare and foresight could provide, using the utmostdiligence of a very cautious person, with due regard forall the circumstances.

OTHER INVALID CAUSES Explosion Damage to cargo from explosion ofanother cargo is not ordinarily attributable to peril ofthe sea or accidents of navigation particularly whereit occurs after the vessel has ended its voyage and isfinally moored to unload; Worms & rats Whenever the ship is damaged byworms resulting in damage to cargo, the same cannotbe cited as an excuse. The same is true with respect todamage of cargo by rats whether the cargo wasdirectly damaged by the rats or by water let inthrough holes gnawed by rats in the ship or herfixtures.

 Water Damage: Damage by sea water is not a validexcuse where the water gains entrance through a portwhich had been left open or insufficiently fastened onsailing. Barratry: The shipowner cannot escape liability to thirdpersons if the cause of damage is barratry. It is an actcommitted by the master or crew of the ship for someunlawful or fraudulent purpose, contrary to their duty tothe owner. Intentional fraud or breach of trust or willful violation of law is necessary to constitute barratry. Barratry includes theft by the purser of a specie shippedon board and fraudulently running the ship ashore.

OTHER CASES/BAR PROBLEMS

 Problem: P shipped a box of cigarettes to a dealer inNaga City through Bicol Bus. When the bus reachedLucena City, it developed engine trouble. The driverbrought the bus to a repair shop in Lucena where he wasinformed by the mechanic that an extensive repair wasnecessary which would at least take two days. While thebus was in the repair shop, Typhoon Coring lashed atQuezon Province. The cargoes inside the bus, includingMauricios cigarettes, got wet and were totally spoiled. Mauricio sued BBC for the damage to his cargoes. (Bar1987)

 Answer: The bus company is liable. While a typhoon is a natural disaster, the same cannot be considered the only cause of the loss. The engine trouble is foreseeable and could have been detected if only the bus company exercised reasonable case. Moreover, carriers employee should have secured the cargoes while the bus was being repaired for two days.

 Problem: P boarded a Victory Liner bus bound forOlongapo. He chose a seat at the front near the busdriver. P told the bus driver that he had valuable items in his bag which was placed near his feet. Since he hadnot slept for 24 hours, he requested the driver to keep aneye on the bag should he doze off during the trip. Uponarrival at his destination, the bag was nowhere found. Answer: P may not hold the carrier liable. The drivercould not have set his eyes on the luggage as hisattention was on the road during the trip.

 Problem: M, a paying passenger was hit above her lefteye by a stone hurled at the bus by an unidentifiedbystander as he bus was speeding through the NationalHighway. The bus owners personnel lost no time inbringing M to the provincial hospital where she wasconfined and treated. M wants to sue the bus companyfor damages and seeks your advise. (Bar 1994) Answer: M cannot legally hold the bus company if thestone throwing was entirely unforeseeable and thecarrier exercised utmost diligence. However, I will alsoinform her that the burden is on the carrier to prove suchexercise of due diligence. If she decides to file a case, allthat she will prove is that she was a passenger and shewas injured while on board the bus

RAYNERA v. HICENTA, 306 SCRA 102 (1999) Held: Drivers of vehicles who bump the rear of another vehicle must be presumed to be the cause of the accident, unless contradicted by other evidence, since the rear driver is deemed to have the last clear chance of avoiding the accident, and therefore deemed negligent.

Bar Problem 1992 Facts: Marino was a passenger on a train. Anotherpassenger, Juancho, had taken a gallon of gasolineplaced in a plastic bag into the same coach whereMariano was riding. The gasoline ignited andexploded causing injury to Marino who filed a civilsuit for damages against the railway companyclaiming that Juancho should have been subjected toinspection by its conductor.

 The railway company disclaimed liability resulting from the explosion contending that it was unaware of the contents of the plastic bag and invoking the right of Juancho to privacy. A) Should the railway company be held liable for damages? B) If it were an airline company involved, would your answer be the same? Explain your answer briefly.

Held: A) No. The railway company is not liable for damages. This is subject to the qualification that the companyshould prove that it, through the exercise ofextraordinary diligence, cannot detect the presence ofgasoline. It should be noted that in overlandtransportation, the common carrier is not bound norempowered to make an examination on the contents ofpackages or bags particularly those handcarried by passengers. B) No, my answer would not be the same. If an airlinecompany was involved, it is duty bound to inspect eachand every cargo this brought into the aircraft (R.A. 6235). Exercise of extraordinary diligence would thereforeresult in the discovery of the gasoline.

DEFENSE NO. 2: PUBLIC ENEMY Presupposes the existence of an actual state of war, and refers to the government of a foreign nation atwar with country to which the carrier belongs. Thieves, rioters, robbers, and insurrectionists, thought at war with social order, are not in a legalsense classed as public enemies. Reason for the defense: The exception concerning theacts of public enemies is understandable because thegovernment itself is called upon to protect its subjectsfrom loss or from such hazard and private citizenshave no power to furnish the security and protectionrequired. Public enemy is also an exception under COGSA.

DEFENSE NOS. 3 & 4: ACT OR OMISSION OF OWNER & IMPROPER PACKING COGSA also provides for similar defense, i.e. carriershall not be liable for (1) wastage in bulk or weight orany other loss or damage arising from inherentdefect, quality or vice of goods, (2) insufficiency ofpacking, (3) insufficiency or inadequacy of the marks, or (4) latent defect not discoverable by due diligence. However, common carrier are still required toexercise due diligence to forestall or lessen the lossnotwithstanding the existence of improper packing.

SOUTHERN LINES v. CA, G.R. No. L-16629, Jan. 31, 1962 Facts: More than a thousand sacks of rice were shipped through the vessel of petitioner SouthernLines. There was shortage when the sacks of ricewere delivered to the consignee although it wasalleged that the shortage in the shipment was due toshrinkage, leakage or spillage of the rice on accountof the bad condition of the sacks at the time it received them. Held: Carrier still liable because it was aware of the condition of the sacks when it received the goods.

VIRGENES CALVO v. UPCB GEN. INSURANCE, G.R. 148496, Mar. 19, 2002 Held: Art. 1734 cannot apply where the carrier accepted the goods despite such defects. For this provision to apply, the rule is that if the improper packing or, in this case, the defect in the container is known to the carrier or his employees or apparent upon ordinary observation, but it nevertheless accepts the same without protest or exception notwithstanding such condition, the carrier is not relieved of liability for the resulting damage.

BELGINA OVERSEAS CHARTERING & SHIPPING v. PHIL. FIRST INSURANCE CO., G.R. 143133, June 5, 2002 Facts: Carrier tried to escape liability by citing the notation metal envelopes rust stained and slightly dented printed in the BL as evidence that the character of the goods or defect in the packing or the containers was the proximate cause of the damage.

Held: . Held: . It cannot be reasonably concluded that the damage to thefour coils was due to the condition noted on the BL. The aforecited exception refers to cases when goods arelost or damaged while in transit as a result of the naturaldecay of perishable goods or the fermentation orevaporation of substances liable therefor, the necessaryand natural wear of goods in transport, defects inpackages in which they are shipped, or the naturalpropensities of animals. None of these is present. Even if the fact of improper packing was known to thecarrier or its crew or was apparent upon ordinaryobservation, it is not relieved of liability for loss or injuryresulting therefrom, once it accepts the goodsnotwithstanding such condition.

DEFENSE NO. 5: ORDER OF PUBLIC AUTHORITY Requisite: Such public authority must had power to issue the order.

GANZON v. CA & TUMAMBING, G.R. L-48757, May 30, 1988 Facts: Tumambing contracted the service of Ganzonto haul 305 tons of scrap iron from Mariveles, Bataanto Manila on board LCT Batman. While loadingabout half of the total cargo, the elected Mayorarrived and demanded P5,000 from Tumambing. Thelatter refused hence was shot and later hospitalized. After sometime, the loading resumed. But, the ActingMayor accompanied by 3 policemen order the captainto dump some of the scrap iron at sea and the restwere brought to by the former, which issued a receiptin behalf of the municipality.

Held: Held: The intervention of the municipal officials was not of acharacter that would render impossible the fulfillment bythe carrier of its obligation. The petitioner was not duty bound to obey the illegalorder to dump into the sea the scrap iron. Moreover, there is absence of sufficient proof that the issuance ofthe same order was attended with such force or intimidation as to completely overpower the will of thepetitioners employees. The mere difficulty in the fulfillment of the obligation isnot considered force majeure.

DEFENSES IN CARRIAGE OF PASSENGERS Art. 1759: Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the formers employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. The liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees.

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

CARRIER LIABLE FOR ACTS OF ITS EMPLOYEES Unlike in quasi-delict, a common carrier cannot escape liability by claiming the he exercised due diligence in the selection and supervision of the employee. It is not a defense that the employee acted beyond thescope of his authority because the riding public is notexpected to inquire from time to time before theyboard the carrier whether or not the driver or anyother employee is authorized to drive the vehicle orthat said driver is acting within the scope of hisauthority and observing the existing rules andregulations required of him. Willful acts of the employees include theft.

YU CON v. IPIL, GR No. L-10195, Dec. 29, 1916 Held: It is well and good that the shipowner be not held criminally liable for such crimes or quasi-crimes; but he cannot be excused from liability for the damage and harm which, in consequence of those acts, may be suffered by the third parties who contracted with the captain, in his double capacity of agent and subordinate of the shipowner himself.

 In maritime commerce, the shippers and passengers inmaking contracts with the captain do so through theconfidence they have in the shipowner who appointedhim; they presume that the owner made a most carefulinvestigation before appointing him, and above all, theythemselves are unable to make such an investigation, and even though they should do so, they could notobtain complete security, inasmuch as the shipownercan, whenever he sees fit, appoint another captaininstead. The shipowner is in the same case with respect to themembers of the crew, for, though he does not appointdirectly, he expressly or tacitly, he contributes to theirappointment.

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

3 REASONS UNDERLYING RULE [Art. 1759, NCC] The special undertaking of the carrier requires that it furnish its passenger that full measure of protection afforded by the exercise of the high degree of care prescribed by the law, inter alia, from violence and insults at the hands of strangers and other passengers, but all, from the acts of the carriers own servants charged with the passengers safety;

 Said liability of the carrier for the servants violation ofduty to passengers, is the result of the formers confidingin the servants hands the performance of his contract tosafely transport the passenger, delegating thereiwth theduty of protecting the passenger with the utmost careprescribed by law; and As between the carrier and the passenger, the formermust bear the risk of wrongful acts or negligence of thecarriers employees against passengers, since it, and notthe passengers, has power to select and remove them. (Maranan v. Perez, infra.)

PAL v. CA, 275 SCRA 621 (1997) Held: Even assuming arguendo that airline passengershave no vested right to hotel accommodationallowances in case a flight is cancelled due to force majeure, nevertheless the airline company would beliable for damages when its employees blatantlyrefused to accord the so-called amenities equally to allits stranded passengers, and there was no compellingor justifying reason advanced for such discriminatoryand prejudicial conduct.

BACHELOR EXPRESS v. CA, G.R. 85691, July 31, 1990 Held: The act of passenger stabbing another passenger in the bus is considered as force majeure. However, to be absolved from liability in the case of force majeure, the common carrier must still prove that it was not negligent in causing the injuries resulting from such accident. Otherwise, it would still be held liable.

BARITUA v. MERCADE (350 SCRA 86) Held: A common carrier, by the nature of its business andfor reasons of public policy, is bound to carrypassengers safely as far as human care and foresightcan provide. It is supposed to do so by using theutmost diligence of very cautious persons, with dueregard for all the circumstances. In case of death or injuries to passengers, it ispresumed to have been at fault or to have actednegligently, unless it proves that it observedextraordinary diligence as prescribed in Arts. 1733and 1755 of the Civil Code.

FORTUNE EXPRESS v. CA, 305 SCRA 14 Held: A common carrier can be held liable for failing to prevent a hijacking by frisking passengers and inspecting their baggage, especially when it had received prior notice of such threat. Note: Compare with Nocum v. LTD, infra.

NOCUM v. LTD, G.R. L-23733, Oct. 31, 1969 Facts: One of the bus passengers had firecrackersinside his baggage, which ignited when anotherpassenger smoked cigarettes, causing injuries toanother passenger. The injured passenger sought torecover damages from the carrier. Held: Carrier is not liable. The reason is that the carrier cannot be expected to examine and searcheach and every piece of baggage of passengers, otherwise the bus may not altogether be able to leave. Note: This in only true so long as the cause of theaccident was not apparent and the carrier or itsemployees are not guilty of negligence.

FABRE v. CA, 259 SCRA 426 (1996) [on due diligence in selection and supervision of employees] Held: For a bus company, due diligence in selection ofemployees is not satisfied by finding that the applicantpossessed a professional drivers license. The employershould also examine the applicant for his qualifications, experience and record of service. Due diligence in supervision, on the other hand, requiresthe formulation of rules and regulations for the guidanceof employees and issuance of proper instructions as wellas actual implementation and monitoring of consistentcompliance with the rules.

CARRIER ALSO LIABLE FOR ACTS OF STRANGERS AND OTHER PASSENGERS But subject to defense of EXERCISE BY THE CARRIER OF DUE DILIGENCE TO PREVENT OR STOP THE ACT OR OMISSION. Defense is not available if the carriers driver allowed another person who is not an employee or a regular driver to take over the task of driving the vehicle.

MARANAN v. PEREZ, 20 SCRA 413 Facts: A taxi driver tried to hold-up his passenger, who resisted and was killed. His heirs sued based on culpa contractual against the taxi company, whichdenied liability on the ground that the driver actedbeyond the scope of his authority. Held: It may be true that the taxi driver was actingbeyond the scope of his authority, but Art. 1759 of theCivil Code expressly provides that the owner is liablefor negligence of the employees even if such acts arebeyond the scope of his authority. Note: This case repealed the doctrine in De Gillaco v. Manila Railroad, 97 Phil. 884 which absolved thecarrier for liability caused by its security guard whokilled one of its passengers while already off-duty.

MANILA RAILROAD v. BALLESTEROS, 6 SCRA 641 Facts: A bust of the Manila Railroad reached one of the towns along its route. The bus driver stopped thebus and went down to answer a call of nature. While the driver was outside the bus, one of the passengerswent into the drivers seat and drove off the bus. It met an accident causing injuries to other passengers.

 Held: Carrier is liable. Its driver is guilty of negligence in leaving the key on the ignition. Had he taken the key with himself, the passenger could not have driven off the bus. The carrier is liable for the injuries of other passengers when the carriers employees could have prevented the injuries through the exercise of the diligence of a good father of a family.

RULES ON PASSENGER BAGGAGE Art. 1754: The provision of Articles 1733 to 1753 shallapply to the passengers baggage which is not in hispersonal custody or in that of his employee. As toother baggage, the rules in Articles 1998 and 2000 to2003 concerning the responsibility of hotel-keepersshall be applicable. Art. 1998: The deposit of effects made by the travelersin hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible forthem as depositaries, PROVIDED THAT NOTICEWAS GIVEN TO THEM, or to their employees, of theeffects brought by the guests and that, on the part ofthe latter, they take the precautions which said hotelkeepers or their substitutes advised relative to thecare and vigilance of their effects.

 Art. 1998: The deposit of effects made by the travelersin hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible forthem as depositaries, PROVIDED THAT NOTICEWAS GIVEN TO THEM, or to their employees, of theeffects brought by the guests and that, on the part ofthe latter, they take the precautions which said hotelkeepers or their substitutes advised relative to thecare and vigilance of their effects.

 Art. 2000: The responsibility referred to in the twopreceding articles shall include the loss of, or injury tothe personal property of the guests caused by theservants or employees of the keepers of hotels or inns aswell as strangers; but not that which may proceed from any force majeure. The fact that travelers are constrained to rely on the vigilance of the keeper of the hotels or innsshall be considered in determining the degree of carerequired of him. Art. 2001: The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the use of arms or through an irresistible force.

 Art. 2002: The hotel-keeper is not liable for compensationif the loss is due to the acts of the guests, his family, servants or visitors, or if the loss arises from the character of the things brought into the hotel. Art. 2003: The hotel-keeper cannot free himself fromresponsibility by the posting notices to the effect that heis not liable for the articles brought by the guest. Anystipulation between the hotel-keeper and the guestwhereby the responsibility of the former as set forth inArticles 1998 to 2001 is suppressed or diminished shallbe void.

SARKIES TOURS PHIL. v. CA, 280 SCRA 58 Held: Where a common carrier accepts its passengersbaggage for transportation and even had it placed inthe vehicle by its own employee, its failure to collectthe freight charge is the common carriers ownlookout, and the common carrier is responsible forthe consequent loss of the baggage.

PAL v. IAC, 216 SCRA 334 Held: Although the baggage of a passenger was eventuallydelivered to him, that did not constitute a case ofmere delay in delivery since the baggage was notdelivered at all to the passenger for the purpose of thetrip in contravention of a common carriersundertaking to transport the goods from the place ofembarkation to the ultimate point of destination. The non-delivery of luggage during the entire lengthof passengers stay abroad is a breach of carriersobligation.

OBLIGATION OF SHIPPER & PASSENGER The shipper and passenger have the correspondingobligation to exercise due diligence in avoidingdamage to the goods or injury to himself. However, contributory negligence on the part of thepassenger is not a defense that will excuse the carrierfrom liability. It will only mitigate such liability. BUT IF HIS CONTRIBUTORY NEGLIGENCE IS THE SOLE AND PROXIMATE CAUSE, CARRIER IS ABSOLVED.

WHAT IS PROXIMATE CAUSE Proximate cause is that which, in the natural and continuous sequence, unbroken by an efficient intervening cause, produces injury and without which the result would not have occurred. [Sabena Belgian World Airlines v. CA, 255 SCRA 38]

 Art. 1741: If the shipper or owner merely contributed tothe loss, destruction or deterioration of the goods, theproximate cause thereof being the negligence of thecommon carrier, the latter shall be liable in damages, which however, shall be equitably reduced. Art. 1761: The passenger must observe the diligence of agood father of a family to avoid injury to himself. Art. 1762: The contributory negligence of the passengerdoes not bar recovery of damages for his death orinjuries, if the proximate cause thereof is the negligenceof the common carrier, but the amount of damages shallbe equitably reduced.

ISAAC v. AMMEN TRANSPORT, 101Phil. 1046 (On contributory negligence) Facts: The road on which the bus was passing waswide enough for 2 buses only. A passenger placed hiselbow outside the window railing of the bus. Anoncoming bus hit the passengers elbow, injuring it insuch a manner that it had to be amputated. Held: Carrier is not liable because the proximatecause of the injury was the passengers owncontributory negligence. This is a complete defense tothe common carrier, and absolves it from liability. Note: While contributory negligence will only serveto diminish the liability of the carrier under Art. 1761, NCC, the same will not apply if the proximate causeof his injury is his contributory negligence and notthat of carriers negligence.

CERVANTES v. CA, GR 125138, Mar. 2, 1999 Facts: PAL issued a round trip ticket to Petitionerwhich expressly provides for an expiry date of 1-yearfrom issuance. A separate written agreementprovides that the 1year period may be extendedprovided that the petitioner sends a letter to theairlines counsel asking for extension. Petitionerfailed to do the terms in the agreement. Held: Petitioner cannot sue PAL for breach when he was not allowed to board. Although he was bookedfor the flight through PALs agent, the latter was notauthorized to change the agreement.

DOCTRINE ON AVOIDABLE CONSEQUENCES The party suffering loss or injury must exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission in question. (Art. 2203, NCC)

DOCTRINE OF LAST CLEAR CHANCE INAPPLICABLE TO PASSENGER CLAIM The principle of last clear chance applies in a suitbetween the owners and drivers of colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual obligations. It would be inequitable to exempt the negligentdriver of the jeepney and its owner on the groundthat the other driver was likewise guilty ofnegligence.

DOCTINE ON ASSUMPTION OF RISK That passengers must take such risks incident to themode of travel he takes since carriers are not insurers of the lives of their passengers. In air travel, adverse weather conditions or extreme climactic changers are some of the perils involved, theconsequence of which the passenger must assume orexpect. (Japan Airlines v. CA, GR No. 118664, Aug. 7,1998). But there is no assumption of risk in case the passenger voluntarily boarded a carrier that was overloaded.

YOBIDO v. CA, 281 SCRA 1 (1997) Held: As a rule, when a passenger boards a commoncarrier, he takes the risks incidental to the mode of travel he has taken, since after all, a carrier is not an insurer of the safety of its passengers and is notbound absolutely and at all e vents to carry themsafely and without injury. However, when a passenger is injured or dies whiletraveling, the law under Art. 1755 of the Civil Codepresumes that the common carrier is negligent, andtherefore the burden of proof is upon such commoncarrier to prove that it has exercised the extraordinarydiligence required under the law to avoid damage orinjury to the passenger.

 However, when a passenger is injured or dies while traveling, the law under Art. 1755 of the Civil Code presumes that the common carrier is negligent, and therefore the burden of proof is upon such common carrier to prove that it has exercised the extraordinary diligence required under the law to avoid damage or injury to the passenger.

CALALAS v. CA, G.R. 122039, May 31, 2000 Facts: A student took a passenger jeepney operatedby petitioner. As the jeepney was filled to capacity ofabout 24 passengers, the student was given by theconductor an extension seat. The jeepney stopped onits way to let a passenger off and the student gaveway to the outgoing passenger. Just as she was doingso, a truck bumped the rear end portion of thejeepney. She suffered injuries as a result.

Held: Held: Construing the taking of an extension seat as an implied assumption of risk is akin to arguing that the injuries to the many victims of the tragedies in our seas should not be compensated merely because those passengers assumed a greater risk of drowning by boarding an overloaded ferry.

COMPANA MARITIMA v. CA & CONCEPCION, G.R. L-31379, Aug. 29, 1988 Facts: Respondent Concepcion loaded his constructionequipment aboard MV Cebu to Cagayan de Oro City. Upon arrival, one of his cargoes, a payloader fell onthe pier while being unloaded and damaged. Heclaimed for replacement of the unit. Petitioner deniedthe claim contending that Respondent furnished itwith inaccurate weight of his equipment. The excessweight caused the crane cables to snap.

.Held: .Held: While the act of private respondent in furnishingpetitioner with an inaccurate weight of the payloadercannot successfully be used as an excuse by petitioner toavoid liability, said act constitute a contributorycircumstance to the damage which mitigates the liabilityof petitioner. We find equitable the conclusion of the CA reducing therecoverable amount of damages by 20% or 1/5 of thevalue of the payloader.

CANGCO v. MANILA RAILROAD CO., G.R. 12191, Oct. 14, 1918 Facts: Cangco was clerk of Manila Railroad with a monthlywage of P25. In going to his workplace daily, he rodeon the trains to from his town of San Mateo, Rizal. One day while returning home and while the trainwas slowing down alighted from his coach but one offeet came in contact with a sack of watermelon causing him to fell violently on the platform. Hesustained serious injuries.

.Held: .Held: The test by which to determine whether the passengerhas been guilty of negligence in attempting to alight froma moving railway train, is that of ordinary reasonable care. It is to be considered whether an ordinarily prudentperson, of the age, sex and condition of the passenger, would have acted as the passenger acted under thecircumstances disclosed by the evidence. This care has been defined to be, not the care which mayor should be used by the prudent man generally, but thecare which a man of ordinary prudence would useunder similar circumstance, to avoid injury.

 Or, if we prefer to adopt the mode of exposition used bythis court in Picart v. Smith (37 Phil. 809), we may saythat the test is this: Was there anything in thecircumstances surrounding the plaintiff at the time healighted from the train which would have admonished aperson of average prudence that to get off the trainunder the conditions then existing was dangerous? If so, the plaintiff should have desisted from alighting; and his failure so to desist was contributory negligence. Our conclusion is that the conduct of the plaintiff inundertaking to alight while the train was yet slightlyunder way was not characterized by imprudence andthat therefore he was not guilty of contributorynegligence.

 Plaintiff was earning P25 a month. His expectancy of life, according to the standard mortality tables, isapproximately 33-years. We are of the opinion that a fair compensation for thedamage suffered by him for his permanent disability isthe sum of P2,500, and that he is also entitled to recover of defendant the additional sum of P790.25 for medical attention, etc. Note: Net Earning Capacity = Life Expectancy [2/3 x 80less the age of the plaintiff] x Gross Annual Incomeless Living Expenses [computed @ 50% of GrossAnnual Income]

Facts: Facts: DEL PRADO v. MANILA ELECTRIC CO., G.R. 29462, Mar. 7, 1929 Manila Electric operated a street in Manila forconveyance of passengers. While still moving, plaintiff ran across the street to catch the car, hisapproach being made from the left. The car was ofthe kind having entrance and exit at either end, andthe movement of plaintiff was so timed that hearrived at the front entrance of the car at the moment when the car was passing. Upon approaching the car, plaintiff raised his handas an indication to the motorman of his desire to board. In response, the latter eased up a little, withoutstopping.

 Upon this the plaintiff seized, with his left hand, the front perpendicular handpost, at the same time placing his left foot upon the platform. However, before the plaintiffs position had become secure, and even before his raised right foot had reached the platform, the motorman applied power which caused plaintiffs foot to slip. He fell to the ground and his right foot crushed by the moving car.

Held: Held: Although the motorman was not bound to stop to let theplaintiff on, it was his duty to do no act that would havethe effect of increasing the plaintiffs peril while he wasattempting to board the car. The premature accelerationof the car was a breach of this duty. As to contributory negligence of plaintiff, it should betreated as a mitigating circumstance. It is obvious that the plaintiffs negligence in attemptingto board the moving car was not the proximate cause ofthe injury. The direct and proximate cause was the act ofappellants motorman in putting on the powerprematurely.

DUTY TO PAY FREIGHT Rates charged by vessels for hire is now deregulated (R.A. 9295). However, on overland transportation, deregulated rates are applied only to aircon buses. Person to pay: The shipper or the consignee if carrier and shipper stipulates in the BL. Time to pay: NCC is silent but Art. 374 provides for 24-hr period to pay the freight.

CARRIERS LIEN CARRIERS LIEN If consignee fails to pay the freight within the periodprescribed, the carrier may exercise it lien inaccordance with Art. 375 of the Code of Commerce. Art. 375: The goods transported shall be especiallybound to answer for the cost of transportation andfor the expenses and fees incurred for them duringtheir conveyance and until the moment of delivery. This special right shall PRESCRIBED EIGHT (8) DAYS AFTER THE DELIVERY HAS BEEN MADE, and once prescribed, the carrier shall have no otheraction that that corresponding to him as an ordinarycreditor.

DEMMURRAGE In its strict sense, it is the compensation provided for in the contract of affreightment for the detention of the vessel beyond the time agreed on for loading and unloading. It is essentially a claim for damages for failure to accept delivery. In its broad sense, every improper detention of a vessel may be considered demurrage.

..Liability for demurrage, viewed in its strict sense, exists only when expressly stipulated in the contract. In its broader sense, damages in the nature of demurrageare recoverable for a breach of the implied obligation toload or unload the cargo with reasonable dispatch, butonly by the party to whom the duty is owed and onlyagainst one who is a party to the shipping contract. Notice of arrival of the vessel or conveyance, or theirplacement for purposes of unloading is CONDITIONPRECEDENT to the right to collect demurrage charges.

Chapter 3 EXTRAORDINARY DILIGENCE

.. RATIONALE IN THE REQUIREMENT OF UTMOST DILIGENCE A common carrier is bound to carry the passengerssafely as far as human care and foresight canprovide, using the utmost diligence of very cautiouspersons, with due regard for all circumstances. This extraordinary diligence required of commoncarriers is calculated to protect the passengers fromthe tragic mishaps that frequently occur in connectionwith rapid modern transportation. This high standard of care is imperatively demandedby the preciousness of human life and by theconsideration that every person must in every way besafeguarded against all injury. [Report of the CodeCommission, pp. 35-36]

HOW DUTY IS COMPLIED WITH Source of common carriers legal liability is contractof carriage binding itself to carry the passengerssafely as far as human care and foresight canprovide, using the utmost diligence of a very cautiousperson, with due regard for all the circumstances. It is not enough to exercise ordinary diligence; whatis required is extraordinary diligence. There is, however no fixed definition on whatextraordinary diligence means. In most cases, exercise of extraordinary diligence are given meaningby way of illustrative examples.

EXTRAORDINARY DILIGENGE APPLICALBE TO THIRD PERSONS Primarily, the duty is owed by the common carrier to its passengers and cargoes. But, the duty also extends to: -the members of the crew or complement; -the pedestrians; and -even to the owners and passengers of other vehicles.

KAPALARAN BUS LINES v. CORONADO, GR 85331, Aug. 25, 1989 Judicial notice is made on the gross negligence andthe appalling disregard of the physical safety andproperty of other so commonly exhibited today bythe drivers of passenger buses and similar vehicleson our highways. In requiring the highest possible degree of diligencefrom common carriers and crating a presumption ofnegligence against them, the law compels them tocurb the recklessness of their drivers. While the immediate beneficiaries of the standard of extraordinary diligence are, of course the passengersand owners of cargo carried by a common carrier, they are not the only persons that the law seeks tobenefit.

 For if common carriers carefully observed the statutorystandard of extraordinary diligence in respect of their own passengers, They cannot help BUT SIMULTANEOUSLY BENEFITPEDESTRIANS AND THE OWNERS AND PASSENGERS OF OTHER VEHICLES who are equallyentitled to the safe and convenient use of our roads and highways. The law seeks to stop and prevent the slaughter andmaiming of people (whether passenger or not) and thedestruction of property (whether freight or not) on ourhighways by buses, the very size and power of whichseem often to inflame the minds of their drivers.

EFFECT ON STIPULATION LOWER THAN THE REQUIRED DEGREE On Goods: Art. 1744: A stipulation between the common carrier andthe shipper or owner limiting the liability of the formerfor the loss, destruction, or deterioration of the goods to adegree less than extraordinary diligence shall be valid, provided it be: 1. In writing, signed by the shipper or owner; 2. Supported by a valuable consideration other thanthe service rendered by the common carrier; and 3. Reasonable, just and not contrary to public policy.

On passengers in general: Art. 1757: The responsibility of a common carrier for thesafety of passengers as required in Articles 1733 and1755 cannot be dispensed with or lessened bystipulation, by the posting of notices, by statements ontickets, or otherwise. On gratuitous passengers: Art. 1758: When a passenger is carried gratuitously, astipulation LIMITING THE COMMON CARRIERSLIABILITY for negligence is valid, BUT NOT FORWILLFUL ACTS OR GROSS NEGLIGENCE. The reduction of fare does not justify any limitationof the common carriers liability.

LARA v. VALENCIA, GR 9907, June 30, 1958 Facts: The deceased Lara was inspector of the BFD at DavaoCity. Defendant Valencia was engaged in thebusiness of exporting logs from his timber concessionin Cotabato. Lara went to Valencias area uponinstruction of his chief to classify the logs ofDefendant. After six days of work, Lara, who was then eager toreturn home asked Valencia if he could take him in his pick-up truck to which defendant agreed. Lara was with the five other passengers who werewith Lara at the back of the pick-up. Lara was seatedon a bag. While the pick-up was cruising along Km 96, Laraaccidentally fell from the pick-up and died.

 After six days of work, Lara, who was then eager toreturn home asked Valencia if he could take him in his pick-up truck to which defendant agreed. Lara was with the five other passengers who werewith Lara at the back of the pick-up. Lara was seatedon a bag. While the pick-up was cruising along Km 96, Laraaccidentally fell from the pick-up and died.

Held: Held: Deceased were merely accommodation passengers whopaid nothing for the service and so they can beconsidered invited guests within the meaning of the law. The rule is established by the weight of authority that theowner or operator of an automobile owes the duty to aninvited guest to exercise reasonable care in its operation, and not unreasonably to expose him to danger andinjury by increasing the hazard of travel. Note: Lara is not controlling upon common carriers since Valencia was a private carrier who accommodated Lara.

EXTRAORDINARY DILIGENCE IN CARRIAGE BY SEA

WARRANTY OF VESSELS SEAWORTHINESS First step in complying with the required extraordinary degree of vigilance. Seaworthiness of vessel is impliedly warranted underthe Insurance Code and the Carriage of the Goods bythe Sea Act (COGSA). Shippers when transacting with common carriers arenot expected to inquire into the vesselsseaworthiness, genuineness of its license andcompliance with all maritime laws. Also true with passengers. The burden of proof on seaworthiness is with thecarrier.

SEAWORTHINESS DEFINED Generally, seaworthiness is that strength, durability and engineering skill made a part of s ships construction and continued maintenance, together with a competent and sufficient crew, which would withstand the vicissitudes and dangers of the of the elements which might reasonably be expected or encountered during her voyage without loss or damage to her particular cargo. [Delsan Transport Lines v. CA, GR 127897, Nov. 15, 2001]

STATUTORY PROVISIONS ON SEAWORTHINESS Section 116, Code of Commerce: A warranty of seaworthiness extends not only to the condition of the structure of the ship itself, but requires that it be properly laden, and provided with a competent master, a sufficient number of competent officers and seamen, and the requisite appurtenances and equipment, such as ballasts, cables and anchors, cordage and sails, food, water, fuel and lights, and other necessary or proper stores and implements for the voyage.

 Sec. 119, Insurance Code: A ship is seaworthy for thepurpose of an insurance upon the ship may, nevertheless, by reason of being unfitted to receive thecargo, be unseaworthy for the purpose of insuranceupon the cargo.

 Sec. 3[1] COGSA: The carrier shall be bound beforeand at the beginning of the voyage to exercise duediligence to (a) Make the ship seaworthy; (b) Properly man, equip, and supply the ship; (c) Make the holds, refrigerating and coolingchambers, and all other parts of the ship in whichgoods are carried, fit and safe for their reception, carriage and preservation. Sec. 3[2] COGSA: The carrier shall properly andcarefully load, handle, stow, carry, keep, care for, anddischarge the goods carried.

SUMMATION OF THE REQUIREMENT ON SEAWORTHINESS A vessel must have such degree of fitness which anowner who is exercising extraordinary diligencewould require his vessel to have at thecommencement of the voyage, having regard to allthe probable circumstances of it. Seaworthiness includes fitness of the vessel itself to withstand the vicissitudes of the voyage, fitness ofthe vessel to store the cargoes and accommodatepassengers to be conveyed and adequately equippedwith and properly manned with sufficient andcompetent officers and crew.

FITNESS OF VESSEL: HOW PROVED It was drydocked and inspected by the PGC before it proceeded to its destination. PGC cleared it as searworthy, fitted, equipped and met all the requirement for trading. Note: A ship will not normally sink if the sea is moderate and if it is seaworthy or if the carrier and its employees were not negligent. [Loadstar Shipping v. CA, G.R. 131621, Sept. 28, 1999]

CARGOWORTHY CARGOWORTHY Ship must not only be seaworthy. IT MUST ALSO BECARGO WORTHY. To be cargo-worthy, the ship must be an efficientstorehouse for her cargo. Cargo-worthiness means that the vessel must besufficiently strong and equipped to carry theparticular kind of cargo which she has contracted tocarry and her cargo must be so loaded that it is safefor her to proceed on her voyage. [Lord Chorley and O.C. Siles, Shipping Law, 6th Ed., p. 120]

ADEQUATELY EQUPPED AND PROPERLY MANNED Competency of Masters or Captains is required. The rule is violated if a carrier embarked on a voyagewith unlicensed captain or patron. It cannot claim to have exercised extraordinarydiligence by placing a person whose navigationalskill are questionable, at the helm of the ship. Qualifications of Masters, Captains and Crew ofships are governed by the Philippine Merchant Rulesand Regulations (PMRR).

 Art. 609, Code of Commerce: Captains, masters orpatrons of vessels must be Filipinos, have legal capacityto contract in accordance with this code, and provenskill, capacity, and qualifications necessary to commandand direct the vessel, as established by marine ornavigation laws, ordinances, or regulations, and mustnot be disqualified according to the same for thedischarge of the duties of the position If the owner of a vessel desires to be the captain thereof, without having the legal qualifications therefor, he shall limit himself to the financial administration of the vessel, and shall instrust the navigation to a person possessing the qualifications required by said ordinances and regulations.

OVERLOADING Duty to exercise due diligence also includes the dutyto take passengers or cargoes that are within thecarrying capacity of the vessel. A carrier fails in this requirement where it allowed on1,004 passengers when it total passenger capacity isonly 864 [Negros Navigation v. CA, G.R. 110398, Nov. 7, 1997]

REQUIREMENT OF PROPER STORAGE It is not enough that vessel must be suited for the cargo it contracted. It must also be properly stored. Hence, where it was found out that the cause of explosion was due to the improper storage of anacetylene cylinder which caught fire which wasplaced in the accommodation area near the engineroom instead at the storage, the common carrier washeld to be negligent. [Phil. Home Assurance Corp. v. CA, G.R. 106999, June 20, 1996]

LIMITED LIABILITY RULE The liability of the carrier in connection with losses related to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which stands as the guaranty for their settlement. No vessel, no liability rule

NEGLIGENCE OF CAPTAIN & CREW If the negligence of the captain or crew can be tracedto the fact that they are incompetent and that the shipowner was negligent in their selection, the LimitedLiability Rule will not apply. If simple negligence only by the captain or crew, whoare otherwise competent to discharge their duties, atthe time of the accident, the rule applies.

RULES ON PASSENGER SAFETY AND COURTESY DUE HIM Failure to comply with MARINA rules and regulations constitutes negligence on the part of the captain and crew and of the shipowner. MARINA Memorandum Circular 112 provides that passengers have the right to be treated by the carrier and its employees with kindness, respect, courtesy and due consideration. The are entitled to be protected against personal misconduct, injurious language, indignities and abuses from the carrier and its employees.

MEMORANDUM CIRCULAR NO. 114 Provisions on: Emergency exits Handling of Handcarried Luggage Lifevests or Lifejackets Watertight doors, potholes, ramps and manholes Wearing of proper prescribed uniform by Ships officers and crew. Other safety measures

DEVIATION Art. 359, CoC: If there is an agreement between theshipper and the carrier as to the road over which theconveyance is to be made, the carrier may not changethe route, unless it be by reason of force majeure; andshould he do so without this cause, he shall be liable for all the losses which he goods he transports maysuffer from any of other cause, beside paying the sumwhich may have been stipulated for such case. When on account of said cause of force majeure, thecarrier had to take another route which produced anincrease in transportation charges, he shall bereimbursed for such increase upon formal proofthereof.

TRANSSHIPMENT The act of taking cargo out of one ship and loading itin another; or The transfer of goods from the vessel stipulated inthe contract of affreightment to another vessel beforethe place of destination named in the contract hasbeen reached; or The transfer for further transportation from one shipor conveyance to another. Notes: Improper deviation and Transshipment withoutconsent of the shipper is violation of the requiredstandard of care. Improper deviation may be a validground to deny a marine insurance claim; whiletransshipment of freight without legal excuse is aviolation of the contract of carriage.

EXTRAORDINARY DILIGENCE IN CARRIAGE BY AIR

AIRWORTHINESS Airworthiness means that an aircraft, it engines, propellers, and other components and accessories, are of proper design and construction, and are safe for air navigation purposes, such design and construction being consistent with accepted engineering practice and in accordance with aerodynamic laws and aircraft science. (R.A. 779)

.IT .IT MUST BE PROVIDED WITH COMPETENT AND WELL TRAINED CREW. -Assigning a pilot inflicted with a tumor for a long time fails in the requirement. IT MUST FOLLOW THE DESIGNATED ROUTE. -A plane did not take the designated route resulting to the tragic crash. The tragic crash could have been avoided had it taken said designated route. (Abeto v. PAL, 115 SCRA 489) IT MUST INSPECT ALL CARGO AND/OR BAGGAGEFOR LOADING. (R.A. 6235)

Saludo v. CA, G.R. 95536, Mar. 23, 1992 Held: Where a common carrier has reasonable ground to suspect that the offered goods are of a dangerous or illegal character, the carrier has the right to know the character of such goods and to insist on an inspection, if reasonable and practical under the circumstances, as a condition of receiving and transporting such goods.

Northwest Airlines v. Laya, G.R. 146020, May 29 2002 Held: Thorough inspection of the briefcase of Plaintiff asdeemed justified pursuant to the directive of the FAAof the US brought about by the tragic event thatunfolded on Sept. 11, 2001. The fact that Plaintiff was greatly inconvenienced bythe fact that his attache case was subjected to furtherinspection does not warrant imposition of liabilitybecause he was not singled out and discriminated bythe employees of the carrier.

 Protection of passengers must take precedence over convenience. Nevertheless, the implementation of the security measures must be ATTENDED BY BASIC COURTESIES. Hence, the carrier was made liable not for implementing the security measure BUT FOR TREATING THE PLAINTIFF IN A RUDE, BRUSQUE, ARROGANT AND DOMINEERING manner that caused his humiliation.

PAL v. CA & ZAPATOS, GR 82619, Sept. 15, 1993 Facts: On Aug. 2 1976, Zapatos, together with 20 other passengers, boarded PAL flight 477 from CebuOzamis. The flight route was Cebu-Ozamis-Cotabato. While on flight, the pilot received a radio message that the Ozamis airport was closed due to heavy rains and inclement weather and that the plane should instead proceed to Cotabato.

 Upon arrival at Cotabato, PAL agent informed thepassengers of their option to return to Cebu on-boardFlight 560 on the same day and take the next availableflight to Ozamis City on Aug. 5, 1975. Zapatos chose theoption offered but was not accommodated on the returnflight to Cebu because he was checked in as passengerno. 9 on Flight 477. He insisted to be given priority overconfirmed passengers but the station agent refused. He tried to stop the departure of Flight 560 as hispersonal belongings, including a package containing acamera was still on board.

.Held: .Held: The position taken by PAL in this case clearly illustratesits failure to grasp the exacting standard required bylaw. PALs diversion of its flight due to inclementweather was a fortuitous event. Nonetheless, such occurrence did not terminate it contract with its passengers. Being in the business of aircarriage and the sole one to operate in the country, PALis deemed equipped to deal with situations as in the caseat bar.

 What we said in one case once again must be stressed, i.e. the relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carriers premises. Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have reached their final destination.

ABETO v. PAL, GR L-28692, July 30, 1982 Facts: Judge Abeto boarded PAL flight from Iloilo toManila on Nov. 23, 1960. The plane did not reachManila. After 3 days, it was ascertained that itcrashed at Mt. Baco, Mindoro. All passengersperished. Held: It is clear that the pilot did not follow thedesignated route for his flight between Romblon andManila. The weather was clear and he was supposedto cross airway Amber I over Romblon. Instead, hemade a straight flight to Manila in violation of anytraffic rules.

Baliwag Transit Inc. v. CA (256 SCRA 746) Held: A common carrier breaches its contract of carriage whenit failed to deliver its passengers to their destination safeand sound. A common carrier is bound to carry itspassengers safely as far as human care and foresight canprovide, using the utmost diligence of a very cautiousperson, with due regard for all the circumstances.

 In contract of carriage, it is presumed that thecommon carrier was at fault or was negligent when apassenger dies or is injured. Unless presumption is rebutted, the court need noteven make an express finding of fault or negligenceon the part of the common carrier. This statutorypresumption may only be overcome by evidence thatthe carrier exercised extraordinary diligence asprescribed in Arts. 1733 and 1755 of the Civil Code.

Chapter 4 BILL OF LADING

CONCEPT OF BL A bill of lading, like a passage ticket, is not necessaryfor the perfection of a contract of carriage. Art. 354, Code of Commerce: In the absence of a bill of lading, disputes shall be determined by the legalproofs which the parties may present in support oftheir respective claims, according to the generalprovisions established in this Code for commercialtransaction. Note: If involving common carrier, disputes withoutBL is governed by the Civil Code. In respect toelectronic commerce, it is governed by R.A. 8792 ofthe Electronic Commerce Act.

BILL OF LADING DEFINED A written acknowledgment, signed by the master of a vessel or other authorized agent of the carrier, that he has received the described goods from the shipper, to be transported on the expressed terms to the described place of destination, and to be delivered there to the designated consignee or parties. [70 Am Jur 2d 924]

KINDS OF BILLS OF LADING Negotiable or Non-negotiable Bill of Lading Clean Bill of Lading or Foul Bill of Lading On-board Bill or Received-For-Shipment Bill of Lading Spent Bill of Lading Through Bill of Lading Custody Bill of Lading Port Bill of Lading

Negotiable or Non-negotiable Bill of Lading When delivered to the Order or to bear, negotiable. Otherwise, non-negotiable.

Clean Bill of Lading or Foul Bill of Lading When it does not contain any notation indicating any defect in the goods Clean BL Otherwise, it is Foul BL

On-board Bill or Received-For-

Shipment Bill of Lading On-board BL is one in which it is stated that the goods have been received on board the vessel whichis to carry the goods Received for shipment BL is one which it is statedthat the goods have been received for shipment withor without specifying the vessel by which the goods are to be shipped.

Custody Bill of Lading One which states that the goods are already received by the carrier but the vessel indicated therein has not yet arrived at port.

Port Bill of Lading One which state that the vessel indicated in the BL that will transport the goods is already in the port.

NATURE OF BILL OF LADING It operates both as: 1. A receipt for the goods shipped; and 2. A contract to transport and deliver the goods as stipulated therein. Being a contract, it is the law between the parties who are bound by its terms and conditions sol longs as they are not contrary to law, morals, good customs, public order and public policy. It is also a document of title.

DOCUMENT OF TITLE Includes any bill of lading, dock warrant, quedan, or warehouse receipt or order for the delivery of goods, or any other document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive either by endorsement or by delivery, goods represented by such document. [Art. 1636, NCC]

EFFICACY OF BL Upon delivery to and acceptance by the shipper. It is presumed that the stipulations of the BL wereknown to the shipper, in the absence of fraud, concealment or improper conduct, and he generallybound by his acceptance whether he reads the bill ornot.

 A shipper who receives a BL without objection afteran opportunity to inspect it, and permits the carrier toact on it by proceeding with the shipment ispresumed to have accepted it as correct and assentedto its terms. A BL accepted without dissent raises thepresumption that all the terms therein were broughtto the knowledge of the shipper and agreed to byhim, and in the absence of fraud or mistake, he is estopped from thereafter denying that he assented tosuch terms.

BL AS CONTRACT OF ADHESION BLs, like tickets constitute a class of contracts of adhesion. Construed liberally in favor of the passenger or shipper. But, they are not ENTIRELY prohibited. One who adheres to the contract is in reality free toreject it entirely. If he adheres, he gives his consent. Receipt of the BL or ticket is tantamount to adherenceto the stipulation embodied therein

.. Qua Chee Gan v. Law Union and Rock Insurance Co., 25 SCRA 70 [1968] Held: The courts cannot ignore that nowadays, monopolies, cartels and concentration of capitalendowed with overwhelm economic power, manage toimpose upon parties dealing with them cunninglyprepared agreements that the weaker party may notchange one with his participation in the agreementbeing reduced to the alternative to take it or leave it, labelled since Raymond Sleilles contracts of adherence (contracts d adhesion) in contrast (of which policies ofinsurance and international bill of lading are primeexamples) obviously cap for greater strictness andvigilance on the part of the court with view to protectingthe weaker party from abuses and imposition, andprevent their becoming traps of the unwary.

RULE ON PROTECTION OF THE DISADVANTAGED Art. 24, NCC: In all contractual property or other relations, when one of the parties is at the disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age and other handicap, the courts must be vigilant for his protection.

Held: Servando, et al. v. Phil. Steam Navigation Co., G.R. No. L-36481-2 October 23, 1982 While it may be true that petitioner had not signedthe plane ticket (Exh. '12'), he is nevertheless boundby the provisions thereof. Such provisions have been held to be a part of thecontract of carriage, and valid and binding upon thepassenger regardless of the latter's lack of knowledgeor assent to the regulation.

 It is what is known as a contract of 'adhesion', in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent.

Magellan Manufacturing Marketing Corp. v. CA, G.R. 95529, Aug. 22, 1991 Issue 1: On the argument that there could have been no agreement in the transshipment even if the BL contained such since the same is prohibited in the Letter of Credit, and that, therefore, it had no intention to allow transshipment of the subject cargo, it was:

Held: Held: As between such stilted thesis of petitioner and thecontents of the bill of lading evidencing the intention ofthe parties, it is irremissible that the latter must prevail. The terms of the contract as embodied in the bill of lading are clear and thus obviates the need for anyinterpretation. The intention of the parties which is thecarriage of the cargo under the terms specifiedthereunder and the wordings of the bill of lading do notcontradict each other.

 The terms of the contract being conclusive upon theparties and judging from the contemporaneous andsubsequent actuations of petitioner, to wit: personallyreceiving and signing the bill of lading and payingthe freight charges, there is no doubt that petitionermust necessarily be charged with full knowledge andunqualified acceptance of the terms of the bill oflading and that it intended to be bound thereby.

 Issue No. 2: Can a consignee refuse a bill of lading on theground that there was overshipment of goods than thequantity covered by the letter of credit? Held: In a letter of credit, there are three distinct and independent contracts: (1) the contract of sale betweenthe buyer and the seller; (2) the contract of the buyerwith the issuing bank; and (3) the letter of credit properin which the bank promises to pay the seller pursuant tothe terms and conditions stated therein.

.It .It is clearly settled in law that the three contracts which make up the letter of credit arrangement are to be maintained in a state of perpetual separation. A transaction involving the purchase of goods may also require, apart from a letter of credit, a contract of transportation specially when the seller and the buyer are not in the same locale or country, and the goods purchased have to be transported to the latter.

 Hence, the contract of carriage, as stipulated in the bill oflading must be treated independently of the contract ofsale between the seller and the buyer, and the contractfor the issuance of a letter of credit between the buyerand the issuing bank. Any discrepancy between the amount of goodsdescribed in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforce-ability of the contractof carriage as embodied in the bill of lading.

.As .As a bank cannot be expected to look beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify their accuracy vis--vis the commercial invoice and the letter of credit.

.. Having no actual knowledge of the kind, quantity, orcondition of the contents of the container, the carrier issues the corresponding bill of lading based on thedeclaration of the shipper, and the bill of lading simplystates the contents of the container either as advised bythe shipper or prefaced by the phrase said to contain. The matter of quantity, description and conditions of thecargo inside the container is the sole responsibility of theshipper.

PAROLE EVIDENCE RULE Sec. 9, Rule 130, Rules of Court: When the terms of an agreement have been reduced to writing, it isconsidered as containing all the terms agreed uponand there can be, between the parties and theirsuccessors in interest, no evidence of such terms other than the contents of the written agreement. BL is covered by the parole evidence rule.

EXCEPTIONS TO PAROLE EVIDENCE RULE However, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his pleading: a) An intrinsic ambiguity, mistake or imperfection in the written agreement; b) The failure of the written agreement to express the true intent and agreement of the parties thereto; c) The validity of the written agreement; or d) The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement. The term agreement includes wills.

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

 After the contract has been complied with, the bill oflading which the carrier has issued shall be returned tohim, and by virtue of the exchange of this title with thething transported, the respective obligations and actionsshall be considered cancelled, unless in the same act theclaim which the parties may wish to reserve be reducedto writing, with the exception of that provided for inArticle 366 In case the consignee, upon receiving the goods, cannotreturn the bill of lading subscribed by the carrier, because of its loss or of any other cause, he must give thelatter a receipt for the goods delivered, this receiptproducing the same effects as the return of the bill oflading.

 Art. 709, Code of Commerce: A bill of lading drawn upin accordance with the provisions of this title shall beproof as between all those interested in the cargo andbetween the latter and the insurers, proof to the contrarybeing reserved for the latter. Art. 710, Code of Commerce: If the bills of lading arecontradictory, and no change or erasure can be observedin any of them, those possessed by the shipper orconsignee signed by the captain shall be proof againstthe captain or ship agent in favor of the consignee orshipper; and those possessed by the captain or shipagent signed by the shipper shall be proof against theshipper or consignee in favor of the captain or shipagent.

 Sec. 3[4] & [5], COGSA, C.A. No. 65: [4] Such a bill of lading shall be prima facie evidence ofthe receipt by the carrier of the goods as thereindescribed in accordance with paragraphs 3(a), (b), and(c), of this section. [5] The shipper shall be deemed to have guaranteed tothe carrier the accuracy at the time of the shipment of themarks, number, quantity, and weight, as furnished byhim; and the shipper shall indemnify the carrier againstall loss, damages, and expenses arising or resulting frominaccuracies in such particulars. The right of the carrierto such indemnity shall in no way limit his responsibilityand liability under the contract of carriage to any personother than the shipper.

MATTERS TO BE ENTERED IN A BL OR AIRWAY BILL For BL (Art. 706, Code of Commerce): Name, registry and tonnage of the vessel Name of captain and his domicile [not anymoreapplicable as of present] Port of loading and unloading Name of shipper Name of consignee Quantity, quality, number of packages and marks ofthe merchandise; and Freight and primage

For Airwaybill (Art. 3[1], Warsaw Convention on AirTransport: Place and date of issue Place of departure and destination; Agreed stopping places, provided the carrier mayreserve the right to alter the stopping places in case ofnecessity, and that if he exercises that right, the alterationshall not have the effect of depriving the transportationof its international character; Name and address of the carrier or carriers; and Statement that the transportation is subject to the rulesrelating to liability in this convention.

KINDS OF STIPULATIONS IN A BILL OF LADING First kind: One exempting the carrier from any andall liability for loss or damage occasioned by its ownnegligence VOID; Second kind: One providing for an unqualifiedlimitation of such liability to an agreed valuation VOID; and Third kind: One limiting the liability of the carrier toan agreed valuation unless the shipper declares ahigher value and pays a higher rate of freight VALID. [H.E. Heacock Co. v. Macondray & Co., G.R. 16598l, Oct. 3, 1991]

LIABILITY OF CARRIER UNDER COGSA If goods are to be shipped from a foreign port to the a Philippine, COGSA is applicable suppletority to the Civil Code. Liability of the carrier is US$500 per package, in the absence of a shippers declaration of a higher value in the BL. The above condition is deemed part of the BL even if not expressly stated.

MEANING OF PACKAGE MEANING OF PACKAGE If goods are shipped in cartons Each carton is considered a package even if they are stored in container vans. If what ordinarily considered as packages areshipped in a container supplied by the carrier and thenumber of such unit is disclosed in the BL Each of those units (not the container) constitutes the packagereferred to in COGSA.

Belgian Overseas Chartering v. Phil. First Insurance Co., G.R. 143133, June 5, 2002

Facts: Steel sheets numbering 242 coils were shipped on board a vessel of Petitioner in Germany to Manila. The coils were shipped inside the container vans provided by the carrier. The LC covering the shipment state the per metric ton price of the coils. Upon arrival, it was found out that 4 coils were damaged. Held: Each coil is considered one package. The liability of the carrier should not be based on the price declared in the Letter of Credit.

WARSAW CONVENTION ON AIR TRANSPORT Liability to passenger P250,000 francs (passenger & carrier may agree to a higher limit of liability Liability to baggage and cargo P250 francs per kg(unless the passenger or consignor has made, at thetime when the package was handed over to thecarrier, a special declaration of interest in delivery atdestination and has paid a sup-plementary sum notexceeding the declared sum, unless he proves thatsum is greater than the actual value to the consignorat delivery.

 In case of loss, damage or delay of part of registeredbaggage or cargo, or of any object contained in thewaybill The weight shall be taken into consideration indetermining the amount and carriers liability is limitedto the TOTAL WEIGHT OF THE PACKAGE/S However, when the loss, damage or delay of a part of theregistered baggage or cargo, or of an object containedtherein, affects the value of other packages covered bythe same baggage check of the same airway bill, theTOTAL WIEHT OF SUCH PACKAGE/S shall also betaken into consideration in determining the limit ofliability.

 Liability to hand carried items 5,000 francs per passenger The above limitations are without prejudice to the localcourts award in accordance to its own law, in addition, the whole or part of the court cost and other expenses oflitigation incurred by plaintiff.

 Not applicable if the amount of damages awarded, excluding court costs and other expenses of litigation, does not exceed the sum which the carrier has offered in writing to plaintiff within 6 months from the date ofoccurrence causing the damage or before commencementof the action, if that is later. If damage is caused by willful misconduct or by suchdefault on the part of the carrier: Carrier cannot invokethe provisions in Warsaw Convention on limitedliability.

HAGUE PROTOCOL AMENDMENT TO WARSA CONVENTION ON AIR TRANSPORT Removed the provision that exculpates the airlinecompletely if it took all necessary steps to avoid thedamage. The protocol declares that the stated limits of liabilityare not applicable if it is proved that the damageresulted from an act or omission of the carrier, itsservants or agents, done with intent to cause damageor recklessly and with knowledge that damagewould probably result. Note: Montreal Agreement of 1966 allows a passengerto recover unlimited damages upon proof of willfulmisconduct.

LIABILITY UNDER COGSA If no value is state Maximum: US$500. If value is stated Rule on Qualified Liability. Qualified Liability Rule: A carrier may fix a maximum liability in the event the shipper does not declare any value or a valude up to a certain amount. Should shipper declare a higher value, and willing to pay higher freightage, the carrier shall accordingly be liable for greater damage.

CASES INVOLVING BILLS OF LADING

Maersk Line v. CA, 222 SCRA 108 Held: Bill of lading, although contracts of adhesion, are not prohibited and the terms thereof binding, since the other party is free to reject it, and yet has accepted the terms thereof. But the terms of the bill of lading which create an absurd situation as having the effect of practically leaving the date of arrival of the shipment to the sole determination and will of the carrier cannot be enforced.

Telengtan Bros. v. CA, 236 SCRA 617 Held: A bill of lading is both a receipt and a contract. As a contract, its terms and conditions are conclusive on the parties, including the consignee, as to the route, destination, freight rates or charges, and stipulates the rights and obligations assumed by the parties.

Saludo, Jr. v. CA, 207 SCRA 498 Held: A bill of lading is a written acknowledgment of thereceipt of the goods and an agreement to transportand deliver them at a specific place to a personnamed or on his order. Acceptance thereof without dissent raises thepresumption that all the terms therein were broughtto the knowledge of the shipper and agreed to by himand estops him thereafter from denying the same.

United States Lines v. Commissioner of Customs, 151 SCRA 189 Held: The containerization system was devised to facilitatethe expeditious and economical loading, carriage andunloading of cargoes. Under that system, the shipper loads his cargoes in aspecially designed container, seals the container anddelivers it to the carrier for transportation. The carrier does not participate in the counting of themerchandise for loading into the container, the actualloading thereof nor the sealing of the container.

Everett Steamship v. CA, 287 SCRA 496 Held: A stipulation printed in BL limiting common carriersliability for loss or destruction of a cargo to a certainsum, unless shipper or owner declare a greater valueis sanctioned by law, particularly Arts. 1749 and 1750of the Civil Code, provided such stipulation must bereasonable and just under the circumstances and hasbeen freely and fairly agreed upon. The printing of such limiting stipulation in a smallprint on the BL does not make the BL invalid nor canit be argued that the stipulation has not been fairlyand freely agreed upon as to be binding on thecarrier.

 At most, the situation only calls for a greater vigilance onthe part of courts when dealing with such contracts ofadhesion in that said contracts must be carefullyscrutinized in order to shield the unwary (or weakerparty) from deceptive schemes contained in ready-made covenants. In this case, since the shipper is engaged in tradingbusiness, it cannot be said to be ignorant of the businesstransactions it entered into involving the shipment of itsgoods to its customers. The shipper could have known, or should know thestipulations in the BL and there it should have declared ahigher valuation of the goods shipped.

Valenzuela Hardwood v. CA, 274 SCRA 642 Held: A stipulation in a charter party that the owners shallnot be responsible for loss, split, short-landing, breakages and any kind of damage to the cargo, isNOT VOID as being contrary to public policy, whenit is clear from the arrangement that the carriermerely acted as private carrier under the terms of thecharter party. In a contract of private carriage, the parties mayvalidly stipulate the responsibility for the cargo restssolely on the charterer, exempting the shipownerfrom liability for loss of or damage to the cargocaused even by the negligence of the ship captain.

Held: PAL v. CA, 255 SCRA 48 on the period provided in Way bill Where the failure to file the formal claim within the prescriptive period contemplated in the air waybillwas largely due to the fault of carriersrepresentatives, the condition was deemed fulfilledconsidering the collective action of the carrierspersonnel in tossing around the claim and leaving itunresolved for an indefinite period of time, whichwas tantamount to voluntarily preventing itsfulfillment, and therefore the filing of the baggagefreight claim constituted substantial compliance withthe requirement of the filing of a formal claim

Chapter 5 PRESCRIPTIVE PERIODS IN CLAIMS

FILING OF CLAIM IN INTER-ISLAND COMMERCE (Art. 366, Code of Commerce) If goods arrived in damaged condition: Apparent Must file a claim immediately (oral or written) Not apparent Must file a claim within 24 hours from deliver

FILING OF ACTION IN INTERISLAND TRADE Period to file action if claim is filed but CARRIER REFUSES TO PAY: 6 years if no BL 10 years if there is BL Note: Filing of the claim under Art. 366, CoC is CONDITION PRECEDENT for recovery. If no claim is filed, there will be no recovery, even if an action therefor is meritorious since the claim is part of the cause of action

FILING OF CLAIMS IN OVERSEAS TRADE If damage is APPARENT CLAIM SHOULD BE FILED IMMEDIATELY. If damage is NOT APPARENT CLAIM SHOULD BE FILED WITHIN 3 DAYS.

FILING OF ACTION IN OVERSEAS TRADE 1 year from the time vessel departs from port withoutmaking delivery; or 1 year from the date the damaged cargo is deliveredto arrastre. Note: the 1 year period applies also to collision cases. If mis-delivered: 10 years; If claim is based on delay: 10 years. Note: Filing of claim is NOT A CONDITIONPRECEDENT in the filing of action.

Rizal Surety v. Macondray, 22 SCRA 902 Facts: A vessel arrived in Manila on Oct. 25. It left Manila on Oct. 31. The BL showed that the cargo wasaboard the vessel, but it was never delivered. Theshipper brought an action against the carrier for nondelivery. Held: Since there was no tally sheet AND NODELIVERY, the 1-year prescriptive period for filingthe action should be counted from the LAST DAY ON WHICH THE CARRIER HAD AN OPPORTUNITY TO MAKE THE DELIVERY, i.e. Oct. 31 when the vessel departed from port.

Union Carbide v. Manila Railrod, 77 SCRA 359 Held: In the case when the vessel docked at the pier, where the cargo has been unloaded and delivered to the arrastre, the 1-year period begins to run from the date of delivery to the arrastre operator.

Ang v. American SS Agencies, 19 SCRA 631 Held: Where there was delivery to the wrong person, the prescriptive period is (10) years because there is a violation of contract, and COGSA does not apply to misdelivery.

US Insurance v. Cia. Maritima, 21 SCRA 998 Facts: Cargo was loaded in New York for Davao City. Sincemost of the cargo was for Manila, the carrierunloaded all the cargo, including that for Davao City, in Manila and did not make a trip to Davao. Instead, the goods for Davao were transshipped on an interisland vessel. The cargo arrived in a damagedcondition.

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

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

Dole Philippines v. Maritime Co., 148 SCRA 118 Held: The written extrajudicial demand by creditor DOES NOT TOLL the running of the 1-year prescriptive period under COGSA since an action must be filed within the period.

Mitsui O.S.K. Lines v. CA, 287 SCRA 366 Facts: Carrier undertook loading. However, while in Taiwan, goods were not transshipped immediately, with theresult that goods arrived in France late during the offseason. Consignee paid only half of the value of thegoods and balance was charged against loss sustaineddue to late arrival. Shipper now seeks to recover unpaidbalance from the carrier which opposes the same sincethe loss or damage to goods shipped under Sec. 3(6) ofthe Carriage of the Goods by Sea Act has been barred bythe lapse of 1year period.

Held: Indeed, what is in issue here is not the liability of carrierof its handling of goods as provided under Sec. 3(6) ofCOGSA, but its liability under its contract of carriagewith shipper as covered by the laws of more generalapplication. Since the concept of loss or damage involves hedeterioration of goods DUE TO DELAY in theirtransportation, the claims of shipper DO NOTCONSTITUTE LOSS OR DAMAGE within the meaningof COGSA which requires the suit to be brought within1year from the time the cause of action accrued. The 1-year prescriptive period under COGSA isinapplicable. What is applicable is Art. 1144 of the CivilCode providing for a 10-year prescriptive period.

Mayer Steel Pipe Corp. v. CA, 274 SCRA 432 Facts: The shipper has insured the merchandise against allrisks with South Sea Surety. During the voyage, themerchandise were damaged. Insurer opposed claim onthe ground, inter alia, that it was filed more than one (1) year from discovery of the damage to the merchandiseand therefore barred by the provisions under COGSA.

Held: Held: The provision applies only to carriers liability which isextinguished if no suit is brought within one year. The liability of the insurer is not extinguished becausethe insurers liability is based not on the contract ofcarriage but on the contract of insurance. COGSA governs relationship between carrier andshipper, the consignee and/or the insurer on the otherhand and defines the obligations of the carrier under thecontract of carriage. It does not, however, affect the relationship betweenshipper and insurer which is governed by InsuranceCode.

MEANING OF DAMAGES The pecuniary compensation, recompense, or satisfaction for an injury sustained; or The pecuniary consequences which the law imposes for the breach of some duty or violation of some rights.

DAMAGES RECOVERABLE Actual Damages (dano emergente) Unrealized Profits (lucro cesante) Moral Damages Nominal Damage Temperate or Moderate Damages Liquated Damages Exemplary or Corrective Damages Other damages

ACTUAL & COMPENSATORY DAMAGES Art. 2205, NCC: Damages may be recovered: (1) For loss or impairment of earning capacity in cases of temporary or permanent personal injury; (2) For injury to the plaintiffs business standing or commercial credit. Amount of damages in case of death: P100,000 per passenger for overland; P200,000 for marine transportation.

LOSS OF EARNING CAPACITY UNDER ART. 2206 Formula: Net Earning Capacity = Life Expectancy [2/3 x 80 age at death] x Gross Annual Income less Necessary Living Expenses [fixed at 50% of the gross income in the absence of proof]

MORAL DAMAGES (Art. 2219, Civil Code) Include Physical suffering, Mental anguish, Fright, Serious anxiety, Besmirched reputation, Wounded feelings, Moral shock, Social humiliation, and Similar injury

PRINCIPLES INVOLVING AWARD OF MORAL DAMAGES As a general rule, no moral damages may be awarded where the breach of contract is NOT MALICIOUS. Moral damages may be awarded if the contractualnegligence is considered gross negligence. Though incapable for pecuniary estimation, moraldamages may be recovered if they are the proximateresult of the defendants wrongful act or omission. The award of moral damages is designed tocompensate the claimant for actual injury and is notmeant to enrigh the complainant at the expense of thedefendant.

CASES WHEN MORAL DAMAGES MAY BE AWARDED (Arts. 2219 & 2220, NCC) Criminal offense resulting in physical injuries; Quasi-delicts causing physical injuries Seduction, abduction, rape, or other lascivious acts Adultery or concubinage Illegal or arbitrary detention or arrest Illegal search Libel, slander or any other form of defamation Malicious prosecution Acts mentioned in Art. 309 [disrespect to the dead, orwrongful interference with a funeral] Acts and actions referred to in Articles 21, 26, 27, 28,29, 30, 32, 34 and 35 [on human relations]

In culpa contractual, moral damages may be awarded: Where the mishap resulted in the death of the passenger. (Art. 1764 in relation to Art. 2206) When the carrier was guilty of fraud or bad faith, even ifdeath did not result. (Art. 2220; Sabena Belgian WorldAirlines v. CA, 171 SCRA 620) Note: If the cause of action is culpa aquiliana where thepassenger suffered physical injuries, there is no moreneed to prove that the carrier acted fraudulent or in badfaith (Art. 2210[2], Civil Code)

Lopez v. Pan Am, 16 SCRA 431 (1966) Facts: VP Lopez with his wife, daughter and son-in-lawhad tickets for 1st class bound for SF. When theyarrived in Tokyo, the planes crew found out that the1st class tickets had been overold, and Lopez and hisfamily were compelled to take the economy seats. When the plane arrived at SF, Filipino official and theFilipino community with a band waited for Lopez toappear from the 1st class section. It caused him humiliation.

.Held: .Held: Pan-Am should have informed Lopez of the possibledowngrading to prevent his humiliation The court award Lopez P300,000 in moral damages andP150,000 in attorneys fees. The substantial amount of damages was awarded in view of the importance of the person of the passenger

Zulueta v. Pan-Am (1972) Facts: Zulueta was a passenger on a Pan-Am flightwith his wife and children from SF to Manila. On stopover at Wake Island, the passengers were toldthat the plane would leave in 30 minutes. After 30mins. Zulueta failed to show up, the crew had to lookfor him. When he was found, the plane captain calledhim a brown monkey. Bitter exchanged followed. The captain then order the crew to unload Zuluetasbaggage and he was left behind. Held: Zulueta is entitled to moral damages ofP500,000 and Attorneys fees of P50,000

Ong Yui v. CA, 91 SCRA 223 Held: In repealing the Shewaran Doctrine, the SC ruled that the qualified liabilityappearing on the ticket is binding even if the passenger did not sign it.

ARRASTRE In its generic term, it refers to a contract for the unloading of goods from a vessel. In maritime law, arrastre applies only to overseastrade. When a person brings in cargo from abroad, hecannot unload and deliver the cargo by himself. Thisis done through the arrastre operator, which will beobligated to deliver the cargo to the importer.

Firemens Fund v. Cia. General de Tabacos, 34 SCRA 392 (1970) Held: The Arrastre operator, for the privilege of thoseundertaking signs a Management Contract with thePhilippine Government. But among the stipulationsin the MC are provisions that adversely affect theimporter. The management contract contains stipulations pour autrui and there is stamped across the DeliveryPermit that the importer received the goods subject tothe management contract, then he shall be bound bythe same.

PARTIES IN ARRASTRE CONTRACT The Government (RP) The Arrastre Operator being awarded the privilege of operating an arrastre service Third party beneficiary, who is the shipper or person being serviced by the arrastre.

4 STIPULATIONS IN THE REVISED MANAGEMENT CONTRACT AFFECTING THE IMPORTER OR SHIPPER Formal claim against arrastre: -Within 30 days from date of final entry with the Bureau of Customs supported by invoices and other shipping documents. (A condition precedent) Action on claim by arrastre: 60 days from receipt. (Acondition precedent)

 If claim is refused: Action to be filed within 1 years. If claim is not acted upon: The 1 year period begins to run from the date of the expiry of the 60-day period. Qualified liability of arrastre: P2,000 per package unless higher value is declared. NATURE OF LIABILITY OF ARRASTRE & CARRIER: Solidary

Metro Port Services v. IAC, 213 SCRA 103 (1992) Held: A provision limiting the liability of arrastreoperator through the imposition of a requirement thata formal claim must be made within 30 days fromfiling of entry is complied with when the consigneefiled a provisional claim within the 30-day period. As of that date, the arrastre operator was givenreasonable opportunity to check the validity of theclaim while the facts were still fresh in the minds of the person who took part in the transaction and whilepertinent documents were still available. It did not matter that the provisional claim was forthe whole amount of the invoice. It is sufficient as long as the name of the carrying vessel, its date ofarrival and BL are attached.

Firemens Fund v. Tabacalers, 34 SCRA 392 Held: The adverse stipulations of the Revised Management Contract will affect the importer only if the delivery permit is stamped: subject to RMC. Where there is none, the importer cannot be bound.

DEGREE OF DILIGENCE REQUIRED IN ARRASTRE In the performance of its obligations, an arrastre operator should observe the same degree of diligence as that required of a common carrier and a warehouseman, i.e. EXTRAORDINARY DILIGENCE. Being custodian of the goods discharged from a vessel, an arrastre operators duty is to take good care of the goods and to turn them over to the party entitled to their possession. [Summa Insurance v. CA, 253 SCRA 175]

BURDEN OF PROOF IN ARRASTRE CLAIMS In a claim for loss filed by a consignee, the burden ofproof to show compliance with the obligation todeliver the goods to the appropriate party devolvesupon the arrastre operator. The reason is because the safekeeping of the goodsrest within its knowledge. Hence, it must prove thatthe losses were not due to its negligence or that of itsemployee. [ICTSI v. Prudential Guarantee & AssuranceCo., Inc., 320 SCRA 244]

SHIPPERS LOAD & COUNT SHIPMENT When consigned goods are shipped under shippersload and count, the shipper is solely responsible forthe containers load as the carrier would then be oblivious of the contents of the shipment. Protection against pilferage of the shipment are thenthe consignees lookout. The arrastre operator is, like any ordinary depositary, duty-bound to take good care of the goods receivedfrom the vessel and to turn the same over to the partyentitled to their possession, subject to suchqualification as may have validly been imposed in thecontract between the parties.

 The arrastre operator is not required to verify the contents of the container received and to compare them with those declared by the shipper because the cargo was at the shippers load and count, and is expected to deliver to the consignee only the container received from the carrier.

COMMERCIAL TERMS WHEN CARRIER INTERVENES FOB (Free on Board) Delivery to the vessel is delivery to the buyer. Carrier becomes the AGENT OF THE BUYER. FAS (Free Alongside Ship) The seller pays all charges and bears the risk until the goods are placed alongside overseas vessel and within the reach of its loading tackle. The same presumption as FOB.

 CIF (Cost, Insurance & Freight) The quotation price quotation on CIF presumes that the seller shall pay the cost of rating and packaging, insurance and the freightage. Carrier is deemed the agent of the seller and ownership is retained by him throughout the trip. It passes to the buyer only upon reaching the port of destination and the cargo is discharged and delivered to the buyer. Insurable interest is with the SELLER. Taxes are not yet due since the sale is not yet deemed perfected until the cargo reaches the port of destination.

PART II MARITIME LAW

Chapter 6 GENERAL CONCEPTS

MARITIME LAW The system of laws which particularly relates to theaffairs and business of the sea, to ships, their crewsand navigation, and to marine conveyance of personsand property. Includes: Book II, Code of Commerce (Maritime Commerce Act No. 2616 (The Salvage Law) C.A. No. 65 (Carriage of Goods by Sea Act) P.D. 1521 (Ship Mortgage Decree of 1978) R.A. 9295 (The Domestic Shipping Act of 2004) Other special laws relating to maritime commerce

ORIGINS OF SHIPPING Mans first use of the sea started 3,000 years ago Fishing developed into highly organized activity. At that time, ships were used to carry large andheavy piece of cargo which neither man nor beast ofburden can carry. In one account, the Queen of Ancient Egypt move herstone obelisks weighing 700 tons through the entirelength of Egypt on the Nile River. Egyptians were credited in revolutionizing shippingwhen they invented the SAIL.

..But it is the ROMANS who conceived the basic principle of marine transport on economic dimension of shipping when they found out that carting a large quantity of grain to the empires frontier 75 miles away would cost more than to ship it by sea.

CODE OF HAMURRABI In 2000 BC, Babylonian Ruler Hamurrabi codified the following maritime laws on: -Marine Collisions -Bottomry -Reimbursement for Leased Watercraft

DEVELOPMENT OF UNIVERSAL MARITIME LAW Phoenicians Sea Law Code of Rhodes, which regulated Greek Commerce for a very long time Roman Maritime Law

RHODIAN - ROMAN MARITIME LAW 1st Section (MARE) Deals with the sea and concernsof public law of the sea. Mare liberium did not exist yet. 2nd Section (NAVIS) Deals with the ship andenunciates the classification of watercrafts into freighter or passenger vessels and seagoing or inlandcrafts. 3rd Section (MERX) Deals with cargo and the admiralty principles as known today. 4th Section (OBLIGACIONES) -Deals with the responsibilities of ship owners and masters. 5th Section (ACTIONS) Deals with dispute settlement arising from shipping transactions.

EVOLUTION OF MODERN LAW ON MERCHANT SHIPPING 1896: Comite Maritime Internationale (CMI) organized for the purposed of unification of merchant marine rules. Conference Diplomatique De Droit Maritime (Brussels) 16 International Conventions and protocols approved, i.e. collision at sea, salvage, bill of lading, carriage of goods by sea, etc.

UN AGENCIES IN MARITME LAW International Maritime Organization (IMO) established the Technical Regulation of Shipping. United Nations Conference on Trade and Development (UNCTAD) established the EconomicRegulations of Shipping. International Labor Organization (ILO) establishedthe International Merchant Labor RegulationsStandards. UN Conferences Established UNCLOS (1982), Geneva Conventions on the Law of the Sea (1958/1960)

REAL AND HYPOTHECARY NATURE MARITIME LAW That which distinguishes the maritime from the civillaw and even from the mercantile law in general isthe REAL AND HYPOTHECARY nature of the former, and the many securities of a real nature thatmaritime customs from time immemorial, the laws, the codes, and the later jurisprudence, have providedfor the protection of the various and conflictinginterest which are ventured and risked in maritime expeditions. [Phil. Shipping Co. v. Vergara, G.R. No. 16000, June 1, 1906]

MEANING OF REAL AND HYPOTHECARY NATURE The liability of the carrier in connection with losses related to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which stands as the guaranty for their settlement. NO VESSEL, NO LIABILITY RULE.

SUMMARY OF THE NATURE OF MARINE TRANSACTIONS REAL A vessel is essentially a personal propertybecause it is movable. But the Supreme Courtcharacterized maritime transactions as having a realnature insofar as these transactions are similar to transactions over real property with respect toeffectivity against third persons which are effectedthrough registration. Registration of vessels nowlodged at MARINA. HYPOTHECARY The liability of the owner of thevessels is limited to the vessel itself. If he vessel sinks, generally the liability of the owner is extinguished, although he may have other properties

EVIDENCE OF REAL NATURE OF MARITIME LAW Limitation of the liability of the agents to the actualvalue of the vessel and the freight money; and Right to retain the cargo and the embargo anddetention of vessel even in cases where the ordinarycivil law would not allow more than a personal actionagainst the debtor or person liable. [Luzon Stevodoring v. CA, 156 SCRA 169]

Aboitiz Shipping v. General Accident Fire Ins., 217 SCRA 359 Held: The rights of vessel owner or agent under theLimited Liability Rule are akin to those of the rightsof shareholders to limited liability under ourCorporation Law. In both insolvency of a corporation and the sinking ofa vessel, the claimants or creditors are limited in their recovery to the remaining value of accessible assets.

Monarch Insurance v. CA, 333 SCRA 71 The Limited Liability Rule in Maritime Law has not been rendered obsolete by the advances in modern technology which have considerably lessen the risks involved in maritime trade, and the courts continue to apply the said rule in appropriate cases.

ICTSI v. PRUDENTIAL GUARANTEE, 320 SCRA 244

Held: As both nature of the function and the place of theirperformance, an arrastre operators service are clearlynot maritime in character. The legal relationship between an arrastre operatorand a consignee is akin to that between awarehouseman and a depositor.

PROVISIONS ON LIMITED LIABILITY RULE Art. 587, CoC: The ship agent shall also be civillyliable for the indemnities in favor of third personswhich may arise from the conduct of the captain inthe care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoningthe vessel with all her equipment and the freight itmay have earned during the voyage. Art. 590: The co-owners of the vessel shall be civillyliable in the proportion of their contribution to thecommon fund for the results of the acts of the captain, referred to in Art. 587. Each co-owner may exempt himself from this liability by the abandonment, before a notary, of that part of the vessel belonging to him

..Art. 643 (Ibid): If the vessel and her cargo should be totally lost, by reason of capture or wreck, all rights shall be extinguished, both as regards the crew to demand any wages whatsoever, and as regards the ship agent to recover the advances made. If a portion of the vessel or of the cargo, or both, should be saved, the crew engaged on wages, including the captain shall retain their rights onthe salvage, so far as they go, on the remainderof the vessel as well as on the amount of freightage of the cargo saved;

 But sailors who are engaged on shares shall not haveany right whatsoever on the salvage of the hull, but onlyon the portion of the freightage saved. If they shouldhave worked to recover the remainder of the shipwrecked vessel they shall be given from the amountof the salvage an award in proportion of the efforts madeand to the risks encountered in order to accomplish thesalvage.

 Art. 837 (Ibid): The civil liability incurred by the shipowners in the cases prescribed in this section, shall be understood as limited to the value of the vessel with all her appurtenances and freight. Notes: Art. 837 applies to collision cases only.

EXCEPTIONS Where the injury or death to a passenger is due eitherto the fault of the ship owner or to theCONCURRING NEGLIGENCE OF THE SHIP OWNER AND THE CAPTAIN. Where the vessel is insured. In workmens compensation claims. Where vessel is partially lost. Liability on repairs made prior to the loss of the vessel. Foreclosure of mortgage on the ship

SHIPOWNERS FAULT The well-entrenched rule in our jurisprudence is that a ship owner 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 ship owner. [Negros Navigation v. CA, 281 SCRA 534]

CONCURRENT NEGLIGENCE OF SHIPOWNER & CAPTAIN Although the ship agent is liable for the negligent actof the captain in the care of goods loaded on thevessel, this liability can be limited throughabandonment of the vessel, its equipment andfreightage as provided in Art. 387. Nonetheless, there are exceptional circumstanceswherein the ship agent could still be held answerabledespite the abandonment as where loss or injury wasdue to fault OF SHIPOWNER AND CAPTAIN.

Manila Steamship v. Abdulhman, 100 Phil. 32 Facts: Abdulhaman bought a submarine chaser of WWIIvintage, which he converted into a passenger ship. The chaser, being at fault collided with a new steelvessel of Manila Steamship and it sank. ManilaSteamship sued to recover damanges as Adbulhamanhad other properties. The latter put up the defense that his liability wasextinguished by the loss of the chaser. It was proven that the chaser, being of a certaintonnage, should have been commanded by onehaving qualifications of captain and not a mere patron.

Held: Held: Abdulhaman is still liable. The hypothecary nature will not apply when the ship owner is personally at fault due to: -Lack of proper equipment; or -Lack of proper technical training of the officers and crew.

PARTIAL LOSS In the event the vessel is not entirely lost, the hypothecary nature of the maritime transaction under Art. 837 of the Code of Commerce will not apply, unless the shipowner or agent abandons the vessel. [Luzon Stevedoring v. CA, 156 SCRA 169]

REPAIRS ON VESSEL The limited liability rule in maritime law does not apply in case where the liability was for repairs on the vessel that was completed before her loss. [Government of P.I. v. Insular Maritime Co.. 45 Phil. 805]

LOSS COVERED BY INSURANCE Where vessel is at fault sinks but is insure, the insurance takes the place of such vessel. The liability subsists but only to the extent of the insurance proceeds. The excess is still subject to the hypothecary rule. [Pedro Vazquez v. CA, 138 SCRA 553]

Abueg v. San Diego, 77 Phil. 32 Facts: A vessel of San Diego, a shipping operator, sank and one crew member died. When the heirs of the deceased sought compensation under the Workmens Compensation Law, San Diego put up the defense of the hypothecary nature of maritime transactions to avoid liability.

Held: Held: San Diego is still liable. Workmens compensation is anexception to the hypothecary nature of maritimetransactions in view of two reason, to wit: (1) The Code of Commerce was promulgated in 1880while the Workmens Compensation Law was enacted in1925. In case of conflict, the latter prevails. (2) Provisions on hypothecary nature of maritimetransactions contained in the Code of Commerce are general provisions while that in WorkmensCompensation Law are specific. In case of conflict, specific provisions of law prevail.

Loadstar Shipping v. CA, 315 SCRA 339 Held: Failure of 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. The doctrine of limited liability will not apply.

ABANDONMENT OF VESSEL Abandonment of the vessel, its appurtenances andfreightage is an indispensable requirement before theshipowner can enjoy the benefits o the limitedliability principle. In case of collision, abandonment of the vessel is necessary in order to limit the liability of theshipowner or the agent to the value of the vessel, itsappurtenances and freightage earned in the voyage. Only instance abandonment is dispensed with iswhen the vessel was entirely lost. [Phil. Shipping Co. v. Garcia, 6 Phil. 281

Protest A written statement by the master of a vessel or anyauthorized officer, attested by a proper officer or anotary, to the effect that damages has been sufferedby the ship. Protest is required under the Code of Commerce inthe following cases: 1. Arrival under stress 2. Shipwrecked 3. Gone through a hurricane or the captain believesthat the cargo has suffered damage or average 4. Maritime collisions

Admiralty Jurisdiction RTC or MTc, depending on the amount of the demand or claim. Amount determines jurisdiction of the court. The proceeding is in rem.

Chapter 7 Vessels

Ship or vessel Ship or Vessel -means any kind, class or type of craftor artificial contrivance capable of floating in water, designed to be used, or capable of being used, as ameans of floating in water transport in the domestictrade for the carriage of passengers or cargo, or both, utilizing its own motive power or that of another. [R.A. 9295]

Prescriptive Period on Vessels Acquisitive prescription: Good faith 4 years; bad faith 8 years. Prescription doesnt run in favor the captain since he holds the position that of a trustee. [Art. 573] Right of pre-emption and legal redemption available to co-owners to be exercised within 30-days from sale of the vessel. [Art. 575]

Rules on Co-ownership of Vessel

Co-ownership of vessel gives rise to a partnershipipso jure. No agreement is needed before apartnership is created. {Note: This is one instance ofa partnership coming into existence by mereoperation of law. Another instance when there iscommingling of similar good of fungible nature.} Majority may perform acts of administration but actsof ownership require the concurrence of all the coowners. Majority is determined in accordance to thefollowing: 1 vote given to the co-owner whocontributed the least capital, 2 votes to the one whogave double, et sequitur.

Importance of the Definition The word vessel (Spanish: buque or nave) was notintended to include all ships, craft or floatingstructures of every kind without limitation, and theprovisions of that section should not be held toinclude minor craft engaged only in river and baytraffic. The word nave, which is used inter-changeably withbuque means a SHIP, A VESSEL WITH DECKS ANDSAILS. A deck is not a feature of the smallest typesof watercraft. Such type of watercraft is not contemplated in Art. 835 requiring protest in case of collision. [Lopez v.Dureolo, 52 Phil. 229]

 It is therefore clear that a passenger on a boat likethe Jison, in the case before us, is not required tomake protest as a condition precedent to his right ofaction for the injury suffered by him in the collisiondescribed in the complaint. Art. 835 does not apply. Nevertheless, under Article 836, it is provided thatwant of protest cannot prejudice a person not in acondition to make known his wisher. An individual who has suffered a compound fractureof the femur and received other physical injuriessufficient to keep him in a hospital for many months, cannot be supposed to have been in a condition tomake protest within 24-hours of such occurrence.

Peculiar nature of vessels (Philippine Refining Co. v. Jarque, G.R. 41506, Mar. 25, 1935) Vessels are considered personal property under civil law. Similarly under the common law, vessels are personal property although referred to as a peculiar kind of personal property. Since the term personal property includes vessels, they are subject to mortgage agreeably to the provisions of the Chattel Mortgage Law (Act No. 1508, Sec. 2).

 The only difference between a chattel mortgage of a vessel and of other personalty is that it is not now necessary for a chattel mortgage of a vessel to be noted in the register of deeds, but it is essential that a record of documents affecting title to a vessel be entered in the record of the Collector of Customs (now with MARINA by virtue of M.C. 90) at the port of entry (now at the port of registry, in case of coastwise vessel). Otherwise, a mortgage on a vessel is generally like other chattel mortgages as to its requisites and validity.

Mortgage of Ship (P.D. 1521) Sec. 3. Mortgage of Vessel of Domestic Ownership; records (a) No mortgage is valid in respect to such vesselagainst any person other than the mortgagor, hisheir or assign, and a person with actual noticethereof unless recorded with the PCG (now MARINA) Sec. 4. Preferred Mortgages: Mortgage is preferred based on the date of recording if: -It is recorded with PCG (MARINA) -An affidavit in good faith is filed together with the record of mortgage. -No waiver of preferred status.

Suit in Admiralty (Sec. 10. P.D. 1521) Preferred mortgage constitutes as a lien upon thevessel. In case of default, the mortgage lien may beenforced by SUIT IN REMAINING ADMIRALTY, wherein the vessel itself may be made a partydefendant and be arrested in accordance with Sec. 11. Original jurisdiction: CFI (now depending on theamount of the claim) Requirement of notice by publication and actual notice to: -the master or other ranking officer, or caretaker ofthe vessel; and -Any person who has recorded a notice of claim ofan un-discharged lien upon the vessel.

Arrest of Vessels [Sec. 11, P.D. 1521] Upon filing of petition for judicial foreclosure of aPreferred Ship Mortgage or immediately thereafter, Applicant may apply ex-parte for an order for thearrest of the mortgaged vessel. Judge to immediately issue arrest order, if it is madeto appear by affidavit of the applicant, or of someother person who personally know the facts that adefault in the mortgage has occurred and thatapplicant files a bond executed to the adverse partyin an amount to be fixed by the judge, not exceedingthe applicants claim, conditioned that the latter willpay all the costs which may be adjudged to theadverse part and all damages sustained.

Procedure in discharge of arrest (Sec. 12, P.D. 1521) File counter-bond in an amount double of the claim; or Apply for order on the ground of improper or irregular issuance of order.

Extrajudicial Foreclosure of Vessel (Sec. 14, P.D. 1521) Applicable provisions in Chattel Mortgage Law govern. For purpose of taking possession of the vessel, theforeclosing creditor to secure from RTC Judge of theprovince where the vessel may be our or where thecreditor or debtor resides, an order for the arrest orseizure of the vessel. Upon issuance of the order, the sheriff toimmediately take possession of the vessel for thepurpose of foreclosure and sale.

Foreign Ship Mortgage (Sec. 15, P.D. 1521) Preferred mortgage in foreign ship includes those duly recorded by virtue of Sec. 4 (supra) and: Preferred mortgage lien in foreign ship is subordinate to maritime liens for repairs, supplies towage, use of drydock or marine railway, or other necessaries performed or supplied in the Philippines.

How proceeds of sale disposed (Sec. 17, P.D. 1521) Preferred mortgaged lien takes priority over all claims against the vessel. Exceptions: 1. Expenses and fees allowed and costs taxed by thecourt and taxes due to the government. 2. Crews wages. 3. General average. 4. Salvage, including contract salvage. 5. Maritime liens arising prior in time to the recording ofthe preferred mortgage. 6. Damages arising out of tort. 7. Preferred mortgaged registered prior in time.

 If proceeds of the sale is not sufficient to pay all creditors included in one number or grade, the residue shall be divided among them pro rata. All credits not paid, whether fully or partially shall subsist as ordinary credits enforceable by personal action against the debtor.

Suit in Personam in Admiralty upon Default (Sec. 18. P.D. 1521) Allows the creditor to bring suit in personam in admiralty against the mortgagor for the amount of the outstanding mortgage indebtedness even if secured by the vessel. If the debt is also secured by other realty or personalty, the creditor may proceed upon the same.

Maritime Lien for Necessaries (Sec. 21, P.D. 1521) Repairs, supplies, towage, use of drydock or marine railway, or other necessaries were furnished to the vessel. The work is done on orders of the ship owner or person authorized by the owner. Such credit must be alleged or proved that it was given to the vessel. Enforceable by suit in rem.

MARINA M.C. 100 (Guidelines on Annotation/Cancellation of Mortgage) Documentary requirements: Letter of Intent & Duly accomplished application form; Duly notarized mortgage contract; Proof of payment of documentary stamp tax with the BIR; and Original copy of CO and CVR. Note: The annotation of mortgage to be reflected at the back of the CVR and CO.

Other applicable MARINA regulations on vessels M.C. No. 48 Measure to control overcrowding/ overloading and scalping of tickets in the interislandvessels. M.C. No. 72 Guidelines on the Implementation of atleast 10-minute film on safety features of eachspecific passenger/passenger-cargo vessels asamended by M.C. No. 136. M.C. No. 83 Guideline on the issuance of endorsement certificates in accordance with the STCW (Standards for Training, Certification andWatchkeeping) 1978 Convention. M.C. No. 89 Implementing guidelines for vesselsafety regulations as amended by 89-B.

 M.C. No. 114 Preventive Safety Measure and other concerns M.C. No. 123 Wearing of lifejackets during boarding and/or prior to departure by all passenger vessels with open deck accommodation. M.C. No. 135 Rules on the implementation of voice tape on the safety features of a vessel. M.C. No. 143 Rules and regulations to implement the International Safety Management (ISM) Code in Domestic Shipping ( M.C. No. 159 for NSM).

Republic Act 9295 The Domestic Shipping Development Act of 2004

State policies on shipping (Sec. 2) (a) promote Filipino ownership of vessels operated under Philippine flag; (b) attract private capital to invest in the shipping industry by creating a healthy and competitive investment and operating environment; (c) provide necessary assistance and incentives for the continued growth of the Philippine domestic merchant marine fleet;

 (d) encourage the improvement and upgrading of the existing domestic merchant marine fleet and Filipino crew to meet international standard; (e) ensure the continued viability of domestic shipping operations; and (f) encourage the development of a viable shipbuilding and ship repair industry to support the expansion and modernization of the Philippine domestic merchant marine fleet and its strict adherence to safety standards which will ensure the seaworthiness of all sea-borne structures.

Important terms in R.A. 9295 & IRR Domestic Shipping -means the transport ofpassengers or cargo, or both, by ships duly registeredand licensed under Philippine law to engage in tradeand commerce between Philippine ports and withinPhilippine territorial or internal waters, for hire orcompensation, with general or limited clientele, whether permanent, occasional or incidental, with orwithout fixed routes, and done for contractual or commercial purposes. Domestic Trade -means the sale, barter or exchange of goods, materials or products within the Philippines.

 Domestic Ship Operator" or "Domestic Ship Owner" means a citizen of the Philippines, or a commercialpartnership wholly owned by Filipinos, or acorporation at least sixty percent (60%) of the capitalof which is owned by Filipinos, which is dulyauthorized by the Maritime Industry Authority(MARINA) to engage in the business or domesticshipping. Shipper -means any person, partnership orcorporation who shall procure for itself the servicesof a domestic ship operator for the carriage of itscargo in the domestic trade upon payment of propercompensation.

.. Certificate of Public Convenience -means the license or authority issued by MARINA to a domestic shipoperator to engage in domestic shipping. Cargo Handling Equipments -means any machinerygear or equipment used by the ship operator or aduly authorized and licensed port operator to serviceor handle cargo, on board the vessel, at the pier, orin the terminal or container yard such as, but notlimited to, cranes, forklifts, top lift, stacker, tractorheads, containers, pallet boards, and the like, including all spare parts, replacement parts, appurtenances, accessories, articles, supplies, andmaterial thereof.

 Shipbuilding -means the design, construction, launching and outfitting of all types of ships and watercraft; Ship repair -means the overhaul, refurbishment, renovating, improvement, or alternation of the hull, machineries, equipment, outfits and components of all types of ships; Shipyard -means the shipbuilding or repair facilities which have the capability to lift vessels above the waterline in order to effect ship work vessels, appendages, structure, machinery and equipment.

Investment incentives to domestic shipping industry (Sec. 4) (a) Exemption from value-added tax on theimportation and local purchase of passenger and/orcargo vessels of one hundred fifty (150) tons andabove, including engine and spare parts of saidvessels. Vessels to be imported must comply with the agelimit requirement, at the time of acquisition countedfrom the date of the vessels original commissioning, as follows: 1) For passenger and/or cargo vessels, the age limit is fifteen (15) years old, 2) For tankers, the age limit is ten (10) years old, and 3) For highspeed passenger craft, the age limit is five (5) yearsold;

.. (b) Exemption from value-added tax on the importation of life-saving equipment, safety and rescue equipment and communication and navigational safety equipment, steel plates, and other metal plates including marine-grade aluminum plates, used for transport operations. CONDITIONS IN THE GRANT OF (a) & (b): Not manufactured domestically in sufficient quantity, of comparable quality and at reasonable prices; Directly imported by a MARINA-registered domestic shipping operator;

 Reasonably-needed and will be used exclusively by the registered domestic shipping operators in its transport operations; Approval of a MARINA was obtained prior to the importation of said articles; Valid up to ten (10) years from effectivity.

Deregulation of the Domestic Shipping Industry (Sec. 8) Domestic ship operators authorized to establish their own domestic shipping rates provided that effective competition is fostered and public interest is served. MARINA shall monitor all shipping operations and exercise regulatory intervention where it is established, after due process that public interest needs to be protected and safeguarded.

Safety Standards (Sec. 9) All vessels shall at all times be in seaworthy condition, properly equipped with adequate lifesaving, communication, safety and other equipment, operated and maintained in accordance with the standards set by MARINA, and manned by duly licensed and competent vessel crew. The MARINA given the power to inspect vessels and all equipment on board vessels to ensure compliance with safety standards.

Jurisdiction of MARINA (Sec. 10) Register vessels; Issue certificates of public convenience, or anyextensions or amendments thereto, authorizing theoperation of all kinds, classes and types of vesselsin domestic shipping: Provided, That no suchcertificate shall be valid for a period of more thantwenty-five (25) years; Modify, suspend or revoke at any time, upon noticeand hearing, any certificate, license oraccreditation it may have issued to any domesticship operator; Establish and prescribe routes, zones of areas ofoperations of domestic ship operators;

 Require any domestic ship operator to provide shipping services to any coastal area, island or region in the country where such services are necessary for the development of the area, to meet emergency sealift requirements, or when public interest so requires; Set safety standards for vessels in accordance with applicable conventions and regulations;

.. Require all domestic ship operators to comply with operational and safety standards for vessels set by applicable conventions and regulations, maintain its vessels in safe and serviceable condition, meet the standards of safety of life at sea and safe manning requirements, and furnish safe, adequate, efficient, reliable and proper service at all times; Inspect all vessels to ensure and enforce compliance with safety standards and other regulations;

 Ensure that all domestic ship operators shall have the financial capacity to provide and sustain safe, reliable, efficient and economic passenger or cargo service, or both; Determine the impact which any new service shall have to the locality it will serve; Adopt and enforce such rules and regulations which will ensure compliance by every domestic ship operator with required safety standards and other rules and regulations on vessels safety;

 Adopt such rules and regulations which ensure thereasonable stability of passengers and freight ratesand, if necessary, to intervene in order to protectpublic interest; Hear and adjudicate any compliant made in writinginvolving any violation of this law or the rules andregulations of the Authority; Impose such fines and penalties on, including therevocation of licenses of, any domestic shipoperator who shall fail to maintain its vessels insafe and serviceable condition, or who shall violateor fail to comply with safety regulations;

 Investigate any complaint made in writing againstany domestic ship operator, or any shipper, or anygroup of shippers regarding any matters involvingviolations of the provisions of this Act; Upon notice and hearing, impose such fines, suspend or revoke certificates of publicconvenience or other license issued, or otherwisepenalize any ship operator, shipper or group ofshippers found violating the provisions of this Act; and

 Issue such rules and regulations necessary to implement the provisions of this Act: Provided, That such rules and regulations cannot change or in any way amend or be contrary to the intent and purposes of this Act.

Prohibited Acts and Practices of Domestic Ship Operators (Sec. 16) . Operate without a valid certificate of public convenience, accreditation or other form of authority required by this Act; . Refuse to accept or carry any passenger or cargo without just cause; . Fail to maintain its vessels in safe and serviceable condition, or violate safety rules and regulations; . Fail to obtain or maintain adequate insurance coverage; . Fail to meet or maintain safe manning requirements; and . Such other acts which the MARINA shall determine, after due notice and hearings, to be detrimental or prejudicial to the safety, stability and integrity of domestic shipping.

CPC Issuance (Sec. 2, Rule IV, IRR of R.A. 9295 on Deregulation) Power of MARINA to issue CPC or any amendments/extensions/renewals. Requirements: Economic and beneficial effect which the proposed service shall have to the port, province or region which it proposes to serve; and Financial capacity of the domestic shipowner/operator to provide and sustain safe, reliable, adequate, efficient and economical service in accordance with the standards set by government regulations.

Amendment to CPC (Sec. 3, Rule IV IRR) Permanent Addition or Deletion of a route/port/link; or, Permanent Addition/ Reduction/ Replacement of Ship/Fleet or Change in Ships Name; or, Permanent Addition/ Reduction/ Replacement of Ship/Fleet or Change in Ships Name; or, Change in name of the entity/corporation/partnership/cooperative.

Validity of CPC (Sec. 5, Rule IV IRR) Years of Operation Validity of CPC More than 10 years 25 years More than 5 years up to 10 years 15 years 5 years and below 10 years

.. Qualification Requirements (Sec. 6, Rule IV, IRR) Must be a MARINA-registered shipowner/operatorper MARINA MC 79/79-A or their subsequentamendments. Must be financially capable to provide and sustainsafe, reliable, adequate, efficient and economicalservice in undertaking the proposed shippingservice. Formula on Financial Capability: Capitalization = (Equity fixed assets net of long-term liabilities) + totaldepreciation Must provide a service that has economic andbeneficial effect on the port, province or region it proposes to serve.

Jurisdictional Requirements (Sec. 8, Rule IV, IRR) Affidavit of publication with the newspaper clipping; Copy of the whole newspaper where the Order was published; Photographs showing proof of the required posting of Order.

Safety Standards (Sec. 1, Rule VI, IRR) All ships shall, at all times, be in seaworthy condition as to their hull and machinery Properly outfitted with adequate navigational aids and equipment, firefighting, life-saving, communication, and other safety appliances/equipment. Operated and maintained in accordance with prescribed standards, and manned by duly licensed and competent ship crew.

Rates (Sec. 1, Rule VIII, IRR) Domestic shipowners/operators are authorized to establish/fix their own domestic shipping rates, passenger or cargo rates or both. Limitation: Effective competition is fostered and public interest is served. Effectivity: 7 calendar days from the date of publication.

Conditions in Fixing Rates (Sec. 2, Rule VIII, IRR) Shipowners/operators with Entity/Company CPC to submit under oath with the MARINA their Notice for the adoption of initial/ subsequent upward or downward adjustment of deregulated rates in a prescribed form. The notice shall indicate, among others, the name of covered ship(s), authorized route(s)/link(s), rate(s) per route/link and the grounds for the adjustment.

Publication Requirement of Adjusted Rates The notice shall be published in any of the five (5) major newspapers of national circulation, if the route(s)/area(s) of operation to be served is national and/or inter-regional in scope. If the route(s)/area(s) to be served is local or intraregional in scope, publication in a newspaper of local circulation is sufficient. And, posting of the notice in in all conspicuous places at the affected port(s), vessel(s), company premises, passenger terminals and ticketing office(s).

Instances Warranting MARINA Intervention (Sec. 4, Rule VIII, IRR) Monopoly of a route/link, lack of effective competition in a route/link, and practices which constitute combinations in restraint of trade. Any complaint against the rates charged and/or services rendered by the shipowners/operators provided sufficient basis/justification is submitted. Any adverse findings/recommendations as a result of monitoring activities undertaken by the MARINA. Other analogous instances.

Compulsory Insurance Coverage (Sec.1, Rule IX, IRR) (1) Not less than Php 200,000.00 per manifested passenger; (2) Adequate insurance coverage for cargo, in anamount to be computed in accordance with existinglaws, rules and regulations, and the total amount ofsuch coverage shall be equivalent to the total cargocapacity being offered by the vessel. (3) If a domestic shipowner/operator should offerboth passenger and cargo service, then the totalinsurance coverage shall be in the total sumequivalent to that stipulated in paragraphs (1.1) and (1.2) of this Section.

Amount of Insurance If Operating more than (1) ship The amount equivalent to the total authorized number of passengers, or total cargo capacity, or both, of the largest operating ship. But must not exceed the value of such ship.

Prohibited Acts (Sec. 1, Rule XII, IRR) Operating without a valid certificate of public convenience, accreditation or other form of authority. Refusal to accept or carry any passenger or cargo without just cause, except for tramp operations. Failure to maintain the vessels in safe and serviceable condition, or violation of the safety rules and regulations. Failure to obtain or maintain adequate insurance coverage. Failure to meet or maintain safe manning requirements.

 Failure to submit the required Quarterly Report and an audited Annual Report of Operations and Finances, attaching the copy of the Official Receipt (OR) of Quarterly and Monthly Common Carriers Tax Payments to the Bureau of Internal Revenue. Other detrimental or prejudicial to the safety, stability and integrity of domestic shipping. Those prohibited acts defined in existing MARINA Circulars.

Powers of MARINA (Rule XIV, IRR) Power to Investigate Power to Hear and Adjudicate Power to Issue Summons

Rules on Appeals to MARINA Regional Offices CPC Decisions (Rule XV, IRR) Order, ruling, decision or resolution rendered by MARINA Regional Office relating to CPC application MR 15 days from receipt; If denied, appeal to Administrator 15 days from receipt. If denied by MARINA Administrator: -ADMINISTRATIVE APPEAL to the MARINA Board within 15 days from receipt; or -Special Civil Action on Certiorari with CA within 30 days from receipt.

All other Decisions MR 15 days from receipt; If denied, appeal to MARINA Administrator 15 days from receipt. If denied by MARINA Administrator: ADMINISTRATIVE APPEAL to the MARINA Board within 15 days from receipt.

Perfection of Appeal File a Notice of Appeal with the MARINA Administrator and the concerned CO/MRO Director/OIC. Copy to be served upon the adverse party. Within 15 days from receipt of the appealed from decision, etc. Payment of Docket Fee of P1,000.

Temporary Take-Over of Operations (Sec. 1, Rule IX, IRR) In times of national emergency; When the public interest so requires; Under reasonable terms prescribed by the Flag state; Flag state may temporarily take over or direct theoperations of any vessel engaged in domestic tradeand commerce or prescribe its rates or routes of operation. Immediately upon the cessation of the emergency, the State shall immediately reinstate to the domestic shipowner/operator the operation of the ship under the same terms and conditions existing prior to the occurrence of the emergency.

Chapter 8 Persons Who Take Part In Maritime Commerce

Ship owner and Ship agent Ship owner the person primarily liable for damages sustained in the operation of vessel. Ship agent the person entrusted with provisioning of the vessel, or who represents her in the port in which she happens to be. Both are civilly liable for the acts of the captain and for the obligations contracted by the him to repair, equip, and provision the vessel. [Art. 586, Code of Commerce]

Domestic Shipowner/operator A citizen of the Philippines, or a commercialpartnership wholly owned by Filipinos, or acorporation at least sixty percent (60%) of the capitalof which is owned by Filipinos, which is dulyaccredited by the MARINA under MemorandumCircular No. 79/79-A or their subsequentamendments to engage in the business of domesticshipping, which may include cooperative orassociation duly registered with relevant government agency. [IRR, R.A. 9295]

Captain and Masters Captain those who govern vessels that navigate the high seas or ships of large dimensions and importance, although they may be engaged in coastwise trade. Masters those who command smaller ships engaged exclusively in the coastwise trade. Note: For purposes of maritime commerce, both have the same meaning, i.e. they command ships.

Powers & Functions of Captains (Masters) Nature of his position: confidential and managerial. 3 distinct roles he performs: (1) As general agent. If he is also a co-owner, his agency becomes one coupled with interest. He may not be dismissed if he is a co-owner or the partnership agreement stipulates as a condition as ship captain [see Art. 602 & 606 -607]; (2) As commander and technical director of the vessel; and (3) As representative of the country under whose flag he navigates.

Vessel Pilot A person duly qualified, and licensed, to conduct a vessel into or out of ports, or in certain waters. In a broad sense, the term pilot includes: -Those whose duty it is to guide vessels into or out of ports, or in particular waters; and -Those entrusted with navigation of vessels on the high seas. Compulsory pilotage is enforced in the Port of Manila, Port of Cebu, Port of Tacloban, among others.

Pro Hac Vice Nature of Position of Pilot Under English and American authorities, generallyspeaking, the pilot supersedes the master for thetime being in the command and navigation of theship, and his order must be obeyed in all mattersconnected with her navigation. He becomes master pro hac vice and should give alldirections as to speed, course, stopping andreversing, anchoring, towing and the like. And when a licensed pilot is employed in a placewhere pilotage is compulsory, it is his duty to insiston having effective control of the vessel or to declineas pilot. [Far Eastern Shp., v. CA, G.R. No. 130068, Oct. 1, 1998]

Occasions When Master May Interfere or Even Displace Pilot When Pilot is obviously incompetent or intoxicated; In cases of danger which pilot does not foresee; In all cases of great necessity. To advise or offer suggestions to the pilot considering that he is still in command of the vessel, except so far as her navigation is concerned. To see that there is sufficient watch on deck and that the men are attentive to their duties, etc. Failure on the part of the Master to comply with above duties makes him personally liable for resulting damage cause. [Ibid]

Liability of Pilot Rule: a pilot is personally liable for damages caused by his own negligence or default to the owners of the vessel and to third parties for damages sustained in a collision. Negligence of Pilot is known as MARITIME TORT As held In Far Eastern Shipping: In the United States, the owners of a vessel are not personally liable for the negligent acts of a compulsory pilot, but by admiralty law, the fault or negligence of a compulsory pilot is imputable to the vessel and it may be held liable therefor in rem.

 Where, however, by the provisions of the statute thepilot is compulsory only in the sense that his fee mustbe paid, and is not in compulsory charge of thevessel, there is no exemption from liability. Even though the pilot is compulsory, if his negligencewas not the sole cause of the injury, but thenegligence of the master or crew contributedthereto, the owners are liable. But the liability in rem does not release the pilot fromthe consequences of his own negligence. Therationale for this rule is that the master is not entirelyabsolved of responsibility with respect to navigationwhen a compulsory pilot is in charge.

Other Officers and Crew Deck Officer an officer qualified in accordance withthe provision of the International Convention onStandards of Training, Certification andWatchkeeping for Seafarers (STCW) 1978, asamended, Chapter II. Chief Engineer a senior licensed marine engineofficer responsible for the mechanical propulsion andthe operation and maintenance of the mechanicaland electrical installations of the ship. Engineer Officer an officer qualified in accordancewith the provision of (STCW) 1978, as amended, Chapter III.

 Radio Officer a person holding an appropriate certificate issued and recognized by the MARINA under the provisions of the Radio regulations. Ratings a member of the ships crew other than the master or an officer. Major Patron (MAP) a marine deck officer duly registered and certificated to act as officer or master of vessel of not more than 500 GT navigating in the major coastwise trade routes within the territorial limits of the Philippines.

 Minor Patron (MIP) a marine deck officer duly registered and certificated to act as officer or master of vessel of not more than 250 GT navigating within a specified body of water in the minor coastwise trade route in the Philippines. Marine Diesel Mechanic (MDM) a person authorized by MARINA to operate and maintain the ships diesel engines or the qualification/license to act as such.

 Supercargoes administrative officers of the ship with duties to keep an account and record of their transaction. Powers and duties of the captain with regard to that part of the administration shall cease when thee is a supercargo. Supernumerary -a person who is not a regular member of the crew but performing functions appropriate to the certificate possessed.

Chapter 9 Charter Party

Definition of a Charter Party A written contract whereby the ship owner or the ship agent leases the vessel to transport passengers or cargo for a fixed price. [Art. 652, Code of Commerce] A contact by which an entire ship or some principal part thereof, is left by the owner to another person for a specified time or use. [Caltex Philippines, Inc. v. Sulpicio Lines, Inc., 315 SCRA 709]

National Union Fire Insurance v. Stolt-Nielsen Phil., 184 SCRA 682 Held: Where BL has been issued covering goods shippedaboard a vessel under a charter party, and chartererremains the holder of the BL, it operates as a receiptfor the goods, and as document of title passing theproperty of the goods, but not as varying thecontract between the charterer and ship owner. The BL becomes merely a receipt and not thecontract of carriage in a charter of the entire vessel.

Ouano vs. CA, 211 SCRA 740 Held: Even if a charter party has a condition against subchartering, and the vessel was in fact sub-charteredwithout knowledge on the part of the sub-chartererof the prohibition, no cause of action arises in favorof the owner of the vessel against the sub-charterer. Neither does such owner have any lien against thecargo of sub-charterer. Carrier has a lien on the goods only while he retainspossession of the goods

Obligation of the Charterer Charterer, before transporting its cargo, is of no obligation to ensure that the vessel it chartered complied with all legal requirements. The duty rests upon the common carrier as it is the one engaged in public service. [Caltex v. Sulpicio Lines, infra]

Important Terms Used in Charter Party Primage the bonus to be paid to the captain after asuccessful voyage. Demurrage A penal clause intended to compensatethe owner of the vessel for its non-use. Lay days The period when the vessel will be delayed in port for loading and unloading. Deadfreight The portion of the cargo under acharter not loaded. It is also used as the amount recoverable by the ship owner from the charterer forthat portion of the ships capacity that the latterfailed to occupy despite the stipulation in the charter party.

Cases on Demurrage In its strict sense, demurrage is the compensation provided for in the contract of affreightment for the detention of the vessel beyond the lay time or that period of time agreed on for loading and unloading of cargo and is given to compensate the ship owner for the non-use of the vessel. [National Steel v. CA, 283 SCRA 45] Demurrage is the sum fixed in a charter party as remuneration to the ship owner for the detention of his vessel beyond the number of days allowed by the charter party for loading or unloading or for sailing. [NFA v. CA, 311 SCRA 700]

NFA v. CA, 311 SCRA 700 The shipper or charter is liable for the payment ofdemurrage claims when he exceeds the period ofloading or unloading as agreed upon or the agreedlay days. The period for such may or may not bestipulated in the contract. A charter party may eitherprovide for a fixed lay days or contain general orindefinite words such as customary quick dispatchor as fast as the steamer can load. Customary quick dispatch implies that loading andunloading of the cargo should be within a reasonableperiod of time. Due diligence should be exercisedaccording to the customs and usages of the port orports of call.

.. The circumstances obtaining at the time of loadingand unloading are to be taken into account. When the provision is for demurrage/dispatch: NONE it will be deemed a waiver of the right to claim demurrages. Delay in loading or unloading, to be deemed asdemurrage, runs against the charterer as soon as thevessel is detained for an unreasonable length of timefrom the arrival of the vessel because no available berthing space was provided for the vessel due tothe negligence of the charterer or by reason of thecircumstances caused by the fault of the chartere.

Keng Hua Paper Products v. CA, 286 SCRA 257 Held: A claim for demurrage by carrier involves anobligation NOT ARISING from a loan or forbearanceof money. The applicable interest rate is 6% P.A. pursuant to Art. 2209, NCC. When the BL does not specify the demurrageamount, and the total amount claimed by the carrierincreased as the days went by, the total amountdemanded cannot be deemed to have been established with reasonable certainty until the trialcourt rendered its judgment. Hence, the 6% is to becomputed from the date of the trial courts decisionimposing demurrage charges against the consignee.

Kinds of Charter Party Contract of Affreightment one whereby the owner of the vessel leases a part or all of its space to haul goods for others. It is a contract for special services to be rendered by the ship owner. The ship owner RETAINS the possession, command and navigation of the ship, the charterer merely having use of the space in the vessel in return for his payment. Bare-boat or Demise Charter where the shipowner turns over possession of his vessel to the charterer, with the latter undertaking to provide the crew, victuals, supplies and fuel during the term of the charter. Charterer is owner PRO HAC VICE.

Two Classes of Contract of Affreightment Voyage Charter The vessel is leased to the chartered for a single voyage only; Time Charter The vessel is leased for a fixed period of time.

Substantive Provisions Relating to Charter Party If charterers cargo is not sufficient to fill up 3/5 ofthe capacity of the vessel, carrier has the right tounload the cargo and put it on a smaller vessel at theexpense of the charterer. If cargo exceeds 3/5 of thecpacity, the carrier cannot exercise the right. [Arts. 670 & 671, CoC] If vessel has been chartered in whole by one party, the owner cannot receive the cargo of any otherperson as the charter party becomes an exclusivecontract. [Art. 672] The owner of the vessel is liable to the charterer for damages in case the captain unduly delays thevoyage. [Art. 673]

 If charterer brings more than that agreed upon, thecarrier may accept the increase in cargo and demandincrease of freightate provided the vessel is notoverloaded. [Art. 674] If vessel has been chartered to load cargo in anotherport and upon arrival in that port there is no cargodelivered, the captain has two options: a) Look for other cargo; or b) After expiry of lay days there is still no cargo, thecaptain should file a marine protest and return tohome port in full ballast. The charterer should payfreightage in full. [Art. 675]

 No right to freightage if charterer can prove that the vessel is not in condition to navigate. [Art. 676] Charter may sub-charter where there is no express prohibition. [Art. 679] Charterer who cannot fill the vessel is liable for full freightage. [Art. 680] Charterer is liable for damages if loaded cargo subjects the vessel to forfeiture or confiscation. Under Art. 356, carrier can open the packages of shipper to find out whether they contain items which may subject the vessel to forfeiture. [Art. 681]

.. If merchandise should have been shipped for purpose of illicit commerce, and were taken on board with knowledge of the person from whom the vessel was chartered or of the captain, the captain is jointly liable with the ship owner for all the losses which may cause the other shippers. [Art. 682] Where the vessel is in need of repairs, chartere must wait until vessel is repaired. [Art. 683] Before beginning of the trip, charterer may unload the cargo by paying of the freightage. [Art. 685 in relation to Art. 688]

 Charterer is under obligation to pay the freightage after the discharge of the cargo. [Art. 686] Charterer and shippers cannot abandon the cargo unless it consist of liquids and leaks out due to inherent defect of the cargo and with not more than remaining in the container. [Art. 687]

Other rules affecting charter party and cargo If merchandise sold to make necessary repairs, charterer shall still pay for the freightage. [Art. 659] If merchandise is jettisoned, lost at sea or seized by pirates, no obligation to pay freightage. Considered as general average. [Arts. 660 & 661] Merchandise damaged due to inherent defect: pay full freightage. [Art. 663]

 Where payment is based on weight and the cargo increases in weight during the voyage, the charterer must pay the increase. [Art. 664] Cargo carried is subject to retaining lien by the ship owner. Retaining lien while in possession; Carriers lien subsists up to 30 days from date of release of cargo. [Arts. 665 -667]

Valid Rescission By Charterer of Charter Party (Arts. 688 690, CoC) Before loading by paying of the freightage agreedupon. The consent of ship owner is NOT NECESSARY. Mere notice to him is sufficient. {Note: This is the 1st distinction between charter party and in ordinarylease. In lease, none of the parties may unilaterallycancel the contract without paying the fullconsideration plus damages}; When the vessel is not up to the capacity agreedupon or the flag under which she sails differs fromthat agreed upon. No obligation to pay thefreightage. When the vessel is not place at the disposal of thecharterer. No obligation to pay the freightage.

 When the vessel returns due to pirates or to bad weather and charterer decides to unload. He must pay the full freightage. When the vessel returns for repairs. If repairs take less than 30 days, charterer must pay in full the freightage; if it exceeds 30 days, he must pay that portion of the freightage proportionate to the distance covered.

Total Rescission by the Ship owner (Art. 689) When the charterer fails to load the vessel and laydays have expired. In this case, charterer is underobligation to pay of the freightage. When the owner sells the vessel and the new owner, despite knowledge of the charter party, decides toload the vessel with his own cargo. There is noobligation on the part of the ship owner tocompensate the charterer. But if the new owner hasno cargo to load, he must respect the charter party. {Note: This is the 2nd distinction between charter party and in ordinary lease. In ordinary leasecontract, if the buyer of the object of lease wasaware of the lease, he must respect the contract.}

Total Rescission Due to Fortuitous Event (Art. 690) War Blockade Prohibition to receive cargo Embargo of vessel by a Government Inability of vessel to navigate due to no fault of the captain or ship agent.

Chapter 10 Bottomry & Respondentia

Concepts of Bottomry & Respondentia Bottomry: A maritime contract whereby the owner of a ship borrows for the use, equipment or repair of the vessel, for a definite term, and pledges the ship (or the keel or bottom of the ship pars pro toto) as security, with the stipulation that if the ship is lost during the voyage or during the limited time on account of the perils enumerated, the lender shall lose his money. Respondentia: A maritime contract where it is the goods, or some part thereof, are hypothecated as security for a loan, the repayment of which is dependent upon maritime risks.

Distinguished from Simple Loan

Firstly, in bottomry & respondentia, rate of interest isnot subject to the Usury Law on account of theextraordinary risks involved while in simple loan, therate of interest must not exceed the ceiling fixed bythe Usury Law (note: read now as unconscionable). Secondly, in the former, there must necessarily be amarine risk, the existence of which must be dulyestablished while there is no need for such risk under the latter. Thirdly, in the former, it must be executed inaccordance with form and manner required in theCode of Commerce while in the latter, the formalrequisites on contract apply.

.. Fourthly, loan on bottomry or respondentia must be recorded in the registry of vessels in order to bind third persons while no such registration is required in simple loan. Lastly, in the former, preference is extended to the last lender if there are several lenders upon the theory that were it not for the last lender, then the prior lenders would not have benefited from the preservation of the security. Whereas in the latter, the first lender, as a general rule, enjoys preference over subsequent ones. [Art. 730, CoC]

Characteristics/Common Elements of Bottomry & Respondentia Exposure of security to marine peril. [Art. 732] Obligation of debtor conditioned only upon the safe arrival of the security at the point of destination.

Who May Contract Bottomry or Respondentia Bottomry: General rule only the owner. If owner is absent the captain. [Art. 728] Respondentia: only the owner of the cargo.

Hypothecary Nature of Bottomry & Respondentia (Art. 731) General Rule: The loss of the security, i.e. vessel in bottomry or cargo in respondentia, extinguishes the obligation. Exceptions: Due to inherent defect (cargo); Due to barratry on the part of the captain, i.e. malfeasance; Due to fault or malice of borrower; Vessel was engaged in contraband; and Cargo loaded different from that agreed upon.

Other Relevant Provisions on Bottomry & Respondentia No bottomry on the salaries of the crew. [Art. 725] If loan given in excess of security throughovervaluation by borrower, the excess must bereturned with legal interest. [Art. 726] When respondentia loan is not all utilized for the cargo, the excess must be returned. [Art. 727] If the security in bottomry or respondentia is notsubject to a marine peril, it becomes an ordinaryloan. [Art. 729]

.. Lenders of bottomry and respondentia mustcontribute to the general average once jettison hasmade possible the safe arrival of the security. [Art. 732] Exposure to marine peril takes place from the timethe anchors are a weighed at the port of departureuntil anchors are dropped at the port of destination. [Art. 733] In case of shipwreck and there is salvage, loan willdepend on the repayment on what may be salvaged. [Art. 734]

 The concurrence of bottomry loan with insurance, the insurable interest of the owner of the vessel is the value of the vessel less the loan in bottomry, in reference to Sec. 101 of the Insurance Code. [Art. 735] Failure to pay the premium on time of bottomry or respondentia loans gives rise to liablility for legal interest (delay ex re). [Art. 736]

Chapter 11 Averages

Average Defined Average Defined Any damage deliberately caused, or any expensedeliberately incurred due to a marine peril andbecause of which the vessel and/or cargo is saved. Art. 806: All extraordinary or accidental expenseswhich may be incurred during the voyage in order topreserve the vessel, the cargo, or both. Excludes: Petty and ordinary expenses incident tonavigation, e.g., pilotage, lighterage, towage, anchorage, inspection, health, quarantine, lazaretto[i.e., quarantine station for maritime travellers] , andother so-called port expenses, costs of barges andunloading until the merchandise is place in thewharf, and any other usual expenses in navigation.

Kinds of Average Kinds of Average Particular (or Simple) Average All the damages andexpenses caused to the vessel or to her cargo whichhave NOT INURED TO THE COMMON BENEFIT AND PROFIT of all the persons interested in the vesseland her cargo. The damages sustained shall beborne by the owner of the vessel or the goods only. [Art. 809] General Average All the damages and expenseswhich are DELIBERATELY caused in order to save the vessel, its cargo or both, AT THE SAME TIME, fromREAL AND KNOW RISKS. [Art. 811]

Examples of Particular Average (Art. 809) Losses suffered by the cargo from the time of itsembarkation until it is unloaded, either on account ofinherent defect of the goods or by reason of anaccident of the sea or force majeure, and theexpenses incurred to avoid and repair the same. Losses and expenses suffered by the vessel in itshull, rigging, arms, and equipment, for the samecauses and reasons, from the time it puts to seafrom the port of departure until it anchors and landsin the port of destination. Losses suffered by the merchandise LOADED ONDECK, except in coastwise navigation, if the marineordinances allow it.

.. The wages and victuals of the crew when the vessel is detained or embargoed by legitimate order or force majeure, it the charter has been contracted for a fixed sum for the voyage. The necessary expenses on arrival at a port, in order to make repairs or secure provisions. The lowest value of the goods sold by the captain in arrivals under stress for the payment of provisions and in order to save the crew, or to meet any other need of the vessel, against which the proper amount shall be charged.

.. The victuals and wages of the crew while the vesselis in quarantine. The loss inflicted upon the vessel or cargo by reasonof an impact or collision with another, if it isaccidental and unavoidable. If the accident should occur through the fault or negligence of the captain, the latter shall be liable for all the losses caused. Any loss suffered by the cargo through the fault, negligence, or barratry of the captain or of the crew, without prejudice to the right of th owner to recoverthe corresponding indemnity from the captain, thevessel, and the freightage.

Requisites of General Average There must be common danger; That for the common safety, part of the vesselor of the cargo or both is sacrificedDELIBERATELY; That from the expenses or damages causedfollows the successful saving of the vessel andcargo; and That the expenses or damages should havebeen incurred or inflicted after taking properlegal steps and authority

Procedure in General Average Before the loss is caused or the expenses incurred, the captain must call a meeting with the chief mateand other officers and any cargo owner who may beon board; They shall decide by voting on a resolution of thecaptain. If majority disagrees with the captain, thelatter shall have the final decision; The minutes must be entered in the deck log book, signed by all the persons present and stating in detailall the goods jettisoned and the injuries caused tothose kept on board; Copy of the minutes to be filed within 24 hours afterarrival at first port of entry.

Examples of General Average The goods or cash invested in the redemption of thevessel or of the cargo captured by enemies, privateers, or pirates, and the provisions, wages, andexpenses of the vessel detained during the time thesettlement or redemption is being made. The goods jettisoned to lighten the vessel, whetherthey belong to the cargo, to the vessel, or to thecrew, and the damage suffered through said act bythe goods which are kept on board. The cables and masts which are cut or rendered useless, the anchors and the chains which areabandoned, in order to save the cargo, the vessel orboth.

 The expenses of removing or transferring a portionof the cargo in order to lighten the vessel and placeit in condition to enter a port or roadstead, and thedamage resulting therefrom to the goods removed ortransferred. The damage suffered by the goods of the cargo bythe opening made in the vessel in order to drain itand prevent its sinking. The expenses caused in order to float a vesselintentionally stranded for the purpose of saving it. The damage caused to the vessel which had to beopened, scuttled or broken in order to save the cargo.

 The expenses for the treatment and subsistence of the members of the crew who may have been wounded or crippled in defending or saving the vessel. The wages of any member of the crew held as hostage by enemies, privateers, or pirates, and the necessary expenses which he may incur in his imprisonment, until he is returned to the vessel or to his domicile, should he prefer it.

 The wages and victuals of the crew of a vesselchartered by the month, during the time that it isembargoed or detained by force majeure or by orderof the government, or in order to repair the damagecaused for the common benefit. The depreciation resulting in the value of the goodssold at arrival under stress in order to repair thevessel by reason of gross average. The expenses of the liquidation of the average.

Who Will Contribute for the

General Average Those who benefited from the sacrifice: the ship owner and owners of the cargoes that were saved. Contribution may also be imposed on the insurers of the vessel or cargoes that were saved as well as lenders on bottomry or respondentia.

Who Are Entitled To The

General Average All the owners whose goods were sacrificed pro rata. Exceptions: Goods carried on deck unless the law or customs of the place allow such stowage. Goods that are not recorded in the books or records of the vessel. Fuel for the vessel if there is more than sufficient fuel for the voyage.

American Home Assurance v. CA, 208 SCRA 343 Held: A particular average presupposes that the loss or damage is due to an inherent defect of the goods, an accident of the sea, or a force majuere or the negligence of the crew of the carrier governed by the Code of Commerce. The claims for damages due to the negligence of the common carrier are governed by the Civil Code provisions on common carriers.

Magsaysay Inc. vs. Agan, 96 Phil. 504 Facts: An interisland vessel of petitioner sailed fromManila to Aparri. The vessel entered the Aparri riverwhere she stopped to load and unload. Overnight, asand bar formed at the mouth of the river. On her way out, the vessel hit the sand bar and got stuck. Atug boat was sent by the owner to town the vessel. In Manila, the captain demanded from Agan andother cargo owners to reimburse him for theexpenses of hiring the tugboat. Held: Particular average only. The cargo was notbenefited since it was not perishable nor the cargoowner in a hurry. Even assuming it was generalaverage, the captain did not call the meeting.

Philippine Home Assurance v. CA, 257 SCRA 468 Facts: A vessel, with cargo on board, caught fire due to a small flame coming from the acetylene cylinder which were stored in the accommodation area near the engine room and which exploded despite efforts to extinguish the fire. The vessel was subsequently towed to port with the expenses of having the cargo transshipped to port of destination was charged to the consignees. Petitioner sought recovery as subrogee.

.. Held: The consignee of the cargo cannot be made toshare with the carrier for additional freight andsalvage charges. Fire cannot be considered a natural disaster or calamity since it almost always arises from some actof man. It cannot be an act of God unless caused bya lightning or a natural disaster or casualty notattributable to human agency. While the facts of the case may technically fall withinthe purview of general average, the formalitiesprescribed were not complied with. Consequently, the carriers claim for contribution from the consignees cannot be enforced.

.. Jettison of Cargo Cargo on deck shall be first to be jettisoned followed by those from the lower deck then those of bigger bulk but of smaller value. [Art. 815] Cargo jettisoned, to be entitled to reimbursement for general average, must be covered by a bill of lading. [Art. 816] Expenses to lighten a vessel by the transfer of goods to other vessels is general average. Also when there is fire on port and there is need to sink the vessel to save the goods. [Arts. 817 & 818]

Liquidation of Average Whether general or particular average, the person benefited by the damage or expense incurred must contribute his proportionate share, to be determined by the amount of damages or expenses incurred and apportioned among the those benefited in proportion to the value of their property save. In particular average, it is implied that there is only one interest involved and the proportion pertains to him 100%.

The York-Antwerp Rules Allow deck cargo on coastwise shipping but prohibits it on overseas trade. Hence, a deck cargo stowed on deck, with consent of the shipper in an overseas trade must always contribute to general average. But if it is the one jettisoned, it will not be entitled to reimbursement. On the other, a deck cargo stowed on deck in a coastwise trade with consent of the shipper while also must contribute to general average is likewise entitle to reimbursement if jettisoned.

Chapter 12 Collisions

Collision & Allision Collision & Allision Collision occurs when both vessels are on motion. Allision happens when one of the vessels isstationary. Rule on Collision: The guilty vessel shall payfor the damage caused by the collision. Exception: If guilty vessel sinks due to thehypothecary nature of maritime transactions. Exception to exception: When there isnegligence of ship owner [see Abdulhamancase]

Five Cases Covered by Collision/ Allision One vessel is at fault Vessel at fault is liable for the damage caused to the innocent vessel as well as tothe damage suffered by the owners of cargo of bothvessels. Both vessels at fault Each vessel must bear its own loss, but the shippers of both vessels may go againstthe ship owners, being solidarily liable to them. Vessel at fault is unknown Same rule when both vessels are at fault. Third vessel at fault Same rule as when one vessel is at fault. Fortuitous Event No liability; res perit domino.

Three stages in Collision When the 2 vessels approach each other. When the vessel are so near each other that contact is imminent. Actual contact or collision. Note: The foregoing rule was laid down in Urrutia v. Baco River Plantation, 26 Phil. 623 to apply the doctrine of last clear chance. But this ruling was abandoned in Williams v. Yangco, 27 Phil. 68 (infra)

Williams v. Yangco, 27 Phil. 68 (1914) Held: The doctrine of last clear chance is inapplicable for marine collision since the rule of liability in this jurisdiction for maritime accidents such as that now under consideration is clearly, definitely, and unequivocally laid down in Art. 827 of the Code of Commerce. Under the rule, the evidence disclosing that both vessels were at fault gives neither of the owners an action against the other for the loss or injury sustained by their respective vessel.

Villacarlos v. Everett Steamship, 4 CA Reports 961 Facts: A fishing vessel of Philippine registry collided with a vessel from Europe. The foreign vessel was at fault but its owner was beyond the jurisdiction of the courts. The owner, however, had a shipping agent in the Philippines who, nonetheless denied liability. Held: The agent is liable in the absence of the ship owner. The shipping agent or naviero acts as owner in the absence of the ship owner.

 Code of Commerce uses the word buque in reference to collision of vessel, i.e.a draft with deck. A fishing vessel here had no deck, hence, not a buque so that Art. 835 on marine protest does not apply. Failure of the captain of the fishing vessel to file marine protest does not bar recovery.

Duty of the Overtaking or Crossing Vessel (Sulpicio Lines v. CA, 305 SCRA 478) Under Rule 24-C of the Regulations for Preventing Collision at Sea, the duty of overtaking or crossing vessel to keep out of the way subsists even if the overtaking vessel cannot determine with certainty whether she is at forward or aft more than two points from the vessel being overtaken. In case of collision, it would be beyond cavil that the overtaking vessel must assume responsibility as she was in a better position to avoid the collision. She should have blown its horn or given signs to warn the other vessel that she was overtaking her.

When moving vessel strikes stationary object (Far Eastern Shipping v. CA, 297 SCRA 30) Held: American evidentiary rule provided for a presumption of fault against a moving vessel that strikes a stationary object, such as a dock or navigational aid. In admiralty, this presumption does more than merely require the ship to go forward and produce some evidence on the presumptive matter. The moving vessel must show that it was without fault or that the collision (allision) was occasioned by the fault of the stationary object or was the result of inevitable accident.

Chapter 13 Arrival Under Stress & Shipwrecks

Steps To Be Taken In Determination Of Propriety Of Arrival Under Stress

Captain to determine during voyage if there is wellfounded fear of seizure, privateers or other validgrounds. He then assembles all the officers. He summons the persons interested in the cargo whoare present and who may attend. They have no right to vote. Officers to be determined and agree if there is wellfounded reason after examining the circumstances. The captain has the deciding vote. Agreement to be drafted and minutes to be signed and entered in the deck log book. Also objections.

Instances of Arribada Instances of Arribada Lack of provision or fuel Pirates Inability to navigate. Note: If the lack of fuel or provision is not due to lack offoresight, or the fear of pirates is well-founded or theinability to navigate is not attributable to fault ofcaptain or crew, then these arrivals under stress becomes particular average of the vessel. Shippersmust wait. No damage needs to be paid to the shippers. But if due to bad faith, the damages must be paid to shippers for delay and the vessel bears the loss.

Improper Arribada If lack of provisions should rise from the failure totake the necessary provisions for the voyageaccording to usage and customs, or if they shouldhave been rendered useless or lost through badstowage or negligence in their care. If the risk of enemies, privateers, or pirates shouldnot have been well-known, manifest, and based onpositive and provable facts. If the defect of the vessel should have arisen from the fact that it was not repaired, rigged equipped, and prepared in a manner suitable for the voyage, orfrom some erroneous order of the captain.

 When malice, negligence, want of foresight, or lack of skill on the part of the captain exists in the act causing the damage. Expenses. [Art. 820, Code of Commerce]

Shipwreck (Agrounding) The demolition or shattering of a vessel caused by her driving ashore or on rocks and shoals in the midseas, or by the violence of winds and waves in tempests.

Rules on Shipwrecks (Arts. 840-845) Losses/deterioration due to shipwreck or stranding tothe account of the owners & ship owner. If caused by malice, negligence, or lack of skill of thecaptain or because vessel put to sea wasinsufficiently repaired and equipped: Shippers candemand indemnity from the captain. The goods saved from the wreck to be speciallybound for the payment of the expenses of therespective salvage. If several vessels sail under convoy, and any of themshould be wrecked, the cargo saved will bedistributed among the rest in proportion to theamount which each one is able to take.

 If any captain should refuse, without sufficient cause, to receive what may correspond to him, the captainof the wrecked vessel to enter a marine protestagainst him. If it is not possible to transfer to the other vesselsthe entire cargo of the vessel wrecked, the goods ofthe highest value and smallest volume to be savedfirst. Designation to be made by the captain withconcurrence of his officers. The captain taking on-board the goods saved fromthe wreck to continue his course to the port ofdestination and upon arrival he should deposit thegoods for disposal to their owners.

 In case the captain changes his course, and if he canunload them at the port of which they wereconsigned, he may make said port if the shippers orsupercargoes present and the officers andpassengers of the vessel consent thereto. But he isnot required to do so even if he has the consentduring time of war or when the port is difficult anddangerous to make. The owners of the cargo to defray all the expenses ofthis arrival and the payment of the freightage. If cannot be, proceed to judicial sale complying withthe formalities and on publicity.

Chapter 14 Salvage

Definition and Philosophy of Salvage Salvage is a service which one person renders to the owner of a ship or goods, by his own labor, preserving the goods or the ship which the owner or those entrusted with the care of them have either abandoned in distress at sea, or are unable to protect and secure. Salvage Law provides for the compulsory reward to those who brave the perils of the sea to save the cargo or vessel in order to encourage such services. Whether the owner of the property save likes it or not, he must give a reward. The maximum amount is 50% of the value of the property save.

Kinds of Salvage Services Voluntary compensation is dependent on the success. Under contract for a per diem or per horam wage, payable at all event. Under contract for compensation payable only in case of success.

Requisites For Salvage Reward Valid object of salvage. Such object must be exposed to marine peril. Must be rendered voluntarily. Must be successful.

Derelict A vessel or cargo badly damaged and abandoned by the crew to the mercy of the sea. Mere abandonment does not make such vessel or cargo res nullius. Proper procedure must be followed by the salvors to be entitled of the reward.

Procedure In Derelict If vessel is abandoned, salvor must tow her to thenearest port where it will be delivered to themunicipal treasurer or collector of customs who willadvertise the fact of salvage. If owner of salvaged vessel or cargo appears, hemay take possession of vessel or cargo and pay thereward amount not exceeding 50% of the value ofthe vessel. Reward is determined by considering: -the value of the property save; zeal employed; danger posed to the salvors; number of persons who took part; services render; and expenses incurred.

 If no claim for the vessel is made within 3 months after publication, the municipal treasurer to sell theproperty salvaged at public auction. The reward andexpenses will be deducted from the proceeds. Thebalance to be deposited with the treasury. If no one claims for the balance after 3 years, willgo to the salvors and the other half to the government. If one vessel saves another: - to the ship owner of the saving vessel. - to the captain - to the crew

Honorio Barrios v. Go Thong & Co., G.R. L-17192, March 30, 1963 Facts: Go Thong is the owner of a vessel plying theroute from Mindanao to Cebu. The engine of hisvessel conked out while she was in the middle of the sea. The captain radioed the owner and was advisedthat a sister ship was on its way to tow the vessel. The sea at the time was calm. The radio messagewas picked up by another vessel which thereafterproceeded to the stranded vessel of Go Thong. Thecaptain agreed that the vessel be towed. The ownerof the towing vessel knew the owner of the strandedvessel. He waived charges of towing. But the captainand the crew the responding vessel complained oftheir respective shares in the reward.

 Issue: Was there salavage or towage? Held: There was no salvage because there was no marine peril at the time. There was no danger for the stranded ship. The sea was calm and a sister ship was nearby. Hence, no reward is due. Also, there is no need for compensation for the towage because of the waiver of the towing vessel.

Chapter 15 COGSA

History of COGSA History of COGSA Originally passed by Congess of the US on April 16,1936 as Public Act No. 521. Adopted by the Phil Commonwealth on October 22,1936 as Commonwealth Act No. 65. When the New Civil Code took effect on August 30,1950, it became the primary law on carriage of goodsby sea. Art. 1753, NCC: The law of the country to which thegoods are to be transported shall govern the liabilityof the common carrier for their loss, destruction ordeterioration. COGSA remains suppletory law for international trade

Chapter 16 Public Service Laws

Meaning and Concept of Public Utility A business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service. [National Power Corporation v. Court of Appeals, G.R. No. 112702, September 26, 1997] In a very real sense, a public utility is engaged in public service--providing basic commodities and services indispensable to the interest of the general public. [Republic v. Meralco, G.R. No. 141314, April 9, 2003]

 When, therefore, one devotes his property to a use in which the public has an interest, he, in effect grants to the public an interest in that use, and must submit to the control by the public for the common good, to the extent of the interest he has thus created. [Kilusang Mayo Uno Labor Center v. Hon. Jesus B. Garcia Jr., G.R. No. 115381, December 23, 1994 citing Pantranco v. Public Service Commission, 70 Phil.221]

Constitutional Provisions Public utilities must be owned by Filipino citizen or 60% owned by Filipino citizens. [Art. XII, Sec. 11] Mass media must 100% Filipino. Government take-over: In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms, temporarily take over or direct the operation of any privately owned public utility or business affected with public interests. [Art. XII, Sec. 17]

 Operation of vital industries: The State, may, in the interest of national welfare or defense, establish and operate vital industries and upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the government. [Art. XII, Sec. 18] Prohibition against monopolies: The State shall regulate or prohibit monopolies when the public interest so requires; no combination in restraint of trade or unfair competition shall be allowed. [Art. XII, Sec. 19]

Public Service Includes every person who 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, fraction railway, subway motor vehicle, steamboat, or steamship line ferries, and water craft, shipyard, ice plant, electric light, heat and power or any other public utility. [Sec. 13(b), Act. 146]

PAL V. CAB, 270 SCRA 538 Held: The terms convenience and necessity if used together is a statute, are usually held not to be separable, but are construed together. Both words modify each other and must be construed together. The word necessity is so connected, not as an additional requirement but to modify and qualify what might otherwise be taken as the strict significance of the word necessity. Public convenience and necessity exists when the proposed facility will meet a reasonable want of the public and supply a need which the existing facilities do not adequately afford.

 It does not mean or require an actual physical necessity or an indispensable thing. The use of the word necessity, in conjunction withpublic convenience in a certificate of authorizationto a public service entity to operate, does not in anyway modify the nature of such certification, or therequirements for the issuance of the same. It is the law which determines the requisite for theissuance of such certification, and not the titleindicating the certificates.

Public Utilities Public utilities are privately owned and operated businesses whose services are essential to the general public. They are enterprises which specially cater to the needs of the public and conduce to their comfort and convenience. As such, public utility services are impressed with public interest and concern. The same is true with respect to the business of common carrier which holds such a peculiar relation to the public interest that there is superinduced upon it the right of public regulation when private properties are affected with public interest, hence, they cease to be juris privati only.

 When, therefore, one devotes his property to a use in which the public has an interest, he, in effect grants to the public an interest in that use, and must submit to the control by the public for the common good, to the extent of the interest he has thus created. [Kilusang Mayo Uno Labor Center v. Hon. Jesus B. Garcia Jr., G.R. No. 115381, December 23, 1994 citing Pantranco v. Public Service Commission, 70 Phil.221]

Difference Between Operation of a Public Utility and Ownership of Facilities While the Constitution in no uncertain terms requires a franchise for the operation of a public utility, it does not require a franchise before one can own the facilities needed to operate a public utility so long as it does not operate them to serve the public. In law, there is clear distinction between the operation of a public utility and the ownership of the facilities and equipment used to serve the public. [Ibid]

Telecommunications

Radio Industry

Broadcasting Broadcast is an undertaking the object of which is to transmit over-the-air commercial radio or television messages for reception of a broad audience in a geographic area.

Cable Television Operations (E.O. 436, Sept. 9, 1997) Classified as mass media Essential components: Reception facilities which extract the broadcast signal from the air, or microwave transmission. Input equipment, which converts and amplifies the signal received; and Distribution system, which consists of feeder or trunk lines originating from the input equipment; smaller distribution cables which carry the signal to the immediate vicinity of the subscriber; and drop lines which carry the signal into the subscribers premises.

Electronic Commerce Act

Internet and Value Added-Services Electronic Mail (Email) Bulletin Board System (BBS) World Wide Web (www)

Mass Media

Electric Power Industry Reform Act of 2001 (R.A. 9136)

Build-Operate-Transfer Law (R.A. 6957, as amended by R.A. 7718)

BOT Schemes BOT Schemes Build-Operate-and-Transfer (BOT Build-and-Transfer (BT) Build-Own-Operate (BOO) Build-Lease-Transfer (BLT Build-Transfer-and-Operate (BTO) Contract-Add-and-Operate (CAO) Develop-Operate-and-Transfer (DOT) Rehabilitate-Operate-and-Transfer (ROT) Rehabilitate-Own-and-Operate (ROO)

End of Subject