A.

CONCEPT OF COMMON CARRIER

1. Definition Article 1732 NCC, De Guzman vs. Court of Appeals 168 SCRA 612 (1993)

The Civil Code defines common carriers in the following terms: Article 1732. Common carriers are persons, corporations, firms, or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as sideline). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service or a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between carrier offering its service to the general public, i.e. the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. Planters Products Inc vs. CA 226 SCRA 76 (1993)

Upon the other hand, the term common or public carrier is defined in Article 1732 of the Civil Code. The definition extends to carriers either by land, air or water which hold themselves out as ready to engage in carrying of goods or transporting passengers or both for compensation as a public employment and not as a casual occupation. The distinction between a common or public carrier and a private or special carrier lies in the character of the business, such that if the undertaking is a single transaction, not a part of the general business or occupation, although involving the carriage of goods for a fee, the person or corporation offering such service is a private carrier.

2. Characteristics Fisher vs. Yangco Steamship Co. 31 Phil 1 (1915) A. Common carriers cannot lawfully decline to accept a particular class of goods for carriage to the prejudice of the traffic in those goods unless it appears that for some sufficient reason the discrimination against the traffic in such goods is reasonable and necessary. Mere prejudice or whim will not suffice. The grounds for discrimination must be substantial ones, such as will justify the courts in holding the discrimination to have been reasonable and necessary under all the circumstances of the case. B. The nature of the business of a common carrier as a public employment is such that it is clearly within the power of the state to impose such just and reasonable regulations thereon in the interest of the public as the legislator may deem proper. The right to enter the public employment as a common carrier and to offer ones services to the public for hire does not carry with it the right to conduct that business as one pleases, without regard to the interest of the public, and free from such reasonable and just regulations as may be prescribed for the protection of the public from the reckless or careless indifference of the carrier as to the public welfare and for the prevention of unjust and unreasonable discriminations of any kind whatsoever in the performance of the carriers duties as a servant of the public. US vs. Quinahon 31 Phil 189 (1915)

C. A common carrier is a person or corporation who regular business is to carry passengers or property for all persons who may choose to employ and remunerate him. A common carrier cannot, under the law, give any unnecessary or unreasonable preference or advantage to any particular person, company, firm, corporation or locality, or any particular kind of traffic, or subject any particular person, company, firm, or corporation or locality, or any particular kind of traffic, to any undue or unreasonable prejudice or discrimination whatsoever. A common carrier can not make a different rate to different persons for carrying persons or merchandise, unless the actual cost of handling and shipping is different. It is when the price charged is for the purpose of favoring persons or localities or particular kinds of merchandise, that the law intervenes and prohibits. It is favoritism and discrimination which the law prohibits. If the services are alike and contemporaneous, discrimination in the price charged is prohibited.

Loadstar Shipping Co., Inc. vs. Court of Appeals 315 SCRA 339 (1999) D. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, with out regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt a private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to the sound public policy; that would reward private respondents precisely for failing to comply with applicable statutory requirements. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations. First Phil. Industrial vs. Court of Appeals SCRA 661 (1998) 300

E. The test for determining whether a party is a common carrier of goods is: 1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not a casual occupation; 2. He must undertake to carry goods of the kind to which his business is confined; 3. He must undertake to carry by the method by which his business is conducted and over his established roads; and 4. The transportation must be for hire. As correctly pointed out by petitioner, the definition of common carrier in the Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe line operators are considered common carriers. 3. Distinguished from Private Carrier Home Insurance Co. vs. American Steamship 23 SCRA 24 (1968) San Pablo vs. Pantranco 153 SCRA 199 (1987) National Steel Corp. vs. Court of Appeals 283 SCRA 45 (1997) 4. Government Regulation of Common Carriers Business KMU Labor Center vs. Garcia, Jr. 239 SCRA 386 (1994) Tatad vs. Garcia, Jr. 243 SCRA 436 (1995)
3

5. Governing Law Samar Mining Co., Inc. vs. Nordeutscher Llyod (1984) Eastern Shipping Lines vs. IAC (1984) National Development Co. vs. Court of Appeals (1988)

132 SCRA 529 150 SCRA 464 164 SCRA 593

B. TRANSPORATION OF GOODS
Article 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Articles 1755 and 1756.

Extraordinary diligence. Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence for the safety of the passengers transported by them, according to all the circumstances of each case. They are bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. Spouses Dante Cruz and Leonora Cruz vs. Sun Holidays, Inc., G.R. No. 186312, June 29, 2010, Third Division, J. Carpio Morales. Note on Goods. The CA concluded that common carriers are not absolute insurers against all risks in the transport of the goods. Here the Supreme Court sustained the findings of the Court of Appeals and the Trial Court. Philippine Charter Insurance Corporation, Vs. Unknown Owner of the Vessel M/V National Honor, National Shipping Corporation of the Philippines and International Container Services, Inc, G.R. No. 161833, July 8, 2005, Second Division, J. Callejo, Sr. Note on Passengers. While the law requires the highest degree of diligence from common carriers in the safe transport of their passengers and creates a presumption of negligence against them, it does not, however, make the carrier an insurer of the absolute safety of its passengers.. Herminio Mariano Jr. vs. Ildefonso C. Callejas and Edgar De Borja, G.R. No. 166640, July 31, 2009, First Division, CJ. Puno.

Registered Owner Rule. Under Section 5 of Republic Act No. 4136 as amended, all motor vehicles used or operated on or upon any highway of the Philippines must be registered with the Bureau of Land Transportation (now Land Transportation Office) for the current year. Furthermore, any encumbrances of motor vehicles must be recorded with the Land Transportation Office in order to be valid against third parties. FEB Leasing and Finance Corporation (now BPI Leasing Corporation) vs. Spouses Sergio P. Baylon and Martess Villena-Baylon, BG Hauler, Inc., and Manuel Y. Estilloso, G.R. No. 181398, June 29, 2011, Second Division, J. Carpio. In accordance with the law on compulsory motor vehicle registration, this Court has consistently ruled that, with respect to the public and third persons, the registered owner of a motor vehicle is directly and primarily responsible for the consequences of its operation regardless of who the actual vehicle owner might be. Well-settled is the rule that the registered owner of the vehicle is liable for quasi-delicts resulting from its use. Thus, even if the vehicle has already been sold, leased, or transferred to another person at the time the vehicle figured in an accident, the registered vehicle owner would still be liable for damages caused by the accident. The sale, transfer or lease of the vehicle, which is not registered with the Land Transportation Office, will not bind third persons aggrieved in an accident involving the vehicle. The compulsory motor vehicle registration underscores the importance of registering the vehicle in the name of the actual owner. (id) The policy behind the rule is to enable the victim to find redress by the expedient recourse of identifying the registered vehicle owner in the records of the Land Transportation Office. The registered owner can be reimbursed by the actual owner, lessee or transferee who is known to him. Unlike the registered owner, the innocent victim is not privy to the lease, sale, transfer or encumbrance of the vehicle. Hence, the victim should not be prejudiced by the failure to register such transaction or encumbrance. (id) Kabit System. The kabit system is an arrangement whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles to operate them under his license, sometimes for a fee or percentage of the earnings. Although the parties to such an agreement are not outrightly penalized by law, the kabit system is invariably recognized as being contrary to public policy and therefore void and inexistent under Art. 1409 of the Civil Code. Abelardo Lim and Esmadito Gunnaban, vs. Court of Appeals and Donato H. Gonzales, G.R. No. 125817, January 16, 2002, Second Division, J. Bellosillo.

In the early case of Dizon v. Octavio the Court explained that one of the primary factors considered in the granting of a certificate of public convenience for the business of public transportation is the financial capacity of the holder of the license, so that liabilities arising from accidents may be duly compensated. The kabit system renders illusory such purpose and, worse, may still be availed of by the grantee to escape civil liability caused by a negligent use of a vehicle owned by another and operated under his license. If a registered owner is allowed to escape liability by proving who the supposed owner of the vehicle is, it would be easy for him to transfer the subject vehicle to another who possesses no property with which to respond financially for the damage done. Thus, for the safety of passengers and the public who may have been wronged and deceived through the baneful kabit system, the registered owner of the vehicle is not allowed to prove that another person has become the owner so that he may be thereby relieved of responsibility. Subsequent cases affirm such basic doctrine. (Id) Twist in this Lim case: The vehicle engaged in Kabit System is the one damaged and owner sought damages. It would seem then that the thrust of the law in enjoining the kabit system is not so much as to penalize the parties but to identify the person upon whom responsibility may be fixed in case of an accident with the end view of protecting the riding public. The policy therefore loses its force if the public at large is not deceived, much less involved. (Id) In the present case it is at once apparent that the evil sought to be prevented in enjoining the kabit system does not exist. First, neither of the parties to the pernicious kabit system is being held liable for damages. Second, the case arose from the negligence of another vehicle in using the public road to whom no representation, or misrepresentation, as regards the ownership and operation of the passenger jeepney was made and to whom no such representation, or misrepresentation, was necessary. Thus it cannot be said that private respondent Gonzales and the registered owner of the jeepney were in estoppel for leading the public to believe that the jeepney belonged to the registered owner. Third, the riding public was not bothered nor inconvenienced at the very least by the illegal arrangement. On the contrary, it was private respondent himself who had been wronged and was seeking compensation for the damage done to him. Certainly, it would be the height of inequity to deny him his right. (Id) In light of the foregoing, it is evident that private respondent has the right to proceed against petitioners for the damage caused on his passenger jeepney as well as on his business. Any effort then to frustrate his claim of damages by the ingenuity with which petitioners framed the issue should be discouraged, if not repelled. (Id)

Boundary System. It is already settled that the relationship between jeepney owners/operators and jeepney drivers under the boundary system is that of employer-employee and not of lessor-lessee. The fact that the drivers do not receive fixed wages but only get the amount in excess of the so-called boundary that they pay to the owner/operator is not sufficient to negate the relationship between them as employer and employee. Primo E. Caong, Jr., Alexander J. Tresquio, and Loriano D. Daluyon vs. Avelino Regualos, G.R. No. 179428, January 26, 2011, Second Division, J. Nachura. Suspension ground on failure to pay boundary in arrears is not illegal dismissal. We have no reason to deviate from such findings. Indeed, petitioners suspension cannot be categorized as dismissal, considering that there was no intent on the part of respondent to sever the employer-employee relationship between him and petitioners. In fact, it was made clear that petitioners could put an end to the suspension if they only pay their recent arrears. As it was, the suspension dragged on for years because of petitioners stubborn refusal to pay. It would have been different if petitioners complied with the condition and respondent still refused to readmit them to work. Then there would have been a clear act of dismissal. But such was not the case. Instead of paying, petitioners even filed a complaint for illegal dismissal against respondent. (Id)
Subsection 2. Vigilance Over Goods Article 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order of act of competent public authority. Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733

Article 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of passengers is further set forth in Articles 1755 and 1756. Article 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy; (5) That the common carrier shall not be responsible for the acts or omissions of his or its employees; (6) That the common carriers liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or forced, is dispensed with or diminished; (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage.

Discussion. General Rule: Common carriers are responsible for the loss, destruction, or deterioration of the goods (Article 1734). if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently (Article 1735). Absolute Exception, presumption of negligence does not attach: Loss, destruction or deterioration is caused by (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order of act of competent public authority. (Article 1734)

Absolute Exception requires compliance with Article 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been the (1) proximate and only cause of the loss. However, the (2) common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the common carrier may be exempt from liability for the loss, destruction, or deterioration of the goods Exception by carriers proof of extraordinary diligence: if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733 (Article 1735). Extraordinary diligence. Utmost diligence of very cautious persons, with due regard for all the circumstances. Spouses Dante Cruz and Leonora Cruz vs. Sun Holidays, Inc., G.R. No. 186312, June 29, 2010, Third Division, J. Carpio Morales. Latest Jurisprudence: (1) Rules for the Liability of Common Carriers for lost or damaged cargo. Regional Container Lines (RCL) of Singapore and Edsa Shipping Agency, vs. The Netherlands Insurance Co. (Philippines), Inc., G.R. No. 168151, September 4, 2009, Second Division, J. Quisumbing. In Central Shipping Company, Inc. v. Insurance Company of North America, we reiterated the rules for the liability of a common carrier for lost or damaged cargo as follows: (1) Common carriers are bound to observe extraordinary diligence over the goods they transport, according to all the circumstances of each case; (2) In the event of loss, destruction, or deterioration of the insured goods, common carriers are responsible, unless they can prove that such loss, destruction, or deterioration was brought about by, among others, flood, storm, earthquake, lightning, or other natural disaster or calamity; and (3) In all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently, unless they observed extraordinary diligence. (2) Fire, not among those enumerated in Article 1734. Edgar Cokaliong Shipping Lines, Inc. vs. UCPB General Insurance Company, Inc., G.R. No. 146018, June 25, 2003, Third Division, J. Panganiban. Reiterated in Dsr-Senator Lines and C.F. Sharp and Company, Inc., vs. Federal Phoenix Assurance Co., Inc., G.R. No. 135377, October 7, 2003, Third Division, J. Sandoval-Gutierrez.
9

Fire is not one of those enumerated under the above provision which exempts a carrier from liability for loss or destruction of the cargo. In Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court , we ruled that since the peril of fire is not comprehended within the exceptions in Article 1734, then the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law. Even if fire were to be considered a natural disaster within the purview of Article 1734, it is required under Article 1739 of the same Code that the natural disaster must have been the proximate and only cause of the loss, and that the carrier has exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster. (3) The records reveal that petitioner took a shortcut route, instead of the usual route, which exposed the voyage to unexpected hazard. Loadstar Shipping Co., Inc., vs. Pioneer Asia Insurance Corp., G.R. No. 157481, January 24, 2006, Third Division, J. Quisumbing. As a common carrier, petitioner is required to observe extraordinary diligence in the vigilance over the goods it transports. When the goods placed in its care are lost, petitioner is presumed to have been at fault or to have acted negligently. Petitioner therefore has the burden of proving that it observed extraordinary diligence in order to avoid responsibility for the lost cargo. Article 1734 enumerates the instances when a carrier might be exempt from liability for the loss of the goods. These are: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; and (5) Order or act of competent public authority. Petitioner claims that the loss of the goods was due to a fortuitous event under paragraph 1. Yet, its claim is not substantiated. On the contrary, we find supported by evidence on record the conclusion of the trial court and the Court of Appeals that the loss of the entire shipment of cement was due to the gross negligence of petitioner. (4) Rule on presumption of Negligence applicable only to common carrier. Here the Supreme Court sustained the findings of the Court of Appeals. FGU Insurance Corporation vs. G.P. Sarmiento Trucking Corporation and Labert M. Eroles, G.R. No. 141910, August 6, 2002, First Division, J. Vitug.
10

The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The appellate court, in its decision of 10 June 1999, discoursed, among other things, that in order for the presumption of negligence provided for under the law governing common carrier (Article 1735, Civil Code) to arise, the appellant must first prove that the appellee is a common carrier. Should the appellant fail to prove that the appellee is a common carrier, the presumption would not arise; consequently, the appellant would have to prove that the carrier was negligent.
Article 1736. The extraordinary responsibility of the common carriers lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provision of Article 1738. Article 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them. Article 1737. The common carriers duty to observe extraordinary diligence in the vigilance over the goods remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner has made use of the right of stoppage in transitu. Art. 1526. Subject to the provisions of this Title, notwithstanding that the ownership in the goods may have passed to the buyer, the unpaid seller of goods, as such, has: (1) A lien on the goods or right to retain them for the price while he is in possession of them; (2) In case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with the possession of them; (3) A right of resale as limited by this Title; (4) A right to rescind the sale as likewise limited by this Title. Where the ownership of the goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in transitu where the ownership has passed to the buyer. 11

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

Discussion. Commencement, Duration and Termination of carriers responsibility over the goods. Commencement and Termination: The extraordinary responsibility of the common carriers lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them (Article 1736). Duration 1, even when goods are stored in a warehouse of the carrier: The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them (Article 1738). Duration 2, even when goods are temporarily unloaded or stored in transit: The common carriers duty to observe extraordinary diligence in the vigilance over the goods remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner has made use of the right of stoppage in transitu (Article 1737). Latest Jurisprudence: (1) Loss was caused while fuel is still being unloaded and there was a backflow. Here the Supreme Court sustained the findings of the Court of Appeals and the Trial Court. Delsan Transport Line, Inc. vs. American Home Assurance Corporation, G.R. No. 149019, August 15, 2006, Second Division, J. Garcia. In the herein challenged decision, the CA affirmed the findings of the trial court. In so ruling, the CA declared that Delsan failed to exercise the extraordinary diligence of a good father (?) of a family in the handling of its cargo. Applying Article 1736 of the Civil Code, the CA ruled that since the discharging of the diesel oil into Caltex bulk depot had not been completed at the time the losses occurred, there was no reason to imply that there was actual delivery of the cargo to Caltex, the consignee. (2) Delivery to notify party and not directly to the consignee considered as valid delivery. Benito Macam, Ben-Mac Enterprises, vs. Court of Appeals, China Ocean Shipping Co., and/or Wallem Philippines Shipping, Inc. G.R. No. 125524, August 15, 2009, Second Division, J. Bellosillo.
12

We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them was proper.
Article 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the common carrier may be exempt from liability for the loss, destruction, or deterioration of the goods. The same duty is incumbent upon the common carrier in case of an act of the public enemy referred to in Article 1734, No. 2. Article 1740. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility. Article 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods, the proximate cause thereof, being the negligence of the common carrier, the latter shall be liable in damages, which however, shall be equitably reduced.

Discussion. Natural disaster must have been the proximate and only cause of the loss. Natural disaster. 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 In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, cited in Edgar Cokaliong Shipping Lines, Inc. vs. UCPB General Insurance Company, Inc., G.R. No. 146018, June 25, 2003, Third Division, J. Panganiban.

13

Proximate and only cause of the loss. Proximate cause is that which, in natural and continuous sequence, unbroken by an efficient intervening cause, produces injury, and without which, the result would not have occurred. An injury or damage is proximately caused by an act or failure to act, whenever it appears from the evidence in the case that the act or omission played a substantial part in bringing about or actually causing the injury or damage, and that the injury or damage was either a direct result or a reasonably probable consequence of the act or omission. Ocean Builders Construction Corp. and/or Dennis Hao, vs. Spouses Antonio and Anicia Cubacub, G.R. No. 150898, April 13, 2011, Third Division, J. Carpio Morales. Diligence to prevent or minimize the loss. common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the common carrier may be exempt from liability for the loss, destruction, or deterioration of the goods. The same duty is incumbent upon the common carrier in case of an act of the public enemy referred to in Article 1734, No. 2. (Article 1739) Common carrier negligently in delay. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility (Article 1740) Contributory negligence of the Shipper. If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods, the proximate cause thereof, being the negligence of the common carrier, the latter shall be liable in damages, which however, shall be equitably reduced (Article 1741) Latest Jurisprudence: (1) Loss occasioned by a natural disaster does not automatically relieve common carrier from liability. Asia Lighterage and Shipping, Inc. vs. Court of Appeals and Prudential Guarantee and Assurance, Inc., G.R. No. 147246, August 19, 2003, Third Division, J. Puno. In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable for the loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and only cause of the loss of the goods, and that it has exercised due diligence before, during and after the occurrence of the typhoon to prevent or minimize the loss. The evidence show that, even before the towing bits of the barge broke, it had already previously sustained damage when it hit a sunken object while docked at the Engineering Island. It even suffered a hole. Clearly, this could not be solely attributed to the typhoon. The partlysubmerged vessel was refloated but its hole was patched with only clay and cement. The patch work was merely a provisional remedy, not enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo to further damage.
14

(2) Loss occasioned by a natural disaster does not automatically relieve common carrier from liability. New World International Development (Phils.), Inc., vs. NYK-Filjapan Shipping Corp, G.R. No. 171468, August 24, 2011, Third Division, J. Abad. That the loss was occasioned by a typhoon, an exempting cause under Article 1734 of the Civil Code, does not automatically relieve the common carrier of liability. The latter had the burden of proving that the typhoon was the proximate and only cause of loss and that it exercised due diligence to prevent or minimize such loss before, during, and after the disastrous typhoon. As found by the RTC and the CA, NYK failed to discharge this burden.
Article 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character of the goods, or the faulty nature of the packing or of the containers, the common carrier must exercise due diligence to forestall or lessen the loss.

Discussion. Loss (1) due to character of the goods or (2) the faulty nature of the packing or of (3) of the containers. Rule: the common carrier must exercise due diligence to forestall or lessen the loss. Latest Jurisprudence. (1) Steel sheets were covered by rust, carrier should have applied additional safety. Iron Bulk Shipping Philippines, Co., Ltd., vs. Remington Industrial Sales Corporation, G.R. No. 136960, December 8, 2003, Second Division, J. Austria-Martinez. Under Article 1742 of the Civil Code, even if the loss, destruction, or deterioration of the goods should be caused, among others, by the character of the goods, the common carrier must exercise due diligence to forestall or lessen the loss. This extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them. In the instant case, if the carrier indeed found the steel sheets to have been covered by rust at the time that it accepted the same for transportation, such finding should have prompted it to apply additional safety measures to make sure that the cargo is protected from corrosion. This, the carrier failed to do.
Article 1743. If through order of public authority the goods are seized or destroyed, the common carrier is not responsible, provided said public authority had power to issue the order.

Discussion.
15

Loss through order of public authority, common carrier is not responsible. Rule: Provided public authority had power to issue the order.
Article 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be: (1) In writing, signed by the shipper or owner; (2) Supported by a valuable consideration other than the service rendered by the common carrier; and (3) Reasonable, just and not contrary to public policy. Article 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy; (1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the common carrier need not observe any diligence in the custody of goods; (4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported; (5) That the common carrier shall not be responsible for the acts or omissions of his or its employees; (6) That the common carriers liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or forced, is dispensed with or diminished; (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage. Article 1746. An agreement limiting the common carriers liability may be annulled by the shipper or owner if the common carrier refused to carry the goods unless the former agreed to such stipulation.

16

Article 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. Article 1748. An agreement limiting the common carriers liability for delay on account of strikes or riots is valid. Article 1749. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding; Article 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. Article 1751. The fact that the common carrier has no competitor along the line of route, or a part thereof, to which the contract refers shall be taken into consideration on the question of whether or not a stipulation limiting the common carriers liability is reasonably, just and in consonance with public policy. Article 1752. Even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or deterioration.

Discussion. General Rule. A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be: (1) In writing, signed by the shipper or owner; (2) Supported by a valuable consideration other than the service rendered by the common carrier; and (3) Reasonable, just and not contrary to public policy. (Article 1744) Stipulation allowed on account of strikes or riots. An agreement limiting the common carriers liability for delay on account of strikes or riots is valid (Article 1748) Stipulation allowed on account of declaring a higher value. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding (Article 1749)

17

Presumption even with stipulation allowed still against the carrier. Even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or deterioration. (1752) Exception: by stipulations considered unreasonable, unjust and contrary to public policy. (1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the common carrier need not observe any diligence in the custody of goods; (4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported; (5) That the common carrier shall not be responsible for the acts or omissions of his or its employees; (6) That the common carriers liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or forced, is dispensed with or diminished; (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage. (Article 1745) Exception: by annulment of the shipper. An agreement limiting the common carriers liability may be annulled by the shipper or owner if the common carrier refused to carry the goods unless the former agreed to such stipulation. (Article 1746) Exception: by delay of the transportation. 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. (Article 1747) Fixing the sum that may be recovered. Contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. (Article 1750) No competitor in the line. The fact that the common carrier has no competitor along the line of route, or a part thereof, to which the contract refers shall be taken into consideration on the question of whether or not a stipulation limiting the common carriers liability is reasonably, just and in consonance with public policy. (Article 1751) Latest Jurisprudence. (1) This rule on stipulations and exceptions does not apply to private carriers. Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation, G.R. No. 102316, June 30, 1997, Third Division, J. Panganiban.

18

The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy, and is deemed valid. Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is not involved, as in this case of a ship totally chartered for the use of a single party. (2) The voyage charter stipulated that cargo insurance was for the charterers account contrary to public policy. Cebu Salvage Corporation, vs. Philippine Home Assurance Corporation, G.R. No. 150403, January 25, 2007, First Division, J. Corona. Finally, petitioner asserts that MCCII should be held liable for its own loss since the voyage charter stipulated that cargo insurance was for the charterers account. This deserves scant consideration. This simply meant that the charterer would take care of having the goods insured. It could not exculpate the carrier from liability for the breach of its contract of carriage. The law, in fact, prohibits it and condemns it as unjust and contrary to public policy. (3) Article 1749 and 1750 has similar provision under the COGSA. Everett Steamship Corporation, vs. Court of Appeals and Hernandez Trading Co., Inc., G.R. No. 122494, October 8, 1998, Second Division, J. Martinez; and Philippine Charter Insurance Corporation, vs. Neptune Orient Lines/Overseas Agency Services, Inc., G.R. No. 145044, June 12, 2008, First Division, J. Azcuna. Such limited-liability clause has also been consistently upheld by this court in a number of cases. Thus, in Sea-Land Service, Inc. vs. Intermediate Appellate Court, we ruled:

19

It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to questioning the justness and fairness of the law itself.... But over and above that consideration, the just and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading.
Article 1753. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration.

Discussion. Conflict of laws, law of the country to which goods are to be transported govern. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration. (Article 1753)
Article 1754. The provisions of Articles 1733 to 1753 shall apply to passengers baggage which is not in his personal custody or in that of his employees. As to other baggage, the rules in Articles 1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall be applicable. (Necessary deposit) Article 1998. The deposit of effects made by travellers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects. Article 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to personal property of the guests caused by the servants or employees of the keepers of hotels or inns as well as by strangers; but not that which may proceed from any force majeure. The fact that travellers are constrained to rely on the vigilance of the keeper of the hotel or inn shall be considered in determining the degree of care required of them. 20

Article 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. Article 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family, servants or visitors, or if the loss arises from the character of the things brought into the hotel. Article 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in Articles 1998 to 2001 is suppressed or diminished shall be void.

Discussion. Rule. The provisions of Articles 1733 to 1753 shall apply to passengers baggage which is not in his personal custody or in that of his employees. As to other baggage, the rules in Articles 1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall be applicable (Article 1754)

C. TRANSPORATION OF PASSENGERS
Subsection 3. Safety of Passengers Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence and wilful 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. Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful acts or negligence of other passengers or of strangers, if the common carriers employees through the exercise of diligence of a good father of a family could have prevented or stopped the act or omission.

Discussion.

21

Extraordinary diligence. Utmost diligence of very cautious persons, with due regard for all the circumstances. Spouses Dante Cruz and Leonora Cruz vs. Sun Holidays, Inc., G.R. No. 186312, June 29, 2010, Third Division, J. Carpio Morales. Reminder note on passengers: While the law requires the highest degree of diligence from common carriers in the safe transport of their passengers and creates a presumption of negligence against them, it does not, however, make the carrier an insurer of the absolute safety of its passengers. Herminio Mariano Jr. vs. Ildefonso C. Callejas and Edgar De Borja, G.R. No. 166640, July 31, 2009, First Division, CJ. Puno. But that its liability for personal injuries sustained by its passenger rests upon its negligence, its failure to exercise the degree of diligence that the law requires. Pilapil v. Court of Appeals, cited in the case of Herminio Mariano Jr. (id) Common carrier liable for death of passenger: (a) through the negligence or wilful acts of its employees (Article 1759) or b) on account of wilful acts or negligence of other passengers or of strangers if the common carriers employees through the exercise of due diligence could have prevented or stopped the act or omission (Article 1763). Breach of contract of carriage. Upon the happening of the accident, the presumption of negligence at once arises, and it becomes the duty of a common carrier to prove that he observed extraordinary diligence in the care of his passengers. It must be stressed that in requiring the highest possible degree of diligence from common carriers and in creating a presumption of negligence against them, the law compels them to curb the recklessness of their drivers. Agapita Diaz vs. Court of Appeals, Heirs of Sherly Moneo, etc., G.R. No. 149749, July 25, 2006, Second Division, J. Corona. In a contract of carriage, it is presumed that the common carrier is at fault or is negligent when a passenger dies or is injured. In fact, there is even no need for the court to make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence. Heirs of Jose Marcial K. Ochoa vs. G & S Transport Corporation, G.R. No. 170071, March 9, 2011, First Division, C.J. Corona. Two Japan Airlines Cases. (a) Common carrier is not liable for acts of state. (b) Common carrier liable if it arrogates unto itself the acts of state. (a) Common carrier is not liable for acts of state. It may be true that JAL has the duty to inspect whether its passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of every entry in these documents. Japan Airlines vs. Michael Asuncion and Jeanette Asuncion, G.R. No. 161730, January 28, 2005, First Division, J. Ynares-Santiago
22

(b) Common carrier liable if it arrogates unto itself the acts of state. We find untenable JALs defense of verification of respondents documents in its breach of contract of carriage. It bears repeating that the power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. Japan Airlines vs. Jesus Simangan, G.R. No. 170141, April 22, 2008, Third Division, J. Reyes, R.T. These rules apply to common carrier and not to travel agents. Since the contract between the parties is an ordinary one for services, the standard of care required of respondent is that of a good father of a family under Article 1173 of the Civil Code. Estela L. Crisostomo vs. Court of Appeals and Caravan Travel and Tours International, Inc., G.R. No. 138334, August 25, 2003, First Division, J. Ynares-Santiago. A flight attendant is overweight was his termination valid; is this justified under the transportation law. The law leaves no room for mistake or oversight on the part of a common carrier. Thus, it is only logical to hold that the weight standards of PAL show its effort to comply with the exacting obligations imposed upon it by law by virtue of being a common carrier. Armando G. Yrasuegui vs. Philippine Airlines, Inc., G.R. No. 168081, October 17, 2008, Third Division, J. Reyes, R.T. Latest Jurisprudence:

Article 1755
(1) Person had fist fight with LRT guard. Victim fell and hit by a passing train and died. Regional Container Lines (RCL) of Light Rail Transit Authority and Rodolfo Roman vs. Marjorie Navidad, heirs of the late Nicanor Navidad and Prudent Security Agency, G.R. No. 145804, February 6, 2003, First Division, J. Vitug. Law and jurisprudence dictate that a common carrier, both from the nature of its business and for reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the safety of passengers. The Civil Code, governing the liability of a common carrier for death of or injury to its passengers, provides: Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.

23

Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the formers employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or negligence of other passengers or of strangers, if the common carriers employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission. The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due regard for all circumstances. Such duty of a common carrier to provide safety to its passengers so obligates it not only during the course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage. The statutory provisions render a common carrier liable for death of or injury to passengers (a) through the negligence or wilful acts of its employees or b) on account of wilful acts or negligence of other passengers or of strangers if the common carriers employees through the exercise of due diligence could have prevented or stopped the act or omission. In case of such death or injury, a carrier is presumed to have been at fault or been negligent, and by simple proof of injury, the passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to prove that the injury is due to an unforeseen event or to force majeure. In the absence of satisfactory explanation by the carrier on how the accident occurred, which petitioners, according to the appellate court, have failed to show, the presumption would be that it has been at fault, an exception from the general rule that negligence must be proved. The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that contract by reason of its failure to exercise the high diligence required of the common carrier. In the discharge of its commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself of the services of an outsider or an independent firm to undertake the task. In either case, the common carrier is not relieved of its responsibilities under the contract of carriage.

24

(2) The Supreme Court outlined the interplay of Articles 1733, 1755 and 1756. Herminio Mariano Jr. vs. Ildefonso C. Callejas and Edgar de Borja, G.R. No. 166640, July 31, 2009, First Division, J. Vitug. The following are the provisions of the Civil Code pertinent to the case at bar: ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. 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. ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755. In accord with the above provisions, Celyrosa Express, a common carrier, through its driver, respondent De Borja, and its registered owner, respondent Callejas, has the express obligation to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances, and to observe extraordinary diligence in the discharge of its duty. The death of the wife of the petitioner in the course of transporting her to her destination gave rise to the presumption of negligence of the carrier. To overcome the presumption, respondents have to show that they observed extraordinary diligence in the discharge of their duty, or that the accident was caused by a fortuitous event. This Court interpreted the above quoted provisions in Pilapil v. Court of Appeals. We elucidated: While the law requires the highest degree of diligence from common carriers in the safe transport of their passengers and creates a presumption of negligence against them, it does not, however, make the carrier an insurer of the absolute safety of its passengers. Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance and precaution in the carriage of passengers by common carriers to only such as human care and foresight can provide. What constitutes compliance with said duty is adjudged with due regard to all the circumstances.

25

Article 1756 of the Civil Code, in creating a presumption of fault or negligence on the part of the common carrier when its passenger is injured, merely relieves the latter, for the time being, from introducing evidence to fasten the negligence on the former, because the presumption stands in the place of evidence. Being a mere presumption, however, the same is rebuttable by proof that the common carrier had exercised extraordinary diligence as required by law in the performance of its contractual obligation, or that the injury suffered by the passenger was solely due to a fortuitous event. In fine, we can only infer from the law the intention of the Code Commission and Congress to curb the recklessness of drivers and operators of common carriers in the conduct of their business. Thus, it is clear that neither the law nor the nature of the business of a transportation company makes it an insurer of the passenger's safety, but that its liability for personal injuries sustained by its passenger rests upon its negligence, its failure to exercise the degree of diligence that the law requires. In the case at bar, petitioner cannot succeed in his contention that respondents failed to overcome the presumption of negligence against them. The totality of evidence shows that the death of petitioners spouse was caused by the reckless negligence of the driver of the Isuzu trailer truck which lost its brakes and bumped the Celyrosa Express bus, owned and operated by respondents. First, we advert to the sketch prepared by PO3 Magno S. de Villa, who investigated the accident. The sketch shows the passenger bus facing the direction of Tagaytay City and lying on its right side on the shoulder of the road, about five meters away from the point of impact. On the other hand, the trailer truck was on the opposite direction, about 500 meters away from the point of impact. PO3 De Villa stated that he interviewed De Borja, respondent driver of the passenger bus, who said that he was about to unload some passengers when his bus was bumped by the driver of the trailer truck that lost its brakes. (3) Passenger bus collided with a truck parked at road due to damaged wheels. Passenger of bus died. William Tiu (D Rough Riders) and Virgilio Te Las Pias vs. Pedro A. Arriesgado, Benjamin Condor, Sergio Pedrano and Philippine Phoenix Surety and Insurance, Inc., G.R. No. 138060, September 1, 2004, Second Division, J. Callejo Sr. Reiterated in the case of Agapita Diaz vs. Court of Appeals, Heirs of Sherly Moneo, etc., G.R. No. 149749, July 25, 2006, Second Division, J. Corona.

26

The rules which common carriers should observe as to the safety of their passengers are set forth in the Civil Code, Articles 1733, 1755 and 1756. In this case, respondent Arriesgado and his deceased wife contracted with petitioner Tiu, as owner and operator of D Rough Riders bus service, for transportation from Maya, Daanbantayan, Cebu, to Cebu City for the price of P18.00. It is undisputed that the respondent and his wife were not safely transported to the destination agreed upon. In actions for breach of contract, only the existence of such contract, and the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his destination are the matters that need to be proved. This is because under the said contract of carriage, the petitioners assumed the express obligation to transport the respondent and his wife to their destination safely and to observe extraordinary diligence with due regard for all circumstances. Any injury suffered by the passengers in the course thereof is immediately attributable to the negligence of the carrier. Upon the happening of the accident, the presumption of negligence at once arises, and it becomes the duty of a common carrier to prove that he observed extraordinary diligence in the care of his passengers. It must be stressed that in requiring the highest possible degree of diligence from common carriers and in creating a presumption of negligence against them, the law compels them to curb the recklessness of their drivers. While evidence may be submitted to overcome such presumption of negligence, it must be shown that the carrier observed the required extraordinary diligence, which means that the carrier must show the utmost diligence of very cautious persons as far as human care and foresight can provide, or that the accident was caused by fortuitous event. As correctly found by the trial court, petitioner Tiu failed to conclusively rebut such presumption. The negligence of petitioner Laspias as driver of the passenger bus is, thus, binding against petitioner Tiu, as the owner of the passenger bus engaged as a common carrier. (4) These rules apply to common carrier and not to travel agents. Estela L. Crisostomo vs. Court of Appeals and Caravan Travel and Tours International, Inc., G.R. No. 138334, August 25, 2003, First Division, J. Ynares-Santiago. The nature of the contractual relation between petitioner and respondent is determinative of the degree of care required in the performance of the latters obligation under the contract. For reasons of public policy, a common carrier in a contract of carriage is bound by law to carry passengers as far as human care and foresight can provide using the utmost diligence of very cautious persons and with due regard for all the circumstances. As earlier stated, however, respondent is not a common carrier but a travel agency. It is thus not bound under the law to observe extraordinary diligence in the performance of its obligation, as petitioner claims.
27

Since the contract between the parties is an ordinary one for services, the standard of care required of respondent is that of a good father of a family under Article 1173 of the Civil Code. This connotes reasonable care consistent with that which an ordinarily prudent person would have observed when confronted with a similar situation. The test to determine whether negligence attended the performance of an obligation is: did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence. (5) Carrier not liable for acts of State. Japan Airlines vs. Michael Asuncion and Jeanette Asuncion, G.R. No. 161730, January 28, 2005, First Division, J. Ynares-Santiago. Under Article 1755 of the Civil Code, a common carrier such as JAL is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage arises. The passenger has every right to expect that he be transported on that flight and on that date and it becomes the carriers obligation to carry him and his luggage safely to the agreed destination. If the passenger is not so transported or if in the process of transporting he dies or is injured, the carrier may be held liable for a breach of contract of carriage. We find that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty to inspect whether its passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness of the entries therein. The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be faulted for the denial of respondents shore pass applications. (6) Carrier can not assume acts of state to inspect passport and then bump off a passenger; the twin requisites to prove liability. Japan Airlines vs. Jesus Simangan, G.R. No. 170141, April 22, 2008, Third Division, J. Reyes, R.T.

28

Apart from the fact that respondents plane ticket, boarding pass, travel authority and personal articles already passed the rigid immigration and security routines, JAL, as a common carrier, ought to know the kind of valid travel documents respondent carried. As provided in Article 1755 of the New Civil Code: 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. Thus, We find untenable JALs defense of verification of respondents documents in its breach of contract of carriage. It bears repeating that the power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. In an action for breach of contract of carriage, all that is required of plaintiff is to prove the existence of such contract and its nonperformance by the carrier through the latters failure to carry the passenger safely to his destination. Respondent has complied with these twin requisites. (7) Passenger failed to reach his destination because he died due to a vehicular incident. Heirs of Jose Marcial K. Ochoa vs. G & S Transport Corporation, G.R. No. 170071, March 9, 2011, First Division, C.J. Corona. What is clear from the records is that there existed a contract of carriage between G & S, as the owner and operator of the Avis taxicab, and Jose Marcial, as the passenger of said vehicle. As a common carrier, G & S is bound to carry [Jose Marcial] safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. However, Jose Marcial was not able to reach his destination safely as he died during the course of the travel. In a contract of carriage, it is presumed that the common carrier is at fault or is negligent when a passenger dies or is injured. In fact, there is even no need for the court to make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence. Unfortunately, G & S miserably failed to overcome this presumption. Both the trial court and the CA found that the accident which led to Jose Marcials death was due to the reckless driving and gross negligence of G & S driver, Padilla, thereby holding G & S liable to the heirs of Jose Marcial for breach of contract of carriage. (8) On December 20, 1987, MV Doa Paz collided with the MT Vector, carriers warrant impliedly the seaworthiness of the ship. Vector Shipping Corporation and Francisco Soriano vs. Adelfor B. Macasa, G.R. No. 160219, July 21, 2008, Third Division, J. Nachura. (Citing Caltex Philippines, Inc. vs. Sulpicio Lines, Inc.)
29

Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code. The provisions owed their conception to the nature of the business of common carriers. This business is impressed with a special public duty. The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety of the passengers, especially because with the modern development of science and invention, transportation has become more rapid, more complicated and somehow more hazardous. For these reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness. (9) A flight attendant is overweight was his termination valid; is this justified under the transportation law. Armando G. Yrasuegui vs. Philippine Airlines, Inc., G.R. No. 168081, October 17, 2008, Third Division, J. Reyes, R.T. The law leaves no room for mistake or oversight on the part of a common carrier. Thus, it is only logical to hold that the weight standards of PAL show its effort to comply with the exacting obligations imposed upon it by law by virtue of being a common carrier. The business of PAL is air transportation. As such, it has committed itself to safely transport its passengers. In order to achieve this, it must necessarily rely on its employees, most particularly the cabin flight deck crew who are on board the aircraft. The weight standards of PAL should be viewed as imposing strict norms of discipline upon its employees. In other words, the primary objective of PAL in the imposition of the weight standards for cabin crew is flight safety. It cannot be gainsaid that cabin attendants must maintain agility at all times in order to inspire passenger confidence on their ability to care for the passengers when something goes wrong. It is not farfetched to say that airline companies, just like all common carriers, thrive due to public confidence on their safety records. People, especially the riding public, expect no less than that airline companies transport their passengers to their respective destinations safely and soundly. A lesser performance is unacceptable.

30

The task of a cabin crew or flight attendant is not limited to serving meals or attending to the whims and caprices of the passengers. The most important activity of the cabin crew is to care for the safety of passengers and the evacuation of the aircraft when an emergency occurs. Passenger safety goes to the core of the job of a cabin attendant. Truly, airlines need cabin attendants who have the necessary strength to open emergency doors, the agility to attend to passengers in cramped working conditions, and the stamina to withstand grueling flight schedules. On board an aircraft, the body weight and size of a cabin attendant are important factors to consider in case of emergency. Aircrafts have constricted cabin space, and narrow aisles and exit doors. Thus, the arguments of respondent that [w]hether the airlines flight attendants are overweight or not has no direct relation to its mission of transporting passengers to their destination; and that the weight standards has nothing to do with airworthiness of respondents airlines, must fail. The rationale in Western Air Lines v. Criswell relied upon by petitioner cannot apply to his case. What was involved there were two (2) airline pilots who were denied reassignment as flight engineers upon reaching the age of 60, and a flight engineer who was forced to retire at age 60. They sued the airline company, alleging that the age-60 retirement for flight engineers violated the Age Discrimination in Employment Act of 1967. Age-based BFOQ and being overweight are not the same. The case of overweight cabin attendants is another matter. Given the cramped cabin space and narrow aisles and emergency exit doors of the airplane, any overweight cabin attendant would certainly have difficulty navigating the cramped cabin area. In short, there is no need to individually evaluate their ability to perform their task. That an obese cabin attendant occupies more space than a slim one is an unquestionable fact which courts can judicially recognize without introduction of evidence. It would also be absurd to require airline companies to reconfigure the aircraft in order to widen the aisles and exit doors just to accommodate overweight cabin attendants like petitioner. The biggest problem with an overweight cabin attendant is the possibility of impeding passengers from evacuating the aircraft, should the occasion call for it. The job of a cabin attendant during emergencies is to speedily get the passengers out of the aircraft safely. Being overweight necessarily impedes mobility. Indeed, in an emergency situation, seconds are what cabin attendants are dealing with, not minutes. Three lost seconds can translate into three lost lives. Evacuation might slow down just because a wide-bodied cabin attendant is blocking the narrow aisles. These possibilities are not remote.

31

Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755.

Discussion. Extraordinary diligence. Utmost diligence of very cautious persons, with due regard for all the circumstances. Spouses Dante Cruz and Leonora Cruz vs. Sun Holidays, Inc., G.R. No. 186312, June 29, 2010, Third Division, J. Carpio Morales. Article 1756 (Culpa-Contractual) compared to Article 2180 (CulpaAquiliana or Quasi-Delicts). The obligation imposed by Article 2176 (Quasi-Delicts) is demandable not only for ones own acts or omissions, but also for those of persons for whom one is responsible. xxx Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are engaged in any business or industry. xxx The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of family to prevent damage. (a) In both cases the employer is liable to the negligence of its employees that resulted to damage; (b) In culpa-contractual proof of diligence of good father of family in the selection and supervision of employees is not a defense while in Culpa-Aquiliana proof of diligence of good father of family in selection and supervision of employees is a defense; (c) In culpa-contractual Article 1756 is applicable while in CulpaAquiliana Article 2180 is the one applicable; (d) In culpa-contractual the victim is a passenger while in CulpaAquiliana the victim is a pedestrian or third person who is not a passenger; (e) In culpa-contractual the defense is diligence in the vigilance over the goods and safety of passengers while in Culpa-Aquiliana the defense is diligence in the selection and supervision of the employees (f) In culpa-contractual proximate cause of the damage is not material to the liability while in culpa-aquiliana proximate cause of the damage is material to the liability.

ARTICLE 1756
Latest Jurisprudence:

32

(1) Passenger already purchased an LRT token but was run over by the train. Lightrail Transit Authority and Rodolfo Roma, vs. Marjorie Navidad, G.R. No. 145804, February 6, 2003, First Division, J. Vitug. In the absence of satisfactory explanation by the carrier on how the accident occurred, which petitioners, according to the appellate court, have failed to show, the presumption would be that it has been at fault (2) LRT sought reconsideration of February 6, 2003 ruling. Court lecture on culpa contractual and culpa aquiliana. Lightrail Transit Authority and Rodolfo Roma, vs. Marjorie Navidad, G.R. No. 145804, May 9, 2003, First Division, Resolution. It must be stressed that the foundation of the liability of the common carrier is based on culpa contractual and it is not dependent upon proof of prior negligence on the part of its employees. In fact, the law cannot be any clearer; in case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they have observed extraordinary diligence required of them. The defense raised by LRTA would have been relevant had petitioners liability been derived solely on account of the fault (willful acts or negligence) of its employees or from culpa aquiliana. But such is not the basis for the Courts holding in this case. Irrefutably, petitioner failed to discharge its burden to prove that it had exercised utmost diligence in ensuring the safety of its passenger which duty the law imposed upon it as a common carrier. The Court is not unaware of the dictum that a common carrier is not an insurer of the safety of its passengers. Petitioner had the opportunity to exonerate itself from liability by proving extraordinary diligence required of it but the fact of the matter is that it did not; hence, the presumption established by Article 1756 of the Civil Code stands and petitioner is liable (3) Common carrier bumped pedestrian it is Article 2180 that is applicable and not Article 1756. This is the ruling of the Court of Appeals modifying the findings of the RTC and sustained by the Supreme Court. Cecilia Yambao, vs. Melchorita C. Zuiga, et.al., G.R. No. 146173, December 11, 2003, Second Division, J. Quisumbing.

33

While sustaining the trial courts findings that Venturina had been reckless and negligent in driving the petitioners bus, thus hitting the victim with fatal results, the appellate court, however, found the trial courts reliance on Articles 1755 and 1756 of the Civil Code misplaced. It held that this was a case of quasi-delict, there being no pre-existing contractual relationship between the parties. Hence, the law on common carriers was inapplicable. The court a quo then found the petitioner directly and primarily liable as Venturinas employer pursuant to Article 2180 of the Civil Code as she failed to present evidence to prove that she has observed the diligence of a good father of a family in the selection and supervision of her employees. (4) Common carrier hit a tree and a house due to the recklessness of its driver thus the passenger was injured. R Trasport Corporation, vs. Eduarte Pante, G.R. No. 162104, September 15, 2009, Third Division, J. Peralta. Under the Civil Code, common carriers, like petitioner bus company, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence for the safety of the passengers transported by them, according to all the circumstances of each case. They are bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. Article 1756 of the Civil Code states that [i]n case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed by Articles 1733 and 1755. Further, Article 1759 of the Civil Code provides that [c]ommon carriers are liable for the death or injury to passengers through the negligence or willful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. In this case, the testimonial evidence of respondent showed that petitioner, through its bus driver, failed to observe extraordinary diligence, and was, therefore, negligent in transporting the passengers of the bus safely to Gapan, Nueva Ecija on January 27, 1995, since the bus bumped a tree and a house, and caused physical injuries to respondent.

34

Article 1759 of the Civil Code explicitly states that the common carrier is liable for the death or injury to passengers through the negligence or willful acts of its employees, and that such liability does not cease upon proof that the common carrier exercised all the diligence of a good father of a family in the selection and supervision of its employees. Hence, even if petitioner was able to prove that it exercised the diligence of a good father of the family in the selection and supervision of its bus driver, it is still liable to respondent for the physical injuries he sustained due to the vehicular accident. (5) Effect on the presumption of negligence on the part of the carrier when the driver pleaded guilty to the offense. Herminio Mariano, Jr., vs. Ildefonso C. Callejas and Edgar de Borja, G.R. No. 166640, July 31, 2009, First Division, C.J. Puno. In the case at bar, petitioner cannot succeed in his contention that respondents failed to overcome the presumption of negligence against them. The totality of evidence shows that the death of petitioners spouse was caused by the reckless negligence of the driver of the Isuzu trailer truck which lost its brakes and bumped the Celyrosa Express bus, owned and operated by respondents. In fine, the evidence shows that before the collision, the passenger bus was cruising on its rightful lane along the Aguinaldo Highway when the trailer truck coming from the opposite direction, on full speed, suddenly swerved and encroached on its lane, and bumped the passenger bus on its left middle portion. Secondly, any doubt as to the culpability of the driver of the trailer truck ought to vanish when he pleaded guilty to the charge of reckless imprudence resulting to multiple slight physical injuries and damage to property in Criminal Case No. 2223-92, involving the same incident. (6) March 16, 1983 Bus No. 142 fell into a river while traversing the Bugko Bailey Bridge. Although victim survived the fall but he later died of asphyxia secondary to drowning. Jose Baritua and JB Line, vs. Nimfa Divina Mercader, G.R. No. 136048, January 23, 2001, Third Division, J. Panganiban.

35

We agree with the findings of both courts that petitioners failed to observe extraordinary diligence that fateful morning. It must be noted that a common carrier, by the nature of its business and for reasons of public policy, is bound to carry passengers safely as far as human care and foresight can provide. It is supposed to do so by using the utmost diligence of very cautious persons, with due regard for all the circumstances. In case of death or injuries to passengers, it is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. We sustain the ruling of the CA that petitioners failed to prove that they had observed extraordinary diligence. (7) Bus collided with a parked truck. Victims were injured. William Tiu, vs. Pedro A. Arriesgado, G.R. No. 138060, September 1, 2004, Second Division, J. Callejo, Sr. The rules which common carriers should observe as to the safety of their passengers are set forth in the Civil Code, Articles 1733, 1755 and 1756. In this case, respondent Arriesgado and his deceased wife contracted with petitioner Tiu, as owner and operator of D Rough Riders bus service, for transportation from Maya, Daanbantayan, Cebu, to Cebu City for the price of P18.00. It is undisputed that the respondent and his wife were not safely transported to the destination agreed upon. In actions for breach of contract, only the existence of such contract, and the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his destination are the matters that need to be proved. This is because under the said contract of carriage, the petitioners assumed the express obligation to transport the respondent and his wife to their destination safely and to observe extraordinary diligence with due regard for all circumstances. Any injury suffered by the passengers in the course thereof is immediately attributable to the negligence of the carrier. Upon the happening of the accident, the presumption of negligence at once arises, and it becomes the duty of a common carrier to prove that he observed extraordinary diligence in the care of his passengers. It must be stressed that in requiring the highest possible degree of diligence from common carriers and in creating a presumption of negligence against them, the law compels them to curb the recklessness of their drivers.

36

While evidence may be submitted to overcome such presumption of negligence, it must be shown that the carrier observed the required extraordinary diligence, which means that the carrier must show the utmost diligence of very cautious persons as far as human care and foresight can provide, or that the accident was caused by fortuitous event. As correctly found by the trial court, petitioner Tiu failed to conclusively rebut such presumption. The negligence of petitioner Laspias as driver of the passenger bus is, thus, binding against petitioner Tiu, as the owner of the passenger bus engaged as a common carrier. (8) Victim Sunga rode on the jeepney of Calalas but was bumped by a truck owned by Salva. Liability of Calalas is the issue. Vicente Calalas, vs. Court of Appeals, Eliza Jujeurche Sunga and Francisco Salva, G.R. No. 122039, May 31, 2000, Second Division, J. Mendoza. Consequently, in quasi-delict, the negligence or fault should be clearly established because it is the basis of the action, whereas in breach of contract, the action can be prosecuted merely by proving the existence of the contract and the fact that the obligor, in this case the common carrier, failed to transport his passenger safely to his destination. In case of death or injuries to passengers, Art. 1756 of the Civil Code provides that common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as defined in Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the common carrier the burden of proof. There is, thus, no basis for the contention that the ruling in Civil Case No. 3490, finding Salva and his driver Verena liable for the damage to petitioners jeepney, should be binding on Sunga. It is immaterial that the proximate cause of the collision between the jeepney and the truck was the negligence of the truck driver. The doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions involving breach of contract. The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a preexisting contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as contracts of carriage are concerned, some aspects regulated by the Civil Code are those respecting the diligence required of common carriers with regard to the safety of passengers as well as the presumption of negligence in cases of death or injury to passengers (9) PUVs (Public Utility Vehicles) required to obtain insurance policies as part of its Article 1756 duty. Eastern Assurance & Surety Corporation (EASCO), vs. Land Transportation Franchising and Regulatory Board (LTFRB), G.R. No. 149717, October 7, 2003, Third Division, J. Panganiban.
37

It should be stressed that PUVs, as common carriers, are engaged in a business affected with public interest. Under Article 1756 of the Civil Code, in cases of death or injuries to passengers, common carriers are presumed to be at fault and are required to compensate the victims, unless they observed extraordinary diligence. To assure this compensation, PUVs are required to obtain insurance policies. (10) Husband of Gemma Sulit died in a vehicular accident. She sued the common carrier. Philhawk Transport, vs. Court of Appeals, G.R. No. 164946, April 4, 2005, Third Division, Resolution. Considering that the contract of carriage was established, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible for the payment of damages sought by the passenger, or in this case, the passenger's widow. Under Article 1756 of the Civil Code, in case of death or injuries to passengers, a common carrier is presumed to have been at fault or to have acted negligently, unless it proves that it observed extraordinary diligence.
Article 1757. The responsibility of a common carrier for the safety of passengers as required in Articles 1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise. Article 1760. The common carriers responsibility prescribed in the preceding article cannot be eliminated or limited by stipulation, by the posting of notices, by statements on the tickets or otherwise. Article 1758. When a passenger is carried gratuitously, a stipulation limiting the common carriers liability for negligence is valid, but not for wilful acts or gross negligence. The reduction of fare does not justify any limitation of the common carriers liability.

Discussion. Note that this is not similar in terms of carriage of goods or baggage since there responsibility of a common carrier for the safety of goods can be subject matter of stipulations. Note that under Article 1758 if passengers are carried gratuitously, a stipulation limiting the common carriers liability for negligence is valid but not for wilful acts of gross negligence.

38

Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence and wilful 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.

Discussion Similar to the discussion under Articles 1755 and Article 1756.
Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755.

ARTICLE 1759
Latest Jurisprudence: (1) Passenger was injured on account of the negligence of the driver of the carrier. Baliwag Transit Inc., vs. Court of Appeals, spouses Antonio Garcia, A & J Trading, and Julio Recontique, G.R. No. 116110, May 15, 1996, Second Division, J. Quisumbing. The records are bereft of any proof to show that Baliwag exercised extraordinary diligence. On the contrary, the evidence demonstrates its driver's recklessness. Leticia Garcia testified that the bus was running at a very high speed despite the drizzle and the darkness of the highway. The passengers pleaded for its driver to slow down, but their plea was ignored. Leticia also revealed that the driver was smelling of liquor. She could smell him as she was seated right behind the driver. Another passenger, Felix Cruz testified that immediately before the collision, the bus driver was conversing with a co-employee. All these prove the bus driver's wanton disregard for the physical safety of his passengers, which makes Baliwag as a common carrier liable for damages under Article 1759 of the Civil Code. (2) Passenger was injured when the bus hit a tree and a house to the bus drivers recklessness; due diligence in the selection of its driver is immaterial. R Transport Corporation represented by Rizalina Lamzon, vs. Eduardo Pante, G.R. No. 162104, September 15, 2009, Third Division, J. Peralta.
39

Article 1759 of the Civil Code provides that [c]ommon carriers are liable for the death or injury to passengers through the negligence or willful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. In this case, the testimonial evidence of respondent showed that petitioner, through its bus driver, failed to observe extraordinary diligence, and was, therefore, negligent in transporting the passengers of the bus safely to Gapan, Nueva Ecija on January 27, 1995, since the bus bumped a tree and a house, and caused physical injuries to respondent. Article 1759 of the Civil Code explicitly states that the common carrier is liable for the death or injury to passengers through the negligence or willful acts of its employees, and that such liability does not cease upon proof that the common carrier exercised all the diligence of a good father of a family in the selection and supervision of its employees. Hence, even if petitioner was able to prove that it exercised the diligence of a good father of the family in the selection and supervision of its bus driver, it is still liable to respondent for the physical injuries he sustained due to the vehicular accident. (3) Passenger was injured when a taxi ram the railing at EDSA Santolan due to drivers recklessness; due diligence in the selection of its driver is immaterial. Heirs of Jose Marcial K. Ochoa, vs. G & S Transport Corporation, G.R. No. 170071, March 9, 2011, First Division, J. Del Castillo. On the other hand, the heirs maintained that Padilla was grossly negligent in driving the Avis taxicab on the night of March 10, 1995. They claimed that Padilla, while running at a very high speed, acted negligently when he tried to overtake a ten-wheeler truck at the foot of the fly-over. This forced him to swerve to the left and as a consequence, the Avis taxicab hit the center of the railing and was split into two upon hitting the ground. The manner by which Padilla drove the taxicab clearly showed that he acted without regard to the safety of his passenger.

40

The heirs also averred that in order for a fortuitous event to exempt one from liability, it is necessary that he has committed no negligence or conduct that may have occasioned the loss. Thus, to be exempt from liability for the death of Jose Marcial on this ground, G & S must clearly show that the proximate cause of the casualty was entirely independent of human will and that it was impossible to avoid. And since in the case at bar it was Padillas inexcusable poor judgment, utter lack of foresight and extreme negligence which were the immediate and proximate causes of the accident, same cannot be considered to be due to a fortuitous event. This is bolstered by the fact that the court trying the case for criminal negligence arising from the same incident convicted Padilla for said charge. At any rate, the heirs contended that regardless of whether G & S observed due diligence in the selection of its employees, it should nonetheless be held liable for the death of Jose Marcial pursuant to Article 1759 of the Civil Code. (4) Passenger was injured when the bus figured in an accident; due diligence in the selection of its driver is immaterial. Engracio Fabre, Jr. et. al. vs. Court of Appeals, The Word for the World Christian Fellowship, Inc., et. al., G.R. No. 111127, July 26, 1996, Second Division, J. Mendoza. As common carriers, the Fabres were bound to exercise extraordinary diligence for the safe transportation of the passengers to their destination. This duty of care is not excused by proof that they exercised the diligence of a good father of the family in the selection and supervision of their employee. As Art. 1759 of the Code provides: Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of the formers employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees.
Article 1761. The passenger must observe the diligence of a good father of a family to avoid injury to himself. Article 1762. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced.

Discussion

41

Note passengers are required to observe ordinary diligence to avoid injury to himself. Note that contributory negligence of passengers does not bar recovery of damages for his death or injuries. Contributory negligence of the shipper of goods (Article 1741) states that the common carrier shall be liable for damages, which however, shall be equitably reduced.
Subsection 4. Common Provisions Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of passenger caused by the breach of contract by a common carrier.

Discussion: Moral Damages. In fine, moral damages may be recovered in an action upon breach of contract of carriage only when: (a) where death of a passenger results, or (b) it is proved that the carrier was guilty of fraud and bad faith, even if death does not result. Sulpicio Lines, Inc., vs. Domingo E. Curso, et. al., G.R. No. 157009, March 17, 2010, First Division, J. Vitug. Relative can claim moral damages. Article 2206 of the Civil Code entitles the descendants, ascendants, illegitimate children, and surviving spouse of the deceased passenger to demand moral damages for mental anguish by reason of the death of the deceased. (Id) Article 1764 vis--vis Article 2206. of the Civil Code holds the common carrier in breach of its contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity and (3) moral damages. Spouses Dante Cruz and Leonara Cruz, vs. Sun Holidays, Inc., G.R. No. 186312, June 29, 2010, Third Division, J. Carpio Morales. Life Expectancy. The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 age at death]) adopted in the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality. (Id. Spouses Dante)

ARTICLE 1764
Latest Jurisprudence: (1) The surviving brothers and sisters of a passenger of a vessel that sinks during a voyage are entitled to recover moral damages from the vessel owner as common carrier. Sulpicio Lines, Inc., vs. Domingo E. Curso, et. al., G.R. No. 157009, March 17, 2010, First Division, J. Vitug.

42

In fine, moral damages may be recovered in an action upon breach of contract of carriage only when: (a) where death of a passenger results, or (b) it is proved that the carrier was guilty of fraud and bad faith, even if death does not result. Article 2206 of the Civil Code entitles the descendants, ascendants, illegitimate children, and surviving spouse of the deceased passenger to demand moral damages for mental anguish by reason of the death of the deceased. (2) The surviving brothers and sisters of a passenger of a vessel that sinks during a voyage are entitled to recover moral damages from the vessel owner as common carrier. Trans-Asia Shipping Lines, Inc., vs. Court of Appeals and Atty. Renato T. Arroyo, G.R. No. 118126, March 4, 1996, Third Division, J. Davide, Jr. As to its liability for damages to the private respondent, Article 1764 of the Civil Code expressly provides: ART. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by common carrier. The damages comprised in Title XVIII of the Civil Code are actual or compensatory, moral, nominal, temperate or moderate, liquidated, and exemplary. In his complaint, the private respondent claims actual or compensatory, moral, and exemplary damages. Actual or compensatory damages represent the adequate compensation for pecuniary loss suffered and for profits the obligee failed to obtain. In contracts or quasi-contracts, the obligor is liable for all the damages which may be reasonably attributed to the nonperformance of the obligation if he is guilty of fraud, bad faith, malice, or wanton attitude. Moral damages include moral suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or similar injury. They may be recovered in the cases enumerated in Article 2219 of the Civil Code, likewise, if they are the proximate result of, as in this case, the petitioners breach of the contract of carriage. Anent a breach of a contract of common carriage, moral damages may be awarded if the common carrier, like the petitioner, acted fraudulently or in bad faith.

43

(3) Jose Marcial K. Ochoa (Jose Marcial) died on the night of March 10, 1995 while on board an Avis taxicab owned and operated by G & S Transport Corporation (G & S), a common carrier. Heirs of Jose Marcial K. Ochoa, etc., vs. G & S Transport Corporation, G.R. No. 170071, March 9, 2011, First Division, J. Del Castillo. In Victory Liner Inc. v. Gammad we awarded P100,000.00 by way of moral damages to the husband and three children of the deceased, a 39-year old Section Chief of the Bureau of Internal Revenue, to compensate said heirs for the grief caused by her death. This is pursuant to the provisions of Articles 1764 and 2206(3) which provide: Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Articles 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier. Art. 2206. x x x (3) The spouse, legitimate and illegitimate descendants and the ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased. Here, there is no question that the heirs are likewise entitled to moral damages pursuant to the above provisions, considering the mental anguish suffered by them by reason of Jose Marcials untimely death, as can be deduced from the testimony of his wife Ruby. Under this circumstance, we thus find as sufficient and somehow proportional to and in approximation of the suffering inflicted an award of moral damages in an amount similar to that awarded in Victory which is P100,000.00. (4) Death of newly-weds when the transportation to the resort capsized; American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality. Spouses Dante Cruz and Leonara Cruz, vs. Sun Holidays, Inc., G.R. No. 186312, June 29, 2010, Third Division, J. Carpio Morales. Article 1764 vis--vis Article 2206 of the Civil Code holds the common carrier in breach of its contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity and (3) moral damages. Petitioners are entitled to indemnity for the death of Ruelito which is fixed at P50,000. As for damages representing unearned income, the formula for its computation is:

44

Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses). Life expectancy is determined in accordance with the formula: 2 / 3 x [80 age of deceased at the time of death] The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 age at death]) adopted in the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality. The second factor is computed by multiplying the life expectancy by the net earnings of the deceased, i.e., the total earnings less expenses necessary in the creation of such earnings or income and less living and other incidental expenses. The loss is not equivalent to the entire earnings of the deceased, but only such portion as he would have used to support his dependents or heirs. Hence, to be deducted from his gross earnings are the necessary expenses supposed to be used by the deceased for his own needs. In computing the third factor necessary living expense, Smith Bell Dodwell Shipping Agency Corp. v. Borja teaches that when, as in this case, there is no showing that the living expenses constituted the smaller percentage of the gross income, the living expenses are fixed at half of the gross income. Applying the above guidelines, the Court determines Ruelito's life expectancy as follows: Life expectancy = 2/3 x [80 - age of deceased at the time of death] 2/3 x [80 - 28] 2/3 x [52] Life expectancy = 35 Documentary evidence shows that Ruelito was earning a basic monthly salary of $900 which, when converted to Philippine peso applying the annual average exchange rate of $1 = P44 in 2000, amounts to P39,600. Ruelitos net earning capacity is thus computed as follows: Net Earning Capacity = life expectancy x (gross annual income reasonable and necessary living expenses). = 35 x (P475,200 - P237,600) = 35 x (P237,600) Net Earning Capacity = P8,316,000

45

Respecting the award of moral damages, since respondent common carriers breach of contract of carriage resulted in the death of petitioners son, following Article 1764 vis--vis Article 2206 of the Civil Code, petitioners are entitled to moral damages. Since respondent failed to prove that it exercised the extraordinary diligence required of common carriers, it is presumed to have acted recklessly, thus warranting the award too of exemplary damages, which are granted in contractual obligations if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. Under the circumstances, it is reasonable to award petitioners the amount of P100,000 as moral damages and P100,000 as exemplary damages. (5) Suit between a passenger and a travel agent. Expertravel & Tours, Inc., vs. The Hon. Court of Appeals and Ricardo Lo, G.R. No. 130030, June 25, 1999, Third Division, J. Vitug. By special rule in Article 1764, in relation to Article 2206, of the Civil Code, moral damages may also be awarded in case the death of a passenger results from a breach of carriage. (6) Bus fell into a ravine and the passengers died and were insured. Victory Liner, Inc., vs. Rosalito Gammad, et. al., G.R. No. 159636, November 25, 2004, First Division, J. Ynares-Santiago. Article 1764 in relation to Article 2206 of the Civil Code, holds the common carrier in breach of its contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity, and (3) moral damages. In the present case, respondent heirs of the deceased are entitled to indemnity for the death of Marie Grace which under current jurisprudence is fixed at P50,000.00. By special rule in Article 1764 in relation to Article 2206 of the Civil Code, moral damages may also be awarded in case the death of a passenger results from a breach of carriage. On the other hand, exemplary damages, which are awarded by way of example or correction for the public good may be recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. (7) The bus fell into a ravine and struck a tree. Tito Tumboy died and physical injuries to other passengers. Alberta Yobido and Cresencio Yobido, vs. Court of Appeals, Leny Tumboy, etc., G.R. No. 113003, October 17, 1997, Third Division, J. Romero.

46

Having failed to discharge its duty to overthrow the presumption of negligence with clear and convincing evidence, petitioners are hereby held liable for damages. Article 1764 in relation to Article 2206 of the Civil Code prescribes the amount of at least three thousand pesos as damages for the death of a passenger. Under prevailing jurisprudence, the award of damages under Article 2206 has been increased to fifty thousand pesos (P50,000.00). Moral damages are generally not recoverable in culpa contractual except when bad faith had been proven. However, the same damages may be recovered when breach of contract of carriage results in the death of a passenger, as in this case. Exemplary damages, awarded by way of example or correction for the public good when moral damages are awarded, may likewise be recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. Because petitioners failed to exercise the extraordinary diligence required of a common carrier, which resulted in the death of Tito Tumboy, it is deemed to have acted recklessly. As such, private respondents shall be entitled to exemplary damages. (8) Flight was cancelled but passenger was not properly rebooked. China Airlines, vs. Daniel Chiok, G.R. No. 152122, July 30, 2003, Third Division, J. Panganiban. Moral damages cannot be awarded in breaches of carriage contracts, except in the two instances contemplated in Articles 1764 and 2220 of the Civil Code, which we quote: Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier. Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. There is no occasion for us to invoke Article 1764 here. We must therefore determine if CAL or its agent (PAL) is guilty of bad faith that would entitle respondent to moral damages.

47

Since the status of respondent on Flight PR 311 was OK, as a matter of right testified to by PALs witness, he should have been automatically transferred to and allowed to board Flight 307 the following day. Clearly resulting from negligence on the part of PAL was its claim that his name was not included in its list of passengers for the November 24, 1981 PR 311 flight and, consequently, in the list of the replacement flight PR 307. Since he had secured confirmation of his flight -- not only once, but twice -- by personally going to the carriers offices where he was consistently assured of a seat thereon -- PALs negligence was so gross and reckless that it amounted to bad faith. In view of the foregoing, we rule that moral and exemplary damages were properly awarded by the lower courts. (9) The right of a passenger affected by the interruption of a vessels voyage and the consequent delay in the vessels arrival at its port of destination. Trans-Asia Shipping Lines, Inc., vs. Court of Appeals and Atty. Renato T. Arroyo, G.R. No. 118126, March 4, 1996, Third Division, J. Davide Jr. As to its liability for damages to the private respondent, Article 1764 of the Civil Code expressly provides: ART. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by common carrier. The damages comprised in Title XVIII of the Civil Code are actual or compensatory, moral, nominal, temperate or moderate, liquidated, and exemplary. (10) Determination of earning capacity to fix the amount of damages. Smith Bell Dodwell Shipping Agency Corporation, vs. Catalino Borja and International Towage and Transport Corporation, G.R. No. 143008, June 10, 2002, Third Division, J. Panganiban. Both parties have a point. In determining the reasonableness of the damages awarded under Article 1764 in conjunction with Article 2206 of the Civil Code, the factors to be considered are: (1) life expectancy (considering the health of the victim and the mortality table which is deemed conclusive) and loss of earning capacity; (b) pecuniary loss, loss of support and service; and (c) moral and mental sufferings. The loss of earning capacity is based mainly on the number of years remaining in the persons expected life span. In turn, this number is the basis of the damages that shall be computed and the rate at which the loss sustained by the heirs shall be fixed.

48

(11) Rule on damages also apply to the death of the crew of the vessel but based on the other provisions. Candano Shipping Lines, Inc., vs. Florentina J. Sugata-on, G.R. No. 163212, March 13, 2007, Third Division, J. Chico-Nazario. The obligation of the common carrier to indemnify its passenger or his heirs for injury or death arose from the contract of carriage entered into by the common carrier and the passenger. By the very nature of the obligation which is imbued with public interest, in contract of carriage the carrier assumes the express obligation to transport its passenger to his destination safely and to observe extraordinary diligence with due regard to all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of the carrier and thus gives rise to the right of the passenger or his heirs for indemnity. In the same breadth, the employer shall be liable for the death or personal injury of its employees in the course of employment as sanctioned by Article 1711 of the New Civil Code. The liability of the employer for death or personal injury of his employees arose from the contract of employment entered into between the employer and his employee which is likewise imbued with public interest. Accordingly, when the employee died or was injured in the occasion of employment, the obligation of the employer for indemnity, automatically attaches. The indemnity may partake of the form of actual, moral, nominal, temperate, liquidated or exemplary damages, as the case may be depending on the factual milieu of the case and considering the criterion for the award of these damages as outlined by our jurisprudence. In the case at bar, only the award of actual damages, specifically the award for unearned income is warranted by the circumstances since it has been duly proven that the cause of death of Melquiades is a fortuitous event for which Candano Shipping cannot be faulted. (12) Carrier can not assume acts of state to inspect passport and then bump off a passenger; liability for damages. Japan Airlines vs. Jesus Simangan, G.R. No. 170141, April 22, 2008, Third Division, J. Reyes, R.T. As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not one of the items enumerated under Article 2219 of the Civil Code. As an exception, such damages are recoverable: (1) in cases in which the mishap results in the death of a passenger, as provided in Article 1764, in relation to Article 2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Article 2220.

49

The acts committed by JAL against respondent amounts to bad faith. As found by the RTC, JAL breached its contract of carriage with respondent in bad faith. JAL personnel summarily and insolently ordered respondent to disembark while the latter was already settled in his assigned seat. He was ordered out of the plane under the alleged reason that the genuineness of his travel documents should be verified. (13) Employee of the common carrier died while fixing the brakes of the truck. Unusual as the Supreme Court used the rule on passengercommon carrier. Baliwag Transit, Inc. vs. Court of Appeals, Divina Vda. De Dionisio, G.R. No. 116624, September 20, 1996, First Division, J. Bellosillo. As regards the reasonableness of the damages awarded, under Art. 1764, in conjunction with Art. 2206, of the Civil Code, as well as established jurisprudence, several factors are considered, namely: (a) life expectancy (considering the health of the deceased and the mortality table being deemed conclusive) and loss of earning capacity; (b) pecuniary loss, loss of support and service; and, (c) moral and mental sufferings. The loss of earning capacity is based mainly on two factors, namely, the number of years on the basis of which the damages shall be computed, and the rate at which the loss sustained by the heirs should be fixed. (14) Baggage were lost on a trip to the Philippines from abroad. Sabena Belgian World Airlines vs. Court of Appeals and Paula San Agustin, G.R. No. 104685, March 14, 1996, First Division, J. Vitug. The Court thus sees no error in the preponderant application to the instant case by the appellate court, as well as by the trial court, of the usual rules on the extent of recoverable damages beyond the Warsaw limitations. Under domestic law and jurisprudence (the Philippines being the country of destination), the attendance of gross negligence (given the equivalent of fraud or bad faith) holds the common carrier liable for all damages which can be reasonably attributed, although unforeseen, to the non-performance of the obligation, including moral and exemplary damages. (15) Victim Sunga rode on the jeepney of Calalas but was bumped by a truck owned by Salva. Award of moral damages is the issue. Vicente Calalas, vs. Court of Appeals, Eliza Jujeurche Sunga and Francisco Salva, G.R. No. 122039, May 31, 2000, Second Division, J. Mendoza. As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not one of the items enumerated under Art. 2219 of the Civil Code. As an exception, such damages are recoverable: (1) in cases in which the mishap results in the death of a passenger, as provided in Art. 1764, in relation to Art. 2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty of fraud or bad faith, as provided in Art. 2220.
50

In this case, there is no legal basis for awarding moral damages since there was no factual finding by the appellate court that petitioner acted in bad faith in the performance of the contract of carriage. Sungas contention that petitioners admission in open court that the driver of the jeepney failed to assist her in going to a nearby hospital cannot be construed as an admission of bad faith. The fact that it was the driver of the Isuzu truck who took her to the hospital does not imply that petitioner was utterly indifferent to the plight of his injured passenger. If at all, it is merely implied recognition by Verena that he was the one at fault for the accident. (15) Passenger was injured when the bus figured in an accident; award of damages is the issue. Engracio Fabre, Jr. et. al. vs. Court of Appeals, The Word for the World Christian Fellowship, Inc., et. al., G.R. No. 111127, July 26, 1996, Second Division, J. Mendoza. On the theory that petitioners are liable for breach of contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since Cabils gross negligence amounted to bad faith. Amyline Antonios testimony, as well as the testimonies of her father and co-passengers, fully establish the physical suffering and mental anguish she endured as a result of the injuries caused by petitioners negligence.
Article 1765. The Public Service Commission may, on its own motion or on petition of any interested party, after due hearing, cancel the certificate of public convenience granted to any common carrier that repeatedly fails to comply with his or its duty to observe extraordinary diligence as prescribed in this Section. Article 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws.

ARTICLE 1766
Latest Jurisprudence: (1) Liability of common carrier for the sustenance of passenger while in delay; not provided for in civil code but code of commerce is suppletory. Trans-Asia Shipping Lines, Inc., vs. Court of Appeals and Atty. Renato T. Arroyo, G.R. No. 118126, March 4, 1996, Third Division, J. Davide, Jr. Undoubtedly, there was, between the petitioner and the private respondent, a contract of common carriage. The laws of primary application then are the provisions on common carriers under Section 4, Chapter 3, Title VIII, Book IV of the Civil Code, while for all other matters not regulated thereby, the Code of Commerce and special laws.

51

As to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent. However, as correctly pointed out by the petitioner, Article 698 of the Code of Commerce specifically provides for such a situation. It reads: In case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare in proportion to the distance covered, without right to recover for losses and damages if the interruption is due to fortuitous event or force majeure, but with a right to indemnity if the interruption should have been caused by the captain exclusively. If the interruption should be caused by the disability of the vessel and a passenger should agree to await the repairs, he may not be required to pay any increased price of passage, but his living expenses during the stay shall be for his own account. This article applies suppletorily pursuant to Article 1766 of the Civil Code. (2) Cargo transported from Hong Kong to the Philippines were damaged; COGSA applicable suppletory to the Civil Code. Philippine Charter Insurance Corporation vs. Neptune Orient Lines/Overseas Agency Services, Inc., G.R. No. 145044, June 12, 2008, First Division, J. Azcuna. Since the subject cargoes were lost while being transported by respondent common carrier from Hong Kong to the Philippines, Philippine law applies pursuant to the Civil Code which provides: Art. 1753. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration. Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws. The rights and obligations of respondent common carrier are thus governed by the provisions of the Civil Code, and the COGSA, which is a special law, applies suppletorily. The pertinent provisions of the Civil Code applicable to this case are as follows: Art. 1749. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.

52

Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. In addition, Sec. 4, paragraph (5) of the COGSA, which is applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade, provides: Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading shall be prima facie evidence, but shall be conclusive on the carrier. (3) Coils of various Prime Cold Rolled steel sheets were damages when shipped from Germany to Manila. Belgian Overseas Chartering and Shipping N.V. and Jardine Davies Transport Services, Inc. vs. Philippine First Insurance Co., Inc., G.R. No. 143133, June 5, 2002, Third Division, J. Panganiban. It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a fixed amount per package. In all matters not regulated by the Civil Code, the right and the obligations of common carriers shall be governed by the Code of Commerce and special laws. Thus, the COGSA, which is suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory provision limiting the carriers liability in the absence of a shippers declaration of a higher value in the bill of lading. The provisions on limited liability are as much a part of the bill of lading as though physically in it and as though placed there by agreement of the parties. Some related terms:

53

Doctrine of Last Clear Chance. Furthermore, under the doctrine of "last clear chance" (also referred to, at times as "supervening negligence" or as "discovered peril"), petitioner bank was indeed the culpable party. This doctrine, in essence, states that where both parties are negligent, but the negligent act of one is appreciably later in time than that of the other, or when it is impossible to determine whose fault or negligence should be attributed to the incident, the one who had the last clear opportunity to avoid the impending harm and failed to do so is chargeable with the consequences thereof. [LBC Air Cargo, Inc. vs. Court of Appeals, 241 SCRA 619, 624 [1995], citing Picart vs. Smith, supra] Stated differently, the rule would also mean that an antecedent negligence of a person does not preclude the recovery of damages for the supervening negligence of, or bar a defense against liability sought by another, if the latter, who had the last fair chance, could have avoided the impending harm by the exercise of due diligence. [Pantranco North Express. Inc. vs. Baesa, 179 SCRA 384; Glan People's Lumber and Hardware vs. Intermediate Appellate Court, 173 SCRA 464]. Cited in the case of Philippine Bank of Commerce vs. Court of Appeals, G.R. No. 97626, March 14, 1997, First Division, J. Hermosisima Jr. The Court had occasion to reiterate the well-established doctrine of last clear chance in Philippine National Railways v. Brunty [G.R. No. 169891, November 2, 2006, 506 SCRA 685.] as follows: The doctrine of last clear chance states that where both parties are negligent but the negligent act of one is appreciably later than that of the other, or where it is impossible to determine whose fault or negligence caused the loss, the one who had the last clear opportunity to avoid the loss but failed to do so, is chargeable with the loss. Stated differently, the antecedent negligence of plaintiff does not preclude him from recovering damages caused by the supervening negligence of defendant, who had the last fair chance to prevent the impending harm by the exercise of due diligence.[Id] Cited in the case of Sealoader Shipping Corporation vs. Grand Cement Manufacturing Corporation, G.R. No. 167363, December 15, 2010, First Division, J. Leonardo-de Castro. Accommodation passengers. The owner and driver of a vehicle owes to accommodation passengers or invited guests merely the duty to exercise reasonable care so that they may be transported safely to their destination. Thus, The rule is established by weight of authority that the owner or operator of an automobile owes the duty to an invited guest to exercise reasonable care in its operation, and not unreasonably to expose him to danger and injury by increasing the hazard of travel. The owner of the vehicle in the case at bar is only required to observe ordinary care, and is not in duty bound to exercise extraordinary diligence required by our law. Lourdes J. Lara, et al. vs. Brigido R. Valencia, G.R. No. L-9907, June 60, 198, J. Angelo Bautista.

54

Note: Compare with Article 1758. Article 1758. When a passenger is carried gratuitously, a stipulation limiting the common carriers liability for negligence is valid, but not for wilful acts or gross negligence. The reduction of fare does not justify any limitation of the common carriers liability. Res Ipsa Loquitor. While negligence is not ordinarily inferred or presumed, and while the mere happening of an accident or injury will not generally give rise to an inference or presumption that it was due to negligence on defendants part, under the doctrine of res ipsa loquitur, which means, literally, the thing or transaction speaks for itself, or in one jurisdiction, that the thing or instrumentality speaks for itself, the facts or circumstances accompanying an injury may be such as to raise a presumption, or at least permit an inference of negligence on the part of the defendant, or some other person who is charged with negligence. D.M. Consunji, Inc. case cited in Malayan Insurance Co., Inc. vs. Rodelio Alberto and Enrico Albeto Reyes, G.R. No. 194320, February 1, 2012, Third Division, J. Velasco Jr. Res ipsa loquitur is a rule of necessity and it applies where evidence is absent or not readily available, provided the following requisites are present: (1) the accident was of a kind which does not ordinarily occur unless someone is negligent; (2) the instrumentality or agency which caused the injury was under the exclusive control of the person charged with negligence; and (3) the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured. x x x. (Id.)

D. BILL OF LADING
Bill of Lading under Article 352 of the Code of Commerce (Title VII, Commercial Contract of Transportation Overland, Article 349 to 379) Bill of Lading under Article 706 to 718 of the Code of Commerce (Title III, Special Contracts on Maritime Commerce, No. 6, Article 706 to 718)

1. Three Fold Character "BILL OF LADING": This is a key document for cargo claims. A bill of lading generally serves three purposes: (1) document of title; (2) a contract of carriage and (3) a receipt for goods. Ocean bills can be negotiable instruments and control possession of the goods. (http://www.mondaq.com/unitedstates/article.asp? articleid=94406)

55

Keng Hua Paper Products Co. Inc., vs. Court of Appeals, Regional Trial Court Manila and Sea-Land Services, Inc., G.R. NO. 116863, February 12, 1998, First Division, J. Panganiban. Facts: Sea-Land received at its Hong Kong terminal a sealed container with seventy-six bales of unsorted waste paper for shipment to Keng Hua in Manila. A bill of lading (Exh. A) to cover the shipment was issued by Sea-Land. Keng Hua did not claim the goods for 481 days alleging over shipment. Demurrage accrued. RTC ruled in favor of Sea-Land. CA and SC affirmed the RTC. Held: A bill of lading serves two functions. First, it is a receipt for the goods shipped. Second, it is a contract by which three parties, namely, the shipper, the carrier, and the consignee undertake specific responsibilities and assume stipulated obligations. A bill of lading delivered and accepted constitutes the contract of carriage even though not signed, because the (a)cceptance of a paper containing the terms of a proposed contract generally constitutes an acceptance of the contract and of all of its terms and conditions of which the acceptor has actual or constructive notice. The acceptance of a bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that the same was a perfected and binding contract. Keng Hua admits that it received the bill of lading immediately after the arrival of the shipment having been afforded an opportunity to examine the said document, it did not immediately object to or dissent from any term or stipulation therein Cebu Salvage Corporation vs. Philippine Home Assurance Corporation, G.R. No. 150403, January 25, 2007, First Division, J. Corona. Facts: Cebu Salvage (as carrier) and Maria Cristina Chemicals Industries, Inc. [MCCII] (as charterer) entered into a voyage charter wherein Cebu Salvage was to load 800 to 1,100 metric tons of silica quartz on board M/T Espiritu that ALS Timber Enterprises (ALS). ALS issued a bill of lading to MCCII. The vessel sank resulting in the total loss of the cargo. Philippine Home Assurance Corporation paid MCCII and was subrogated to its rights. Home Assurance filed a complaint at RTC against Cebu Salvage for reimbursement. RTC ruled in favor of Home Assurance. CA and SC sustained the RTC. Held: The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had been received for transportation. It was not signed by MCCII, as in fact it was simply signed by the supercargo of ALS. This is consistent with the fact that MCCII did not contract directly with ALS. While it is true that a bill of lading may serve as the contract of carriage between the parties, it cannot prevail over the express provision of the voyage charter 2. Delivery of Goods a) Period of Delivery

56

Article 358, Commercial Contract of Transportation Overland. Should not period within which goods are to be delivered be previously fixed, the carrier shall be under the obligation to forward them in the first shipment of the same or similar merchandise which he may make to the point of delivery; and should he not do so the damages occasioned by the delay shall be suffered by him.

b) Delivery without surrender of bill of lading (As per Article 353 of the Code of Commerce; acknowledgment of the delivery by signing the delivery receipt suffices) National Trucking and Forwarding Corporation vs. Lorenzo Shipping Corporation, G.R. No. 153563, February 7, 2005, First Division, J. Quisumbing. Facts: The Department of Health engaged National Trucking to ship 4,868 bags of non-fat dried milk to Zamboanga. National Trucking engaged Lorenzo Shipping Corporation (LSC) as the shipper and Lorenzo Shipping issued bills of lading. The consignee named in the bills of lading was Abdurahman Jama, National Truckings branch supervisor in Zamboanga City. Lorenzo Shippings agent delivered the bags to Adburahman but the latter as the named consignee did not surrender the originals of the bill of lading. The goods were not received and so National Trucking sued Lorenzo Shipping. RTC ruled in favor of Lorenzo Shipping. CA and SC sustained the RTC. Held: Although the original bills of lading remained with National Trucking, Lorenzo Shippings agents demanded from Abdurahman the certified true copies of the bills of lading. They also asked the latter and in his absence, his designated subordinates, to sign the cargo delivery receipts. This practice, which respondents agents testified to be their standard operating procedure, finds support in Article 353 of the Code of Commerce: ART. 353 xxx After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to him, and by virtue of the exchange of this title with the thing transported, the respective obligations and actions shall be considered cancelled, xxx In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier, because of its loss or of any other cause, he must give the latter a receipt for the goods delivered, this receipt producing the same effects as the return of the bill of lading. (Emphasis supplied) Conformably with the aforecited provision, the surrender of the original bill of lading is not a condition precedent for a common carrier to be discharged of its contractual obligation. If surrender of the original bill of lading is not possible, acknowledgment of the delivery by signing the delivery receipt suffices. This is what Lorenzo Shipping did.
57

(As a standard maritime practice upon request of the shipper when goods are perishable) Benito Macam vs. Court of Appeals, China Ocean Shipping Co and Wallem Philippines Shipping, Inc., G.R. No. 125524, August 25, 1999, Second Division, J. Bellosillo. Facts: Benito Macam shipped perishable fruits using the vessel of China Ocean Shipping Co. through its local agent Wallem. The goods were covered by Bill of Lading and exported through a letter of credit that Pakistan Bank issued. The bill of lading requires that one must be surrendered duly endorsed in exchange for the goods or delivery order. Pakistani Bank was the consignee and Great Prospect Company (GPC) as notify party. As per letter of credit requirement copies of the bill of lading were submitted to Macams depositary bank (Solid Bank) which paid Macam the total value of the shipment. Wallem delivered directly the goods to GPC not to Pakistani Bank without surrender of the bill of lading. GPC failed to pay Pakistani Bank and so Pakistani Bank refused to reimburse Solid Bank of what it has paid to Macam. Macam allegedly returned the amount to Solid Bank and Macam demanded payment from Wallem. Macam sued Wallem for delivery to the goods to GPC without the bill of lading but Wallem contended that delivery was done upon Macams Telex instruction. Wallem explained that it is a standard maritime practice, when immediate delivery is of the essence, for the shipper (Macam) to request or instruct the carrier (Wallem) to deliver the goods to the buyer (GPC) upon arrival at the port of destination without requiring presentation of the bill of lading as that usually takes time. RTC ruled in favor of Macam. CA reversed the RTC. SC affirmed the SC. Held: Macam declared that it was his practice to ask the shipping lines to immediately release shipment of perishable goods through telephone calls by himself or his people. Macam no longer required presentation of a bill of lading nor of a bank guarantee as a condition to releasing the goods in case Macam was already fully paid. Thus, taking into account that subject shipment consisted of perishable goods and SOLIDBANK pre-paid the full amount of the value thereof, it is not hard to believe the claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC without presentation of the bills of lading and bank guarantee. c) Refusal of Consignee to take delivery (consignee not privy to the contract of affreightment)

58

MOF Company, Inc. vs. Shin Yang Brokerage Corporation, G.R. No. 172822, December 18, 2009, Second Division, J. Del Castillo. Facts: Halla Trading Co. (shipper) shipped secondhand cars through Hanjin Shipping Co., Ltd. (carrier) and designated Shin Yang as the consignee. The bill of lading was prepared by Hanjin payment was freight collect basis meaning the consignee Shin Yang would pay freight and other charges. The shipment arrived in Manila and MOF Company (Hanjins exclusive general agent) demanded payment from Shin Yang. Shin Yang refused to pay contending that it did not cause the importation of the goods and the bill of lading was prepared without its consent. MTC and RTC ruled in favor of MOF. CA reversed RTC and ruled in favor of Shin Yang. SC sustained the CA. Held: A consignee, although not a signatory to the contract of carriage between the shipper and the carrier, becomes a party to the contract by reason of either a) the relationship of agency between the consignee and the shipper/consignor; b) the unequivocal acceptance of the bill of lading delivered to the consignee, with full knowledge of its contents or c) availment of the stipulation pour autrui, i.e., when the consignee, a third person, demands before the carrier the fulfillment of the stipulation made by the consignor/shipper in the consignees favor, specifically the delivery of the goods/cargoes shipped. In the instant case, Shin Yang consistently denied in all of its pleadings that it authorized Halla Trading to ship the goods on its behalf; or that it got hold of the bill of lading covering the shipment or that it demanded the release of the cargo. Basic is the rule in evidence that the burden of proof lies upon him who asserts it, not upon him who denies, since, by the nature of things, he who denies a fact cannot produce any proof of it. Thus, MOF has the burden to controvert all these denials, it being insistent that Shin Yang asserted itself as the consignee and the one that caused the shipment of the goods to the Philippines. 3. Period for Filing Claims Article 366, Commercial Contract of Transportation Overland. Within the twenty-four hours following the receipt of the merchandise, a claim may be made against the carrier on account of damage or average found therein on opening the packages, provided that the indications of the damage or average giving arise to the claim cannot be ascertained from the exterior of said packages, in which case said claim would only be admitted on the receipt of the packages. After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim whatsoever shall be admitted against the carrier with regard to the condition in which the goods transported were delivered. (Period as stipulated in the bill of lading)

59

Provident Insurance Corp., vs. Court of Appeals and Azucar Shipping Corp., G.R. No. 118030, January 15, 2004, First Division, J. Ynares-Santiago. Facts: Azucar Shipping Corp. (MV Eduardo II) shipped from Toledo City 32,000 plastic woven bags it was consigned to Atlas Fertilizer and insured by Provident Insurance Corporation. The cargo was damaged. Provident after it paid Atlas was subrogated to its rights and filed a complaint against Azucar Shipping. The period for filing claims outlined in the bill of landing however was not followed. RTC dismissed the complaint as the period of filing claims outlined in the bill of landing was not followed. CA and SC affirmed the RTC. Held: There is also no dispute that the consignee failed to strictly comply with Stipulation No. 7 of the Bill of Lading in not making claims for damages to the goods within the twenty-four hour period from the time of delivery, and that there was no exterior sign of damage of the goods. The bill of lading defines the rights and liabilities of the parties in reference to the contract of carriage. Stipulations therein are valid and binding in the absence of any showing that the same are contrary to law, morals, customs, public order and public policy. Where the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of the stipulations shall control. The twenty-four hour requirement under the said stipulation is, by agreement of the contracting parties, a sine qua non for the accrual of the right of action to recover damages against the carrier. A bill of lading is in the nature of a contract of adhesion, defined as one where one of the parties imposes a ready-made form of contract which the other party may accept or reject, but which the latter cannot modify. One party prepares the stipulation in the contract, while the other party merely affixes his signature or his adhesion thereto, giving no room for negotiation and depriving the latter of the opportunity to bargain on equal footing. Nevertheless, these types of contracts have been declared as binding as ordinary contracts, the reason being that the party who adheres to the contract is free to reject it entirely. The acceptance of the bill without dissent raises the presumption that all the terms therein were brought to the knowledge of the shipper and agreed to by him and, in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such terms. 4. Period for Filing Actions
Article 1144 of the Civil Code. The following actions must be brought within ten years from the time the right of action accrues: (1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment.

E. MARITIME COMMERCE
Title III Special Contracts of Maritime Commerce
60

A. Charter Parties (Section 1, Article 652 to 718 of the Code of Commerce) Includes: Forms and Effects of Charter Parties (Article 652 to 668) Rights and Obligations of Owners (Article 669 to 678) Obligations of Charterers (Article 679 to 687) Total and Partial Rescissions of Charter Parties (Article 688 to 692) Passengers of Sea Voyages (Article 693 to 705) Bills of Lading (Article 706 to 718)

1. Charter Parties (San Miguel Corporation vs. Heirs of Sabiniano Inguito and Julius Ouano, G.R. No. 141716, July 4, 2002, First Division, J. Ynares Santiago) Rule: A charter party is a contract by virtue of which the owner or the agent of a vessel binds himself to transport merchandise or persons for a fixed price. It has also been defined as a contract by virtue of which the owner or the agent of the vessel leases for a certain price the whole or a portion of the vessel for the transportation of goods or persons from one port to another. A charter party may either be a (1) bareboat or demise charter or (2) contract of affreightment. Under a demise or bareboat charter, the charterer mans the vessel with his own people and becomes, in effect, the owner of the ship for the voyage or service stipulated, subject to liability for damages caused by negligence. In a contract of affreightment, on the other hand, the owner of the vessel leases part or all of its space to haul goods for others. It is a contract for special service to be rendered by the owner of the vessel. Under such contract the ship owner retains the possession, command and navigation of the ship, the charterer or freighter merely having use of the space in the vessel in return for his payment of the charter hire. Otherwise put, a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charterer provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ships store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship.
61

If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship. Lea Mer Industries, Inc. vs. Malayan Insurance Co., Inc. G.R. No. 161745, September 30, 2005, Third Division, J. Panganiban. Facts: Ilian Silica Mining through Lea Mer Industries, Inc., shipped of 900 metric tons of silica sand valued at P565,000 consigned to Vulcan Industrial and Mining Corporation for transport from Palawan to Manila. The cargo was placed on board Judy VII a barge leased by Lea Mer. The vessel sank and the cargo lost. Malayan Insurance was subrogated to the rights of Vulcan after it paid it. Malayan sued Lea Mer for reimbursement. RTC dismissed the complaint grounded on fortuitous event. CA reversed the RTC finding that the vessel was not seaworthy when it left port. SC affirmed the CA Held: Charter parties are classified as contracts of (1) demise (or bareboat) and (2) affreightment, which are distinguished as follows: Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in effect, the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer; anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all. The distinction is significant, because a demise or bareboat charter indicates a business undertaking that is private in character. Consequently, the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by the law on common carriers. Also (1) Valenzuela Hardwood and Industrial Supply, Inc. vs. Court of Appeals and Seven Brothers Shipping Corporation, G.R. No. 102316, June 30, 1997, Third Division, J. Panganiban; (2) National Food Authority, Roselinda Geraldez, Ramon Sargan and Adelina A. Yap vs. Court of Appeals and HongFil Shipping Corporation, G.R. No. 96453, August 4, 1999, Third Division, J. Purisima; (3) a) Bareboat/demise charter Under a demise or bareboat charter, the charterer mans the vessel with his own people and becomes, in effect, the owner of the ship for the voyage or service stipulated, subject to liability for damages caused by negligence. (Now a Private Carrier)
62

b) Time charter A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time. (Still a Common Carrier) c) Voyage/trip charter A contract of affreightment may be either voyage charter, wherein the ship is leased for a single voyage. (Still a Common Carrier) Title II. Persons Who May Take Part in Maritime Commerce (Code of Commerce) Ship owners and ship agents (Section 1, Article 586 to 608) Captains and Masters of Vessels (Section 2, Article 609 to 625) Officers and Crews of Vessels (Section 3, Article 626 to 648) Supercargoes (Section 4, Article 649 to 651) 2. Liabilities of ship owners and shipping agents a) Liability for acts of captain Abandonment in Maritime Transport (587, 590, 837, Code of Commerce), Real and Hypothecary Nature of a Shipping Transportation Contract (Agustin P. Dela Torre vs. Court of Appeals, Crisostomo G. Concepcion, Ramon Larrazabal, Philippine Trigon Shipyard Corporation and Roland G. Dela Torre, G.R. No. 160088, July 13, 2011, Third Division, J. Mendoza, citing Yangco v. Laserna and Monarch Insurance Co., Inc. v. CA) Rule No vessel, no liability, expresses in a nutshell the limited liability rule. The shipowners or agents liability is merely coextensive with his interest in the vessel such that a total loss thereof results in its extinction. The total destruction of the vessel extinguishes maritime liens because there are no longer any res to which it can attach. This doctrine is based on the real and hypothecary nature of maritime law which has its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to encourage shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel, equipment, and freight, or insurance, if any.

63

Grotius, in his law of War and Peace, says that men would be deterred from investing in ships if they thereby incurred the apprehension of being rendered liable to an indefinite amount by the acts of the master, Agustin P. Dela Torre vs. Court of Appeals, Crisostomo G. Concepcion, Ramon Larrazabal, Philippine Trigon Shipyard Corporation and Roland G. Dela Torre, G.R. No. 160088, July 13, 2011, Third Division, J. Mendoza. Facts: Crisostomo G. Concepcion entered into a bareboat charter party over LCTJosephine in favor of Roland G. Dela Torre and Trigon Shipyard Corporation, who in turn sub-chartered it in favor of Agustin P. Dela Torre through a special power of attorney he issued to Roland again sub-chartered the vessel to Ramon Larrazabal. LCT-Josephine sank. It was Agustins crew who manned the vessel when it sank. Concepcion sued Roland, who in turn sued Agustin, who in turned sued Larrazabal. Roland invoked the Limited Liability Rule and the Real and Hypothecary Nature of Shipping Transportation contract. RTC ruled in favor of Concepcion holding defendants solidarily liable. CA and SC affirmed the RTC. Held: With respect to petitioners position that the Limited Liability Rule under the Code of Commerce should be applied to them, the argument is misplaced. The said rule has been explained to be that of the real and hypothecary doctrine in maritime law where the shipowner or ship agents liability is held as merely coextensive with his interest in the vessel such that a total loss thereof results in its extinction. In this jurisdiction, this rule is provided in three articles of the Code of Commerce. These are: Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have earned during the voyage. Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their interests in the common fund for the results of the acts of the captain referred to in Art. 587. Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him. Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall be understood as limited to the value of the vessel with all its appurtenances and freightage served during the voyage.

64

Article 837 specifically applies to cases involving collision which is a necessary consequence of the right to abandon the vessel given to the shipowner or ship agent under the first provision Article 587. Similarly, Article 590 is a reiteration of Article 587, only this time the situation is that the vessel is co-owned by several persons. Obviously, the forerunner of the Limited Liability Rule under the Code of Commerce is Article 587. Now, the latter is quite clear on which indemnities may be confined or restricted to the value of the vessel pursuant to the said Rule, and these are the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel. Thus, what is contemplated is the liability to third persons who may have dealt with the shipowner, the agent or even the charterer in case of demise or bareboat charter. The only person who could avail of this is the shipowner, Concepcion. He is the very person whom the Limited Liability Rule has been conceived to protect. The petitioners cannot invoke this as a defense. In Yangco v. Laserna, this Court, through Justice Moran, wrote: The policy which the rule is designed to promote is the encouragement of shipbuilding and investment in maritime commerce. Grotius, in his law of War and Peace, says that men would be deterred from investing in ships if they thereby incurred the apprehension of being rendered liable to an indefinite amount by the acts of the master, Later, in the case of Monarch Insurance Co., Inc. v. CA, this Court, this time through Justice Sabino R. De Leon, Jr., again explained: No vessel, no liability, expresses in a nutshell the limited liability rule. The shipowners or agents liability is merely coextensive with his interest in the vessel such that a total loss thereof results in its extinction. The total destruction of the vessel extinguishes maritime liens because there is no longer any res to which it can attach. This doctrine is based on the real and hypothecary nature of maritime law which has its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to encourage shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel, equipment, and freight, or insurance, if any.

65

Also (1) (Liability of Ship Agent) Macondray & Co. Inc., vs Provident Insurance Corporation, G.R. No. 154305, December 9, 2004, Third Division, J. Panganiban; (2) Monarch Insurance Co., Inc. Tabacalera Insurance Co., Inc and Hon. Judge Amante Purisima, vs. Court of Appeals and Aboitiz Shipping Corporation, G.R. No. 92735, March 29, 1999, Second Division, J. De Leon, Jr. b) Exceptions to Limited Liability (Liability of the vessels insurer and negligence on the part of the shipowner) (Aboitiz Shipping Corporation vs. Court of Appeals, Malayan Insurance Company, Inc., Compagnie Maritimes Des Chargeurs Reunis and F.E. Zuellig (M), Inc., G.R. No. 121833, October 17, 2008, Second Division, J. Tinga) Rule: As a general rule, a ship owners liability is merely coextensive with his interest in the vessel, except where actual fault is attributable to the shipowner. Thus, as an exception to the limited liability doctrine, a shipowner or ship agent may be held liable for damages when the sinking of the vessel is attributable to the (1) actual fault or negligence of the shipowner or its (2) failure to ensure the seaworthiness of the vessel. However, despite the total loss of the vessel, its (3) insurance answers for the damages for which a shipowner or agent may be held liable. Aboitiz Shipping Corporation vs. Court of Appeals, Malayan Insurance Company, Inc., Compagnie Maritimes Des Chargeurs Reunis and F.E. Zuellig (M), Inc., G.R. No. 121833, October 17, 2008, Second Division, J. Tinga. Facts: These insurance companies Malayan Insurance Company, Inc., Compagnie Maritimes Des Chargeurs Reunis and F.E. Zuellig (M), Inc. were subrogated to the rights of the shipper who have claims against Aboitiz Shipping occasion upon the sinking of M/V P. Aboitiz on 31 October 1980. Aboitiz Shipping invoked the Limited Liability Rule founded on the Real and Hypothecary Nature of a Shipping Transportation Contract since the vessel was totally lost. RTC ruled in favor of the insurance companies. CA and SC sustained the RTC. Held: The court citing 587, 590, 837, Code of Commerce said these articles precisely intend to limit the liability of the shipowner or agent to the value of the vessel, its appurtenances and freightage earned in the voyage, provided that the owner or agent abandons the vessel. When the vessel is totally lost in which case there is no vessel to abandon, abandonment is not required. Because of such total loss the liability of the shipowner or agent for damages is extinguished.

66

However, despite the total loss of the vessel, its insurance answers for the damages for which a shipowner or agent may be held liable. Nonetheless, there are exceptional circumstances wherein the ship agent could still be held answerable despite the abandonment of the vessel, as where the loss or injury was due to the fault of the shipowner and the captain. The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowners liability, does not apply to cases where the injury or average was occasioned by the shipowners own fault. Likewise, the shipowner may be held liable for injuries to passengers notwithstanding the exclusively real and hypothecary nature of maritime law if fault can be attributed to the shipowner. The instant petitions provide another occasion for the Court to reiterate the well-settled doctrine of the real and hypothecary nature of maritime law. As a general rule, a ship owners liability is merely co-extensive with his interest in the vessel, except where actual fault is attributable to the shipowner. Thus, as an exception to the limited liability doctrine, a shipowner or ship agent may be held liable for damages when the sinking of the vessel is attributable to the actual fault or negligence of the shipowner or its failure to ensure the seaworthiness of the vessel. The instant petitions cannot be spared from the application of the exception to the doctrine of limited liability in view of the unanimous findings of the courts below that both Aboitiz and the crew failed to ensure the seaworthiness of the M/V P. Aboitiz. Also (1) Central Shipping Company Inc., vs. Insurance Company of North America, G.R. No. 150751, September 20, 2004, Third Division, J. Panganiban; Shipwrecks (Article 840-845, Code of Commerce) Seven Brothers Shipping Corporation vs. Oriental Assurance Corporation, G.R. No. 140613, October 15, 2002, Third Division, J. Sandoval-Gutierrez. Facts: Alcantara and Sons entered into a charter party with Seven Brothers Shipping involving the shipment of logs where Alcantara and Sons was the consignee. The entire cargo was lost when the vessel sank off the coast of Mati, Davao Oriental. Oriental Assurance paid Alcantara and was subrogated it rights. Oriental sued Seven Brothers Shipping. RTC dismissed the complaint. CA reversed the RTC and ruled in favor of Oriental. SC dismissed the petition on ground of finality of judgment Held: The CA citing Articles 840 and 841 of the Code of Commerce as well as Tan Chiong Sian vs. Inchausti and Co. (22 Phil. 152) said: 'Treating of shipwrecks, article 840 of the Code of Commerce prescribes:

67

The losses and damages suffered by a vessel and her cargo by reason of shipwreck or stranding shall be individually for the account of the owners, the part of the wreck which may be saved belonging to them in the same proportion. 'And Article 841 of the same Code reads: 'If the wreck or stranding should arise through malice, negligence, or lack of skill of the captain, or because the vessel put to sea insufficiently repaired and supplied, the owner or the freighters may demand indemnity of the captain for the damages caused to the vessel or cargo by the accident, in accordance with the provisions contained in articles 610, 612, 614 and 621. 'The general rule established in the first of the foregoing articles is that the loss of the vessel and of its cargo as the result of shipwreck, shall fall upon the respective owners thereof save for the exceptions specified in the second of the said articles. 'These legal provisions are in harmony with those of Articles 361 and 362 of the Code of Commerce, and are applicable whenever it is proved that the loss of or damage to the goods was the result of fortuitous event or of force majeure; but the carrier shall be liable for the loss or damage arising from the causes aforementioned if it shall have been proven that they occurred through his own fault or negligence or by his failure to take the same precautions usually adopted by diligent and careful persons.' The Salvage Law (Act 2616) Philippine Home Assurance Corporation vs. Court of Appeals and Eastern Shipping Lines, Inc. G.R. No. 106999, June 20, 1996, First Division, J. Kapunan. Facts: Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan, cargoes for carriage to Manila and Cebu. The vessel caught fire but was salvaged by a tugboat under the control of Fukuda Salvage Co. arrived near the vessel and commenced to tow the vessel for the port of Naha, Japan. ESLI the assessed the consignees additional freight and salvage charges. Philippine Home Assurance paid under protest the charges and then sued ESLI to recover the sum under protest. RTC dismissed the complaint and CA sustained the RTC. SC reversed the CA on the issue that fire may not be considered a natural disaster or calamity since it almost always arises from some act of man or by human means ruled in Held: (The RTC had the occasion to mention the elements of a valid Salvage claim that the SC did not bother to discuss) Citing Section 1 of Act No. 2616 the RTC mentioned, in relation to the above provision, the Supreme Court has ruled in Erlanger & Galinger v. Swedish East Asiatic Co., Ltd., 34 Phil. 178, that three elements are necessary to a valid salvage claim, namely (a) a marine peril (b) service voluntarily rendered when not required as an existing duty or from a special contract and (c) success in whole or in part, or that the service rendered contributed to such success.
68

Maritime Protest (Sea Protest) It is a written statement under oath made by the captain or master of the vessel after the occurrence of an accident or disaster in which the vessel or cargo is lost or injured with respect to circumstances attending such occurrence. It is usually intended to show that the loss or damage resulted from (a) a peril of the sea, or (b) some other cause for which neither the master nor owner was responsible. It concludes with the protestation against any liability of the owner of such loss or damage. Liabilities of ship owners and shipping agents ( Article 586 of the Code of Commerce states that a ship agent is the person entrusted with provisioning or representing the vessel in the port in which it may be found.) (a) Liable for Acts of captain by Article 586 and 587 of the Code of Commerce. Macondray & Co., Inc. vs. Provident Insurance Corporation, G.R. No. 154305, December 9, 2004, Third Division, J. Panganiban. Article 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested for the benefit of the same. Article 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight it may have earned during the voyage. (b) Liable for negligent acts of the captain in the care of goods (Article 587)

69

(1) The Philippine American General Insurance Company, Inc. vs. Court of Appeals and Felman Shippping Lines, G.R. No. 116940, June 11, 1997, First Division, J. Bellosillo; (2) Valenzuela Hardwood and Industrial Supply, Inc. vs. Court of Appeals and Seven Brother Shipping Corporation, G.R. No. 102316, June 30, 1997, Third Division, J. Panganiban; (3) Monarch Insurance Co., Inc. Tabacalera Insurance Co., Inc. and Hon. Judge Amante Purisima vs. Court of Appeals and Aboitiz Shipping, G.R. No. 92735, June 8, 2000, De Leon Jr.; (4) Aboitiz Shipping Corporation vs. Court of Appeals, Malayan Insurance Company Inc., et. al., G.R. No. 121833, October 17, 2008, Second Division, J. Tinga; (5) Philippine First Insurance Co., Inc., vs. Wallem Philippines, et. al., G.R. No. 165647, March 26, 2009, Second Division, J. Tinga; (6) Agustin P. Dela Torre vs. Court of Appeals, Crisostomo G. Concepcion, Ramon Boy Larrazabal, Philippine Trigon Shipyard Corporation and Roland G. Dela Torre, G.R. No. 160088, July 13, 2011, Third Division, J. Mendoza; (c) Not liable for acts of captain if loss was due to fortuitous event Philippine American General Insurance Company vs. PKS Shippping Company, G.R. No. 149038, April 9, 2003, First Division, J. Vitug. (d) Ship owner or agent exercised the limited liability rule. (Discussed earlier) Supercargoes (Articles 649 to 651, Code of Commerce) A person specially employed by the owner of cargo to take charge of and sell to the best advantage, merchandise which has been shipped, to purchase returning cargoes and to receive freight.
Title IV. Risks, Damages and Accidents of Maritime Commerce (Code of Commerce) Averages (Section 1, Article 806 to 818) Arrivals Under Stress (Section 2, Article 819 to 825) Collisions (Section 3, Article 826 to 839) Shipwrecks (Section 4, Article 840 to 845) Title V. Proof and Liquidation of Averages (Code of Commerce) Provisions Common to All Kinds of Averages (Sec. 1 Article 846 to 850) Liquidation of Gross Average (Section 2, Article 851 to 868) Liquidation of Ordinary Averages (Section 3, Article 869)

3. Accidents and damages in maritime commerce

70

a) General Average (require formalities under Article 813 and 814 of the Code of Commerce) A General or Gross Averages include all damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk.
Article 813. In order to incur the expenses and cause the damages corresponding to gross average, there must be a resolution of the captain, adopted after deliberation with the sailing mate and other officers of the vessel, and after hearing the persons interested in the cargo who may be present. xxx Article 814. The resolution adopted to cause the damages which constitute a general average must necessarily be entered in the logbook, stating the motives and reasons therefor, the votes against it, and the reason for the disagreement should there be any, and irresistible and urgent causes which move the captain if he acted of his own accord. xxx

Marine insurance provision under which damages or expenses incurred by shippers (whose cargo is exposed to a common danger) are shared among them in proportion to the value of their exposed cargo. Such damages or expenses occur by direct harm to the ship and/or to the cargo, or in a course of action to prevent initial or additional harm to them. General-average, like particular-average, is independent of the insurance cover bought for the cargo. Instead, it arises out of the contract between the cargo owner and the ship owner. Now largely replaced by relevant institute cargo clause. (http://www.businessdictionary.com/definition/generalaverage.html)

71

Philippine Home Assurance Corporation vs. Court of Appeals and Eastern Shipping Lines, Inc. G.R. No. 106999, June 20, 1996, First Division, J. Kapunan. Facts: Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan, cargoes for carriage to Manila and Cebu. The vessel caught fire but was salvaged by a tugboat under the control of Fukuda Salvage Co. arrived near the vessel and commenced to tow the vessel for the port of Naha, Japan. ESLI the assessed the consignees additional freight and salvage charges. Philippine Home Assurance paid under protest the charges and then sued ESLI to recover the sum under protest. RTC dismissed the complaint and CA sustained the RTC. SC reversed the CA on the issue that fire may not be considered a natural disaster or calamity since it almost always arises from some act of man or by human means Held: On the issue of whether or not respondent court committed an error in concluding that the expenses incurred in saving the cargo are considered general average, we rule in the affirmative. As a rule, general or gross averages include all damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk. While the instant case may technically fall within the purview of the said provision, the formalities prescribed under Article 813 and 814 of the Code of Commerce in order to incur the expenses and cause the damage corresponding to gross average were not complied with. Consequently, respondent ESLI's claim for contribution from the consignees of the cargo at the time of the occurrence of the average turns to naught. Particular Average Marine insurance provision under which damages or expenses incurred by a shipper (whose cargo is exposed to a danger) are borne by that shipper only. Such damages or expenses occur by direct harm to the ship and/or cargo, or in a course of action to prevent initial or additional harm to them. Particular average, like general-average is independent of the insurance cover bought for the cargo. Instead, it arises out of the contract between the cargo-owner and the ship-owner. Now largely replaced by the relevant institute cargo clause. (http://www.businessdictionary.com/definition/particularaverage.html)

72

Institute Cargo Clause. Set of terms for cargo insurance policies voluntarily adopted as standard terms by many international marine insurance organizations, including the Institute Of London Underwriters and the American Institute Of Marine Underwriters. Widest insurance cover is provided under 'Institute Cargo Clause A', a more restrictive cover under 'Institute Cargo Clause B', and the most restrictive cover under 'Institute Cargo Clause C.' These clauses have replaced the older 'All Risks,' 'With Average,' and 'Free Of Particular Average' clauses. Also called American Institute cargo clauses. (http://www.businessdictionary.com/definition/institutecargo-clauses.html) Jettison (Article 815 and 816, Code of Commerce)
Article 815. The captain shall direct the jettison, and shall order the goods cast overboard in the following order: (1) Those which are on deck, beginning with those which embarrass the maneuvers or damage the vessel, preferring if possible, the heaviest ones and those of least utility and valued. (2) Those which are below the upper deck, always beginning with those of the greatest weight and small value, to the amount and number absolutely indispensable. Article 816. In order that the goods jettisoned may be included in the gross average and the owners therefore be entitled to indemnity, it shall be necessary in so far as the cargo is concerned that their existence on board be proved by means of the bill of lading; and with regard to those belonging to the vessel, by means of the inventory made up before the departure in accordance with the first paragraph of Article 612.

BEQ 2009 VII: [a] Will you characterize the jettison of Romualdos TV sets as an average? If so, what kind of an average, and why? If not, why not? (3%) [b] Against whom does Romualdo have a cause of action for indemnity of his lost TV sets? Explain. (3%) Jason Clause. Provision in a contract of carriage that requires cargo owners to contribute in general-average even for an 'incident' caused by the carrier's negligence. (http://www.businessdictionary.com/definition/Jason-clause.html) b) Collisions (the impact of two vessels both of which are moving)

73

Cases: (1) Cokaliong Shipping Lines, Inc. vs. Hon. Omar U. Amin, Presiding Judge of the RTC, Makati, Branch 135 and Prudential Guarantee & Assurance, Inc., G.R. No. 112233, July 31, 1996; (2) Malayan Insurance Corporation vs. Court of Appeals and TKC Marketing Corporation, G.R. No. 119599, March 20, 1997, Second Division, J. Romero; (3) Negros Navigation Co., Inc. vs. The Court of Appeals, Ramon Miranda, Spouses Ricardo and Virginia Dela Victoria, G.R. No. 110398, November 7, 1997, Second Division, J. Mendoza; (4) PNOC Shipping and Transport Corporation vs. Court of Appeals and Maria Efigenia Fishing Corporation, G.R. No. 107518, October 8, 1998, Third Division, J. Romero; (5) Sulpicio Lines, Inc. vs. Cresencio G. Castaneda vs. Court of Appeals and Aquarius Fishing Co., Inc., G.R. No. 93291, March 29, 1999, Third Division, J. Purisima; (6) Monarch Insurance Co., Inc. Tabacalera Insurance Co., Inc and Hon. Judge Amante Purisima, vs. Court of Appeals and Aboitiz Shipping Corporation, G.R. No. 92735, March 29, 1999, Second Division, J. De Leon, Jr. (7) Rizal Surety & Insurance Company vs. Court of Appeals and Transworld Knitting Mills, Inc., G.R. No. 112360, July 18, 2000, Third Division, J. Purisima; (8) Habagat Grill through Louie Biraogo vs. DMC-Urban Properties Developer, Inc., G.R. No. 155110, March 31, 2005, Third Division, J. Panganiban; (9) Victor Shipping Corporation and Francisco Soriano vs. Adelfo B. Macasa, et. al., G.R. No. 160219, July 21, 2008, Third Division, J. Nachura, citing the case of Caltex Philippines Inc. vs. Sulpicio Lines Inc., G.R. No. 131166, September 30, 1999, First Division, J. Pardo; (10) Agustin P. Dela Torre vs. Court of Appeals, Crisostomo G. Concepcion, Ramon Larrazabal, Philippine Trigon Shipyard Corporation and Roland G. Dela Torre, G.R. No. 160088, July 13, 2011, Third Division, J. Mendoza a. Fortuitous (Article 830 and 832, Code of Commerce) Due to fortuitous event or force majeure. Each vessel and its cargo shall bear its own damages (Fortuitous) b. Culpable (Article 826, 827 and 831, Code of Commerce) Due to the fault, negligence or lack of skill of the captain, sailing mate or the complement of the vessel. Ship owner liable for the losses and damages (Culpable Fault) c. Doubtful collision (Article 828, Code of Commerce); Doctrine of Inscrutable Fault It cannot be determined which of the 2 vessels caused the collision - each vessel shall suffer its own damages, and both shall be solidarily responsible for the losses and damages occasioned to their cargoes. (Inscrutable Fault) d. Presumption of collision (Article 838, Code of Commerce)

74

e. Liability (Articles 829, 834, 835, 836, 837 and 838 Code of Commerce) f. Error in Extremis Where a navigator, suddenly realizing that a collision is imminent by no fault of his own, in confusion and excitement of the moment, does something which contributes to the collision or omits to do something by which the collision might be avoided, such act or omission is ordinarily considered to be in extremis and the ordinary rules of strict accountability does not apply. Allision the striking of a moving vessel against one that is stationary. Cases: (1) The Philippine American General Insurance Company, Inc. vs. Court of Appeals and Felman Shippping Lines, G.R. No. 116940, June 11, 1997, First Division, J. Bellosillo; (2) Far Eastern Shipping Company vs. Court of Appeals and Philippine Ports Authority, G.R. No. 130068, October 1, 1998, en banc, J. Regalado; (U.S. and Canadian decided cases on collisions) (http://admiraltylaw.com/collisions.htm) (COGREGS, International Regulations for Preventing Collisions at Sea, 1972, up to and including those annexed to IMO Resolution A.910 (22). In accordance with the Convention, the latest amendments come into force internationally on 29 November 2003.) (http://www.collisionregs.com/MSN1781.pdf) (COGREGS, Amendments, Resolution A.910 (22), Adopted on 29 November 2001, (Agenda item 14) Amendments to the International Regulations for Preventing Collisions At Sea) 1972 (http://www.collisionregs.com/Amendments.pdf)

CARRIAGE OF GOODS BY SEA ACT (Republic Act No. 521, 1936)

Section 1. That the provisions of Public Act No. 521 of the 7th Congress of the United States, approved on April 16, 1936, be accepted, as it is hereby accepted to be made applicable to all contracts for the carriage of goods by sea to and from the Philippine ports in foreign trade: Provided, that nothing in this Act shall be construed to repealing any existing provision of the Code of Commerce which is now in forced, or as limiting its application 75

4. Carriage of Goods by Sea Act a) Application (Section 1, COGSA) That the provisions of Public Act No. 521 of the 7th Congress of the United States, approved on April 16, 1936, be accepted, as it is hereby accepted to be made applicable to all contracts for the carriage of goods by sea to and from the Philippine ports in foreign trade: Provided, That nothing in this Act shall be construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application. Philippine First Insurance Co., Inc. vs. Wallem Phils. Shipping, Inc., et. al., G.R. No. 165647, March 26, 2009, Third Division, J. Tinga. Facts: Philippines First Insurance Co., Inc was subrogated to the rights of L.G. Atkimson Import-Export, Inc. (consignee) with its claim against Wallem Phils. Shipping, Inc. for the damage cargo shipped to the Port of Manila. The arrastre operator Asian Terminals, Inc. caused the damage to the cargo. RTC awarded damages and held the arrastre operator solidarily liable with the shipper. CA reversed the RTC making the arrestre operator solely liable. SC reversed the CA. Held: It is beyond question that respondents vessel is a common carrier. Thus, the standards for determining the existence or absence of the respondents liability will be gauged on the degree of diligence required of a common carrier. Moreover, as the shipment was an exercise of international trade, the provisions of the Carriage of Goods by Sea Act (COGSA), together with the Civil Code and the Code of Commerce, shall apply. Also, Insurance Company of North America vs. Asian Terminals Inc., G.R. No. 180784, February 15, 2012, Third Division, J. Peralta. b) Notice of Loss or damage (Section 3 [6], COGSA) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods into the custody of the person entitled to the delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days of the delivery. Such notice of loss or damage may be endorsed upon the receipt of the goods given by the person taking delivery thereof. The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey or inspection.

76

Also Article 366 of the Code of Commerce. (But this is under Title VII, Commercial Contracts of Transportation Overland [?]) With the twenty-four hours following the receipt of the merchandise, a claim may be made against the carrier on account of damage or average found therein on opening the packages, provided that the indications of the damage or average giving rise to the claim cannot be ascertained from the exterior of said packages, in which case said claim would only be admitted on the receipt of the packages. After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim whatsoever shall be admitted against the carrier with regard to the condition in which the goods transported were delivered. UCPB General Insurance Co., Inc. vs. Aboitiz Shipping Corp., Eagle Express Lines, Damco Intermodal Services, Inc., and Pimentel Customs Brokerage Co., G.R. No. 168433, February 10, 2009, Second Division, J. Tinga. Facts: UCPB was subrogated to the rights of San Miguel Corporation with its claim against respondents for the damage to a waste water treatment accessory shipped from Charleston, U.S.A. to Cebu. RTC ruled in favor of UCPB, CA reversed the RTC because UCPB failed to file a formal notice of claim within 24 hours from (SMCs) receipt of the damaged merchandise as required under Art. 366 of the Code of Commerce, SC affirmed the CA. Held: The provisions of the Code of Commerce, which apply to overland, river and maritime transportation (?), come into play. The requirement to give notice of loss or damage to the goods is not an empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the shipment has been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is still fresh and easily investigated so as to safeguard itself from false and fraudulent claims. The 24-hour claim requirement as a condition precedent to the accrual of a right of action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and prove the fulfillment of the condition. Otherwise, no right of action against the carrier can accrue in favor of the former.

77

Sec. 3(6) of the COGSA provides a similar claim mechanism as the Code of Commerce but prescribes a period of three (3) days within which notice of claim must be given if the loss or damage is not apparent. UCPB seizes upon the last paragraph which dispenses with the written notice if the state of the goods has been the subject of a joint survey which, in this case, was the opening of the shipment in the presence of an Eagle Express representative. It should be noted at this point that the applicability of the above-quoted provision of the COGSA was not raised as an issue by UCPB before the trial court and was only cited by UCPB in its Memorandum in this case. Neither did the inspection of the cargo in which Eagle Expresss representative had participated lead to the waiver of the written notice under the Sec. 3(6) of the COGSA. Also Wallem Philippines, Inc. vs. S.R. Farms, Inc., G.R. No. 161849, July 9, 2010, Second Division, J. Peralta; c) Period of Prescription (Section 3 [6], COGSA) In any even the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered: Provided, That, if a notice of loss or damage either apparent or concealed, is not given as provided in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered. New World International Development (Phils.), Inc., vs. NKY-Fil Japan Shipping Corp, et. al., G.R. No. 171468, August 24, 2011, Third Division, J. Abad. Facts: Three (3) generator sets that petitioner bought from DMT was damage when it was transported from Wisconsin to Manila. Petitioner filed insurance claims against Seaboard but Seaboard delayed thus the complaint against NKY-Fil Japan was filed beyond the one year provided under the Carriage of Goods by Sea Act (COGSA). RTC ruled in favor of Seaboard, the CA on motion reversed itself and also ruled in favor of Seaboard. The SC reversed the CA. Held: Regarding prescription of claims, Section 3(6) of the COGSA provides that the carrier and the ship shall be discharged from all liability in case of loss or damage unless the suit is brought within one year after delivery of the goods or the date when the goods should have been delivered. In the ordinary course, if Seaboard had processed that claim and paid the same, Seaboard would have been subrogated to petitioner New Worlds right to recover from NYK. And it could have then filed the suit as a subrogee Also Loadstar Shipping Co., Inc. vs. Court of Appeals and Manila Insurance Co., Inc., G.R. No. 131621, September 28, 1999, First Division, CJ. Davide, Jr.; Wallem Philippines, Inc. vs. S.R. Farms, Inc., G.R. No. 161849, July 9, 2010, Second Division, J. Peralta;
78

Also Article 1144 of the Civil Code. The following actions must be brought within ten years from the time the right of action accrues: (1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment. (Goods were not lost or damaged) Mitsui O.S.K. Lines Ltd., vs. Court of Appeals and Lavine Loungewear Mfg. Corp., G.R. No. 119571, March 11, 1998, Second Division, J. Mendoza. Facts: Mitsui undertook to transport the goods of Lavine from Manila to Le Havre France within 28 days from initial loading. The goods arrived almost four (4) months after and already off season. It was only two (2) years later that Mitsui was impleaded in an amended complaint and so it sought dismissal grounded on prescription under Section 3 (6) of COGSA. RTC denied the motion to dismiss. CA and SC sustained the RTC. Held: In the case at bar, there is neither deterioration nor disappearance nor destruction of goods caused by the carriers breach of contract. Whatever reduction there may have been in the value of the goods is not due to their deterioration or disappearance because they had been damaged in transit. The question before the trial court is not the particular sense of damages as it refers to the physical loss or damage of a shippers goods as specifically covered by 3(6) of COGSA but petitioners potential liability for the damages it has caused in the general sense and, as such, the matter is governed by the Civil Code, the Code of Commerce and COGSA, for the breach of its contract of carriage with private respondent. The suit below is not for loss or damage to goods contemplated in 3(6), the question of prescription of action is governed not by the COGSA but by Art. 1144 of the Civil Code which provides for a prescriptive period of ten years. (It was the arrestre that was sued)

79

Insurance Company of North America vs. Asian Terminals Inc., G.R. No. 180784, February 15, 2012, Third Division, J. Peralta. Facts: Insurance Company of North America was subrogated to the rights of San Miguel Corporation for the damage cargo shipped to the Port of Manila. The arrastre operator Asian Terminals, Inc. caused the damage to the cargo. The carrier was not made party to the suit. RTC found damages but dismissed the complaint as it is barred by the Statutes of Limitation particularly Section 3 (6) of the COGSA. SC Reversed the RTC. Held: From the provision above, the carrier and the ship may put up the defense of prescription if the action for damages is not brought within one year after the delivery of the goods or the date when the goods should have been delivered. It has been held that not only the shipper, but also the consignee or legal holder of the bill may invoke the prescriptive period. However, the COGSA does not mention that an arrastre operator may invoke the prescriptive period of one year; hence, it does not cover the arrastre operator. Compare: Philippine First Insurance Co., Inc. vs. Wallem Phils. Shipping, Inc., et. al., G.R. No. 165647, March 26, 2009, Third Division, J. Tinga: Held: It is beyond question that respondents vessel is a common carrier. Thus, the standards for determining the existence or absence of the respondents liability will be gauged on the degree of diligence required of a common carrier. Moreover, as the shipment was an exercise of international trade, the provisions of the Carriage of Goods by Sea Act (COGSA), together with the Civil Code and the Code of Commerce, shall apply. (It was the insurer that was sued) Mayer Steel Pipe Corporation and Hongkong Government Supplies Department vs. Court of Appeals, South Sea Surety and Insurance Co., Inc. and Charter Insurance Corporation, G.R. No. 124050, June 19, 1997, Second Division, J. Puno. Facts: Mayer Steel shipped pipes to and fittings to Hongkong. Mayer insured the pipes and fittings against all risks with South Sea Surety and Insurance Co., Inc. and Charter Insurance Corp. The pipes and fittings were damaged. Mayer and Hongkong sued the insurers for the damages. RTC ruled in favor of Mayer and Hongkong. CA set aside the decision of RTC on prescription based on Section 3 (6) of the COGSA. SC reversed the CA. Held: The liability of the insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the contract of insurance. The Carriage of Goods by Sea Act governs the relationship between the carrier on the one hand and the shipper, the consignee and/or the insurer on the other hand. It defines the obligations of the carrier under the contract of carriage. It does not, however, affect the relationship between the shipper and the insurer. The latter case is governed by the Insurance Code.
80

Responsibility and Liability (Section 3 [2], COGSA). The carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried. Philippine First Insurance Co., Inc. vs. Wallem Phils. Shipping, Inc., et. al., G.R. No. 165647, March 26, 2009, Third Division, J. Tinga. Facts: Philippines First Insurance Co., Inc was subrogated to the rights of L.G. Atkimson Import-Export, Inc. (consignee) it is claim against Wallem Phils. Shipping, Inc. for the damage cargo to the Port of Manila. The arrastre operator Asian Terminals, Inc. caused the damage to the cargo. RTC awarded damages and held the arrastre operator solidarily liable with the shipper. CA reversed the RTC making the arrestre operator solely liable. SC reversed the CA. Held: Section 2 of the COGSA provides that under every contract of carriage of goods by sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities set forth in the Act. The aforementioned Section 3(2) of the COGSA states that among the carriers responsibilities are to properly and carefully load, care for and discharge the goods carried. The bill of lading covering the subject shipment likewise stipulates that the carriers liability for loss or damage to the goods ceases after its discharge from the vessel. Article 619 of the Code of Commerce holds a ship captain liable for the cargo from the time it is turned over to him until its delivery at the port of unloading d) Limitation of liability Limitation of liability (Section 4 [5], COGSA). Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package of lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier.

81

Unsworth Transport International (Phils.), Inc., vs. Court of Appeals and Pioneer Insurance and Surety Corporation, G.R. No. 166250, July 26, 2010, Second Division, J. Nachura. Facts: Sylvex Purchasing Corporation delivered to Unsworth raw materials for pharmaceutical manufacturing insured with Pioneer Insurance. One drum was damaged. Pioneer was subrogated to the consignee Unilab. RTC ruled in favor of Pioneer awarding P76,231.27 more than COGSAs $500, CA affirmed the RTC. Held: SC affirmed the applicability of the Package Limitation Rule under the COGSA, contrary to the RTC and the CAs findings. In the present case, the shipper did not declare a higher valuation of the goods to be shipped. Liability should be limited to $500 per steel drum. In this case, as there was only one drum lost, private respondent is entitled to receive only $500 as damages for the loss. Also, Philippine Charter Insurance Corporation vs. Neptune Orient Lines/Overseas Agency Services, Inc., G.R. No. 145044, June 12, 2008, First Division, J. Azcuna; (How is per package determined) Belgian Overseas Chartering and Shipping N.V. and Jardine Davies Transport Services Inc. vs. Philippine First Insurance Co., Inc., G.R. No. 143133, June 5, 2002, Third Division J. Panganiban. Facts: On June 13, 1990, CMC Trading A.G. shipped on board the MN Anangel Sky at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. Four (4) coils were found to be in bad order and unfit for the intended purpose, the consignee Philippine Steel Trading Corporation declared the same as total loss. Philippine First Insurance was subrogated to the consignee after it paid P506,086.50. RTC dismissed the complaint. CA reversed the RTC and awarded P451,027.32. SC modified award to $2,000. Held: The liability should be computed based on US$500 per package and not on the per metric ton price declared in the Letter of Credit. Citing the case of Eastern Shipping Lines, Inc. v. Intermediate Appellate Court the SC explained the meaning of package: When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed in the shipping documents, each of those units and not the container constitutes the package referred to in the liability limitation provision of Carriage of Goods by Sea Act. Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly disclosed the contents of the containers, the number of units, as well as the nature of the steel sheets, the four damaged coils should be considered as the shipping unit subject to the US$500 limitation

F. PUBLIC SERVICE ACT

82

Public Service Act (Commonwealth Act No. 146, 1936) Public Service Act was enacted in 1936, the Public Service Commission (PSC) was vested with jurisdiction over public services. (Divina Garcia, G.R. No. 162272, April 7, 2009). Commonwealth Act No. 146, otherwise known as the Public Service Act, was approved creating the Public Service Commission (PSC), which was vested with jurisdiction over numerous public utility services. (San Pablo, G.R. No. 167641, May 10, 2005) Cases: (1) BF Homes Inc., vs. The Philippine Waterworks and Construction Corp., vs. Manila Electric Company, G.R. No. 171624, December 6, 2010, First Division, J. Leonardo-De Castro; (2) Santiago C. Divinagracia vs. Consolidated Broadcasting System and Peoples Broadcasting Service, Inc., G.R. No. 162272, April 7, 2009, Second Division, J. Tinga; (3) The Metropolitan Manila Development Authority and Bayani Fernando vs. Viron Transportation Co., Inc, G.R. 170656, August 15, 2007, en banc, J. Carpio-Morales; and (4) San Pablo vs. Marina, G.R. No. 167641, May 10, 2005, en banc. 1. Definition of public utility The business and operations of a public utility are imbued with public interest. 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. For this reason, a public utility submits to the regulation of government authorities and surrenders certain business prerogatives, including the amount of rates that may be charged by it. It is the imperative duty of the State to interpose its protective power whenever too much profits become the priority of public utilities. (Republic of the Philippines, represented by Energy Regulatory Board, vs. Manila Electric Company, G.R. No. 141314, April 9, 2003, Third Division, J.Puno) Ridjo Doctrine (Ridjo Tape & Chemical Corp. v. CA, 350 Phil. 184 [1998]).

83

The Ridjo doctrine simply states that the public utility has the imperative duty to make a reasonable and proper inspection of its apparatus and equipment to ensure that they do not malfunction. Its failure to discover the defect, if any, considering the length of time, amounts to inexcusable negligence; its failure to make the necessary repairs and replace the defective electric meter installed within the consumers premises limits the latters liability. The use of the words defect and defective in the above-cited case does not restrict the application of the doctrine to cases of mechanical defects in the installed electric meters. A more plausible interpretation is to apply the rule on negligence whether the defect is inherent, intentional or unintentional, which therefore covers tampering, mechanical defects and mistakes in the computation of the consumers billing. 2. Necessity for certificate of public convenience Registered Owner Rule. Under Section 5 of Republic Act No. 4136 as amended, all motor vehicles used or operated on or upon any highway of the Philippines must be registered with the Bureau of Land Transportation (now Land Transportation Office) for the current year. Furthermore, any encumbrances of motor vehicles must be recorded with the Land Transportation Office in order to be valid against third parties. FEB Leasing and Finance Corporation (now BPI Leasing Corporation) vs. Spouses Sergio P. Baylon and Martess Villena-Baylon, BG Hauler, Inc., and Manuel Y. Estilloso, G.R. No. 181398, June 29, 2011, Second Division, J. Carpio. In accordance with the law on compulsory motor vehicle registration, this Court has consistently ruled that, with respect to the public and third persons, the registered owner of a motor vehicle is directly and primarily responsible for the consequences of its operation regardless of who the actual vehicle owner might be. Well-settled is the rule that the registered owner of the vehicle is liable for quasi-delicts resulting from its use. Thus, even if the vehicle has already been sold, leased, or transferred to another person at the time the vehicle figured in an accident, the registered vehicle owner would still be liable for damages caused by the accident. The sale, transfer or lease of the vehicle, which is not registered with the Land Transportation Office, will not bind third persons aggrieved in an accident involving the vehicle. The compulsory motor vehicle registration underscores the importance of registering the vehicle in the name of the actual owner. (id) The policy behind the rule is to enable the victim to find redress by the expedient recourse of identifying the registered vehicle owner in the records of the Land Transportation Office. The registered owner can be reimbursed by the actual owner, lessee or transferee who is known to him. Unlike the registered owner, the innocent victim is not privy to the lease, sale, transfer or encumbrance of the vehicle. Hence, the victim should not be prejudiced by the failure to register such transaction or encumbrance. (id)
84

a) Requisites (i) Citizenship Section 11, Article XII of the 1987 Constitution which reads: Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; x x x. The term capital in Section 11, Article XII of the Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares,41 and not to the total outstanding capital stock comprising both common and non-voting preferred shares. (Wilson P. Gamboa vs. Finance Secretary Margarito B. Teves, et. al., G.R. No. 176579, June 28, 2011, en banc, J.Carpio) The limiting thrust of the foregoing constitutional provision on the grant of franchise or other forms of authorization to operate public utilities may, in context, be stated as follows: (a) the grant shall be made only in favor of qualified Filipino citizens or corporations; (b) Congress can impair the obligation of franchises, as contracts; and (c) no such authorization shall be exclusive or exceed fifty years. Cases (1) Santiago C. Divinagracia vs. Consolidated Broadcasting System and Peoples Broadcasting Service, Inc., G.R. No. 162272, April 7, 2009, Second Division, J. Tinga; (2) Ernesto B. Francisco, Jr. and Jose Ma. O. Hizon vs. Toll Regulatory Board, Philippine National Construction Corporation, et. al., G.R. No. 166910, October 19, 2010, en banc, J. Velasco, Jr. (3) Tawang MultiPurpose Cooperative vs. La Trinidad Water District, G.R. No. 166471, March 22, 2011, en banc, J. Carpio; (ii) Promotion of public interests b) Prior operator rule (i) Meaning (ii) Exceptions (iii) Ruinous competition 3. Fixing of rate a) Rate of return b) Exclusion of income tax as expense
85

4. Unlawful arrangements a) Boundary system Boundary System. It is already settled that the relationship between jeepney owners/operators and jeepney drivers under the boundary system is that of employer-employee and not of lessor-lessee. The fact that the drivers do not receive fixed wages but only get the amount in excess of the so-called boundary that they pay to the owner/operator is not sufficient to negate the relationship between them as employer and employee. Primo E. Caong, Jr., Alexander J. Tresquio, and Loriano D. Daluyon vs. Avelino Regualos, G.R. No. 179428, January 26, 2011, Second Division, J. Nachura. Suspension ground on failure to pay boundary in arrears is not illegal dismissal. We have no reason to deviate from such findings. Indeed, petitioners suspension cannot be categorized as dismissal, considering that there was no intent on the part of respondent to sever the employer-employee relationship between him and petitioners. In fact, it was made clear that petitioners could put an end to the suspension if they only pay their recent arrears. As it was, the suspension dragged on for years because of petitioners stubborn refusal to pay. It would have been different if petitioners complied with the condition and respondent still refused to readmit them to work. Then there would have been a clear act of dismissal. But such was not the case. Instead of paying, petitioners even filed a complaint for illegal dismissal against respondent. (Id) b) Kabit system Kabit System. The kabit system is an arrangement whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles to operate them under his license, sometimes for a fee or percentage of the earnings. Although the parties to such an agreement are not outrightly penalized by law, the kabit system is invariably recognized as being contrary to public policy and therefore void and inexistent under Art. 1409 of the Civil Code. Abelardo Lim and Esmadito Gunnaban, vs. Court of Appeals and Donato H. Gonzales, G.R. No. 125817, January 16, 2002, Second Division, J. Bellosillo.

86

In the early case of Dizon v. Octavio the Court explained that one of the primary factors considered in the granting of a certificate of public convenience for the business of public transportation is the financial capacity of the holder of the license, so that liabilities arising from accidents may be duly compensated. The kabit system renders illusory such purpose and, worse, may still be availed of by the grantee to escape civil liability caused by a negligent use of a vehicle owned by another and operated under his license. If a registered owner is allowed to escape liability by proving who the supposed owner of the vehicle is, it would be easy for him to transfer the subject vehicle to another who possesses no property with which to respond financially for the damage done. Thus, for the safety of passengers and the public who may have been wronged and deceived through the baneful kabit system, the registered owner of the vehicle is not allowed to prove that another person has become the owner so that he may be thereby relieved of responsibility. Subsequent cases affirm such basic doctrine. (Id) Twist in this Lim case: The vehicle engaged in Kabit System is the one damaged and owner sought damages. It would seem then that the thrust of the law in enjoining the kabit system is not so much as to penalize the parties but to identify the person upon whom responsibility may be fixed in case of an accident with the end view of protecting the riding public. The policy therefore loses its force if the public at large is not deceived, much less involved. (Id) In the present case it is at once apparent that the evil sought to be prevented in enjoining the kabit system does not exist. First, neither of the parties to the pernicious kabit system is being held liable for damages. Second, the case arose from the negligence of another vehicle in using the public road to whom no representation, or misrepresentation, as regards the ownership and operation of the passenger jeepney was made and to whom no such representation, or misrepresentation, was necessary. Thus it cannot be said that private respondent Gonzales and the registered owner of the jeepney were in estoppel for leading the public to believe that the jeepney belonged to the registered owner. Third, the riding public was not bothered nor inconvenienced at the very least by the illegal arrangement. On the contrary, it was private respondent himself who had been wronged and was seeking compensation for the damage done to him. Certainly, it would be the height of inequity to deny him his right. (Id) In light of the foregoing, it is evident that private respondent has the right to proceed against petitioners for the damage caused on his passenger jeepney as well as on his business. Any effort then to frustrate his claim of damages by the ingenuity with which petitioners framed the issue should be discouraged, if not repelled. (Id) 5. Approval of sale, encumbrance or lease of property
87

Title I. Vessels (Book Three, Maritime Commerce, Code of Commerce, Article 573 to Article 585) Loans on bottomry and respondentia (Section 2, Article 719 to 736 of the Code of Commerce) Bottomry Respondentia Ship Mortgage Decree (Presidential Decree No. 1521, 1978)

G. THE WARSAW CONVENTION

WARSAW CONVENTION (Convention for the Unification of Certain Rules Relating to International Carriage by Air, Signed at Warsaw on 12 October 1929) Background of International Air Treaties (http://www.cargolaw.com/presentations_montreal_cli.html)

1. Applicability Jurisdiction of Philippine Courts (Article 28 [1], Warsaw Convention) An action for damages must be brought, at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the Court having jurisdiction where (a) the carrier is ordinarily resident, or (b) has his principal place of business, or (c) has an establishment by which the contract has been made or (d) before the Court having jurisdiction at the place of destination. Edna Diago Lhuillier vs. British Airways, G.R. No. 171092, March 15, 2010, Second Division, J. Del Castillo. Facts: Petitioner filed a case in Makati for misconduct of flight attendants in a trip from London, United Kingdom to Rome, Italy. RTC Dismissed the case based on Article 28 (1). SC sustained the RTC Held: SC citing Santos III v. Northwest Orient Airlines In this case, it is not disputed that respondent is a British corporation (a) domiciled in London, United Kingdom with London as its (b) principal place of business. In the passenger ticket and baggage check presented by both the petitioner and respondent, it appears that (c) the ticket was issued in Rome, Italy. Finally, both the petitioner and respondent aver that the (d) place of destination is Rome, Italy, which is properly designated given the routing presented in the said passenger ticket and baggage check. Accordingly, petitioner may bring her action before the courts of Rome, Italy. RTC of Makati correctly ruled that it does not have jurisdiction over the case.

88

American Airlines vs. Court of Appeals, Hon. Bernardo Ll. Salas and Democrito Mendoza, G.R. No. 116044-45, March 9, 2000, Third Division, J. Gonzaga-Reyes. Facts: Private Respondent filed a case in Cebu for misconduct of petitioners security at Geneva Airport in a trip through conjunction tickets for Manila - Singapore - Athens - Larnaca - Rome - Turin - Zurich Geneva - Copenhagen - New York. RTC refused to dismissed the case based on Article 28 (1). SC sustained the RTC Held: The contract of carriage between the private respondent and Singapore Airlines although performed by different carriers under a series of airline tickets, including that issued by petitioner, constitutes a single operation (Article 1 [3]). A contract of air transportation is taken as a single operation whether it is founded on a single contract or a series of contracts. The third option of the plaintiff under Art 28 (1) of the Warsaw Convention e.g., to sue in the place of business of the carrier wherein the contract was made, is therefore, Manila, and Philippine courts are clothed with jurisdiction over this case. While this case was filed in Cebu and not in Manila the issue of venue is no longer an issue as the petitioner is deemed to have waived it when it presented evidence before the trial court. Also: Purita S. Mapa, Carmina S. Mapa and Cornelio P. Mapa vs. Court of Appeals and Trans-World Airline Inc., G.R. No. 122308, July 8, 1997, Third Division, J. David, J.; China Airlines vs. Daniel Chiok, G.R. No. 152122, July 30, 2003, Third Division, J. Panganiban [A common carrier has a peculiar relationship with and an exacting responsibility to its passengers. For reasons of public interest and policy, the ticket-issuing airline acts as principal in a contract of carriage and is thus liable for the acts and the omissions of any errant carrier to which it may have endorsed any sector of the entire, continuous trip. (China Airlines)] 2. Limitation of liability Prescription (Article 29, Warsaw Convention) The right to damages shall be extinguished if an action is not brought within two years, reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the carriage stopped. United Airlines vs. Willie J. Uy, G.R. No. 127768, November 19, 1999, Second Division, J. Bellosillo. Facts: Private Respondent filed a case, against United Airlines for humiliation at the airport and damaged baggage, two (2) years after arrival at place of destination. RTC dismissed the case based on Article 29. CA reversed the RTC, SC sustained the CA Held: Only the second cause of action (damage baggage) falls within the convention. Cause of action based on humiliation is not barred by Article 29. Within our jurisdiction the Warsaw Convention can be applied, or ignored, depending on the peculiar facts presented by each case. The Convention does not preclude the operation of the Civil Code and other pertinent laws.
89

Despite the express mandate of Art. 29 of the Warsaw Convention that an action for damages should be filed within two (2) years from the arrival at the place of destination such rule shall not be applied in the instant case because of the delaying tactics employed by petitioner airline itself. Thus, private respondent's second cause of action cannot be considered as time-barred under Art. 29 of the Warsaw Convention. Philippine Airlines Inc., vs. Hon. Adriano Savillo and Simplicio Grio, G.R. No. 149547, July 4, 2008, Third Division, J. Chico-Nazario. Facts: Private Respondent filed a case, against Philippine Airlines for their failure to board Singapore Airlines as PAL failed to endorse their tickets. But the case was filed three (3) years after the incident thus PAL sought dismissal under Article 29. RTC refused to dismiss based on the Civil Code and not Article 29. CA and SC sustained the RTC Held: Citing United vs. Uy, Nevertheless, this Court notes that jurisprudence in the Philippines and the United States also recognizes that the Warsaw Convention does not exclusively regulate the relationship between passenger and carrier on an international flight. This Court finds that the present case is substantially similar to cases in which the damages sought were considered to be outside the coverage of the Warsaw Convention. a) Liability to passengers Liability to passengers (Chapter III, Article 17, Warsaw Convention) The carrier is liable for damage sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on board the aircraft or in the court of any of the operations of embarking and disembarking b) Liability for checked baggage Liability for checked baggage (Chapter III, Article 19, Warsaw Convention) The carrier is liable for damage occasioned by delay in the carriage by air of passengers, luggage or goods.

90

Philippine Airlines Incorporated vs. Court of Appeals, Dr. Josefino Miranda and Luisa Miranda, G.R. No. 119641, May 17, 1996, Second Division, J. Regalado. Facts: Private Respondents baggage was off-loaded in Honolulu to accommodate other baggages in a trip from Los Angeles Honolulu - Manila. RTC awarded damages more than that of the Warsaw Convention. CA and SC sustained the RTC Held: Citing the case of Cathay Pacific, the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach of contract of carriage or as an absolute limit of the extent of that liability. The Warsaw Convention declares the carrier liable in the enumerated cases and under certain limitations. However, it must not be construed to preclude the operation of the Civil Code and pertinent laws. Liability for checked baggage, limited liability (Article 22, Warsaw Convention) Philippine Airlines Incorporated vs. Court of Appeals, Gilda C. Mejia, G.R. No. 119706, March 14, 1996, Second Division, J. Regalado. Facts: Private Respondents microwave oven was damaged while checked in from San Francisco to Manila. She wanted to declare a higher value but the airline advised her not to. RTC awarded more than the limited liability of U.S. $20.00 based on weight. CA and SC sustained the RTC Held: The Warsaw Convention, being a treaty to which the Philippines is a signatory, is as much a part of Philippine law as the Civil Code, Code of Commerce and other municipal special laws. The provisions therein contained, specifically on the limitation of carriers liability, are operative in the Philippines but only in appropriate situations. Moreover, the trial court underscored the fact that petitioner was not able to overcome the statutory presumption of negligence in Article 1735 which, as a common carrier, it was laboring under in case of loss, destruction or deterioration of goods, through proper showing of the exercise of extraordinary diligence

91

British Airways vs. Court of Appeals, Gop Mahtani and Philippine Airlines, G.R. No. 121824, March 29, 1998, Third Division, J. Romero. Facts: Private Respondents luggage was lost while checked in from Manila to Bombay India. He did declare a higher value to it but British Airways did not object and even conducted cross examination when evidence to that effect was presented. RTC awarded more than the limited liability of U.S. $20.00 (250 Francs) per kilogram. CA and SC sustained the RTC Held: American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in excess of the limits specified in the tariff which was filed with the proper authorities. This doctrine is recognized in this jurisdiction. Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesion contracts where the facts and circumstances justify that they should be disregarded. In addition, we have held that benefits of limited liability are subject to waiver such as when the air carrier failed to raise timely objections during the trial when questions and answers regarding the actual claims and damages sustained by the passenger were asked. Liability for luggage or goods; presumption (Article 26, Warsaw Convention) (1) Receipt by the person entitled to delivery of luggage or goods without complaint is prima facie evidence that the same have been delivered in good condition and in accordance with the document of carriage, (2) In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and, at least, within three days from the date of receipt in the case of luggage and seven days from the date of receipt in the case of goods. In case of delay the complaint must be made at the latest within fourteen days from the date which the luggage or goods have been placed at his disposal, (3) Every complaint must be made in writing upon the document of carriage or by separate notice in writing despatched within the times aforesaid, (4) Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part.

92

Federal Express Corporation vs. American Home Assurance Company and Philam Insurance Company, Inc., G.R. No. 150094, August 18, 2004, Third Division, J. Panganiban. Facts: Private Respondents are subrogated to the rights of Smithkline Beecham whose veterinary biologicals were damaged as these were not refrigerated. The case was filed even without notice to the FedEx provided in Article 26 (3). RTC awarded damages and CA affirmed. SC reversed the RTC and CA Held: The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The fundamental reasons for such a stipulation are (1) to inform the carrier that the cargo has been damaged, and that it is being charged with liability therefor; and (2) to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims. Also: Victorino Savellano, Virginia B. Savellano and Deogracias B. Savellano vs. Northwest Airlines, G.R. No. 157183, July 8, 2003, Third Division, J. Panganiban. c) Liability for hand-carried baggage Section II, Luggage Ticket, Article 4 (1), Convention, For the carriage of luggage, other than small personal objects of which the passenger take charge himself, the carrier must deliver a luggage ticket. 3. Willful misconduct Sabena Belgaian World Airlines vs. Court of Appeals and Ma. Paula San Agustin, G.R. No. 104685, March 14, 1996, First Division, J. Vitug. Facts: The loss of said baggage not only once by twice, said the appellate court, underscores the wanton negligence and lack of care on the part of the carrier. Held: The above findings, which certainly cannot be said to be without basis, foreclose whatever rights petitioner might have had to the possible limitation of liabilities enjoyed by international air carriers under the Warsaw Convention (as amended by the Hague Protocol of 1955, the Montreal Agreement of 1966, the Guatemala Protocol of 1971 and the Montreal Protocols of 1975). Citing Alitalia vs. Intermediate Appellate Court The Warsaw Convention however denies to the carrier availment of the provisions which exclude or limit his liability, if the damage is caused by his wilful misconduct

93

Also: Philippine Airlines Inc., vs. Court of Appeals and Gilda C. Mejia, G.R. No. 119706, March 14, 1996, Second Division, J. Regalado; Philippine Airlines Inc., vs. Court of Appeals, Dr. Josefino Miranda and Luisa Miranda, G.R. No. 119641, May 17, 1996, Second Division, J. Regalado; Northwest Airlines vs. Court of Appeals, Rolando Torres, G.R. No. 120334, January 30, 1998, First Division, J. Davide, Jr.; United Airlines vs. Willie J. Uy, G.R. No. 127768, November 19, 1999, Second Division, J. Bellosillo; Edna Diago Lhuillier vs. British Airways, G.R. No. 171092, January 15, 2010, Second Division, J. Del Castillo; The Montreal Convention of 1999 (http://www.cargolaw.com/presentations_montreal_cli.html) There are currently more than 135 parties to the Warsaw Convention either in its original form or one of its amended forms. Some States separately have adopted laws or regulations relating to international carrier liability. In addition, as noted earlier, there are private voluntary agreements among carriers relating to liability. The result of these many instruments is a patchwork of liability regimes. The new Convention is designed to replace the Warsaw Convention and all of its related instruments and to eliminate the need for the patchwork of regulation and private voluntary agreements. The most notable features of the new Convention include: (1) it removes all arbitrary limits on recovery for passenger death or injury; (2) it imposes strict liability on carriers for the first 100,000 SDR (``Special Drawing Rights'' which is an artificial `basket' currency developed by the International Monetary Fund for internal accounting purposes).) of proven damages in the event of passenger death or injury; (3) it expands the bases for jurisdiction for claims relating to passenger death or injury to permit suits in the passenger's homeland if certain conditions are met; (4) it clarifies the obligations of carriers engaged in codesharing operations; and (5) it preserves all key benefits achieved for the air cargo industry by Montreal Protocol No. 4. A more detailed review of the essential elements of the Convention follows.

H. SPACE TRAVEL
http://space.xprize.org/ansari-x-prize Ansari X PRIZE "I think the [Ansari] X PRIZE should be viewed as the beginning of one giant leap..." Dr. Buzz Aldrin NASA Astronaut Apollo 11

94

On October 4, 2004, the X PRIZE Foundation captured the world's attention when we awarded the largest prize in history, the $10 million Ansari X PRIZE, to Scaled Composites for their craft SpaceShipOne. To win the prize, famed aerospace designer Burt Rutan and financier Paul Allen led the first private team to build and launch a spacecraft capable of carrying three people to 100 kilometers above the earth's surface, twice within two weeks. Spaceflight was no longer the exclusive realm of government. With that single flight, and the winning of the $10 million Ansari X PRIZE, a new industry was born. The Ansari X PRIZE was modeled after the Orteig Prize, won by Charles Lindbergh in 1927 for being the first to fly non-stop from New York to Paris, and mirrored the hundreds of aviation incentive prizes offered early in the 20th century that helped create today's $300 billion commercial aviation industry. Dr. Peter Diamandis designed the prize after reading The Spirit of St. Louis about the winning of the Orteig Prize. In 1996, he formally announced the prize in St. Louis, and the race was on. The Ansari family shared our vision and agreed to join the revolution by becoming the title sponsors of the first X PRIZE, jumpstarting 26 teams from 7 different nations to pursue their passions by competing for the prize. Those 26 teams combined spent more than $100 million to win the prize. Since SpaceShipOne won the prize, there has been more than $1.5 billion dollars in public and private expenditure in support of the private spaceflight industry. Following the success of the Ansari X PRIZE, Peter Diamandis and the rest of the X PRIZE Foundation were inspired to create more prizes that would spur innovations in other stalled industries. The Foundation has an ongoing goal of creating new Prizes in the following areas: Exploration (Space & Deep Ocean); Energy & Environment; Education & Global Development; and Life Sciences. The Teams The teams that competed for the Ansari X PRIZE were a dynamic and diverse group of individuals and companies, each with their own unique idea of how to win the $10 million. Many of the Ansari teams are still reaching for space, even though the prize money is no longer up for grabs. Others are competing in current X PRIZE competitions, like the Google Lunar X PRIZE or the Northrop Grumman Lunar Lander Challenge. A list of all of the teams who competed in the Ansari X PRIZE is to the left. All content on team pages is exactly the same as it was on the original X PRIZE Foundation website in 2003, including tense. SCALED COMPOSITES http://www.scaled.com/about/
95

Scaled Composites, LLC is an aerospace and specialty composites development company located in Mojave, California (about 80 miles north of Los Angeles). Founded in 1982 by Burt Rutan, Scaled has broad experience in air vehicle design, tooling and manufacturing, specialty composite structure design, analysis and fabrication, and developmental flight tests of air and space vehicles. The employees at Scaled come from a diverse background of talents, experience, and interests. This unique combination of individuals helps promote an innovative and creative atmosphere. Scaled offers the opportunity to pursue career and personal interests in a manner that can be found nowhere else by following one simple rule: have fun. Our normal business hours are from 7 am to 4:30 pm (Pacific), Monday through Thursday. We are open every other Friday from 7 am to 3:30 pm (Pacific). VIRGIN GALACTIC http://www.virgingalactic.com/ Sir Richard Branson and New Mexico Governor Susana Martinez dedicate the Virgin Galactic Gateway to Space'WhiteKnightTwo and SpaceShipTwo soar over Spaceport America New Science and Education Customers to Bring Benefits of Space Access to Students and Researchers. Looking skyward, more than 800 guests marveled at Virgin Galactics commercial space vehicles as they soared through the skies of southern New Mexico during the dedication ceremonies of Virgin Galactics new home at Spaceport America. The flight of WhiteKnightTwo and SpaceShipTwo was the highlight of a spectacular ceremony which featured the dedication of the Sir Norman Fosterdesigned building and announcements of new scientific and educational customers for the worlds first commercial space line. Today is another history-making day for Virgin Galactic, said Sir Richard Branson. We are here with a group of incredible people who are helping us lead the way in creating one of the most important new industrial sectors of the 21st century. Weve never wavered in our commitment to the monumental task of pioneering safe, affordable and clean access to space, or to demonstrate that we mean business at each step along the way. Branson and his children, Sam and Holly, who will be the first commercial passengers on SpaceShipTwo, brought the event to a spectacular conclusion by officially naming the worlds first purposebuilt spaceline terminal as the Virgin Galactic Gateway to Space while rappelling together from the roof of the striking new building.

96

I trust that will be the first of many safe landings at Spaceport America! What an absolute joy to celebrate the naming of the Virgin Galactic Gateway to Space with Governor Martinez! said Sir Richard, as the family touched the ground. The Virgin Galactic Gateway to Space, a combined terminal and hangar facility, will support up to two WhiteKnightTwo and five SpaceShipTwo vehicles. In addition, The Gateway will house all of the companys astronaut preparation and celebration facilities, a mission control center, and a friends and family area. There is also space committed to public access via the planned New Mexico Spaceport Authoritys Visitor Experience. The iconic 120,000 square-foot building, which meets LEED Gold standards for environmental quality, was designed by world-renowned United Kingdom-based Foster + Partners, along with URS Corporation and local New Mexico architects SMPC. The trio won an international competition in 2007 to build the first private spaceport in the world. Built using local materials and regional construction techniques, the facility is sustainable with few additional energy requirements due to the use of a range of sustainable features including geothermal heating and cooling. New Mexico Governor Susana Martinez participated in the dedication ceremony with U.S. Congressman Steve Pearce, representing New Mexicos 2nd District. New Mexico has a long tradition of pioneering innovation in aerospace and related technologies, said Governor Martinez. We already possess an impressive array of facilities and expertise in advanced technologies. Spaceport America and the opening of the Virgin Galactic Gateway to Space significantly deepen those capabilities and strengthen our global position as a powerhouse supporter of the space industry. Our partnership with Virgin Galactic is a perfect example of how government and private industry can work together to drive economic growth and science education. Virgin Galactic CEO and President George Whitesides said the company continues to make excellent and unequalled progress, under the motto safety is our North Star. Whitesides remarked, Flight testing by prime contractor Scaled Composites is progressing very well, with 30 SpaceShipTwo flights and 75 WhiteKnightTwo flights to date. We are also recruiting aggressively and assembling a highly talented and accomplished workforce focused on safe commercial operations led by Vice President of Operations Mike Moses, who will run our efforts at the spaceport.

97

In addition, the company is taking steps to expand its mission beyond commercial space tourism. The company announced last week that it had been awarded a contract under NASAs Flight Opportunity Program for research flights to a potential value of $4.5m. During the ceremony, it was announced that new flight reservations have been made by research and education institutions to support research initiatives and inspire students. Purdue University, Space Florida, the Challenger Center for Space Science Education and Southwest Research Institute were recognized as the most recent participants in this new growth area for Virgin Galactic. For me, my children and our ever growing community of future astronauts, many of whom are with us today, standing in front of the Virgin Galactic Gateway to Space as it glimmers majestically under the New Mexican sun brings our space adventure so close we can almost taste it, said Sir Richard. Present for the dedication ceremony were over 150 Virgin Galactic customers from 21 countries who have already made deposits to fly to space. A total of over 450 future astronauts worldwide have signed on to join Virgin Galactic for a voyage into space. GOVERNMENT REGULATIONS ON SPACE TRAVEL http://www.faa.gov/about/office_org/headquarters_offices/ast/human_s pace_flight_reqs/ New Regulations Govern Private Human Space Flight Requirements for Crew and Space Flight Participants The Federal Aviation Administration (FAA) today issued regulations establishing requirements for crew and space flight participants (passengers) involved in private human space flight. The new rules maintain FAAs commitment to protect the safety of the uninvolved public and call for measures that enable passengers to make informed decisions about their personal safety. The regulations require launch vehicle operators to provide certain safety-related information and identify what an operator must do to conduct a licensed launch with a human on board. In addition, launch operators are required to inform passengers of the risks of space travel generally and the risks of space travel in the operators vehicle in particular. These regulations also include training and general security requirements for space flight participants. The regulations also establish requirements for crew notification, medical qualifications and training, as well as requirements governing environmental control and life support systems. They also require a launch vehicle operator to verify the integrated performance of a vehicles hardware and any software in an operational environment. An operator must successfully verify the integrated performance of a vehicle's hardware and any software in an operational flight environment before allowing any space flight participant on board. Verificatioin must include flight testing.
98

Congress mandated these regulations in the Commercial Space Launch Amendments Act of 2004. Recognizing that this is a fledgling industry, the law required a phased approach in regulating commercial human space flight, with regulatory standards evolving as the industry matures. DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Parts 401, 415, 431, 435, 440 and 460 [Docket No. FAA200523449] RIN 2120AI57 Human Space Flight Requirements for Crew and Space Flight Participants AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Final rule. (http://www.gpo.gov/fdsys/pkg/FR-2006-12-15/pdf/E6-21193.pdf)

99