THE LAW ON TRANSPORTATION AND PUBLIC UTILITIES

SWU LAW- PHINMA

Atty. Jandel V. Ondangan
Instructor
COURSE SYLLABUS
PART I - COMMON CARRIERS ..................................................................................................................................... 5
Definition of Contract of Transportation.................................................................................................... 5
R.A 4136: land Transportation and Traffic Code ........................................................................................ 5
Unsworth Transportation International v. CA ............................................................................................6
Agustin Dela Torre v. CA ............................................................................................................................. 5
Parties ................................................................................................................................................................. 7
1.1 Carriage of Passengers / Contract to Carry Passenger ......................................................................... 7
1.2 Carriage of Goods/ Contract to carry Goods ........................................................................................ 7
Laws and Jurisprudence: .................................................................................................................................... 7
Baliwag Transit Corporation v CA ............................................................................................................... 7
Everett Steamship Corp. v. CA .................................................................................................................. 8
British Airways v. CA ................................................................................................................................. 8
Perfection - ......................................................................................................................................................... 9
Mauro Ganzon v. CA No. L-48757, May 30, 1988 ...................................................................................... 9
Korean Airlines Co. ltd v. CA August 3, 1994 234 SCRA 717 ..................................................................... 10
Dangwa Transportation Co., Inc. v CA October 7, 1991, 202 SCRA 574 ................................................... 10
Common carrier -........................................................................................................................................... 11
Public service - .......................................................................................................................................... 11
Article 1732 of the New Civil Code ........................................................................................................... 11
Commonwealth Act No. 146 section 13 par. b as amended .................................................................... 11
De Guzman v. CA ...................................................................................................................................... 11
Test: .................................................................................................................................................................. 11
1.3 First Philippine Industrial Corporation v. CA .................................................................................... 11
1.4 Estrellita M. Bascos v. CA .................................................................................................................. 12
1.5 FGU Insurance Corporation v. G. P. Sarmiento Trucking Corporations ........................................... 13
1.6 Sps. Teodoro and Nanette Perena v. Sps Teresita Phil. Nicolas, et al. ............................................. 14
1.7 National Steel Corporation v. CA ...................................................................................................... 20
1.8 Sps Cruz v. Holiday ............................................................................................................................ 21
Characteristics .................................................................................................................................................. 21
Broader concept ....................................................................................................................................... 23
Ancillary business ..................................................................................................................................... 23
Limited clientele ....................................................................................................................................... 23
Means of transportation .......................................................................................................................... 23
Laws and Jurisprudence: .................................................................................................................................. 23
Article 1732 of the New Civil Code ........................................................................................................... 23
National Steel Corporation v. CA .............................................................................................................. 23
a. Asia Lighterage and Shipping, Inc. v. CA ............................................................................................... 23
b. Fabre, Jr. v. CA ...................................................................................................................................... 25
c. Phil. American general insurance Company v. PKS Shipping Co ........................................................... 26
d. Virgines Calvo v. UCPB General Insurance Co ...................................................................................... 28
e. Caltex(phil) v. Sulpicio Lines ................................................................................................................. 29
f. Loadstar Shipping Co. v. Pioneer Asia Insurance ................................................................................ 30
g. Home Assurance Corp .......................................................................................................................... 31
h. Planters v. CA ...................................................................................................................................... 32
i. A.F Sanchez Brokerage Inc. v. CA ........................................................................................................... 33
2. Effect of Charter Party .......................................................................................................................................... 33
3. Common carrier v. Private Carrier ........................................................................................................................ 34
a. Cebu Salvage Corporation v. Philippine Home Assurance Corp ........................................................... 33
b. Valenzuela Hardwood and Industrial Supply, Inc. v. CA ..................................................................... 34
c. Loadmasters Customs Services, Inc. Glodel Brokerage Corporation .................................................... 36
4. Common carrier v. Other contracts ...................................................................................................................... 37
a. Towage - Cargolift Shipping Inc. V. L. Actuario Marketing Co. and Skyland Brokerage ..................... 37
 b. Stevedoring - Mindanao Terminal and Brokerage services v. Phoenix Assurance Co ......................... 38
c. Arrastre- Cebu Arrastre Services v. Collector of Internal Revenue .................................................... 40
d. Travel Agency- Crisostomo v. CA ........................................................................................................ 40
5. Governing Laws .................................................................................................................................................... 41
5.1 Article 1766 of the New Civil Code(NCC) ............................................................................................ 41
5.2 Article 1753 NCC ................................................................................................................................. 41
5.3 Article 1732-1766 NCC........................................................................................................................ 41
5.4 National Dev. Company v. CA ........................................................................................................... 41
5.5 Mapa v. CA ........................................................................................................................................ 42
5.6 Alitalia v. Intermediate Appellate Court ........................................................................................... 43
5.7 Philippine Charter Insurance Corpo v. Neptune Orient Lines .......................................................... 43
5.10 RA 4136............................................................................................................................................. 44
5.11 RA 9497............................................................................................................................................. 44
6. Nature of business ................................................................................................................................................ 44
7. Registered owner rule and Kabit System ............................................................................................................. 44
7.1 Registration laws ........................................................................................................................................ 44
Compulsory registration of motor vehicles ...................................................................................... 44
7.2 Registered owner rule ................................................................................................................................ 44
7.3 Kabit system ............................................................................................................................................... 47
7.4 Pari Delicto Rule ......................................................................................................................................... 49
7.5 Aircrafts and vessels ................................................................................................................................... 50
a. PCI leasing and finance, Inc. v. UCPB General Insurance Co ................................................................ 44
b. Equitable Leasing Corporation v. Lucita Suyon .................................................................................... 45
c. Aguilar v. Commercial Savings Bank ................................................................................................... 45
d. Perez v. Gutierrez ............................................................................................................................... 46
e. Aberlardo Lim ....................................................................................................................................... 48
f. Teja Marketing v. Intermediate Appellate Court .................................................................................. 49
g. Lita Enterprises, Inc. v. IAC ................................................................................................................. 48
h. Mariano C Mendoza and Lim v. SPS Gomez and Gomez .................................................................... 49
i. Estela Crisostomo v. CA and Caravan Travel and Tours ...................................................................... 50
8. Boundary System .................................................................................................................................................. 51
Laws and Jurisprudence.................................................................................................................................... 51
a. Gregorio George Amante and Vicente Amante vs. Bibiano Serwelas ......................................... 51
b. Oscar Villarama Jr v. CA ........................................................................................................................ 52
c. Martin Lantaco et al. v. City Judge Francisco R. Llamas ...................................................................... 53
d. Isabelo Doce v. WCC and Dadao Jadao .............................................................................................. 55
e. Rodolfo J. Serrano v. Severino Santos Transit and/or Severino Santos ............................................... 55
____________________________________________________________________________________________
PART II OBLIGATION OF THE CARRIER .................................................................................................................. 57
Philam Insurance Co. v. Chartis Phil Insurance................................................................................... 57
Gregorio Anuran, Maria Maligaya v. Buno et al ................................................................................. 59
Duty to accept .......................................................................................................................................................... 60
FC Fisher v. Yangco Steamship Co. ..................................................................................................... 60
Valid grounds for non- acceptance.................................................................................................. 61
Article 356-357-358 of the Code of Commerce(COC) ........................................................................ 61
Article 1742 of the NCC ...................................................................................................................... 61
Duty to deliver goods ............................................................................................................................................... 61
Consequences of delay ............................................................................................................................................. 61
Article 1740 NCC ................................................................................................................................. 61
Article 1747 NCC ................................................................................................................................. 61
A. 370 COC .......................................................................................................................................... 61
A. 371 COC .......................................................................................................................................... 61
A. 372 COC .......................................................................................................................................... 61
A. 373 COC .......................................................................................................................................... 61
A. 374 COC .......................................................................................................................................... 61
Rights of passengers in case of delay ....................................................................................................................... 61
Article 698 COC ................................................................................................................................... 61
 Trans-asia Shipping Lines, Inc. v. CA ............................................................................................. 61
Marina regulation Mem. Circular no. 112 .......................................................................................... 64
Place of delivery ....................................................................................................................................................... 64
A. 360 COC .......................................................................................................................................... 64
A. 368 COC .......................................................................................................................................... 64
A. 369 COC .......................................................................................................................................... 64
To whom delivered ................................................................................................................................................... 64
Delay to transport Passengers .................................................................................................................................. 64
Marina Memorandum Circular no. 112 December 15, 1995 ................................................................... 64
Duty to Exercise Extra-ordinary Diligence ................................................................................................................ 65
1.1 Code of commerce provisions ............................................................................................................ 65
1.2 Presumption of negligence ................................................................................................................. 65
1.3 Duration of Duty in Carriage of Goods ............................................................................................... 65
1.4 Commencement of Duty in Carriage of Passengers ........................................................................... 65
Laws and jurisprudence: ........................................................................................................................................... 65
a. Article 1733 of the NCC ........................................................................................................................ 65
b. Artilc 1755 of the NCC .......................................................................................................................... 65
c. Article 1736 of the NCC ......................................................................................................................... 65
d. Article of 1737 of the NCC .................................................................................................................... 65
e. Article of 1738 of the NCC .................................................................................................................... 65
Mariano v. Calleja ..................................................................................................................................... 65
Belgian Overseas Chartering and Shipping v. Phil. First Ins. Co., ............................................................. 66
Ganzon v. CA G.R. No. L-48757 May 30, 1998 .......................................................................................... 67
Saludo v. CA .............................................................................................................................................. 68
Republic of the Philippines v. Lorenzo Shipping ....................................................................................... 68
Regional Container Lines v. Netherlands Insurance Co. ........................................................................... 70
Defenses of Common Carriers .................................................................................................................................. 73
Proximate Causation .......................................................................................................................... 73
New Civil Code Provisions .................................................................................................................. 73
Defense in Carriage of Passengers ..................................................................................................... 73
Fortuitous event ................................................................................................................................. 73
Public enemy ...................................................................................................................................... 73
Improper Packing................................................................................................................................ 73
Order of Public Authority ................................................................................................................... 73
Defenses of Carriage of Passengers.................................................................................................... 73
Acts of Employees .............................................................................................................................. 73
Sabena Belgian World Airlines vs. CA ....................................................................................................... 73
Leopoldo Poblete vs. Donato Fabros ........................................................................................................ 76
Collin A. Morris vs. CA............................................................................................................................... 77
Antonia Maranan vs. Pascual Perez, et al,................................................................................................ 80
Act of Other Passengers and 3rd persons ................................................................................................................ 81
Jose Pilapil vs. CA ...................................................................................................................................... 81
Passengers baggages ............................................................................................................................................... 83
1.5 Define baggage ................................................................................................................................... 83
1.6 Checked-in-Baggage ........................................................................................................................... 84
1.7 Hand Carried baggage ........................................................................................................................ 84
Philippine Airlines Inc. vs. CA .................................................................................................................... 85
British Airways vs. CA ............................................................................................................................... 93
Philippine Airlines Inc. vs. Hon. Adriano Savillo, et. al.,............................................................................ 97
Obligations of Shipper, Consignee and Passenger ................................................................................................. 100
1.8 Negligence of Shipper or Passenger ................................................................................................. 100
1.9 Payment of Freight ........................................................................................................................... 100
1.10 Who will pay the freight ................................................................................................................. 100
1.11 Time to pay the freight ................................................................................................................... 100
1.12 Carriers lien.................................................................................................................................... 100
1.13 Payment of Demurrage .................................................................................................................. 100
PART I - COMMON CARRIERS
Art 1732- Common Carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.
Common Carrier one that holds itself out as ready to engage in the transportation of goods for hire as a public
employment and not as a casual occupation. (De Guzman v. CA, G.R. No. L-47822, 22 December 1988)

Definition of Contract of Transportation

The movement of persons or things from one place to another, by a carrier.
(Blacks Law Dictionary)

A contract of transportation is whereby a certain person or association of persons obligate themselves to transport
persons, things, news from one place to another for a fixed price. It is the removal of goods or persons from one place
to another.

Does not presume that the carrier is a common carrier.

Laws and Jurisprudence:

R.A 4136: land Transportation and Traffic Code

Section 3. Words and phrases defined. - As used in this Act:
(a) "Motor Vehicle" shall mean any vehicle propelled by any power other than muscular power using the public
highways, but excepting road rollers, trolley cars, street-sweepers, sprinklers, lawn mowers, bulldozers, graders,
fork-lifts, amphibian trucks, and cranes if not used on public highways, vehicles which run only on rails or tracks, and
tractors, trailers and traction engines of all kinds used exclusively for agricultural purposes.
Trailers having any number of wheels, when propelled or intended to be propelled by attachment to a motor vehicle,
shall be classified as separate motor vehicle with no power rating.
(b) "Passenger automobiles" shall mean all pneumatic-tire vehicles of types similar to those usually known under the
following terms: touring car, command car, speedster, sports car, roadster, jeep, cycle, car (except motor wheel and
similar small outfits which are classified with motorcycles), coupe, landaulet, closed car, limousine, cabriolet, and sedan.
Motor vehicles with changed or rebuilt bodies, such as jeepneys, jitneys, or station wagons, using a chassis of the usual
pneumatic-tire passenger automobile type, shall also be classified as passenger automobile, if their net allowable
carrying capacity, as determined by the Commissioner of Land Transportation, does not exceed nine passengers and if
they are not used primarily for carrying freight or merchandise.
The distinction between "passenger truck" and "passenger automobile" shall be that of common usage: Provided, That
a motor vehicle registered for more than nine passengers shall be classified as "truck": And Provided, further, That a
"truck with seating compartments at the back not used for hire shall be registered under special "S" classifications. In
case of dispute, the Commissioner of Land Transportation shall determine the classification to which any special type of
motor vehicle belongs.
(d) "Driver" shall mean every and any licensed operator of a motor vehicle.
(e) "Professional driver" shall mean every and any driver hired or paid for driving or operating a motor vehicle, whether
for private use or for hire to the public.
Any person driving his own motor vehicle for hire is a professional driver.

Is a freight forwarder liable as a common carrier?

Unsworth Transportation International v. CA

The term "freight forwarder" refers to a firm holding itself out to the general public (other than as a pipeline, rail,
motor, or water carrier) to provide transportation of property for compensation and, in the ordinary course of its
business, (1) to assemble and consolidate, or to provide for assembling and consolidating, shipments, and to perform
or provide for break-bulk and distribution operations of the shipments; (2) to assume responsibility for the
transportation of goods from the place of receipt to the place of destination; and (3) to use for any part of the
transportation a carrier subject to the federal law pertaining to common carriers.

A freight forwarder's liability is limited to damages arising from its own negligence, including negligence in choosing the
carrier; however, where the forwarder contracts to deliver goods to their destination instead of merely arranging for
their transportation, it becomes liable as a common carrier for loss or damage to goods. A freight forwarder assumes
the responsibility of a carrier, which actually executes the transport, even though the forwarder does not carry the
merchandise itself.
Real and Hypothecary or Limited Liability Rule -
May the Charterer invoke the Limited Liability Rule against the owner?
Agustin Dela Torre v. CA

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 co-extensive 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.

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.

Later, in the case of Monarch Insurance Co., Inc. v. CA,[28] 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.[29]

In view of the foregoing, Concepcion as the real shipowner is the one who is supposed to be supported and
encouraged to pursue maritime commerce. Thus, it would be absurd to apply the Limited Liability Rule against him who,
in the first place, should be the one benefitting from the said rule. In distinguishing the rights between the charterer
and the shipowner, the case of Yueng Sheng Exchange and Trading Co. v. Urrutia & Co.[30] is most enlightening. In that
case, no less than Chief Justice Arellano wrote:

The whole ground of this assignment of errors rests on the proposition advanced by the appellant company that the
charterer of a vessel, under the conditions stipulated in the charter party in question, is the owner pro hac vice of the
ship and takes upon himself the responsibilities of the owner.
xxx
If G. Urrutia & Co., by virtue of the above-mentioned contract, became the agents of the Cebu, then they must respond
for the damages claimed, because the owner and the agent are civilly responsible for the acts of the captain.

But G. Urrutia & Co. could not in any way exercise the powers or rights of an agent. They could not represent the
ownership of the vessel, nor could they, in their own name and in such capacity, take judicial or extrajudicial steps in all
that relates to commerce; thus if the Cebu were attached, they would have no legal capacity to proceed to secure its
release; speaking generally, not even the fines could or ought to be paid by them, unless such fines were occasioned by
their orders. x x x.

The contract executed by Smith, Bell & Co., as agents for the Cebu, and G. Urrutia & Co., as charterers of the vessel, did
not put the latter in the place of the former, nor make them agents of the owner or owners of the vessel. With relation
to those agents, they retained opposing rights derived from the charter party of the vessel, and at no time could they
be regarded by the third parties, or by the authorities, or by the courts, as being in the place of the owners or the
agents in matters relating to the responsibilities pertaining to the ownership and possession of the vessel. x x x.[31]
In Yueng Sheng, it was further stressed that the charterer does not completely and absolutely step into the shoes of
the shipowner or even the ship agent because there remains conflicting rights between the former and the real
shipowner as derived from their charter agreement. The Court again quotes Chief Justice Arellano:

Their (the charterers) possession was, therefore, the uncertain title of lease, not a possession of the owner, such as is
that of the agent, who is fully subrogated to the place of the owner in regard to the dominion, possession, free
administration, and navigation of the vessel.[32]

Therefore, even if the contract is for a bareboat or demise charter where possession, free administration and even
navigation are temporarily surrendered to the charterer, dominion over the vessel remains with the shipowner. Ergo,
the charterer or the sub-charterer, whose rights cannot rise above that of the former, can never set up the Limited
Liability Rule against the very owner of the vessel. Borrowing the words of Chief Justice Artemio V. Panganiban, Indeed,
where the reason for the rule ceases, the rule itself does not apply.[33]

The Court now comes to the issue of the liability of the charterer and the sub-charterer.

In the present case, the charterer and the sub-charterer through their respective contracts of agreement/charter
parties, obtained the use and service of the entire LCT-Josephine. The vessel was likewise manned by the charterer
and later by the sub-charterers people. With the complete and exclusive relinquishment of possession, command and
navigation of the vessel, the charterer and later the sub-charterer became the vessels owner pro hac vice. Now, and in
the absence of any showing that the vessel or any part thereof was commercially offered for use to the public, the
above agreements/charter parties are that of a private carriage where the rights of the contracting parties are primarily
defined and governed by the stipulations in their contract.[34]

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

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

1.2 Carriage of Goods/ Contract to carry Goods

Shipper is the person who delivers the goods to the carrier for transportation. He is the person who pays the
consideration or on whose behalf payment is made.
Consignee is the person to whom the goods are to be delivered.
May be the shipper himself where the goods will be delivered to one of the branch offices of the shipper, or
May be a third person who is not actually a party to the contract.
Carrier
Laws and Jurisprudence:
Release of claims
Baliwag Transit Corporation v CA
The passenger(George) and his Parents filed an action for damages against carrier(Baliwag) arising from breach of
contract of carriage because of an accident which hospitalized the passenger. Carrier filed Motions to Dismiss on the
ground that passenger, in consideration of a sum of money had executed a "Release of Claims". Parents disagrees since
passenger is still living with them and they shouldered the medical bills.

Held: Release of Claims executed by him, as the injured party, discharging Fortune Insurance and Baliwag from any and
all liability is valid. He was then of legal age, a graduating student of Agricultural Engineering, and had the capacity to do
acts with legal effect (Article 37 in relation to Article 402, Civil Code). Thus, he could sue and be sued even without the
assistance of his parents.

Significantly, the contract of carriage was actually between George, as the paying passenger, and Baliwag, as the
common carrier. As such carrier, Baliwag was bound to carry its passengers safely as far as human care and foresight
could provide, and is liable for injuries to them through the negligence or wilful acts of its employees (Articles 1755 and
1759, Civil Code). Thus, George had the right to be safely brought to his destination and Baliwag had the correlative
obligation to do so. Since a contract may be violated only by the parties thereto, as against each other, in an action
upon that contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said contract
(Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-40234, December 14, 1987, 156 SCRA 368).

A real party-in-interest -plaintiff is one who has a legal right while a real party-in-interest-defendant is one who has a
correlative legal obligation whose act or omission violates the legal right of the former (Lee vs. Romillo, Jr., G.R. No.
60973, May 28, 1988). In the absence of any contract of carriage between Baliwag and George's parents, the latter are
not real parties-in-interest in an action for breach of that contract.
 Limited Liability in the Bill of Lading
Consignee, when bound in the stipulation in Bill of Lading
Everett Steamship Corp. v. CA

Private respondent imported three crates of bus spare part from its supplier, Maruman Trading Company, Ltd.
(Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The crates were shipped from Nagoya to
Manila on board ADELFA EVERETTE, a vessel owned by petitioners principal, Everett Orient Lines. The said crates were
covered by Bill of Lading No. NGO53MN. one of the crates was missing.

Respondent made Formal claim upon petitioner for the value of the lost cargo amounting to One Million Five Hundred
Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November
14, 1991. However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum amount
stipulated under Clause 18 of the covering bill of lading which limits the liability of petitioner.
Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil Case No. C-15532,
against petitioner before the Regional Trial Court of Caloocan City, Branch 126.

Held: A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo to a
certain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and
1750 of the Civil Code which provide:
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.
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 freely
and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in a number of cases.

Whether or not private respondent, as consignee, who is not a signatory to the bill of lading is bound by the
stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that even if the consignee was
not a signatory to the contract of carriage between the shipper and the carrier, the consignee can still be bound by
the contract. When Hernandez formally claimed reimbursement for the missing goods from Everett and subsequently
filed a case against the it based on the very same bill of lading, it accepted the provisions of the contract and thereby
made itself a party thereto, or at least has come to court to enforce it.

British Airways v. CA

Facts: Mahtani who wants to go to India asked Mr. Gumar to prepare his travelplans. Mr. Gumar purchased a ticket
from British Airways (BA).Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to
Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay on board BA. Before
departure, Mahtani checked in at PAL counter his two pieces of luggage containing his clothings and personal effects,
confident that upon reaching Hongkong, the same would be transferred to the BA flight bound for Bombay.

When Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from
the BA representatives, he was told that the same might have been diverted to London. After waiting for 1 week, BA
finally advised him to file a claim by accomplishing the "Property Irregularity Report. In the Philippines, on June 11,
1990 Mahtani filed his complaint for damages and attorney's fees against BA and Mr.Gumar before the RTC.

alleging that the reason for the non-transfer of the luggage was due to the latter's late arrival in Hongkong, thus leaving
hardly any time for the proper transfer of Mahtani's luggage to the BA aircraft bound for Bombay.

Held:
In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2) aspects of
the same, namely:
(a) the contract "to carry (at some future time)," which contract is consensual and is necessarily perfected by
mere consent - applicable in this case
(b) the contract "of carriage" or "of common carriage" itself which should be considered as a real contract for
not until the carrier is actually used can the carrier be said to have already assumed the obligation of a carrier

Even if a prepaid ticket advice (PTA) is merely an advice from the sponsors that an airline is authorized to issue a
ticket and thus no ticket was yet issued, the fact remains that the passage had already been paid for by the principal
of the appellee, and the appellant had accepted such payment

Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified the period
of compliance therewith, and with emphasis that it could only be used if the passengers fly on BA involvement of the
BA in the contract "to carry" was well demonstrated when the it immediately advised First Int'l
Acts of BA indeed constitute malice and evident bad faith which had caused damage and besmirched the reputation
and business image fo First Int'l

Perfection
Passengers
1st Type: CONTRACT TO CARRY an agreement to carry the passenger at some future date.
(CONSENSUAL IN NATURE hence, PERFECTED BY MERE CONSENT.
2nd Type: CONTRACT OF CARRIAGE OR OF COMMON CARRIAGE
(A REAL CONTRACT for not until the facilities of the carrier are actually used can the carrier be said to have
already assumed the obligation as a carrier)
Goods
1st Type: CONTRACT TO CARRY an agreement to carry and transport goods at some future date.
CONSENSUAL IN NATURE hence, PERFECTED BY MERE CONSENT. (ganzon)
2nd Type: CONTRACT OF CARRIAGE OR OF COMMON CARRIAGE
By the act of delivery of the goods, that is, when the goods are unconditionally placed in the possession and
control of the carrier, and upon their receipt by the carrier for transportation, the contract of carriage is
perfected.

1. AIRCRAFT
a) If contract to carry passengers, there is perfection even if no tickets have been issued to said passengers so
long as there was already a meeting of minds with respect to the subject matter and the consideration. (British
Airways, Inc. vs. CA, G. R. No. 92288, 9 February 1993)
b) If contract of carriage, there is perfection if it can be established that the passenger had checked in at the
departure counter, passed through customs and immigration, boarded the shuttle bus and proceeded to the ramp of
the aircraft and that his baggage had already been loaded in the aircraft to be flown with the passenger to his
destination. (Korean Airlines Co. Ltd. Vs. CA, G.R. No. 114061, 3 August 1994, 234 SCRA 717, 723)

2. BUSES, JEEPNEYS, STREET CARS

a) Once a public utility bus or jeepney stops, it is in effect making a continuous offer to the passengers. Hence,
it is the duty of the drivers to stop their conveyances for a reasonable length of time in order to afford passengers an
opportunity to board and enter.
b) Passenger is deemed to be accepting the offer if he is already attempting to board the conveyances and the
contract of carriage is perfected from that point.
c) Any injury suffered by the passenger resulting from the sudden starting up of the carrier is already based on
contract.

3. TRAINS
a) There is perfection when a person with a bona fide intention to use the facilities of the carrier and
possessing sufficient fare with which to pay for his passage, has presented himself to the carrier for transportation in
the place and manner provided.
b) Where a person has already purchased a LRT token and while waiting on the platform designated for
boarding fell thereon and hit by the train, he was deemed a passenger.
(LRTA, et.al. Vs. Marjorie Navidad, et.al., G.R. No. 145804, 06 February 2003)
Laws and Jurisprudence:
British Airways v. CA February 9, 1993, 218 SCRA 699 - XXX XXX
Perfection of Contract of carriage of goods
Mauro Ganzon v. CA No. L-48757, May 30, 1988
Facts: Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles,
Bataan, to the port of Manila on board the lighter LCT "Batman".

Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three
feet of water. Gelacio Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of the lighter, for
loading which was actually begun on the same date by the crew of the lighter under the captain's supervision. When
about half of the scrap iron was already loaded, Mayor Advincula of Mariveles, Bataan, arrived and demanded
P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown and after a heated argument between them,
Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing. The gunshot was not fatal but Tumambing had to
be taken to a hospital in Balanga, Bataan, for treatment.

After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub,
accompanied by three policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron where the lighter
was docketed. The rest was brought to the compound of NASSCO. Later on Acting Mayor Rub issued a receipt stating
that the Municipality of Mariveles had taken custody of the scrap iron.

SC: By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common
carrier, and upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected.
 Perfection of Contract of Carriage of Passengers
Korean Airlines Co. ltd v. CA
Juanito C. Lapuz, an automotive electrician, was contracted for employment in Jeddah, Saudi Arabia, for a period of
one year through Pan Pacific Overseas Recruiting Services, Inc. Lapuz was supposed to leave on November 8, 1980, via
Korean Airlines. Initially, he was "wait-listed," which meant that he could only be accommodated if any of the
confirmed passengers failed to show up at the airport before departure. When two of such passengers did not appear,
Lapuz and another person by the name of Perico were given the two unclaimed seats.

According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the check-in counter of KAL.
He passed through the customs and immigration sections for routine check-up and was cleared for departure as
Passenger No. 157 of KAL Flight No. KE 903. Together with the other passengers, he rode in the shuttle bus and
proceeded to the ramp of the KAL aircraft for boarding. However, when he was at the third or fourth rung of the stairs,
a KAL officer pointed to him and shouted "Down! Down!" He was thus barred from taking the flight. When he later
asked for another booking, his ticket was canceled by KAL. Consequently, he was unable to report for his work in
Saudi Arabia within the stipulated 2-week period and so lost his employment.

KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services Inc. coordinated with KAL for
the departure of 30 contract workers, of whom only 21 were confirmed and 9 were wait-listed passengers. The agent
of Pan Pacific, Jimmie Joseph, after being informed that there was a possibility of having one or two seats becoming
available, gave priority to Perico, who was one of the supervisors of the hiring company in Saudi Arabia. The other
seat was won through lottery by Lapuz. However, only one seat became available and so, pursuant to the earlier
agreement that Perico was to be given priority, he alone was allowed to board.

The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name was entered
in the passenger manifest of KAL for its Flight No. KE 903. His clearance through immigration and customs clearly
shows that he had indeed been confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the
contract of carriage between them when it failed to bring Lapuz to his destination.

This Court has held that a contract to transport passengers is different in kind and degree from any other contractual
relation. The business of the carrier is mainly with the traveling public. It invites people to avail themselves of the
comforts and advantages it offers. The contract of air carriage generates a relation attended with a public duty.
Passengers have the right to be treated by the carrier's employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected against personal misconduct, injurious language, indignities and abuses
from such employees. So it is that any discourteous conduct on the part of these employees toward a passenger gives
the latter an action for damages against the carrier.

KAL argues that "the evidence of confirmation of a chance passenger status is not through the entry of the name of a
chance passenger in the passenger manifest nor the clearance from the Commission on Immigration and Deportation,
because they are merely means of facilitating the boarding of a chance passenger in case his status is confirmed." We
are not persuaded. The evidence presented by Lapuz shows that he had indeed checked in at the departure counter,
passed through customs and immigration, boarded the shuttle bus and proceeded to the ramp of KAL's aircraft. In
fact, his baggage had already been loaded in KAL's aircraft, to be flown with him to Jeddah. The contract of carriage
between him and KAL had already been perfected when he was summarily and insolently prevented from boarding the
aircraft.

KAL's allegation that the respondent court abused its discretion in awarding moral and exemplary damages is also not
tenable.

Perfection Contract to Carry Passengers

Dangwa Transportation Co., Inc. v CA

A public utility bus, once it stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of
the driver and the conductor, every time the bus stops, to do no act that would have the effect of increasing the peril
to a passenger while he was attempting to board the same. The premature acceleration of the bus in this case was a
breach of such duty.

It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to
stop their conveyances a reasonable length of time in order to afford passengers an opportunity to board and enter,
and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their
conveyances while they are doing so.

The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is
entitled all the rights and protection pertaining to such a contractual relation. Hence, it has been held that the duty
which the carrier passengers owes to its patrons extends to persons boarding cars as well as to those alighting
therefrom. 15
Common carrier
Public service
Article 1732 of the New Civil Code
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.
Commonwealth Act No. 146 section 13 par. b as amended

Includes every person who may own, operate, manage, or control in the Philippines for hire or compensation, with
general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, fraction railway, subway motor vehicle, steamboat, or
steamship line ferries, and water craft, shipyard, ice plant, electric light, heat and power or any other public utility. [Sec.
13(b), Act. 146]

De Guzman v. CA

De Guzman a merchant contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a
warehouse of General Milk in Makati, Rizal, to petitioner's establishment. 150 cartons were loaded on a truck driven by
respondent himself, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada,
respondent's driver and employee. Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600
boxes never reached petitioner, since the truck which carried these boxes was hijacked by armed men who took with
them the truck, its driver, his helper and the cargo.
Respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the
lost goods, such loss having been due to force majeure. On appeal before the Court of Appeals, respondent urged that
the trial court had erred in considering him a common carrier; in finding that he had habitually offered trucking services
to the public; in not exempting him from liability on the ground of force majeure; and in ordering him to pay damages
and attorney's fees.
the issue is whether or not respondent may, under the facts earlier set forth, be properly characterized as a common
carrier.
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 "a sideline"). Article 1732
also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular
or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the "general public," i.e., the general community or population,
and one who offers services or solicits business only from a narrow segment of the general population. We think that
Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of
"public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public
Service Act, "public service" includes:
... every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar
public services. ... (Emphasis supplied)
Tests:
May a pipeline concessionaire be liable as a common carrier?
First Philippine Industrial Corporation v. CA

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 as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his established roads; and
4. The transportation must be for hire.[15]
Based on the above definitions and requirements, there is no doubt that petitioner is a common carrier. It is
engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports
the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the
definition of a common carrier. In De Guzman vs. Court of Appeals[16] we ruled that:
"The above article (Art. 1732, Civil Code) makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a
'sideline'). Article 1732 x x x avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the 'general public,' i.e., the
general community or population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1877 deliberately refrained from making such distinctions.
So understood, the concept of 'common carrier' under Article 1732 may be seen to coincide neatly with the notion of
'public service,' under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public
Service Act, 'public service' includes:
'every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight
or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of
any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system gas, electric light heat and power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services.'
"(Underscoring Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local Government
Code refers only to common carriers transporting goods and passengers through moving vehicles or vessels either by
land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" 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.[17]
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier." Thus,
Article 86 thereof provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the preferential right to utilize
installations for the transportation of petroleum owned by him, but is obligated to utilize the remaining transportation
capacity pro rata for the transportation of such other petroleum as may be offered by others for transport, and to
charge without discrimination such rates as may have been approved by the Secretary of Agriculture and Natural
Resources."
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7 thereof
provides:
"that everything relating to the exploration for and exploitation of petroleum x x and everything relating to the
manufacture, refining, storage, or transportation by special methods of petroleum, is hereby declared to be a public
utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No. 069-83, it
declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No. 387 x x x. Such being the case, it is not subject to withholding tax
prescribed by Revenue Regulations No. 13-78, as amended."

Estrellita M. Bascos v. CA

1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. Article 1732 also carefully
avoids making any distinction between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguished between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the general population.
We think that Article 1732 deliberately refrained from making such distinctions."

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

FGU Insurance Corporation v. G. P. Sarmiento Trucking Corporations

Lessons Applicable: Loss caused by negligence of the insured (Insurance)

FACTS:

Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the shipping business
operating two common carriers, M/T ANCO tugboat and D/B Lucio barge that has no engine of its own, it could not
maneuver by itself and had to be towed by a tugboat for it to move from one place to another.

San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO

D/B Lucio was towed by the M/T ANCO arrived and M/T ANCO left the barge immediately. The clouds were dark and the
waves were big so SMCs District Sales Supervisor, Fernando Macabuag, requested ANCOs representative to transfer
the barge to a safer place but it refused so around the midnight, the barge sunk along with 29,210 cases of Pale Pilsen
and 500 cases of Cerveza Negra totalling to P1,346,197

When SMC claimed against ANCO it stated that they agreed that it would not be liable for any losses or damages
resulting to the cargoes by reason of fortuitous event and it was agreed to be insured with FGU for 20,000 cases
or P858,500

ISSUE: W/N FGU should be exempted from liability to ANCO for the lost cargoes because of a fortuitous event and
negligence of ANCO.

HELD: YES. 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.
Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745 Nos. 5, 6,
and 7 . . .

Art. 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;

xxx
Art. 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 exempted from liability for the loss, destruction, or deterioration of the goods . . .

Caso fortuito or force majeure

extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which
though foreseen, were inevitable
not enough that the event should not have been foreseen or anticipated, as is commonly believed but
it must be one impossible to foresee or to avoid - not in this case
other vessels in the port of San Jose, Antique, managed to transfer to another place
To be exempted from responsibility, the natural disaster should have been the proximate and only cause of
the loss. There must have been no contributory negligence on the part of the common carrier.
 there was blatant negligence on the part of M/T ANCOs crewmembers, first in leaving the engine-less
barge D/B Lucio at the mercy of the storm without the assistance of the tugboat, and again in failing to heed the
request of SMCs representatives to have the barge transferred to a safer place
When evidence show that the insureds negligence or recklessness is so gross as to be sufficient to constitute a
willful act, the insurer must be exonerated.
ANCOs employees is of such gross character that it amounts to a wrongful act which must exonerate FGU
from liability under the insurance contract
both the D/B Lucio and the M/T ANCO were blatantly negligent.

Sps. Teodoro and Nanette Perena v. Sps Teresita Phil. Nicolas, et al.

The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe extraordinary
diligence in the conduct of his business. He is presumed to be negligent when death occurs to a passenger. His liability
may include indemnity for loss of earning capacity even if the deceased passenger may only be an unemployed high
school student at the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse decision
promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed with modification the decision
rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260, in Paraaque City that had decreed them
jointly and severally liable with Philippine National Railways (PNR), their co-defendant, to Spouses Nicolas and Teresita
Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate (Aaron), then a high school student of Don
Bosco Technical Institute (Don Bosco).
Antecedents
The Pereas were engaged in the business of transporting students from their respective residences in Paraaque City
to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereas used a KIA Ceres Van (van) with
Plate No. PYA 896, which had the capacity to transport 14 students at a time, two of whom would be seated in the front
beside the driver, and the others in the rear, with six students on either side. They employed Clemente Alfaro (Alfaro)
as driver of the van.
In June 1996, the Zarates contracted the Pereas to transport Aaron to and from Don Bosco. On August 22, 1996, as on
previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates residence. Aaron took his place on
the left side of the van near the rear door. The van, with its air-conditioning unit turned on and the stereo playing loudly,
ultimately carried all the 14 student riders on their way to Don Bosco. Considering that the students were due at Don
Bosco by 7:15 a.m., and that they were already running late because of the heavy vehicular traffic on the South
Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow path underneath
the Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short cut into Makati. At the
time, the narrow path was marked by piles of construction materials and parked passenger jeepneys, and the railroad
crossing in the narrow path had no railroad warning signs, or watchmen, or other responsible persons manning the
crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing open to traversing motorists.
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated by Jhonny
Alano (Alano), was in the vicinity of the Magallanes Interchange travelling northbound. As the train neared the railroad
crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing a large passenger bus. His view of the
oncoming train was blocked because he overtook the passenger bus on its left side. The train blew its horn to warn
motorists of its approach. When the train was about 50 meters away from the passenger bus and the van, Alano
applied the ordinary brakes of the train. He applied the emergency brakes only when he saw that a collision was
imminent. The passenger bus successfully crossed the railroad tracks, but the van driven by Alfaro did not. The train hit
the rear end of the van, and the impact threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron
landed in the path of the train, which dragged his body and severed his head, instantaneously killing him. Alano fled the
scene on board the train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for damages against Alfaro,
the Pereas, PNR and Alano. The Pereas and PNR filed their respective answers, with cross-claims against each other,
but Alfaro could not be served with summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Perea for the adequate and safe transportation
carriage of the former spouses' son from their residence in Paraaque to his school at the Don Bosco
Technical Institute in Makati City;
(3) During the effectivity of the contract of carriage and in the implementation thereof, Aaron, the
minor son of spouses Zarate died in connection with a vehicular/train collision which occurred while
Aaron was riding the contracted carrier Kia Ceres van of spouses Perea, then driven and operated by
the latter's employee/authorized driver Clemente Alfaro, which van collided with the train of PNR, at
around 6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes Interchange in Makati City,
Metro Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject site of the vehicular/train collision was a
railroad crossing used by motorists for crossing the railroad tracks;
(5) During the said time of the vehicular/train collision, there were no appropriate and safety warning
signs and railings at the site commonly used for railroad crossing;
 (6) At the material time, countless number of Makati bound public utility and private vehicles used on
a daily basis the site of the collision as an alternative route and short-cut to Makati;
(7) The train driver or operator left the scene of the incident on board the commuter train involved
without waiting for the police investigator;
(8) The site commonly used for railroad crossing by motorists was not in fact intended by the railroad
operator for railroad crossing at the time of the vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the vehicular/train collision;
(11) The eventual closure of the railroad crossing alleged by PNR was an internal arrangement
between the former and its project contractor; and
(12) The site of the vehicular/train collision was within the vicinity or less than 100 meters from the
Magallanes station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for
negligence constituting the proximate cause of the vehicular collision, which resulted in the death of
plaintiff spouses' son;
(2) Whether or not the defendant spouses Perea being the employer of defendant Alfaro are liable
for any negligence which may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator of the railroad system is
liable for negligence in failing to provide adequate safety warning signs and railings in the area
commonly used by motorists for railroad crossings, constituting the proximate cause of the vehicular
collision which resulted in the death of the plaintiff spouses' son;
(4) Whether or not defendant spouses Perea are liable for breach of the contract of carriage with
plaintiff-spouses in failing to provide adequate and safe transportation for the latter's son;
(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages, and
attorney's fees;
(6) Whether or not defendants spouses Teodorico and Nanette Perea observed the diligence of
employers and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved in
the accident, in allowing or tolerating the motoring public to cross, and its failure to install safety
devices or equipment at the site of the accident for the protection of the public;
(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and
whatever amount the latter may be held answerable or which they may be ordered to pay in favor of
plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed by
the latter in their Complaint by reason of its gross negligence;
(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and exemplary
damages and attorney's fees.2
The Zarates claim against the Pereas was upon breach of the contract of carriage for the safe transport of Aaron; but
that against PNR was based on quasi-delict under Article 2176, Civil Code.
In their defense, the Pereas adduced evidence to show that they had exercised the diligence of a good father of the
family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued a drivers license and had
not been involved in any vehicular accident prior to the collision; that their own son had taken the van daily; and that
Teodoro Perea had sometimes accompanied Alfaro in the vans trips transporting the students to school.
For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing of the van
whose driver had not first stopped, looked and listened; and that the narrow path traversed by the van had not been
intended to be a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision, 3 disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against
the defendants ordering them to jointly and severally pay the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorneys fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereas motion for reconsideration, 4 reiterating that the cooperative gross
negligence of the Pereas and PNR had caused the collision that led to the death of Aaron; and that the damages
awarded to the Zarates were not excessive, but based on the established circumstances.
The CAs Ruling
Both the Pereas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit:5
The Court a quo erred in:
 1. In finding the defendant-appellant Philippine National Railways jointly and severally liable together
with defendant-appellants spouses Teodorico and Nanette Perea and defendant-appellant Clemente
Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite
overwhelming documentary evidence on record, supporting the case of defendants-appellants
Philippine National Railways.
The Pereas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and
exemplary damages and attorneys fees with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereas against the Philippine
National Railways and in not holding the latter and its train driver primarily responsible for the
incident.
The trial court erred in awarding excessive damages and attorneys fees.
The trial court erred in awarding damages in the form of deceaseds loss of earning capacity in the
absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited the moral
damages to 2,500,000.00; and deleted the attorneys fees because the RTC did not state the factual and legal bases,
to wit:6
WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of
Paraaque City is AFFIRMED with the modification that the award of Actual Damages is reduced to
59,502.76; Moral Damages is reduced to 2,500,000.00; and the award for Attorneys Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aarons earning capacity, taking cognizance of the ruling in Cariaga v. Laguna
Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga a sum representing
the loss of the deceaseds earning capacity despite Cariaga being only a medical student at the time of the fatal incident.
Applying the formula adopted in the American Expectancy Table of Mortality:
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from age of 21 (the
age when he would have graduated from college and started working for his own livelihood) instead of 15 years (his age
when he died). Considering that the nature of his work and his salary at the time of Aarons death were unknown, it
used the prevailing minimum wage of 280.00/day to compute Aarons gross annual salary to be 110,716.65, inclusive
of the thirteenth month pay. Multiplying this annual salary by Aarons life expectancy of 39.3 years, his gross income
would aggregate to 4,351,164.30, from which his estimated expenses in the sum of 2,189,664.30 was deducted to
finally arrive at P 2,161,500.00 as net income. Due to Aarons computed net income turning out to be higher than the
amount claimed by the Zarates, only 2,109,071.00, the amount expressly prayed for by them, was granted.
On April 4, 2003, the CA denied the Pereas motion for reconsideration. 8
Issues
In this appeal, the Pereas list the following as the errors committed by the CA, to wit:
I. The lower court erred when it upheld the trial courts decision holding the petitioners jointly and
severally liable to pay damages with Philippine National Railways and dismissing their cross-claim
against the latter.
II. The lower court erred in affirming the trial courts decision awarding damages for loss of earning
capacity of a minor who was only a high school student at the time of his death in the absence of
sufficient basis for such an award.
III. The lower court erred in not reducing further the amount of damages awarded, assuming
petitioners are liable at all.
Ruling
The petition has no merit.
1.
Were the Pereas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereas and the PNR, basing their claim
against the Pereas on breach of contract of carriage and against the PNR on quasi-delict.
The RTC found the Pereas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.
To start with, the Pereas defense was that they exercised the diligence of a good father of the family in the selection
and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a drivers license and that he had not been
involved in any vehicular accident prior to the fatal collision with the train; that they even had their own son travel to
and from school on a daily basis; and that Teodoro Perea himself sometimes accompanied Alfaro in transporting the
passengers to and from school. The RTC gave scant consideration to such defense by regarding such defense as
inappropriate in an action for breach of contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts that the Pereas operated as a common
carrier; and that their standard of care was extraordinary diligence, not the ordinary diligence of a good father of a
family.
Although in this jurisdiction the operator of a school bus service has been usually regarded as a private carrier, 9primarily
because he only caters to some specific or privileged individuals, and his operation is neither open to the indefinite
public nor for public use, the exact nature of the operation of a school bus service has not been finally settled. This is
the occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to transport or convey goods or persons from one place to another,
gratuitously or for hire. The carrier is classified either as a private/special carrier or as a common/public carrier.10 A
private carrier is one who, without making the activity a vocation, or without holding himself or itself out to the public
as ready to act for all who may desire his or its services, undertakes, by special agreement in a particular instance only,
to transport goods or persons from one place to another either gratuitously or for hire. 11 The provisions on ordinary
contracts of the Civil Code govern the contract of private carriage.The diligence required of a private carrier is only
ordinary, that is, the diligence of a good father of the family. In contrast, a common carrier is a person, corporation, firm
or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering such services to the public.12 Contracts of common carriage are governed by the provisions
on common carriers of the Civil Code, the Public Service Act, 13 and other special laws relating to transportation. A
common carrier is required to observe extraordinary diligence, and is presumed to be at fault or to have acted
negligently in case of the loss of the effects of passengers, or the death or injuries to passengers.14
In relation to common carriers, the Court defined public use in the following terms in United States v. Tan Piaco, 15viz:
"Public use" is the same as "use by the public". The essential feature of the public use is not confined
to privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality
that gives it its public character. In determining whether a use is public, we must look not only to the
character of the business to be done, but also to the proposed mode of doing it. If the use is merely
optional with the owners, or the public benefit is merely incidental, it is not a public use, authorizing
the exercise of the jurisdiction of the public utility commission. There must be, in general, a right which
the law compels the owner to give to the general public. It is not enough that the general prosperity
of the public is promoted. Public use is not synonymous with public interest. The true criterion by
which to judge the character of the use is whether the public may enjoy it by right or only by
permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any distinction between a
person or an enterprise offering transportation on a regular or an isolated basis; and has not distinguished a carrier
offering his services to the general public, that is, the general community or population, from one offering his services
only to a narrow segment of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides neatly with the
notion of public service under the Public Service Act, which supplements the law on common carriers found in the Civil
Code. Public service, according to Section 13, paragraph (b) of the Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for
hire or compensation, with general or limited clientle, whether permanent or occasional, and done
for the general business purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation system, gas,
electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar public services. x x
x.17
Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as common
carriers pipeline operators,18 custom brokers and warehousemen,19 and barge operators20 even if they had limited
clientle.
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the business actually
transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is a part
of the activity engaged in by the carrier that he has held out to the general public as his business or occupation. If the
undertaking is a single transaction, not a part of the general business or occupation engaged in, as advertised and held
out to the general public, the individual or the entity rendering such service is a private, not a common, carrier. The
question must be determined by the character of the business actually carried on by the carrier, not by any secret
intention or mental reservation it may entertain or assert when charged with the duties and obligations that the law
imposes.21
Applying these considerations to the case before us, there is no question that the Pereas as the operators of a school
bus service were: (a) engaged in transporting passengers generally as a business, not just as a casual occupation; (b)
undertaking to carry passengers over established roads by the method by which the business was conducted; and (c)
transporting students for a fee. Despite catering to a limited clientle, the Pereas operated as a common carrier
because they held themselves out as a ready transportation indiscriminately to the students of a particular school living
within or near where they operated the service and for a fee.
The common carriers standard of care and vigilance as to the safety of the passengers is defined by law. Given the
nature of the business and for reasons of public policy, the common carrier is 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."22 Article 1755 of the Civil Code specifies that the common carrier should "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." To successfully fend off liability in an action upon the death or injury to a
passenger, the common carrier must prove his or its observance of that extraordinary diligence; otherwise, the legal
presumption that he or it was at fault or acted negligently would stand. 23 No device, whether by stipulation, posting of
notices, statements on tickets, or otherwise, may dispense with or lessen the responsibility of the common carrier as
defined under Article 1755 of the Civil Code. 24
And, secondly, the Pereas have not presented any compelling defense or reason by which the Court might now
reverse the CAs findings on their liability. On the contrary, an examination of the records shows that the evidence fully
supported the findings of the CA.
As earlier stated, the Pereas, acting as a common carrier, were already presumed to be negligent at the time of the
accident because death had occurred to their passenger. 25 The presumption of negligence, being a presumption of law,
laid the burden of evidence on their shoulders to establish that they had not been negligent. 26 It was the law no less
that required them to prove their observance of extraordinary diligence in seeing to the safe and secure carriage of the
passengers to their destination. Until they did so in a credible manner, they stood to be held legally responsible for the
death of Aaron and thus to be held liable for all the natural consequences of such death.
There is no question that the Pereas did not overturn the presumption of their negligence by credible evidence. Their
defense of having observed the diligence of a good father of a family in the selection and supervision of their driver was
not legally sufficient. According to Article 1759 of the Civil Code, their liability as a common carrier did not cease upon
proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employee.
This was the reason why the RTC treated this defense of the Pereas as inappropriate in this action for breach of
contract of carriage.
The Pereas were liable for the death of Aaron despite the fact that their driver might have acted beyond the scope of
his authority or even in violation of the orders of the common carrier. 27 In this connection, the records showed their
drivers actual negligence. There was a showing, to begin with, that their driver traversed the railroad tracks at a point
at which the PNR did not permit motorists going into the Makati area to cross the railroad tracks. Although that point
had been used by motorists as a shortcut into the Makati area, that fact alone did not excuse their driver into taking
that route. On the other hand, with his familiarity with that shortcut, their driver was fully aware of the risks to his
passengers but he still disregarded the risks. Compounding his lack of care was that loud music was playing inside the
air-conditioned van at the time of the accident. The loudness most probably reduced his ability to hear the warning
horns of the oncoming train to allow him to correctly appreciate the lurking dangers on the railroad tracks. Also, he
sought to overtake a passenger bus on the left side as both vehicles traversed the railroad tracks. In so doing, he lost
his view of the train that was then coming from the opposite side of the passenger bus, leading him to miscalculate his
chances of beating the bus in their race, and of getting clear of the train. As a result, the bus avoided a collision with the
train but the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go to a full stop before
traversing the railroad tracks despite knowing that his slackening of speed and going to a full stop were in observance
of the right of way at railroad tracks as defined by the traffic laws and regulations. 28He thereby violated a specific traffic
regulation on right of way, by virtue of which he was immediately presumed to be negligent. 29
The omissions of care on the part of the van driver constituted negligence, 30 which, according to Layugan v.
Intermediate Appellate Court,31 is "the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would not do,32 or as Judge Cooley defines it, (t)he failure to observe for the protection
of the interests of another person, that degree of care, precaution, and vigilance which the circumstances justly
demand, whereby such other person suffers injury." 33
The test by which to determine the existence of negligence in a particular case has been aptly stated in
the leading case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence in a particular case may be stated as
follows: 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. The law here in effect adopts the standard supposed to be supplied by the imaginary
conduct of the discreet paterfamilias of the Roman law. The existence of negligence in a given case is
not determined by reference to the personal judgment of the actor in the situation before him. The
law considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence
and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must of
course be always determined in the light of human experience and in view of the facts involved in the
particular case. Abstract speculation cannot here be of much value but this much can be profitably said:
Reasonable men govern their conduct by the circumstances which are before them or known to them.
They are not, and are not supposed to be, omniscient of the future. Hence they can be expected to
take care only when there is something before them to suggest or warn of danger. Could a prudent
man, in the case under consideration, foresee harm as a result of the course actually pursued? If so, it
was the duty of the actor to take precautions to guard against that harm. Reasonable foresight of
harm, followed by the ignoring of the suggestion born of this prevision, is always necessary before
negligence can be held to exist. Stated in these terms, the proper criterion for determining the
existence of negligence in a given case is this: Conduct is said to be negligent when a prudent man in
the position of the tortfeasor would have foreseen that an effect harmful to another was sufficiently
probable to warrant his foregoing the conduct or guarding against its consequences. (Emphasis
supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereas driver was entirely negligent when he traversed the
railroad tracks at a point not allowed for a motorists crossing despite being fully aware of the grave harm to be thereby
caused to his passengers; and when he disregarded the foresight of harm to his passengers by overtaking the bus on
the left side as to leave himself blind to the approach of the oncoming train that he knew was on the opposite side of
the bus.
Unrelenting, the Pereas cite Phil. National Railways v. Intermediate Appellate Court, 35 where the Court held the PNR
solely liable for the damages caused to a passenger bus and its passengers when its train hit the rear end of the bus that
was then traversing the railroad crossing. But the circumstances of that case and this one share no similarities. In
Philippine National Railways v. Intermediate Appellate Court, no evidence of contributory negligence was adduced
against the owner of the bus. Instead, it was the owner of the bus who proved the exercise of extraordinary diligence
by preponderant evidence. Also, the records are replete with the showing of negligence on the part of both the
Pereas and the PNR. Another distinction is that the passenger bus in Philippine National Railways v. Intermediate
Appellate Court was traversing the dedicated railroad crossing when it was hit by the train, but the Pereas school van
traversed the railroad tracks at a point not intended for that purpose.
At any rate, the lower courts correctly held both the Pereas and the PNR "jointly and severally" liable for damages
arising from the death of Aaron. They had been impleaded in the same complaint as defendants against whom the
Zarates had the right to relief, whether jointly, severally, or in the alternative, in respect to or arising out of the accident,
and questions of fact and of law were common as to the Zarates. 36 Although the basis of the right to relief of the
Zarates (i.e., breach of contract of carriage) against the Pereas was distinct from the basis of the Zarates right to relief
against the PNR (i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and severally
liable by virtue of their respective negligence combining to cause the death of Aaron. As to the PNR, the RTC rightly
found the PNR also guilty of negligence despite the school van of the Pereas traversing the railroad tracks at a point
not dedicated by the PNR as a railroad crossing for pedestrians and motorists, because the PNR did not ensure the
safety of others through the placing of crossbars, signal lights, warning signs, and other permanent safety barriers to
prevent vehicles or pedestrians from crossing there. The RTC observed that the fact that a crossing guard had been
assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks to others as
well as the need to control the vehicular and other traffic there. Verily, the Pereas and the PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aarons earning capacity proper?
The RTC awarded indemnity for loss of Aarons earning capacity. Although agreeing with the RTC on the liability, the CA
modified the amount. Both lower courts took into consideration that Aaron, while only a high school student, had been
enrolled in one of the reputable schools in the Philippines and that he had been a normal and able-bodied child prior to
his death. The basis for the computation of Aarons earning capacity was not what he would have become or what he
would have wanted to be if not for his untimely death, but the minimum wage in effect at the time of his death.
Moreover, the RTCs computation of Aarons life expectancy rate was not reckoned from his age of 15 years at the time
of his death, but on 21 years, his age when he would have graduated from college.
We find the considerations taken into account by the lower courts to be reasonable and fully warranted.
Yet, the Pereas submit that the indemnity for loss of earning capacity was speculative and unfounded.1wphi1 They
cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for victim Jussi Leinos loss of earning capacity
as a pilot for being speculative due to his having graduated from high school at the International School in Manila only
two years before the shooting, and was at the time of the shooting only enrolled in the first semester at the Manila
Aero Club to pursue his ambition to become a professional pilot. That meant, according to the Court, that he was for all
intents and purposes only a high school graduate.
We reject the Pereas submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was not akin to that
of Aaron here. The CA and the RTC were not speculating that Aaron would be some highly-paid professional, like a pilot
(or, for that matter, an engineer, a physician, or a lawyer). Instead, the computation of Aarons earning capacity was
premised on him being a lowly minimum wage earner despite his being then enrolled at a prestigious high school like
Don Bosco in Makati, a fact that would have likely ensured his success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his parents and in
favor of the defendants whose negligence not only cost Aaron his life and his right to work and earn money, but also
deprived his parents of their right to his presence and his services as well. Our law itself states that the loss of the
earning capacity of the deceased shall be the liability of the guilty party in favor of the heirs of the deceased, and shall in
every case be assessed and awarded by the court "unless the deceased on account of permanent physical disability not
caused by the defendant, had no earning capacity at the time of his death."38 Accordingly, we emphatically hold in
favor of the indemnification for Aarons loss of earning capacity despite him having been unemployed, because
compensation of this nature is awarded not for loss of time or earnings but for loss of the deceaseds power or ability
to earn money.39
This favorable treatment of the Zarates claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus Company and
Manila Railroad Company,40 fourth-year medical student Edgardo Carriagas earning capacity, although he survived the
accident but his injuries rendered him permanently incapacitated, was computed to be that of the physician that he
dreamed to become. The Court considered his scholastic record sufficient to justify the assumption that he could have
finished the medical course and would have passed the medical board examinations in due time, and that he could have
possibly earned a modest income as a medical practitioner. Also, in People v. Sanchez, 41 the Court opined that murder
and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed good-paying jobs had they
graduated in due time, and that their jobs would probably pay them high monthly salaries from 10,000.00 to
15,000.00 upon their graduation. Their earning capacities were computed at rates higher than the minimum wage at the
time of their deaths due to their being already senior agriculture students of the University of the Philippines in Los
Baos, the countrys leading educational institution in agriculture.
 3.
Were the amounts of damages excessive?
The Pereas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the respective
amounts of 2,500,000.00 and 1,000,000.00 on the ground that such amounts were excessive.
The plea is unwarranted.
The moral damages of 2,500,000.00 were really just and reasonable under the established circumstances of this case
because they were intended by the law to assuage the Zarates deep mental anguish over their sons unexpected and
violent death, and their moral shock over the senseless accident. That amount would not be too much, considering that
it would help the Zarates obtain the means, diversions or amusements that would alleviate their suffering for the loss of
their child. At any rate, reducing the amount as excessive might prove to be an injustice, given the passage of a long
time from when their mental anguish was inflicted on them on August 22, 1996.
Anent the 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to render effective
the desired example for the public good. As a common carrier, the Pereas needed to be vigorously reminded to
observe their duty to exercise extraordinary diligence to prevent a similarly senseless accident from happening again.
Only by an award of exemplary damages in that amount would suffice to instill in them and others similarly situated like
them the ever-present need for greater and constant vigilance in the conduct of a business imbued with public interest.
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on November 13, 2002;
and ORDER the petitioners to pay the costs of suit.
SO ORDERED.

National Steel Corporation v. CA

FACTS:
The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or shipment for the
general public. Its services are available only to specific persons who enter into a special contract of charter party with
its owner. It is undisputed that the ship is a private carrier. And it is in the capacity that its owner, Vlasons Shipping, Inc.,
entered into a contract of affreightment or contract of voyage charter hire with National Steel Corporation.

Plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping, Inc. (VSI) as Owner, entered
into a Contract of Voyage Charter Hire whereby NSC hired VSI's vessel, the MV "VLASONS I" to make one (1) voyage to
load steel products at Iligan City and discharge them at North Harbor, Manila.

The parties stipulated in their contract that the terms and conditions of the NONYOZAI Charter Party shall form part of
their terms. The terms "F.I.O.S.T." (Freight In and Out including Stevedoring and Trading) which is used in the shipping
business is a standard provision in said Charter Party means that the handling, loading and unloading of the cargoes
are the responsibility of the Charterer. Under Paragraph 5 of the NANYOZAI Charter Party, it states, "Charterers to load,
stow and discharge the cargo free of risk and expenses to owners.

It also stipulated that the owners shall not be liable for loss of or damage of the cargo arising or resulting from:
unseaworthiness unless caused by want of due diligence on the part of the owners to make the vessel seaworthy, and
to secure that the vessel is properly manned, equipped and supplied and to make the holds and all other parts of the
vessel in which cargo is carried, fit and safe for its reception, carriage and preservation xxx

In accordance with the Contract of Voyage Charter Hire, the MV "VLASONS I" loaded at plaintiffs pier at Iligan City, the
NSC's shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets for carriage to Manila. The shipment was
placed in the 3 hatches of the ship.

The vessel arrived with the cargo at North Harbor, Manila. The following day, when the vessel's 3 hatches containing
the shipment were opened by plaintiff's agents, nearly all the skids of tinplates and hot rolled sheets were allegedly
found to be wet and rusty.

The cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed after incurring
a delay of 11 days due to the heavy rain which interrupted the unloading operations.

MASCO (surveyor hired by the NSC) made a report of its ocular inspection conducted on the cargo, both while it was
still on board the vessel and later at the NDC warehouse where the cargo was taken and stored. It found wetting and
rusting of the packages of hot rolled sheets and metal covers of the tinplates; that tarpaulin hatch covers were noted
torn at various extents; that container/metal casings of the skids were rusting all over. MASCO ventured the opinion
that "rusting of the tinplates was caused by contact with SEA WATER sustained while still on board the vessel as a
consequence of the heavy weather and rough seas encountered while en route to destination. It was also reported
that MASCO's surveyors drew at random samples of bad order packing materials of the tinplates and delivered the
same to the M.I.T. Testing Laboratories for analysis which affirmed MASCOs finding.

On the basis of the aforesaid report, NSC filed with the defendant its claim for damages suffered due to the
downgrading of the damaged tinplates in the amount of P941K.

Plaintiff formally demanded payment of said claim but defendant VSI refused and failed to pay. In its complaint, it
claimed that it sustained losses as a result of the act, neglect and default of the master and crew in the management of
the vessel as well as the want of due diligence on the part of the defendant to make the vessel seaworthy and to make
the holds and all other parts of the vessel in which the cargo was carried, fit and safe for its reception, carriage and
preservation all in violation of defendant's undertaking under their Contract of Voyage Charter Hire.

Defendant denied liability for the alleged damage claiming that the MV "VLASONS I" was seaworthy in all respects for
the carriage of plaintiff's cargo and that said vessel was not a "common carrier" inasmuch as she was under voyage
charter contract with the plaintiff as charterer under the charter party.

RTC ruled in favor of defendant. It held that The MV "VLASONS I" is a vessel of Philippine registry engaged in the
tramping service and is available for hire only under special contracts of charter party as in this particular case. It further
held that defendant cannot be held liable for it pursuant to Article 1734 of the Civil Case which exempts the carrier from
responsibility for loss or damage arising from the "character of the goods . . ." All the 1,769 skids of the tinplates could
not have been damaged by water as claimed by plaintiff but because of its own sweating; and that due to the fact the
vessel encountered rough seas and bad weather on which account the master filed a Marine Protest can be invoked as
a defense of force majeure.

CA modified the decision of the RTC by reducing the demurrage and deleting attorneys fees and expenses.

ISSUE:
- W/N VSI is a private/common carrier? PRIVATE
- W/N defendant may be held liable on account of the damage of the cargo owned by plaintiff? NO

RULING:
In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by the RTC, it
carried passengers or goods only for those it chose under a "special contract of charter party." The MV Vlasons I "was
not a common but a private carrier. Consequently, the rights and obligations of VSI and NSC, including their respective
liability for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter
party.

It is clear from the parties' Contract of Voyage Charter Hire that VSI "shall not be responsible for losses except on
proven willful negligence of the officers of the vessel." The NANYOZAI Charter Party, which was incorporated in the
parties' contract of transportation further provided that the shipowner shall not be liable for loss of or a damage to the
cargo arising or resulting from unseaworthiness, unless the same was caused by its lack of due diligence to make the
vessel seaworthy or to ensure that the same was "properly manned, equipped and supplied," and to "make the holds
and all other parts of the vessel in which cargo was carried, fit and safe for its reception, carriage and preservation."

Because the MV Vlasons I was a private carrier, the shipowner's obligations are governed by the foregoing provisions of
the Code of Commerce and not by the Civil Code which, as a general rule, places the prima facie presumption of
negligence on a common carrier. It is a hornbook doctrine that: In an action against a private carrier for loss of, or
injury to, cargo, the burden is on the plaintiff to prove that the carrier was negligent or unseaworthy, and the fact that
the goods were lost or damaged while in the carrier's custody does not put the burden of proof on the carrier.

Indicators of VSIs due diligence:

a) It was drylocked and inspected by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to
Manila under the contract of voyage charter hire. The vessel's voyage from Iligan to Manila was the vessel's first voyage
after drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all
requirements for trading as cargo vessel.
b) The records sufficiently support VSI's contention that the ship used the old tarpaulin, only in addition to the new one
used primarily to make the ship's hatches watertight.
c) Despite encountering rough weather twice, the new tarpaulin did not give way and the ship's hatches and cargo
holds remained waterproof.
Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew of MV Vlasons I.
On the contrary, the records reveal that it was the stevedores of NSC who were negligent in unloading the cargo from
the ship. The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by a
passing typhoon disrupted the unloading of the cargo. This tent-like covering, however, was clearly inadequate for
keeping rain and seawater away from the hatches of the ship.

The charter party is a normal commercial contract and its stipulations are agreed upon in consideration of many factors,
not the least of which is the transport price which is determined not only by the actual costs but also by the risks and
burdens assumed by the shipper in regard to possible loss or damage to the cargo. In recognition of such factors, the
parties even stipulated that the shipper should insure the cargo to protect itself from the risks it undertook under the
charter party. That NSC failed or neglected to protect itself with such insurance should not adversely affect VSI, which
had nothing to do with such failure or neglect.

Sps Cruz v. Holiday

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 2001 against Sun Holidays, Inc.
(respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from the death of their son Ruelito C.
Cruz (Ruelito) who perished with his wife on September 11, 2000 on board the boat M/B Coco Beach III that capsized en
route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach Island Resort
(Resort) owned and operated by respondent.

The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by virtue of a tour
package-contract with respondent that included transportation to and from the Resort and the point of
departure in Batangas. Miguel C. Matute (Matute), a scuba diving instructor and one of the survivors, gave his account
of the incident that led to the filing of the complaint as follows:

Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave the Resort in
the afternoon of September 10, 2000, but was advised to stay for another night because of strong winds and
heavy rains.On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitioners' son
and his wife trekked to the other side of the Coco Beach mountain that was sheltered from the wind where
they boarded M/B Coco Beach III, which was to ferry them to Batangas.Shortly after the boat sailed, it started to rain.
As it moved farther away from Puerto Galera and into the open seas, the rain and wind got stronger, causing the boat
to tilt from side to side and the captain to step forward to the front, leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after the other,M/B Coco Beach III
capsized putting all passengers underwater.The passengers, who had put on their life jackets, struggled to get out
of the boat. Upon seeing the captain, Matute and the other passengers who reached the surface asked him what
they could do to save the people who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang
sarili niyo" (Just save yourselves). AcCTaD
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by
the capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18 passengers and four
crew members, who were brought to Pisa Island. Eight passengers, including petitioners' son and his wife, died during
the incident. At the time of Ruelito's death, he was 28 years old and employed as a contractual worker for Mitsui
Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900. Petitioners, by letter of
October 26, 2000, demanded indemnification from respondent for the death of their son in the amount of at least
P4,000,000. Respondent denied any responsibility for the incident which it considered to be a fortuitous event. It
nevertheless offered, as an act of commiseration, the amount of P10,000 to petitioners upon their
signing of a waiver. Petitioners declined, they filed the Complaint, alleging that respondent, as a common carrier,
was guilty of negligence in allowing M/B Coco Beach III to sail notwithstanding storm warning bulletins issued by
the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) as early as 5:00 a.m.
of September 11, 2000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four conditions to be
met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard, (3) there
is clearance from the captain and (4) there is clearance from the Resort's assistant manager. He added that M/B
Coco Beach III met all four conditions on September 11, 2000, but a subasco or squall, characterized by strong winds
and big waves, suddenly occurred, causing the boat to capsize. By Decision of February 16, 2005, Branch 267 of the
Pasig RTC dismissed petitioners' Complaint and respondent's Counterclaim Petitioners' Motion for Reconsideration
having been denied by Order dated September 2, 2005, they appealed to the Court of Appeals.

By Decision of August 19, 2008, the appellate court denied petitioners' appeal, holding, among other things, that
the trial court correctly ruled that respondent is a private carrier which is only required to observe ordinary diligence;
that respondent in fact observed extraordinary diligence in transporting its guests on board M/B Coco Beach III; and
that the proximate cause of the incident was a squall, a fortuitous event. Petitioners' Motion for Reconsideration
having been denied by Resolution dated January 16, 2009, they filed the present Petition for Review

ISSUE:
1. WON respondent is a common carrier
2. WON respondent is guilty of negligence in allowing M/B Coco Beach III sail notwithstanding storm warning bulletins
issued by PAGASA.

HELD:
1. YES.
Petitioners correctly rely on De Guzman v. Court of Appeals in characterizing respondent as a common carrier.
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 "a sideline").
Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.
Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services
or solicits business only from a narrow segment of the general population.
We think that Article 1733 deliberately refrained from making such distinctions. So understood, the concept of
"common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common
carriers set forth in the Civil Code.

Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be
properly considered ancillary thereto. The constancy of respondent's ferry services in its resort operations is
underscored by its having its own Coco Beach boats. And the tour packages it offers, which include the ferry services,
may be availed of by anyone who can afford to pay the same. These services are thus available to the public. That
respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be imprudent
to suppose that it provides said services at a loss. The Court is aware of the practice of beach resort operators
offering tour packages to factor the transportation fee in arriving at the tour package price. That guests who opt not to
avail of
respondent's ferry services pay the same amount is likewise inconsequential. These guests may only be deemed to have
overpaid.

2. YES.
A very cautious person exercising the utmost diligence would thus not brave such stormy weather and put
other people's lives at risk. The extraordinary diligence required of common carriers demands that they take care of
the goods or lives entrusted to their hands as if they were their own. This respondent failed to do.

Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned M/B Coco Beach

III. As reflected above, however, the occurrence of squalls was expected under the weather condition of September 11,
2000. Moreover, evidence shows that M/B Coco Beach III suffered engine trouble before it capsized and sank.
The incident was, therefore, not completely free from human intervention.
The Court need not belabor how respondent's evidence likewise fails to demonstrate that it exercised due diligence
to prevent or minimize the loss before, during and after the occurrence of the squall.
As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberately refrained from
making distinctions on whether the carrying of persons or goods is the carrier's principal business, whether it is offered
on a regular basis, or whether it is offered to the general public. The intent of the law is thus to not consider such
distinctions. Otherwise, there is no telling how many other distinctions may be concocted by unscrupulous
businessmen engaged in the carrying of persons or goods in order to avoid the legal obligations and liabilities of
common carriers.

The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone warnings for shipping
on September 10 and 11, 2000 advising of tropical depressions in Northern Luzon which would also affect the province
of Mindoro. By the testimony of Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be expected
under such weather condition.
Respondent's insistence that the incident was caused by a fortuitous event does not impress either.

The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence, or the failure
of the debtors to comply with their obligations, must have been independent of human will; (b) the event
that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c)
the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a normal
manner; and (d) the obligor must have been free from any participation in the aggravation of the resulting injury
to the creditor.

To fully free a common carrier from any liability, the fortuitous event must have been the proximate and only cause
of the loss. And it should have exercised due diligence to prevent or minimize the loss before, during and after
the occurrence of the fortuitous event.
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.

Characteristics
Broader concept
Ancillary business
Limited clientele
Means of transportation
Laws and Jurisprudence:
Article 1732 of the New Civil Code
National Steel Corporation v. CA
The true test of a CC is the carriage of goods or passengers, provided it has space for all who opt to avail themselves of its transportation
for a fee.

Asia Lighterage and Shipping, Inc. v. CA

FACTS:
Petitioner Asia Lighterage and Shipping, Inc. was contracted as carrier by the consignee, General Milling Corporation, to
deliver a cargo to the consignee's warehouse at Pasig City. The cargo, however, did not reach the consignee.
The transport of said cargo was suspended due to a warning of an incoming typhoon, however, the petitioner
proceeded
to pull the barge to Engineering Island off Baseco to seek shelter from the approaching typhoon. A few days after,
the barge develop a list because of a hole it sustained after hitting an unseen protruberance underneath the water.
Upon reaching the Sta. Mesa spillways, the barge again ran aground due to strong current. To avoid the complete
sinking of the barge, a portion of the goods was transferred to three other barges. The next day, the towing bits of the
barge broke. It sank completely, resulting in the total loss of the remaining cargo. Private respondent, Prudential
Guarantee and Assurance, Inc., as insurer, indemnified the General Milling Corp. for the lost cargo and thus, as
subrogee, sought recovery from petitioner, Asia Lighterage. Both the trial court and the appellate court ruled in favor
of private respondent.

ISSUE:
1. Whether or not Asia Lighterage is a common carrier?
2. Whether or not Asia Lighterage exercised extraordinary diligence in its care and custody of the consignees
cargo?

HELD:
1. Yes,
Asia Lighterage is a common carrier. Article 1732 of the Civil Code defines common carriers as persons, corporations,
firms or associations engaged in the business of carrying or transporting passengers or goods
or both, by land, water, or air, for compensation, offering their services to the public. The definition of common carriers
in Article 1732 of the Civil Code makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity; that there was no distinguishment between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis,
that Article 1732 does not distinguish between a carrier offering its services to the general public, and one who offers
services or solicits business only from a narrow segment of the general
population.
In the case at bar, the principal business of the petitioner is that of lighterage and drayage and it offers its barges to the
public for carrying or transporting goods by water for compensation. Petitioner is clearly a common carrier, whether its
carrying of goods is done on an irregular rather than scheduled manner, and with an only limited clientele. A common
carrier need not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets. The
test to determine a common carrier
is "whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the
general public as his occupation rather than the quantity or extent of the business transacted." In
the case at bar, the petitioner admitted that it is engaged in the business of shipping and lighterage, offering its barges
to the public, despite its limited clientele for carrying or transporting goods by water for compensation.

2. No,
Petitioner failed to exercise extraordinary diligence in its care and custody of the consignee's goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them.
They are presumed to have been at fault or to have acted negligently if the goods are lost,
destroyed or deteriorated. To overcome the presumption of negligence in the case of loss, destruction or deterioration
of the goods, the common carrier must prove that it exercised extraordinary diligence. There
are, however, exceptions to this rule. Article 1734 of the Civil Code enumerates the instances when the presumption of
negligence does not attach:

Art. 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 or act of competent public authority.

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 partly-submerged 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.

Fabre, Jr. v. CA
DOCTRINE: Due diligence in selection of employees is not satisfied by finding that the applicant possessed a
professional drivers license. The employer should also examine the applicant for his qualifications, experience and
record of service. Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for
the guidance of employees and the issuance of proper instructions as well as actual implementation and monitoring of
consistent compliance with the rules.

FACTS:
- Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They used the bus
principally in connection with a bus service for school children which they operated in Manila.
- The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for two weeks. His job
was to take school children to and from the St. Scholasticas College in Malate, Manila.
- Private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with petitioners for the
transportation of 33 members of its Young Adults Ministry from Manila to La Union and back in consideration
of which private respondent paid petitioners the amount of P3K.
- The group was scheduled to leave at 5PM. However, as several members of the party were late, the bus did
not leave the Tropical Hut at the corner of Ortigas Avenue and EDSA until 8PM. Petitioner Porfirio Cabil drove
the minibus.
- The usual route to Caba, La Union was through Carmen, Pangasinan. Petitioner Cabil, who was unfamiliar with
the area (it being his first trip to La Union), was forced to take a detour through the town of Ba-ay in
Lingayen, Pangasinan. At 11:30PM, he came upon a sharp curve on the highway, running on a south to east
direction/siete. The road was slippery because it was raining, causing the bus, which was running at the
speed of 50 kilometers per hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and
sign along the road and rammed the fence of one Jesus Escano, then turned over and landed on its left side,
coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it
had hit fell on it and smashed its front portion.
- Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus
and pinned down by a wooden seat which came off after being unscrewed. It took three persons to safely
remove her from this position. She was in great pain and could not move.
- The Lingayen police investigated the incident the next day and subsequently filed a criminal complaint against
the driver, Porfirio Cabil. The case was later filed with the RTC Lingayen.
- Amyline Antonio, who was seriously injured, brought this case in the RTC Makati. As a result of the accident,
she is now suffering from paraplegia and is permanently paralyzed from the waist down. During the trial she
described the operations she underwent and adduced evidence regarding the cost of her treatment and
therapy.
- RTC gave judgment for private respondents ordering petitioners Mr. & Mrs. Engracio Fabre, Jr. and Porfirio
Cabil pursuant to articles 2176 and 2180 to pay the respondents jointly and severally. CA affirmed.

ISSUE: W/N common carrier Fabres were negligent, and accordingly, liable to private respondents? YES

RULING:
Pursuant to Arts. 2176 and 2180 of the Civil Code, Cabils negligence gave rise to the presumption that his employers, the
Fabres, were themselves negligent in the selection and supervision of their employee.

The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to exercise
the diligence of a good father of the family in the selection and supervision of their employee is fully supported by the
evidence on record. Indeed, it was admitted by Cabil that on the night in question, it was raining, and, as a
consequence, the road was slippery, and it was dark which according to him, was the reason for his failure to see that
there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour
and only slowed down when he noticed the curve some 15 to 30 meters ahead. By then it was too late for him to avoid
falling off the road. Given the conditions of the road and considering that the trip was Cabils first one outside of
Manila, Cabil should have driven his vehicle at a moderate speed.

Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional drivers
license. The employer should also examine the applicant for his qualifications, experience and record of service. Due
diligence in supervision, on the other hand, requires the formulation of rules and regulations for the guidance of
employees and the issuance of proper instructions as well as actual implementation and monitoring of consistent
compliance with the rules.

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that
Cabil had been driving for school children only, from their homes to the St. Scholasticas College in Metro Manila. They
had hired him only after a two-week apprenticeship. They had tested him for certain matters, such as whether he could
remember the names of the children he would be taking to school, which were irrelevant to his qualification to drive on
a long distance travel, especially considering that the trip to La Union was his first. The existence of hiring procedures
and supervisory policies cannot be casually invoked to overturn the presumption of negligence on the part of an
employer.

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.

a. Phil. American general insurance Company v. PKS Shipping Co.

DOCTRINE:
Art. 587 of the Code of Commerce is NOT applicable to the case at bar. Simply put, the ship agent is liable for the
negligent acts of the captain in the care of goods loaded on the vessel. This liability however can be limited through
abandonment of the vessel, its equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional
circumstances wherein the ship agent could still be held answerable despite the abandonment, 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. It must be stressed at this point that Art. 587 speaks only of
situations where the fault or negligence is committed solely by the captain. Where the shipowner is likewise to be
blamed, Art. 587 will not apply, and such situation will be covered by the provisions of the Civil Code on common carrier.

FACTS:
- On July 6, 1983, Coca-Cola Bottlers Philippines, Inc., loaded on board MV Asilda, a vessel owned and operated
by respondent Felman Shipping Lines (FELMAN), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be
transported from Zamboanga City to
Cebu City for consignee Coca-Cola Bottlers Philippines, Inc., Cebu. The shipment was insured with
petitioner Philippine American General Insurance Co., Inc. (PHILAMGEN).
- MV Asilda left the port of Zamboanga in fine weather at eight oclock in the evening of the same day. At
around 8:45AM, July 7, the vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo
with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.
- On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with respondent
FELMAN for recovery of damages it sustained as a result of the loss of its softdrink bottles that sank with MV
Asilda. FELMAN denied the claim thus prompting the consignee to file an insurance claim with PHILAMGEN
which paid its claim of P755,250.
- Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which disclaimed
any liability for the loss. Consequently, PHILAMGEN sued the shipowner for sum of money and damages.
- In its complaint PHILAMGEN alleged that the sinking and total loss of MV Asilda and its cargo were due to
the vessels unseaworthiness as she was put to sea in an unstable condition. It further alleged
that the vessel was improperly manned and that its officers were grossly negligent in failing to take
appropriate measures to proceed to a nearby port or beach after the vessel started to list.
- FELMAN filed a MTD based on the affirmative defense that no right of subrogation in favor of PHILAMGEN was
transmitted by the shipper, and that, in any event, FELMAN had abandoned all its rights, interests and
ownership over MV Asilda together with her freight and appurtenances for the purpose of limiting and
extinguishing its liability under Art. 587 of the Code of Commerce.
- The trial court dismissed the complaint of PHILAMGEN. On appeal the Court of Appeals set aside the dismissal
and remanded the case to the lower court for trial on the merits. FELMAN filed a petition for certiorari with
the SC which was subsequently denied.
- The trial court rendered judgment in favor of FELMAN. It ruled that MV Asilda was seaworthy when it left
the port of Zamboanga as confirmed by certificates issued by the Philippine Coast Guard and the shipowners
surveyor attesting to its seaworthiness. Thus the loss of the vessel and its entire shipment could only be
attributed to either a fortuitous event, in which case, no liability should attach unless there was a stipulation to
the contrary, or to the negligence of the captain and his crew, in which case, Art. 587 of the Code of Commerce
should apply. Moreover, assuming MV Asilda was unseaworthy, still PHILAMGEN could not recover from
FELMAN since the assured (Coca-Cola Bottlers Philippines, Inc.) had breached its implied warranty on the
vessels seaworthiness. Resultantly, the payment made by PHILAMGEN to the assured was an undue, wrong
and mistaken payment.
- PHILAMGEN appealed the decision to the CA. CA rendered judgment finding MV Asilda unseaworthy for
being top- heavy as 2,500 cases of Coca-Cola softdrink bottles were improperly stowed on deck. In other
words, while the vessel possessed the necessary Coast Guard certification indicating its seaworthiness with
respect to the structure of the ship itself, it was not seaworthy with respect to the cargo. Nonetheless, said
court denied the claim of PHILAMGEN on the ground that the assureds implied warranty of seaworthiness was
not complied with. Perfunctorily, PHILAMGEN was not properly subrogated to the rights and interests of the
shipper. Furthermore, respondent court held that the filing of notice of abandonment had absolved the
shipowner/agent from liability under the limited liability rule.

ISSUES:
(1) W/N MV Asilda was seaworthy when it left the port of Zamboanga? YES
(2) W/N the limited liability under Art. 587 of the Code of Commerce should apply? NO
(3) W/N PHILAMGEN was properly subrogated to the rights and legal actions which the shipper had against FELMAN,
the shipowner? YES

RULING:
(1) MV Asilda was unseaworthy when it left the port of Zamboanga. In a joint statement, the captain as well as the
chief mate of the vessel confirmed that the weather was fine when they left the port of Zamboanga. According to
them, the vessel was carrying 7,500 cases of 1-liter Coca-Cola softdrink bottles, 300 sacks of seaweeds, 200 empty CO2
cylinders and an undetermined quantity of empty boxes for fresh eggs. They loaded the empty boxes for eggs and
about 500 cases of Coca-Cola bottles on deck. The ship captain stated that around 4AM of 7 July he was awakened by
the officer on duty to inform him that the vessel had hit a floating log. At that time he noticed that the weather had
deteriorated with strong southeast winds inducing big waves. After thirty minutes he observed that the vessel was
listing slightly to starboard and would not correct itself despite the heavy rolling and pitching. He then ordered his
crew to shift the cargo from starboard to portside until the vessel was balanced. At about 7AM, the master of the
vessel stopped the engine because the vessel was listing dangerously to portside. He ordered his crew to shift the
cargo back to starboard. The shifting of cargo took about an hour after which he rang the engine room to resume full
speed. After an hour and a half, the vessel suddenly listed to portside and before the captain could decide on his next
move, some of the cargo on deck were thrown overboard and seawater entered the engine room and
cargo holds of the vessel. At that instance, the master of the vessel ordered his crew to abandon ship. Shortly
thereafter, MV Asilda capsized and sank. He ascribed the sinking to the entry of seawater through a hole in the
hull caused by the vessels collision with a partially submerged log.

The Elite Adjusters, Inc., submitted a report regarding the sinking of MV Asilda which was given credence both by the
CA and the SC finding that the vessel was top-heavy which is to say that while the vessel may not have been
overloaded, yet the distribution or stowage of the cargo on board was done in such a manner that the vessel was in
top-heavy condition at the time of her departure and which condition rendered her unstable and unseaworthy for that
particular voyage. It is also to be noted that the subject vessel was designed as a fishing vessel and it was not designed
to carry a substantial amount or quantity of cargo on deck. Therefore, the report strongly asserted that had her cargo
been confined to those that could have been accommodated under deck, her stability would not have been affected
and the vessel would not have been in any danger of capsizing, even given the prevailing weather conditions at that
time of sinking.

But from the moment that the vessel was utilized to load heavy cargo on its deck, the vessel was rendered
unseaworthy for the purpose of carrying the type of cargo because the weight of the deck cargo so decreased the
vessels metacentric height as to cause it to become unstable. Thus, the Court held that the proximate cause of the
sinking of the M/V Asilda was her condition of unseaworthiness arising from her having
been top-heavy when she departed from the Port of Zamboanga. Her having capsized and eventually sunk
was bound to happen and was therefore in the category of an inevitable occurrence.

(2) Art. 587 of the Code of Commerce is NOT applicable to the case at bar. Simply put, the ship agent is liable for the
negligent acts of the captain in the care of goods loaded on the vessel. This liability however can be limited through
abandonment of the vessel, its equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional
circumstances wherein the ship agent could still be held answerable despite the abandonment, 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. It must be stressed at this point that Art. 587 speaks only of
situations where the fault or negligence is committed solely by the captain. Where the shipowner is likewise to be
blamed, Art. 587 will not apply, and such situation will be covered by the provisions of the Civil Code on common
carrier.

It was already established at the outset that the sinking of MV Asilda was due to its unseaworthiness even at the
time of its departure from the port of Zamboanga. It was top-heavy as an excessive amount of cargo was loaded on
deck. Closer supervision on the part of the shipowner could have prevented this fatal miscalculation. As
such, FELMAN was equally negligent. It cannot therefore escape liability through the expedient of filing a notice of
abandonment of the vessel by virtue of Art. 587 of the Code of Commerce. FELMAN, the shipowner, was likewise not
able to rebut the presumption of negligence as stated in Art. 1733 of the NCC.

(3) The marine policy issued by PHILAMGEN to the Coca-Cola bottling firm in at least two (2) instances has dispensed
with the usual warranty of worthiness. Paragraph 15 of the Marine Open Policy reads (t)he liberties as per Contract of
Affreightment the presence of the Negligence Clause and/or Latent Defect Clause in the Bill of Lading and/or Charter
Party and/or Contract of Affreightment as between the Assured and the Company shall not prejudice the
insurance. The seaworthiness of the vessel as between the Assured and the Assurers is hereby admitted. The same
clause is present in par. 8 of the Institute Cargo Clauses (F.P.A.) of the policy which states (t)he seaworthiness of the
vessel as between the Assured and Underwriters in hereby admitted x x x x"
The result of the admission of seaworthiness by the assurer PHILAMGEN may mean one or two things: (a) that the
warranty of the seaworthiness is to be taken as fulfilled; or, (b) that the risk of unseaworthiness is assumed by the
insurance company. The insertion of such waiver clauses in cargo policies is in recognition of the realistic fact that
cargo owners cannot control the state of the vessel. Thus it can be said that with such categorical
waiver, PHILAMGEN has accepted the risk of unseaworthiness so that if the ship should sink by unseaworthiness, as
what occurred in this case, PHILAMGEN is liable.

PHILAMGENs action against FELMAN is squarely sanctioned by Art. 2207 of the Civil Code. Payment by the assurer to
the assured operates as an equitable assignment to the assurer of all the remedies which the assured may have
against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of any privity of contract or upon payment by the insurance company of
the insurance claim. It accrues simply upon payment by the insurance company of the insurance claim.

Virgines Calvo v. UCPB General Insurance Co.,

FACTS:
- Virgines Calvo is the owner of Transorient Container Terminal Services, Inc (TCTSI), a sole proprietorship
customs broker. Calvo entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels
of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's
warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured by respondent
UCPB General Insurance Co., Inc.
- On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board "M/V
Hayakawa Maru" and, after 24 hours, were unloaded from the vessel to the custody of the arrastre operator,
Manila Port Services, Inc.
- From July 23 to July 25, 1990, petitioner, pursuant to her contract with SMC, withdrew the cargo from the
arrastre operator and delivered it to SMC's warehouse in Ermita, Manila.
- On July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the
semi-chemical fluting paper were "wet/stained/torn" and 3 reels of kraft liner board were likewise torn. The
damage was placed at P93,112.
- SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount.
- As subrogee of SMC, UCPB brought suit against petitioner in the RTC which rendered judgment finding
petitioner Calvo liable to respondent for the damage to the shipment. It held that defendant by reason of the
nature of [her] business should have devised ways and means in order to prevent the damage to the cargoes
which it is under obligation to take custody of and to forthwith deliver to the consignee. It held that Calvo did
not present any evidence on what precaution she performed to prevent the said incident, hence the
presumption is that the moment the defendant accepts the cargo she shall perform such extraordinary
diligence because of the nature of the cargo.
- CA affirmed RTCs decision.
- Petitioner contends that contrary to the findings of the trial court and the CA, she is not a common carrier but a
private carrier because, as a customs broker and warehouseman, she does not indiscriminately hold her
services out to the public, but only offers the same to select parties with whom she may contract in the
conduct of her business.

ISSUE: W/N petitioner is a common carrier and is thus liable to respondent? YES

RULING:
There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an integral
part of her business. To uphold petitioner's contention would be to deprive those with whom she contracts the
protection which the law affords them notwithstanding the fact that the obligation to carry goods for her customers,
as already noted, is part and parcel of petitioner's business.

Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:

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. . . .

In the case at bar, petitioner denies liability for the damage to the cargo. She claims that the "spoilage or wettage" took
place while the goods were in the custody of either the carrying vessel "M/V Hayakawa Maru," which transported the
cargo to Manila, or the arrastre operator, to whom the goods were unloaded and who allegedly kept them in open air
for nine days from July notwithstanding the fact that some of the containers were deformed, cracked or otherwise
damaged.

Contrary to petitioner's assertion, the Survey Report of the Marine Cargo Surveyors indicates that when the shipper
transferred the cargo in question to the arrastre operator, these were covered by clean Equipment Interchange Report
(EIR) and, when petitioner's employees withdrew the cargo from the arrastre operator, they did so without exception
or protest either with regard to the condition of container vans or their contents.
To put it simply, Calvo received the shipment in good order and condition and delivered the same to the consignee
damaged. CA can only conclude that the damages to the cargo occurred while it was in the possession of the
defendant-appellant. Whenever the thing is lost (or damaged) in the possession of the debtor (or obligor), it shall be
presumed that the loss (or damage) was due to his fault, unless there is proof to the contrary. No proof was proffered
to rebut this legal presumption and the presumption of negligence attached to a common carrier in case of loss or
damage to the goods.

Anent petitioner's insistence that the cargo could not have been damaged while in her custody as she immediately
delivered the containers to SMC's compound, suffice it to say that to prove the exercise of extraordinary diligence,
petitioner must do more than merely show the possibility that some other party could be responsible for the damage. It
must prove that it used "all reasonable means to ascertain the nature and characteristic of goods tendered for
transport and that it exercised due care in the handling thereof. Petitioner failed to do this.

Nor is there basis to exempt provision to apply petitioner from liability under Art. 1734(4) because the rule is that if the
improper packing or, in this case, the defect/s in the container, is/are known to the carrier or his employees or apparent
upon ordinary observation, but he nevertheless accepts the same without protest or exception notwithstanding such
condition, he is not relieved of liability for damage resulting therefrom. 14 In this case, petitioner accepted the cargo
without exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner to prove
that she exercised extraordinary diligence in the carriage of goods in this case or that she is exempt from liability, the
presumption of negligence as provided under Art. 1735.

Caltex(phil) v. Sulpicio Lines

Facts:
On December 20, 1987, motor tanker MV Vector, carrying petroleum products of Caltex, collided in the open sea with
passenger ship MV Doa Paz, causing the death of all but 25 of the latters passengers. Among those who died were
Sebastian Canezal and his daughter Corazon Canezal. On March 22, 1988, the board of marine inquiry found that Vector
Shipping Corporation was at fault. On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezals
wife and mother respectively, filed with the Regional Trial Court of Manila a complaint for damages arising from breach
of contract of carriage against Sulpicio Lines. Sulpicio filed a third-party complaint against Vector and Caltex. The trial
court dismissed the complaint against Caltex, but the Court of Appeals included the same in the liability. Hence, Caltex
filed this petition.
Issue:
Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a
passenger ship?
Held:
First: The charterer has no liability for damages under Philippine Maritime laws.
Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.
A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another
person for a specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets
the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in
consideration of the payment of freight. A contract of affreightment may be either time charter, wherein the leased
vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single
voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time
or for a single or consecutive voyage, the ship owner to supply the ships store, pay for the wages of the master of the
crew, and defray the expenses for the maintenance of the ship. If the charter is a contract of affreightment, which
leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of
ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship.
Second: MT Vector is a common carrier
The charter party agreement did not convert the common carrier into a private carrier. The parties entered into a
voyage charter, which retains the character of the vessel as a common carrier. It is imperative that a public carrier shall
remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the
charter is limited to the ship only, as in the case of a time-charter or voyage charter. It is only when the charter includes
both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be the property of the charterer. A
common carrier is a person or corporation whose regular business is to carry passengers or property for all persons
who may choose to employ and to remunerate him. 16 MT Vector fits the definition of a common carrier under Article
1732 of the Civil Code.
The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety of
the passengers, especially because with the modern development of science and invention, transportation has become
more rapid, more complicated and somehow more hazardous. For these reasons, a passenger or a shipper of goods is
under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly
warrant its seaworthiness.
Third: Is Caltex liable for damages under the Civil Code?
The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied
with all legal requirements. The duty rests upon the common carrier simply for being engaged in "public service." The
relationship between the parties in this case is governed by special laws. Because of the implied warranty of
seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire into the vessels
seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and
hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the
public in general is concerned. Such a practice would be an absurdity in a business where time is always of the essence.
Considering the nature of transportation business, passengers and shippers alike customarily presume that common
carriers possess all the legal requisites in its operation.

Loadstar Shipping Co. v. Pioneer Asia Insurance

FACTS:
- LOADSTAR received on board its M/V "Cherokee" the following goods for shipment: a) 705 bales of lawanit
hardwood; b) 27 boxes and crates of tilewood assemblies and the others; and c) 49 bundles of mouldings R &
W (d) Apitong Bolidenized.
- The goods, amounting to P6M were insured for the same amount with respondent MIC against various risks
including "TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was insured by Prudential
Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million.
- On its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank off
Limasawa Island.
- As a result of the total loss of its shipment, the consignee made a claim with LOADSTAR which, however,
ignored the same.
- As the insurer, MIC paid P6M to the insured in full settlement of its claim, and the latter executed a subrogation
receipt therefor.
- MIC filed a complaint against LOADSTAR and PGAI, alleging that the sinking of the vessel was due to the fault
and negligence of LOADSTAR and its employees. It also prayed that PGAI be ordered to pay the insurance
proceeds from the loss the vessel directly to MIC, said amount to be deducted from MIC's claim from
LOADSTAR.
- LOADSTAR denied any liability for the loss of the shipper's goods and claimed that sinking of its vessel was due
to force majeure. PGAI, on the other hand, averred that MIC had no cause of action against it, LOADSTAR being
the party insured. In any event, PGAI was later dropped as a party defendant after it paid the insurance
proceeds to LOADSTAR.
- RTC rendered judgment in favor of MIC, prompting LOADSTAR to elevate the matter to the court of Appeals,
which, however, agreed with the trial court and affirmed its decision in toto.
- LOADSTAR submits that the vessel was a private carrier because it was not issued a certificate of public
convenience, it did not have a regular trip or schedule nor a fixed route, and there was only one shipper, one
consignee for a special cargo.

ISSUE: W/N LOADSTAR is a private/common carrier?

RULING:
LOADSTAR is a common carrier. It is not necessary that the carrier be issued a certificate of public convenience, and this
public character is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic
or unscheduled.

In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American Steamship Agencies,
Inc., where this Court held that a common carrier transporting special cargo or chartering the vessel to a special
person becomes a private carrier that is not subject to the provisions of the Civil Code. Any stipulation in the charter
party absolving the owner from liability for loss due to the negligence of its agent is void only if the strict policy
governing common carriers is upheld. Such policy has no force where the public at is not involved, as in the case of a
ship totally chartered for the use of a single party. LOADSTAR also cited Valenzuela Hardwood and Industrial Supply, Inc.
v. Court of Appeals and National Steel Corp. v. Court of Appeals, both of which upheld the Home Insurance doctrine.

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

Under the facts and circumstances obtaining in this case, LOADSTAR fits the definition of a common carrier under
Article 1732 of the Civil Code. The SC upheld the doctrine enshrined in De Guzman v. Court of Appeals, where the Court
juxtaposed the statutory definition of "common carriers" with the peculiar circumstances of that case. Art. 1732 makes
no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who
does such carrying only as ancillary activity. Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services or solicits business only from a
narrow segment of the general population.

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, without
 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.

As regards the issue of seaworthiness of M/V Cherokee, the Court found that the subject vessel was not seaworthy
when it embarked on its voyage on 19 November 1984. The vessel was not even sufficiently manned at the time. "For a
vessel to be seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of
competent officers and crew. The failure of a common carrier to maintain in seaworthy condition its vessel involved in a
contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code."

Home Assurance Corp.

FACTS:
NOV 12, 1984 - Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals Industries, Inc. [MCCII] (as charterer)
entered into a voyage charter wherein CSC was to load 800 to 1,100 metric tons of silica quartz on board the M/T
Espiritu Santo at Ayungon, Negros Occidental for transport to and discharge at Tagoloan, Misamis Oriental to
consignee Ferrochrome Phils., Inc
DEC 23, 1984, CSC received and loaded 1,100 metric tons of silica quartz on board the M/T Espiritu Santo which left for
Misamis the next day M/T Espiritu Santo sank off the beach of Opol, Misamis Oriental, resulting in the total loss of the
cargo.
MCCII filed a claim for the loss of the shipment with its insurer Philippine Home Assurance Corporation paid the claim
of P211,500 and was subrogated to the rights of MCCII
PHAC filed a case against CSC for reimbursement of the amount it paid MCCII WON IN THE RTC! CSC ordered to
reimburse
CA affirmed CSC appealed

ISSUE: May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not own?

CSC and MCCII entered into a "voyage charter," also known as a contract of affreightment wherein the ship was leased
for a single voyage for the conveyance of goods, in consideration of the payment of freight. Under a voyage charter,
the shipowner 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 freight. An owner who retains possession of the ship remains
liable as carrier and must answer for loss or non-delivery of the goods received for transportation.

CSC argues that the voyage of charter is NOT a contract of carriage. It insists that the agreement was merely a contract
of hire wherein MCCII hired the vessel from its owner, ALS Timber Enterprises (ALS). Not being the owner of the M/T
Espiritu Santo, petitioner did not have control and supervision over the vessel, its master and crew thus, it could not be
held liable for the loss of the shipment
SC DISAGREES! Based on the agreement signed by the parties and the testimony of CSCs operations manager, it is
clear that it was a contract of carriage.
There is no dispute that CSC was a common carrier. At the time of the loss of the cargo, it was engaged in the business
of carrying and transporting goods by water, for compensation, and offered its services to the public.
From the nature of their business and for reasons of public policy, common carriers are bound to observe
extraordinary diligence over the goods they transport according to the circumstances of each case. In the event of loss
of the goods, common carriers are responsible, unless they can prove that this was brought about by the causes
specified in Article 1734. In all other cases, common carriers are presumed to be at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence.
IN THIS CASE CSC was the one which contracted with MCCII for the transport of the cargo. It had control over what
vessel it would use. All throughout its dealings with MCCII, it represented itself as a common carrier. The fact that it did
not own the vessel it decided to use to consummate the contract of carriage did not negate its character and duties as
a common carrier.
Court did said it is not reasonable to expect MCCII to ask about ownership of vessel As a practical matter, it is very
difficult and often impossible for the general public to enforce its rights of action under a contract of carriage if it
should be required to know who the actual owner of the vessel is. In fact, in this case, the voyage charter itself
denominated petitioner as the "owner/operator" of the vessel

CSC says if there was a contract of carriage it was between MCCII and ALS as evidenced by the bill of lading ALS
issued SC DISAGREES AGAIN
o A bill of lading may serve as the contract of carriage between the parties BUT it cannot prevail over the express
provision of the voyage charter [I]n cases where a Bill of Lading has been issued by a carrier covering goods shipped
aboard a vessel under a charter party, and the charterer is also the holder of the bill of lading, "the bill of lading
operates as the receipt for the goods, and as document of title passing the property of the goods, but not as varying
the contract between the charterer and the shipowner."

Coastwise 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.
 Planters v. CA
Facts:
Planters Products, Inc. purchased from Mitsubishi International Corporation 9,329.7069 metric tons of Urea 46%
fertilizer, which the latter shipped aboard the cargo vessel M/V Sun Plum on June 16, 1974. Prior to its voyage, a
time-charter party was entered into between Mitsubishi as shipper, and Kyosei Kisen Kabushiki Kaisha as shipowner.
Before loading the fertilizer aboard the vessel, four of her holds were presumably inspected by the charterers
representative and found it fit to take the load. After loading the cargo, the steel hatches were closed with heavy iron
lids, covered with 3 layers of tarpaulin then tied with steel bonds. It remained sealed throughout the entire voyage.
Upon arrival of the vessel, petitioner unloaded the cargo, which took 11 days. A private marine and cargo surveyor,
Cargo Superintendents Company, Inc. (CSCI) was hired by petitioner to determine the outturn of the cargo shipped.
CSCI reported shortage of 106.726 metric tons, and contamination of 18 metric tons due to dirt. PPI sent a claim letter
against Soriamont Steamship Agencies, the resident agent of KKKK. The request was denied, hence, PPI filed an action
for damages before the CFI Manila. The lower court sustained the petitioners claim, but such decision was reversed by
the appellate court, which absolved the carrier from liability. The appellate court ruled that the vessel was a private
carrier and not a common carrier by reason of the charter party.
Issues:
(1) Whether a common carrier becomes a private carrier by reason of a charter party
(2) Whether the ship owner was able to prove the exercise of the diligence required under the circumstances
Held:
(1) A "charter-party" is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner
to another person for a specified time or use; Charter parties are of two types: (a) contract of affreightment which
involves the use of shipping space on vessels leased by the owner in part or as a whole, to carry goods for others; and,
(b) charter by demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer
to him of its entire command and possession and consequent control over its navigation, including the master and the
crew, who are his servants. Contract of affreightment may either be time charter, wherein the vessel is leased to the
charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage.
Upon the other hand, the term "common or public carrier" is defined in Art. 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 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. Article 1733 of the
New Civil Code mandates that common carriers, by reason of the nature of their business, should observe extraordinary
diligence in the vigilance over the goods they carry. In the case of private carriers, however, the exercise of ordinary
diligence in the carriage of goods will suffice. Moreover, in case of loss, destruction or deterioration of the goods,
common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise
rests on them. On the contrary, no such presumption applies to private carriers, for whosoever alleges damage to or
deterioration of the goods carried has the onus of proving that the cause was the negligence of the carrier.
When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the
employ of the shipowner and therefore continued to be under its direct supervision and control. Hardly then can we
charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer did
not have any control of the means in doing so. This is evident in the present case considering that the steering of the
ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime
navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner. It is
only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes
private, at least insofar as the particular voyage covering the charter-party is concerned.
(2) In an action for recovery of damages against a common carrier on the goods shipped, the shipper or consignee
should first prove the fact of shipment and its consequent loss or damage while the same was in the possession, actual
or constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to prove that he has exercised
extraordinary diligence required by law or that the loss, damage or deterioration of the cargo was due to fortuitous
event, or some other circumstances inconsistent with its liability. To our mind, respondent carrier has sufficiently
overcome, by clear and convincing proof, the prima facie presumption of negligence.
Before the fertilizer was loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated. After completing
the loading of the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and sealed with iron lids,
then covered with three (3) layers of serviceable tarpaulins which were tied with steel bonds. The hatches remained
close and tightly sealed while the ship was in transit as the weight of the steel covers made it impossible for a person to
open without the use of the ship's boom. It was also shown during the trial that the hull of the vessel was in good
condition, foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside the hull of the
vessel. When M/V "Sun Plum" docked at its berthing place, representatives of the consignee boarded, and in the
presence of a representative of the shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI,
opened the hatches and inspected the condition of the hull of the vessel. The stevedores unloaded the cargo under the
watchful eyes of the shipmates who were overseeing the whole operation on rotation basis.
The period during which private respondent was to observe the degree of diligence required of it as a public carrier
began from the time the cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and
passed scrutiny by the shipper, up to and until the vessel reached its destination and its hull was re-examined by the
consignee, but prior to unloading. A shipowner is liable for damage to the cargo resulting from improper stowage only
when the stowing is done by stevedores employed by him, and therefore under his control and supervision, not when
the same is done by the consignee or stevedores under the employ of the latter.
Common carriers are not responsible for the loss, destruction or deterioration of the goods if caused by the character
of the goods or defects in the packaging or in the containers. The primary cause of these spillages is the clamped shell
which does not seal very tightly. Also, the wind tends to blow away some of the materials during the unloading process.
The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater
by the fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the elements and
the grimy condition of the various pieces of equipment used in transporting and hauling it. If there was loss or
contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to
the dump trucks and finally to the consignee's warehouse.
Bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss or damage, more so, with a variable
weather condition prevalent during its unloading, as was the case at bar. This is a risk the shipper or the owner of the
goods has to face. Clearly, respondent carrier has sufficiently proved the inherent character of the goods which makes
it highly vulnerable to deterioration; as well as the inadequacy of its packaging which further contributed to the loss. On
the other hand, no proof was adduced by the petitioner showing that the carrier was remiss in the exercise of due
diligence in order to minimize the loss or damage to the goods it carried.

A.F Sanchez Brokerage Inc. v. CA,

Principle: Customs broker is engaged in the business of transportation as a common carrier as it obliges itself to undertake
to deliver goods to
the warehouse for consideration

Facts:
AF Sanchez is engaged in a broker business wherein its main job is to calculate customs duty, fees and charges as well as
storage fees for the cargoes. Part also of the services being given by AF Sanchez is the delivery of the shipment to the
consignee upon the instruction of the shipper.

Wyett engaged the services of AF Sanchez where the latter delivered the shipment to Hizon Laboratories upon instruction
of Wyett. Upon inspection, it was found out that at least 44 cartons containing contraceptives were in bad condition. Wyett
claimed insurance from FGU. FGU exercising its right of subrogation claims damages against AF Sanchez who delivered the
damaged goods. AF Sanchez contended that it is not a common carrier but a brokerage firm.

Held:
SC held that Art 1732 of the Civil Code in defining common carrier does not distinguish whether the activity is undertaken as
a principal activity or merely as an ancillary activity. In this case, while it is true that AF Sanchez is principally engaged as a
broker, it cannot be denied from the evidence presented that part of the services it offers to its customers is the delivery of
the goods to their respective consignees.

Addendum:
Doctrine of Foul Bill of Lading reservation or protest on a shipment or goods improperly packed.

AF Sanchez claimed that the proximate cause of the damage is improper packing. Under the CC, improper packing of the
goods is an exonerating circumstance. But in this case, the SC held that though the goods were improperly packed, since AF
Sanchez knew of the condition and yet it accepted the shipment without protest or reservation, the defense is deemed
waived.

Effect of Charter Party.

Cebu Salvage Corporation v. Philippine Home Assurance Corp.

Principle: Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control over what vessel
it would use. All throughout its dealings with MCCII, it represented itself as a common carrier. The fact that it did not own
the vessel it decided to use to did not negate its character and duties as a common carrier. The MCCII (respondents
subrogor) could not be reasonably expected to inquire about the ownership of the vessels which petitioner carrier offered
to utilize.

As a practical matter, it is very difficult and often impossible for the general public to enforce its rights of action under a
contract of carriage if it should be required to know who the actual owner of the vessel is. In fact, in this case, the voyage
charter itself denominated petitioner as the owner/operator of the vessel. While it is true that the BOL may serve as a
contract of carriage between the parties, it cannot prevail over the express provision of voyage charter that MCCII and
petitioner executed

Facts
Petitioner CSC & Maria Christina Chemicals Industries, Inc., (MCCII) entered into a voyage charter wherein CSC was to load
800-1,100 metric tons of silica quartz on board the M/T Espiritu Santo at Ayungon, Negros Occidental for transport to and
discharge at Tagoloan, Misamis Oriental to consigned Ferrochrome Phils., Inc. Pursuant to the contract, on December 23,
1984, CSC received & loaded 1,100 metric tons of silica quartz on board the M/T Espiritu Santo which left Ayungon for
Tagoloan the next day.
However, the shipment never reached its destination because the M/T Espiritu Santo sank off the beach of Opol, Misamis
Oriental, resulting in the total loss of the cargo.
MCCII filed a claim for the loss of the shipment with its insurer, PHAC. PHAC paid the claim in the amount of P211,500 and
was surrogated to MCCIIs rights. It thereafter filed a case in the RTC against CSC for reimbursement of the amount it paid
MCCII.

However, CSC claims no liability insisting that the agreement was merely a contract of hire wherein MCCII hired the vessel
from its owner, ALS Timber Enterprises. Not being the owner of the M/T Espiritu Santo, petitioner did not have control over
the vessel, its master & crew. Thus, it could not allegedly be held liable for the loss of the shipment caused by the sinking of
a ship it didnt own.

HELD:
1. Yes. The cargo was loaded on board the vessel; loss/non-delivery of the cargo was proven; and petitioner failed to prove
that it exercised extraordinary diligence to prevent such loss or that it was due to some casualty or force majeure. The
voyage charter here being a contract of affreightment, the carrier was answerable for the loss of the goods received for
transportation.
2. CSC was the one which contracted with MCCII for the transport of the cargo. It had control over what vessel it would
use. All throughout its dealings with MCCII, it represented itself as a common carrier. The fact that it did not own the
vessel it decided to use to consummate the contract of carriage did not negate its character & duties as a common carrier.
The MCCII could not be reasonably expected to inquire about the ownership of the vessels which petitioner carrier offered
to utilize. It is very difficult & often impossible for the general public to enforce its rights of action under a contract of
carriage if it should be required to know who the actual owner of the vehicle is. In this case, the voyage charter itself
denominated the petitioner as the owner/operator of the vessel.
3. 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 that MCCII and petitioner
executed.
4. It deserves scant consideration that the voyage charter stipulated that cargo insurance was for the charterers account.
This 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 prohibits it and condemns it as unjust & contrary to public policy.
5. The idea proposed by CSC is preposterous & dangerous. MCCII never dealt with ALS and yet petitioner insists that MCCII
should sue ALS for reimbursement for its loss. Certainly, to permit a common carrier to escape its responsibility for the
goods it agreed to transport (by expedient of alleging non-ownership of the vessel it employed) would radically derogate
from the carriers duty of extraordinary diligence. It would also open the door to collusion between the carrier & the
supposed owner and to the possible shifting of liability from the carrier to one without any financial capability to answer for
the resulting damages.

Common carrier v. Private Carrier.

Valenzuela Hardwood and Industrial Supply, Inc. v. CA
Principle: In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on
the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of
the ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is freely entered into by the
parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of
private carriage is not even a contract of adhesion.

We stress that in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce
would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general
public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably
be applied to a ship transporting commercial goods as a private carrier.

The Facts
Plaintiff (Valenzuela Hardwood and Industrial Supply, Inc.) entered into an agreement with the defendant Seven Brothers
(Shipping Corporation) whereby the latter undertook to load on board its vessel M/V Seven Ambassador the formers lauan
round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila.

Plaintiff insured the logs against loss and/or damage with defendant South Sea Surety and Insurance Co., Inc. for
P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00 on said date, the
plaintiff gave the check in payment of the premium on the insurance.
The vessel M/V Seven Ambassador sank resulting in the loss of the plaintiffs insured logs. On 30 January 1984, a check for
P5,625.00 (Exh. E) to cover payment of the premium and documentary stamps due on the policy was tendered due to the
insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it issued
as of the date of the inception for non-payment of the premium due in accordance with Section 77 of the Insurance Code.

Plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the proceeds of the policy but
the latter denied liability under the policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping
Corporation for the value of the lost logs but the latter denied the claim.
After due hearing and trial, the court a quo rendered judgment in favor of plaintiff and against defendants. Both defendants
shipping corporation and the surety company appealed.

Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to the court a quo the following assignment of
errors, to wit:
B. The lower court erred in declaring that the non-liability clause of the Seven Brothers Shipping Corporation from logs (sic)
of the cargo stipulated in the charter party is void for being contrary to public policy invoking article 1745 of the New Civil
Code.

The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South Sea Surety and Insurance
Company (South Sea), but modified it by holding that Seven Brothers Shipping Corporation (Seven Brothers) was not
liable for the lost cargo. 5 In modifying the RTC judgment, the respondent appellate court ratiocinated thus:

It appears that there is a stipulation in the charter party that the ship owner would be exempted from liability in case of loss.
The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the liability of the
shipping corporation. The provisions on common carriers should not be applied where the carrier is not acting as such but
as a private carrier.

Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person
only, becomes a private carrier.

The Issue
whether or not respondent Court (of Appeals) committed a reversible error in upholding the validity of the stipulation in
the charter party executed between the petitioner and the private respondent exempting the latter from liability for the
loss of petitioners logs arising from the negligence of its (Seven Brothers) captain.
The Courts Ruling

The petition is not meritorious.

Validity of Stipulation is Lis Mota- The charter party between the petitioner and private respondent stipulated that the
(o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo. 10 The
validity of this stipulation is the lis mota of this case.

It should be noted at the outset that there is no dispute between the parties that the proximate cause of the sinking of M/V
Seven Ambassadors resulting in the loss of its cargo was the snapping of the iron chains and the subsequent rolling of the
logs to the portside due to the negligence of the captain in stowing and securing the logs on board the vessel and not due to
fortuitous event. Likewise undisputed is the status of Private Respondent Seven Brothers as a private carrier when it
contracted to transport the cargo of Petitioner Valenzuela. Even the latter admits this in its petition.

In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the
charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the
ship captain. Pursuant to Article 1306 17 of the Civil Code, such stipulation is valid because it is freely entered into by the
parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of
private carriage is not even a contract of adhesion. We stress that in a contract of private carriage, the parties may freely
stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common
carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common
carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private
carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or
remove the protection given by law in contracts involving common carriers.

Petitioner likewise argues that the stipulation subject of this controversy is void for being contrary to Articles 1170 and 1173
of the Civil Code 27 which read:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable for damages
Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of
the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows
bad faith, the provisions of articles 1171 and 2201, shall apply.
If the law does not state the diligence which is to be observed in the performance, that which is expected of a good father
of a family shall be required.
The Court notes that the foregoing articles are applicable only to the obligor or the one with an obligation to
perform. In the instant case, Private Respondent Seven Brothers is not an obligor in respect of the cargo, for
this obligation to bear the loss was shifted to petitioner by virtue of the charter party. This shifting of
responsibility, as earlier observed, is not void. The provisions cited by petitioner are, therefore, inapplicable to
the present case.

Loadmasters Customs Services, Inc. Glodel Brokerage Corporation

Common Carrier - Customs Broker
FACTS:
R&B Insurance issued a Marine Policy in favor of Columbia to insure the shipment of 132 bundles of electric copper
cathodes against All Risks. The cargoes were shipped on board the vessel "Richard Rey" from Isabela, Leyte, to Pier
10, North Harbor, Manila. They arrived on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the pier and the
subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the services of Loadmasters for the use of its
delivery trucks to transport the cargoes to Columbias warehouses/plants in Bulacan and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by its employed drivers and
accompanied by its employed truck helpers. Of the six (6) trucks route to Balagtas, Bulacan, only five (5) reached the
destination. One (1) truck, loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo.
Later on, the said truck, was recovered but without the copper cathodes. Because of this incident, Columbia filed
with R&B Insurance a claim for insurance indemnity. After the investigation, R&B Insurance paid Columbia insurance
indemnity.
R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and Glodel before the (RTC), It
sought reimbursement of the amount it had paid to Columbia for the loss of the subject cargo. It claimed that it had been
subrogated "to the right of the consignee to recover from the party/parties who may be held legally liable for the loss."
RTC rendered a decision holding Glodel liable for damages for the loss of the subject cargo and dismissing Loadmasters
counterclaim for damages and attorneys fees against R&B Insurance.
Both R&B Insurance and Glodel appealed the RTC decision to the CA.
CA rendered that the appellee is an agent of appellant Glodel, whatever liability the latter owes to appellant R&B Insurance
Corporation as insurance indemnity must likewise be the amount it shall be paid by appellee Loadmasters. Hence,
Loadmasters filed the present petition for review on certiorari.

ISSUE:
Whether or not Loadmasters and Glodel are common carriers to determine their liability for the loss of the subject cargo.

RULING:
Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations engaged in the
business of carrying or transporting passenger or goods, or both by land, water or air for compensation, offering their
services to the public. Loadmasters is a common carrier because it is engaged in the business of transporting goods by land,
through its trucking service. It is a common carrier as distinguished from a private carrier wherein the carriage is generally
undertaken by special agreement and it does not hold itself out to carry goods for the general public. Glodel is also
considered a common carrier within the context of Article 1732. For as stated and well provided in the case of Schmitz
Transport & Brokerage Corporation v. Transport Venture, Inc., a customs broker is also regarded as a common carrier, the
transportation of goods being an integral part of its business.

Loadmasters and Glodel, being both common carriers, are mandated from the nature of their business and for reasons of
public policy, to observe the extraordinary diligence in the vigilance over the goods transported by them according to all the
circumstances of such case, as required by Article 1733 of the Civil Code. When the Court speaks of extraordinary diligence,
it is that extreme measure of care and caution which persons of unusual prudence and circumspection observe for securing
and preserving their own property or rights. With respect to the time frame of this extraordinary responsibility, the Civil
Code provides that the exercise of extraordinary diligence 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.

The Court is of the view that both Loadmasters and Glodel are jointly and severally liable to R & B Insurance for the loss of
the subject cargo. Loadmasters claim that it was never privy to the contract entered into by Glodel with the
consignee Columbia or R&B Insurance as subrogee, is not a valid defense.
For under ART. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions, but
also for those of persons for whom one is responsible.
xxxx
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 not engaged in any business or industry.
It is not disputed that the subject cargo was lost while in the custody of Loadmasters whose employees (truck driver and
helper) were instrumental in the hijacking or robbery of the shipment. As employer, Loadmasters should be made
answerable for the damages caused by its employees who acted within the scope of their assigned task of delivering the
goods safely to the warehouse.
Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to ensure that Loadmasters would fully
comply with the undertaking to safely transport the subject cargo to the designated destination. Glodel should, therefore,
be held liable with Loadmasters. Its defense of force majeure is unavailing.
For the consequence, Glodel has no one to blame but itself. The Court cannot come to its aid on equitable grounds. "Equity,
which has been aptly described as a justice outside legality, is applied only in the absence of, and never against, statutory
law or judicial rules of procedure." The Court cannot be a lawyer and take the cudgels for a party who has been at fault or
negligent.

Common carrier v. Other contracts.

Cargolift Shipping Inc. V. L. Actuario Marketing Co. and Skyland Brokerage

Common Carrier v Contract of Towage
Facts
Respondent L. Acuario Marketing Corp., (Acuario) and respondent Skyland Brokerage, Inc., (Skyland) entered into a time
charter agreement whereby Acuario leased to Skyland its L. Acuario II barge for use by the latter in transporting electrical
posts from Manila to Limay, Bataan. At the same time, Skyland also entered into a separate contract with petitioner
Cargolift, for the latters tugboats to tow the aforesaid barge.

In accordance with the foregoing contracts, petitioners tugboat M/T Beejay left the Manila South Harbor with Acuarios
barge in tow. It reached the port of Limay, Bataan, whereupon M/T Beejay disengaged and once again set sail
for Manila. Petitioners other tugboat, the M/T Count, remained in Bataan to secure the barge for unloading.

Off-loading operations went underway until operations were interrupted for the next two days to give way to the
observance of the lenten season. The unloading of the cargo was concluded by the time M/T Beejay had gone back
to Bataan for the return trip. The M/T Beejay and the barge returned to the port of Manila.

On the same day, the barge was brought to Acuarios shipyard where it was allegedly discovered by Acuarios dry-docking
officer, Guillermo Nacu, Jr., that the barge was listing due to a leak in its hull. According to Nacu, he was informed by the
skipper of the tugboat that the damage was sustained in Bataan. To confirm the same, Nacu ordered an underwater survey
of the barge and prepared a damage report. No representative of Skyland was present during the inspection although it was
furnished with a copy of the said report.

The barge was consequently dry-docked for repairs at the Western Shipyard. Acuario spent for the repairs.

Pursuant to its contract with Skyland which provided that (a)ny damage or loss on the barge due to the fault or negligence
of charterers shall be the responsibility of the (c)harterer or his representative, Acuario wrote Skyland seeking
reimbursement of its repair costs, failing which, it filed a complaint for damages against Skyland before the RTC.

According to Acuario and its witnesses, the weather in Bataan shifted drastically while the barge was docked at the Limay
port eight meters away from the stone wall. Due to strong winds and large waves, the barge repeatedly hit its hull on the
wall, thus prompting the barge patron to alert the tugboat captain of the M/T Count to tow the barge farther out to
sea. However, the tugboat failed to pull the barge to a safer distance due to engine malfunction, thereby causing the
barge to sustain a hole in its hull.

On the other hand, petitioner and Skyland denied that the barge had been damaged. One of its witnesses, Salvador D.
Ocampo, claimed that he was involved in all aspects of the operation and that no accident of any sort was brought to his
knowledge. He alleged that the barge patron and tug master made no mention of any maritime casualty during the clearing
of the vessels at the Philippine Ports Authority in Limay, Bataan. The barge was in good condition and was not damaged
when it was turned over to Acuario.
Held:
SC find no cogent reason to disturb the lower courts finding that the barge sustained a hole in its hull when petitioners
tugboat failed to tow it to a safer distance as the weather changed in the port of Limay. This Court is bound by the factual
determinations of the appellate court especially when these are supported by substantial evidence and merely affirm those
of the trial court, as in this case. There is no showing here that the inferences made by the Court of Appeals were manifestly
mistaken, or that the appealed judgment was based on a misapprehension of facts, or that the appellate court overlooked
certain relevant, undisputed facts which, if properly considered, would justify a different conclusion. Thus, a reversal of the
factual findings in this case is unwarranted.

It was not Acuario that seeks to hold petitioner liable for the damage to the barge, as the former in fact sued only Skyland
pursuant to their charter agreement. It was Skyland that impleaded petitioner as third-party defendant considering that
Skyland was being held accountable for the damage attributable to petitioner. In other words, petitioner was not sued
under Skylands charter agreement with Acuario, but pursuant to its separate undertaking with Skyland. Strictly speaking,
therefore, petitioner is not being held liable under any charter agreement with Acuario.
Consequently, it is not correct for petitioner to assert that Acuario could not recover damages from it due to lack of privity
of contract between them. It is not Acuario that is seeking damages from petitioner but Skyland, with whom it undoubtedly
had a juridical tie. While Acuario could hold Skyland liable under its charter agreement, Skyland in turn could enforce
liability on petitioner based on the latters obligation to Skyland. In other words, petitioner is being held liable by Skyland
and not by Acuario.

Thus, in the performance of its contractual obligation to Skyland, petitioner was required to observe the due diligence of
a good father of the family. This much was held in the old but still relevant case of Baer Senior & Co.s Successors v. La
Compania Maritima[21] where the Court explained that a tug and its owners must observe ordinary diligence in the
performance of its obligation under a contract of towage. The negligence of the obligor in the performance of the
obligation renders him liable for damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the performance of the obligation as the nature of the
obligation so demands.

In the case at bar, the exercise of ordinary prudence by petitioner means ensuring that its tugboat is free of mechanical
problems. While adverse weather has always been a real threat to maritime commerce, the least that petitioner could
have done was to ensure that the M/T Count or any of its other tugboats would be able to secure the barge at all times
during the engagement. This is especially true when considered with the fact that Acuarios barge was wholly dependent
upon petitioners tugboat for propulsion. The barge was not equipped with any engine and needed a tugboat for
maneuvering.

Needless to say, if petitioner only subjected the M/T Count to a more rigid check-up or inspection, the engine
malfunction could have been discovered or avoided. The M/T Count was exclusively controlled by petitioner and the latter
had the duty to see to it that the tugboat was in good running condition. There is simply no basis for petitioners assertion
that Skyland contractually assumed the risk of any engine trouble that the tugboat may encounter. Skyland merely
procured petitioners towing service but in no way assumed any such risk.

That petitioners negligence was the proximate cause of the damage to the barge cannot be doubted. Had its tugboat been
serviceable, the barge could have been moved away from the stone wall with facility. It is too late in the day for petitioner
to insist that the proximate cause of the damage was the barge patrons negligence in not objecting to the position of the
barge by the stone wall. Aside from the fact that the position of the barge is quite understandable since off-loading
operations were then still underway,[24] the alleged negligence of the barge patron is a matter that is also being raised for
the first time before this Court.

Thus, the damage to the barge could have been avoided had it not been for the tugboats inability to tow it away from the
stone wall. Considering that a barge has no power of its own and is totally defenseless against the ravages of the sea, it
was incumbent upon petitioner to see to it that it could secure the barge by providing a seaworthy tugboat. Petitioners
failure to do so did not only increase the risk that might have been reasonably anticipated during the shipside operation but
was the proximate cause of the damage.[25] Hence, as correctly found by the courts below, it should ultimately be held
liable therefor.

Mindanao Terminal and Brokerage services v. Phoenix Assurance Co.

Common Carrier v Contract of Stevedoring

Mindanao Terminal and Brokerage services v. Phoenix Assurance Co.

Del Monte Philippines contracted petitioner Mindanao Terminal and Brokerage Service, Inc, a stevedoring company, to load
and stow a shipment of 146,288 cartons of fresh green Bananas and 15,202 cartons of fresh pineapples belonging to Del
Monte Produce into the cargo hold of the vessel M/v Mistrau The vessel was docked at the port of Davao and goods were
to be transported to Incheon, Korea in favour of consignee Taegu Industries.
Del Monte Produce insured the shipment under an open cargo policy with private respondent Phoenix Assurance Company
of New York, a non-life insurance company, and private respondent McGee & Co, the underwriting manager/agent of
Phoenix
Upon arrival of M/V Mistrau in Incheon, it was discovered upon discharge that some of the cargo was in bad condition
The damage surveyor of Korea, Byeong, surveyed that 16,069 cartons of the banana shipment and 2,185 cartons of the
pineapple shipment were so damaged that they no longer had commercial value.
Del Monte Produce filed a claim under the open cargo policy. McGees Marine Claims evaluated the claim and
recommended that payment in the amount of $210,266.43 be made. Del Monte issued a subrogation receipt to Phoenix
and McGee. Phoenix and McGee instituted an action for damages against Mindanao Terminal
RTC ruled that the only participation of Mindanao Terminal was to load the cargoes on board the vessel and signed the
foremans report unless they were properly arranged and tightly secured to withstand voyage across the open seas. It was
found that the cargoes were damages on account of a typhoon which M/V Mistrau had encountered during the voyage.
It was held that Phoenix and McGee had no cause of action against Mindanao Terminal because the latter, whose services
were contracted by Del Monte, a distinct corporation from Del Monte Produce, had no contract with the assured Del Monte
Produce.
CA reversed the RTC s decision which sustained Phoenix s and McGee s argument that the damage in the cargoes was the
result of the improper stowage by Mindanao Terminal. It imposed on Mindanao Terminal, as the stevedore of the cargo,
the duty to exercise extraordinary diligence in loading and stowing the cargoes.
It further held that even with the absence of a contractual relationship between Mindanao Terminal and Del Monte
Produce, the cause of action of Phoenix and McGee could be based on quasi-delict under Article 2176 of the Civil Code.

RULING:
The present action is based on quasi-delict, arising from the negligent and careless loading and stowing of the cargoes
belonging to Del Monte Produce. Even assuming that both Phoenix and McGee have only been subrogated in the rights of
Del Monte Produce, who is not a party to the contract of service between Mindanao Terminal and Del Monte, still the
insurance carriers may have a cause of action in light of the Courts consistent ruling that the act that breaks the contract
may be also a tort.
In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract
In the present case, Phoenix and McGee are not suing for damages for injuries arising from the breach of the contract of
service but from the alleged negligent manner by which Mindanao Terminal handled the cargoes belonging to
DelMonte Produce. Despite the absence of contractual relationship between Del Monte Produce and Mindanao Terminal,
the allegation of negligence on the part of the defendant should be sufficient to establish a cause of action arising from
quasi-delict.
Article 1173 of the Civil Code is very clear that if the law or contract does not state the degree of diligence which is to be
observed in the performance of an obligation then that which is expected of a good father of a family or ordinary diligence
shall be required.
Mindanao Terminal, a stevedoring company which was charged with the loading and stowing the cargoes of Del Monte
Produce aboard M/V Mistrau, had acted merely as a labor provider in the case at bar. There is no specific provision of
law that imposes a higher degree of diligence than ordinary diligence for a stevedoring company or one who is charged
only with the loading and stowing of cargoes.
It was neither alleged nor proven by Phoenix and McGee that Mindanao Terminal was bound by contractual stipulation to
observe a higher degree of diligence than that required of a good father of a family. We therefore conclude that following
Article 1173, Mindanao Terminal was required to observe ordinary diligence only in loading and stowing the cargoes of Del
Monte Produce aboard M/V Mistrau.
Mindanao Terminal, as a stevedore, was only charged with the loading and stowing of the cargoes from the pier to the
ships cargo hold; it was never the custodian of the shipment of Del Monte Produce.
The loading and stowing of cargoes would not have a far reaching public ramification as that of a common carrier and a
warehouseman; the public is adequately protected by our laws on contract and on quasi-delict.
The public policy considerations in legally imposing upon a common carrier or a warehouseman a higher degree of diligence
is not present in a stevedoring outfit which mainly provides labor in loading and stowing of cargoes for its clients.
Phoenix and McGee failed to prove by preponderance of evidence that Mindanao Terminal had acted negligently. Phoenix
and McGee relied heavily on the deposition of Byeong Yong Ahn and on the survey report of the damage to the cargoes.
Byeong, whose testimony was refreshed by the survey report, found that the cause of the damage was improper stowage
due to the manner the cargoes were arranged. As admitted by Phoenix and McGee in their Comment before us, the latter is
merely a stevedoring company which was tasked by Del Monte to load and stow the shipments of fresh banana and
pineapple of Del Monte Produce aboard the M/V Mistrau.
How and where it should load and stow a shipment in a vessel is wholly dependent on the shipper and the officers of the
vessel.
we are of the opinion that damage occurred aboard the carrying vessel during sea transit, being caused by ship s heavy
rolling and pitching under boisterous weather while proceeding from 1600 hrs on 7th October to 0700 hrs on 12th October,
1994 as described in the sea protest.
As it is clear that Mindanao Terminal had duly exercised the required degree of diligence in loading and stowing the cargoes,
which is the ordinary diligence of a good father of a family, the grant of the petition is in order.
 Cebu Arrastre Services v. CIR
Common Carrier v Arrastre
Cebu Arrastre Services v. Collector of Internal Revenue

The Cebu Arrastre, an association of persons engaged in the handling of cargoes carried by coastwise vessels stopping at
the port of Cebu, thru its counsel Atty. Jose Muana petitioned the Collector of Internal Revenue for the exemption and the
refund based on the grounds that they are:
1. A group of laborers who had recently organized themselves into an arrastre service association merely for the
purpose of centralizing the collection of handling" charges and making direct payment to the men in order to insure
the compliance of the Minimum Wage Law requirement,
2. theyre under the direct supervision and control of the officers of the ships.
3. That the Cebu Arrastre Service is engaged solely in the loading and unloading of cargoes to and from the boats and
is not engaged in the transportation business."
Acting upon the petition, the Collector referred the matter to his agent in Cebu for investigation. And on the basis of said
report the Collector denied the petition, holding that inasmuch as the Cebu Arrastre was engaged in the loading and
unloading of vessels in port, it may be considered a stevedore within the meaning of section 191 of the Tax Code. In this
connection, it may be stated that section 191 of the Tax Code imposes a tax equivalent to 3 per cent of the gross receipts
on certain businesses and business entities, among them stevedores.

SC
"The question, then revolves around the facts and around the credibility of the description depicting the exact nature of the
work of the laborers working under the contracts entered into by the Cebu Arrastre Co. Inc. with Cebu shipowners. We just
determine therefore, which of the two conflicting versions conies nearer the reality of the situation.
"We may say at the outset that the preponderance of evidence is in favor of the version of the Assistant Agent of the
Bureau of Internal Revenue of Cebu. According to him the loading and unloading of cargoes to and from the ships holds is
done by the laborers under the Cebu Arrastre Service Co., Inc. and the ships officers supervision is limited to the proper
placing of the same inside the ships hold, the inference being that said 'proper placing (stowing) is being done by the
corporation laborers. This is not contradicted by the version of the petitioner as given in its original petition wherein it says:
The men working under the Cebu Arrastre Service are same men of 'Katubusanan sa Maraumuo' who have been handling
the loading of the boats of the Aboitiz & Co. and of the Philippine Navigation Co. since 1947 up to the present.' It says also,
further on: 'The Cebu Arrastre Service is dedicated itself solely to the loading and unloading of cargoes on the boats . . .' It is
true that the President and Counsel corrected this description in the memorandum on appeal to the effect that laborers of
the corporation do not, except on rare occasions, engage in loading or unloading the boat but limit their work on loading or
unloading pele-mele. the slings of the boats under contract with the Arrastre Service, but in the opinion of the Board this
amendment is not nearer to the truth than the original version which was corroborated by the official who investigated the
case by order of the Collector of Internal Revenue.
"It is noteworthy that in the agreement entered into by the shipowners and the corporation mention is twice made of the
'arrastre service on the vessels' (but never on the piers) to be done by the laborers of the Cebu Arrastre Service Inc. Another
circumstance which may help in obtaining a clear picture of the situation is that nowhere in these papers is it contended
that the stevedores actually performing the stowing work belong to an organization not related to the petitioner."
We quote the following definitions of stevedores, viz:
Stevedores is "one who works at, or one who is responsible for, the unloading and loading of a vessel in port. (Webster's
New International Dictionary, Second Edition (unabridged), p. 2473).
A stevedore is a person employed in loading and unloading a vessel. (The Owego, D. C. Wash., 292 F. 505, 507).
Stevedores are class of laborers at the ports whose business it is to load and unload vessels. (The Senator, 21 F. 191).
"Stevedore" is defined as "one whose occupation is to load and unload vessels in port"; in other words, a contractor or a
jobber for special business ready to be employed by anybody at his line of work (Rankin vs. Merchants and Miners
Transp. Co., 73 Ga. 239, 54 Am. Rep. 874).
"Stevedore" and "longshoreman", are synonymous terms when interpreted in the light of the work they perform, namely
loading and unloading of vessels (Zampiere vs. Willian Spencer and Son Corporation, 185 N.Y.S. 639, 640, 194 App. Div.
576).
Under the above definitions the Cebu Arrastre admittedly engaged in the work of loading and unloading coast wise
vessels calling at the port of Cebu, should be regarded as a stevedore and therefore subject to the percentage tax under
section 191 of the Tax Code. But even if we applied the narrower and more specific concept of stevedore used by the Tax
Board, namely, that a stevedore is one who places cargoes in the holds of ships in such a way that the boat would maintain
an even keel, and that even with the movement of the boat, especially in rough weather, the cargoes would not be
displaced from their original position, still', under the finding of fact made by the Tax Board that the Cebu Arrastre is
engaged in this work of towing cargo either in the hold or even on the deck, appellant would be subject to the tax. We also
agree with the Tax Board that the purpose for which the petitioner-appellant was organized, and the supervision exercised
by the ships' officers over its work in loading and unloading vessels including the towing of cargo, has nothing to do with the
tax liability of the petitioner-appellant.

In view of the foregoing, the decision appealed from is hereby affirmed, with costs in both instances.

Crisostomo v. CA
Common Carrier v Travel Agency
FACTS:
Petitioner Estela L. Crisostomo (Crisostomo) contracted the services of respondent Caravan Travel and ToursInternational,
Inc. (Caravan) to arrange and facilitate her booking, ticketing and accommodation in a tour dubbed Jewels of Europe.
Pursuant to said contract, Meriam Menor (MENOR) who is also the niece of Crisostomo, went to the latters residence to
deliver the travel documents and plane tickets. Crisostomo, in turn, gave Menor the full payment for the package tour.
Without checking her travel documents, Crisostomo went to NAIA. However, she discovered that the flight she was
supposed to take had already departed the previous day. She thus called up Menor to complain.

Subsequently, Menor prevailed upon Crisostomo to take another tour the British Pageant to which Crisostomo was asked
to pay once again. Upon Crisostomos return from Europe, she demanded from Caravan the reimbursement of
P61,421.70,representing the difference between the sum she paid for Jewels of Europe and the amount she owed
Caravanfor the British Pageant tour. Despite several demands, Caravan refused to reimburse the amount, contendingthat
the same was non-refundable. Crisostomo thus filed a case.

Crisostomo alleged that her failure to join Jewels of Europe was due to Caravans fault since it did not clearly indicate the
departure date on the plane ticket. Caravan was also negligent in informing her of the wrongflight schedule through its
employee Menor. Caravan insisted that Crisostomo was informed of the correct departure date, which was clearly and
legibly printed on the plane ticket. The travel documents were given two days ahead of the scheduled trip. Crisostomo had
only herself to blame for missing the flight, as she did not bother to read or confirm her flight schedule as printed on the
ticket.

RTC: Caravan was negligent in erroneously advising Crisostomo of the wrong date. Crisostomo incurredcontributory
negligence for not checking her travel documents. Caravan should reimburse Crisostomo but withdeductions due to her
contributory negligence.

CA: Both parties were at fault. However, Crisostomo is more negligent because as a lawyer and well-traveled person,
she should have known better than to simply rely on what was told to her. This being so, she is not entitled to any form of
damages. Crisostomo appealed to SC.

HELD
No, a travel agency is not an entity engaged in the business of transporting either passengers or goodsand is therefore,
neither a private nor a common carrier.

By definition, a contract of carriage or transportation is one whereby a certain person or association of persons obligate
themselves transport
persons, things, or news from one place to another for a fixed price. Such person or association of persons are regarded as c
arriers and are classified as private or special carriers and common or public carriers. A common carrier is defined under
Article 1732 of the Civil Code as persons, corporations, firms or associations engaged in the business of carrying
or transporting passengers orgoods or both, by land, water or air, for compensation, offering their services to the public.

It is obvious from the above definition that respondent is not an entity engaged in the business of transporting either
passengers or goods. Respondent did not undertake to transport petitioner from one place to another since its covenant
with its customers is simply to make travel arrangements in their behalf. Respondents services as a travel agency include
procuring tickets and facilitating travel permits or visas as well as booking customers for tours.

The object of petitioners contractual relation with respondent is the latters service of arranging and facilitating petitioners
booking, ticketing and accommodation in the package tour. In contrast, the object of a contract of carriage is the
transportation of passengers or goods. It is in this sense that the contract between the parties in this case was an ordinary
one for services and not one of carriage.
A travel agency is not an entity engaged in the business of transporting either passengers or goods and is
therefore, neither a private nor a common carrier. It goes without saying that a travel agency is not required by law to
exercise extra ordinary diligence.
Governing Laws:
1.3 Article 1766 of the New Civil Code(NCC).
1.4 Article 1753 NCC.
1.5 Article 1732-1766 NCC.
1.6 National Dev. Company v. CA 164 SCRA 593.
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

Application of Art. 1753NCC

National Dev. Company v. CA

National Development Company (NDC) appointed Maritime Company of the Philippines (MCP) as its agent to manage and
operate its vessel, Dona Nati, for and in behalf of its account. In 1964, while en route to Japan from San Francisco, Dona
Nati collided with a Japanese vessel, SS Yasushima Maru, causing its cargo to be damaged and lost. The private respondent,
as insurer to the consigners, paid almost Php400,000.00 for said lost and damaged cargo. Hence, the private respondent
instituted an action to recover from NDC

Issue:
Which laws govern the loss and destruction of goods due to collision of vessels outside Philippine waters

Ruling:
In a previously decided case, it was held that the law of the country to which the goods are to be transported governs the
liability of the common carrier in case of their loss, destruction or deterioration pursuant to Article 1753 of the Civil Code. It
is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan.It appears, however, that collision
falls among matters not specifically regulated by the Civil Code, hence, we apply Articles 826 to 839, Book Three of the Code
of Commerce, which deal exclusively with collision of vessels.

Mapa v. CA
When Is there International Transportation
When:
1. The place of departure and the place of destination are within the territories of two high contracting parties, regardless
of whether or not there was a break in the transportation or transshipment.

2. The place of departure and the place of destination are within the territory of a single contracting party if there is an
agreed stopping place within a territory subject to the sovereignty, mandate or authority of another power, even though
the power is not a party to the convention.
 Alitalia v. Intermediate Appellate Court
Warsaw Convention

Facts:
Dr. Felipa Pablo, an associate professor in the University of the Philippines and a research grantee of the Philippine Atomic
Energy Agency, was invited to take part at a meeting of the Department of Research and Isotopes in Italy in view of her
specialized knowledge in foreign substances in food and the agriculture environment. She would be the second speaker
on the first day of the meeting. Dr. Pablo booked passage on petitioner Alitalia. She arrived in Milan on the day before
the meeting, but was told that her luggage was delayed and was in a succeeding flight from Rome to Milan. The luggage
included her materials for the presentation. The succeeding flights did not carry her luggage. Desperate, she went to Rome
to try to locate the luggage herself, but to no avail. She returned to Manila without attending the meeting. She demanded
reparation for the damages.

She rejected Alitalias offer of free airline tickets and commenced an action for damages. As it turned out, the luggage was
actually forwarded to Ispra, but only a day after the scheduled appearance. It was returned to her after 11 months. The trial
court ruled in favor of Dr. Pablo, and this was affirmed by the Court of Appeals.

Held:
(1) Under the Warsaw Convention, an air carrier is made liable for damages for:
a. The death, wounding or other bodily injury of a passenger if the accident causing it took place on board the aircraft or I
the course of its operations of embarking or disembarking;
b. The destruction or loss of, or damage to, any registered luggage or goods, if the occurrence causing it took place during
the carriage by air; and
c. Delay in the transportation by air of passengers, luggage or goods.

The 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, or by such default on his part as is considered to be equivalent to wilful misconduct. The
Convention does not thus operate as an exclusive enumeration of the instances of an airline's liability, or as an absolute
limit of the extent of that liability. It should be deemed a limit of liability only in those cases where the cause of the death
or injury to person, or destruction, loss or damage to property or delay in its transport is not attributable to or attended by
any wilful misconduct, bad faith, recklessness, or otherwise improper conduct on the part of any official or employee for
which the carrier is responsible, and there is otherwise no special or extraordinary form of resulting injury.

In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the employees of petitioner airline; and
Dr. Pablo's luggage was eventually returned to her, belatedly, it is true, but without appreciable damage. The fact is,
nevertheless, that some species of injury was caused to Dr. Pablo because petitioner ALITALIA misplaced her baggage and
failed to deliver it to her at the time appointed - a breach of its contract of carriage. Certainly, the compensation for the
injury suffered by Dr. Pablo cannot under the circumstances be restricted to that prescribed by the Warsaw Convention for
delay in the transport of baggage.

(2) She is not, of course, entitled to be compensated for loss or damage to her luggage. She is however entitled to nominal
damages which, as the law says, is adjudicated in order that a right of the plaintiff, which has been violated or invaded by
the defendant, may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff that for any loss
suffered and this Court agrees that the respondent Court of Appeals correctly set the amount thereof at PhP 40,000.00.

The Court also agrees that respondent Court of Appeals correctly awarded attorneys fees to Dr. Pablo and the amount of
PhP 5,000.00 set by it is reasonable in the premises. The law authorizes recovery of attorneys fees inter alia where, as here,
the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his
interest or where the court deems it just and equitable.

Philippine Charter Insurance Corpo v. Neptune Orient Lines

Application of COGSA

Limited liability

While common carriers are liable to pay for loss or destruction of goods transported by them, if they failed to prove
that they observe extraordinary diligence in the vigilance over the goods, a stipulation in the bill of lading limiting their
liability for such loss or destruction to a certain sum is sanctioned by law (Art. 1749 and 1750, Civil Code), unless the
shipper or owner declares a greater value. This is the rule applied in this case of NOL, a shipping company based in Hong
Kong and owner of the vessel M/V Baltimar Orion.

The goods here consisted of three sets of warped yarn shipped from Hong Kong by a garments manufacturer (LTGMC)
on returnable beams aboard the said vessel for transport and delivery to a local garment manufacturer in Metro Manila
(FMC).
 The said cargoes were loaded in a container in good condition under Bill of Lading N. HKG-0396180 9B/L) that had no
declaration as to the actual value of the Goods. FMC however insured the shipment against all risks with Philippine Charter
Insurance Corporation (PCIC) under Marine Cargo Policy No. RN 55581 in the amount of P228,085.

Under the said B/L it is stipulated that neither the carrier nor the vessel shall in any event become liable for any loss
of or damage to or in connection with the transportation of Goods in an amount exceeding US$500 per package or in case
of Goods not shipped in packages, per shipping unit or customary freight unless the nature and value of such Goods have
been declared by the Shipper before shipment and inserted in this B/L and the shipper has paid additional charges on such
declared value

In the course of the maritime voyage from Hong Kong to Manila, the vessel encountered winds and seas such as to
cause moderate to heavy pitching and rolling deeply at times. As a result four containers on board, including the container
of the subject shipment fell overboard.

Thus FMC claimed the value of the lost cargo from OASI, the local agent of NOL in Manila. But the agent ignored the
claim. Hence FMC sought payment from its insurer PCIC for the insured value of the cargoes in the amount of P228,085
which claim was fully satisfied by PCIC.

Held: Yes. Since the cargoes were lost while being transported from HK to the Philippines, the rights and obligations of
common carriers are governed by the provisions of the Civil Code and the Carriage of Goods by Sea Act (COGSA) of the
United States (Article 1753 and 1766, Civil Code).

The pertinent provisions of the Civil Code says that stipulations limiting the common carriers liability 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). Also
under 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.

Section 4 par. 5 of the COGSA which also pertinently provides that 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 not
exceeding $500 per package unless the nature and value of such goods have been declared by the shipper before the
shipment and inserted in the B/L

In this case the B/L submitted by the PCIC did not show that the shipper (LTGMC) declared the actual value of the
goods insured by FMC before shipment and that said value was inserted in the B/L. In fact no additional charges were paid.
Hence the stipulation in the B/L that the carriers liability shall not exceed US$500 per package applies (Philippine Charter
Insurance Corporation vs. Neptune Orient Lines etc., G.R. 145044, June 12, 2008)

1.7 RA 4136.

1.8 RA 9497.

2. Nature of business.

3. Registered owner rule and Kabit System.

3.1 Registration laws.
Compulsory registration of motor vehicles RA 4136

Registered owner rule.

PCI leasing and finance, Inc. v. UCPB General Insurance Co.

The non-registration of the financial lease precludes the enjoyment of the benefits of Section 12 of RA 8556

FACTS:A Mitsubishi Lancer car owned by UCPB, insured with UCPB General Insurance Co., was traversing the LaurelHighway,
Barangay Balintawak, LipaCity. It was driven by Flaviano Isaac with Conrado Geronimo (Asst. Manager of saidbank), was hit
and bumped by an 18-wheeler Fuso Tanker Truck, owned by defendants-appellants PCI Leasing &Finance, Inc. allegedly
leased to and operated by defendant-appellant Superior Gas & Equitable Co., Inc. (SUGECO) anddriven by its employee,
defendant appellant Renato Gonzaga. The impact caused heavy damage to the MitsubishiLancer car resulting in an
explosion of the rear part of the car. The driver and passenger suffered physical injuries.However, the driver
defendant-appellant Gonzaga continued on its way to its destination and did not bother to bringhis victims to the
hospital.As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands were made
byplaintiff-appellee for the payment of the aforesaid amounts. However, no payment was made. PCI Leasing and
Finance,Inc., (petitioner) interposed the defense that it could not be held liable for the collision, since the driver, Gonzaga,
wasnot its employee, but that of its co-defendant SUGECO. In fact, it was SUGECO, that was the actual operator of thetruck,
pursuant to a Contract of Lease signed by petitioner and SUGECO. Petitioner, however, admitted that it was theowner of
the truck in question. RTC rendered judgment in favour of UCPB General Insurance and ordered PCI Leasing and Gonzaga,
to pay jointly and severally the former. CA affirmed with the lower courts decision.
ISSUES:
Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-delict may be held liable, jointly
andseverally, with the driver thereof, for the damages caused to third parties.

RULING: The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting from its use is
well-established in jurisprudence. As explained in the case of Erezo v. Jepte, thus:

Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in
land registration cases, because the administrative proceeding of registration does not bear anyessential relation to the
contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation
of the vehicle upon any public highway (section 5 [a], Act No. 3992, asamended.) The main aim of motor vehicle registration
is to identify the owner so that if any accident happens, orthat any damage or injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed on adefinite individual, the registered owner. Instances are numerous
where vehicles running on public highwayscaused accidents or injuries to pedestrians or other vehicles without positive
identification of the owner or drivers,or with very scant means of identification. It is to forestall these circumstances, so
inconvenient or prejudicial tothe public, that the motor vehicle registration is primarily ordained, in the interest of the
determination of personsresponsible for damages or injuries caused on public highways.

A sale, lease, or financial lease, for that matter, that is not registered with the Land Transportation Office, still does not bind
third persons who are aggrieved in tortious incidents, for the latter need only to rely on the public registration of amotor
vehicle as conclusive evidence of ownership. A lease such as the one involved in the instant case is anencumbrance in
contemplation of law, which needs to be registered in order for it to bind third parties. Under thispolicy, the evil sought to
be avoided is the exacerbation of the suffering of victims of tragic vehicular accidents in notbeing able to identify a guilty
party. A contrary ruling will not serve the ends of justice. The failure to register a lease,sale, transfer or encumbrance,
should not benefit the parties responsible, to the prejudice of innocent victims.

Equitable Leasing Corporation v. Lucita Suyon,

Facts:
A Fuso Road Tractor driven by Raul Tutor rammed into the house store of Myrna Tamayo in Tondo, Manila. A portion of the
house was destroyed which caused death and injury. Tutor was charged with and later convicted of reckless imprudence
resulting in multiple homicide and multiple physical injuries.

Upon verification with the Land Transportation Office, it was known that the registered owner of the tractor was Equitable
Leasing Corporation/leased to Edwin Lim. On April 15, 1995, respondents filed against Raul Tutor, Ecatine Corporation
(Ecatine) and Equitable Leasing Corporation (Equitable) a Complaint for damages.

The petitioner alleged that the vehicle had already been sold to Ecatine and that the former was no longer in possession
and control thereof at the time of the incident. It also claimed that Tutor was an employee, not of Equitable, but of
Ecatine.

Held:
The Lease Agreement between petitioner and Edwin Lim stipulated that it is the intention of the parties to enter into a
finance lease agreement. Ownership of the subject tractor was to be registered in the name of petitioner, until the value of
the vehicle has been fully paid by Edwin Lim.

Lim completed the payments to cover the full price of the tractor. Thus, a Deed of Sale over the tractor was executed by
petitioner in favor of Ecatine represented by Edwin Lim. However, the Deed was not registered with the LTO. Petitioner is
liable for the deaths and the injuries complained of, because it was the registered owner of the tractor at the time of the
accident.The Court has consistently ruled that, regardless of sales made of a motor vehicle, the registered owner is the
lawful operator insofar as the public and third persons are concerned.

Since Equitable remained the registered owner of the tractor, it could not escape primary liability for the deaths and the
injuries arising from the negligence of the driver.

May registered owner prove the actual owner to escape liability?

Aguilar v. Commercial Savings Bank
Facts
Petitioner Conrado Aguilar, Sr. is the father of the victim in a vehicular accident involving a Lancer car registered in the
name of respondent bank, but driven by co-respondent Ferdinand G. Borja.

Petitioner filed a complaint for damages against respondents in the RTC, Branch 59. Borja did not file his answer within the
reglementary period, hence, he was declared in default by the trial court. At the trial, respondent bank admitted that the
Lancer was registered in its name at the time of the incident. Petitioners counsel also showed that Borja was negligent in
driving the car.
The trial court declared that Borjas negligence, carelessness and imprudence caused the victims death. It also found that
Borja was an assistant vice president of respondent bank at the time of the incident. It held that under Art. 2180[3] of the
Civil Code, the negligence of the employee is presumed to be that of the employer, whose liability is primary and direct; and
that respondent bank failed to exercise due diligence in the selection of its employees.

Respondent bank appealed to the Court of Appeals.

The Court of Appeals reversed RTC. It said that before it can apply Art. 2180 on which private respondent anchored its claim
of the banks negligence, petitioner must first establish that Borja acted on the occasion or by reason of the functions
entrusted to him by his employer. The appellate court found no evidence that Borja had acted as respondent banks
assistant vice-president at the time of the mishap. The Court of Appeals reversed the trial courts decision.

The sole issue is whether or not respondent bank, as the Lancers registered owner, is liable for damages.

Held:
In BA Finance Corporation vs. Court of Appeals, 215 SCRA 715, we had already held that the registered owner
of any vehicle, even if not for public service, is primarily responsible to third persons for deaths, injuries and damages it
caused. This is true even if the vehicle is leased to third persons. In that case, petitioners Isuzu ten-wheeler truck driven by
an employee of a certain Lino Castro met an accident. Neither the driver nor Lino Castro was connected to petitioner, for at
the time of the incident, the truck was on lease to Rock Component Philippines, Inc. The Court held petitioner liable as the
trucks registered owner, despite the absence of employer-employee relationship between petitioner and the
driver. Though petitioner in said case had a right of reimbursement against Rock Component for the total amount of its
liability, the Court per Melo, J. made clear petitioner remained legally responsible to the victim of vehicular mishap on the
basis of jurisprudential dogmas.

As early as Erezo vs. Jepte, 102 Phil. 103, the Court through Labrador, J. had synthesized the rationale for holding the
registered owner of a vehicle directly liable. There we said:

Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as
in land registration cases, because the administrative proceeding of registration does not bear any essential relation to
the contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and
operation of the vehicle upon any public highway (section 5 [a], Act No. 3992, as amended.) The main aim of motor vehicle
registration is to identify the owner so that if any accident happens, or that any damage or injury is caused by the vehicle on
the public highways, responsibility therefor can be fixed on a definite individual, the registered owner. Instances are
numerous where vehicles running on public highways caused accidents or injuries to pedestrians or other vehicles without
positive identification of the owner or drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for damages or injuries caused on public highways.

One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of
accident; and another is that the knowledge that means of detection are always available may act as a deterrent from lax
observance of the law and of the rules of conservative and safe operation. Whatever purpose there may be in these
statutes, it is subordinate at the last to the primary purpose of rendering it certain that the violator of the law or of the
rules of safety shall not escape because of lack of means to discover him. The purpose of the statute is thwarted, and the
displayed number becomes a snare and delusion, if courts would entertain such defenses as that put forward by appellee in
this case. No responsible person or corporation could be held liable for the most outrageous acts of negligence, if they
should be allowed to place a middleman between them and the public, and escape liability by the manner in which they
recompense their servants. (King vs. Brenham Automobile Co., 145 S.W. 278, 279.)

We hold with the trial court that the law does not allow the registered owner to prove who the actual and real owner is,
and in accordance with such proof escape or evade responsibility and lay the same on the person actually owning the
vehicle to do so; the law, with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes
and places upon him as an incident or consequence of registration. Were a registered owner allowed to evade
responsibility by proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or
otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no
property with which to respond financially for the damage or injury done. A victim of recklessness on the public highways
is usually without means to discover or identify the person actually causing the injury or damage. He has no means other
than by a recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection that the
law aims to extend to him would become illusory were the registered owner given the opportunity to escape liability by
disproving his ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be
allowed to prove the contrary to the prejudice of the person injured, that is, to prove that a third person or another has
become the owner, so that he may thereby be relieved of the responsibility to the injured person.

Perez v. Gutierrez

A complaint was filed by Fe Perez with the Court of First Instance of Davao against Josefina Gutierrez, for breach of contract
of carriage, alleges that while she, together with nine co-teachers, was a passenger of an AC jeepney registered under the
name of the defendant Gutierrez, the said vehicle, due to the reckless negligence of its driver Leopoldo Cordero, met with
an accident, resulting in injuries to herself which required her hospitalization. In her answer, Josefina Gutierrez averred
that if the claim of Fe Perez is at all justified, responsibility therefor should devolve on one Panfilo Alajar, the actual
owner, by purchase, of the said passenger jeepney when the accident occurred and against whom she has filed a
third-party complaint.

Deed of sale states: That the vendee herein, by these presents, do hereby binds himself and do hereby assume,
responsibility for all actions, claims, demands, and rights of action, and whatever kind and nature, that may hereafter
develop as a consequence of or in the course of operation of the aforementioned vehicle;

Alajar disclaimed responsibility alleging that the deed of sale was null and void for it has not been registered with
the Public service Commission despite his demands on vendee Gutierrez. the Gutierrez collects rentals from him for the use
of said vehicle and that title to said vehicle remained with Gutierrez pending approval of the sale by the Public service
Commission.

CFI: found Leopoldo Cordero guilty of reckless imprudence, and finding that Panfilo Alajar owned and operated the auto
calesa in question and, in fact, after the accident, even assumed responsibility for the payment of the hospital bills due to
the Brokenshire Memorial Hospital for treatment of the injuries suffered by Fe Perez.

SC: The present appeal questions the correctness of the dispositive portion of the decision a quo which adjudged Panfilo
Alajar, instead of Josefina Gutierrez, as the party liable to her for the payment of the damages adjudicated in her favor.
Specifically, Fe Perez argues that the registered owner of a motor vehicle should be the one held liable for damages
resulting from breach of contract of carriage by a common carrier.

We find the appeal meritorious and in accord with settled law on the matter.

In Peralta vs. Mangusang this Court, in approbation of a similar argument, said:

The law (Sec. 20 [g], Public Service Act) really requires the approval of the Public Service Commission in order that a
franchise, or any privileges pertaining thereto, may be sold or leased without infringing the certificate issued to the grantee.
The reason is obvious. Since a franchise is personal in nature any transfer or lease thereof should be submitted for approval
of the Public Service Commission, so that the latter may take proper safeguards to protect the interest of the public. It
follows that if the property covered by the franchise is transferred or leased to another without obtaining the requisite
approval, the transfer is not binding on the Public Service Commission and, in contemplation of law, the grantee
continues to be responsible under the franchise in relation to the Commission and to the public for the consequences
incident to the operation of the vehicle, one of them being the collision under consideration.

In the earlier case of Erezo vs. Jepte, which is cited in the foregoing opinion, this Court held that the doctrine making the
registered owner of a common carrier answerable to the public for negligence injuries to its passengers or third persons,
even though the vehicle had already been transferred to another, is based upon the principle

... that in dealing with vehicles registered under the Public Service Law, the public has the right to assume or presume
that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce the actions that
they may have for injuries caused to them by the vehicles being negligently operated if the public should be required to
prove who the actual owner is.

In Tamayo vs. Aquino, also cited in Mangusang, supra, this Court, reiterating what was stated en passant in Jepte, supra,
described the nature of the liability of the actual transferee of a vehicle the negligent operation of which gives rise to
injuries to its passengers:

The question that is posed, therefore, is how should the holder of the certificate of public convenience Tamayo participate
with his transferee operator Rayos, in the damages recoverable by the heirs of the deceased passenger, if their liability is
not that of joint tortfeasors in accordance with Article 2194 of the Civil Code. The following considerations must be borne in
mind in determining this question. As Tamayo is the registered owner of the truck, his responsibility to the public or to any
passenger riding in the vehicle or truck must be direct, for the reasons given in our decision in the case of Erezo vs.
Jepte, supra, as quoted above. But as the transferee, who operated the vehicle when the passenger died, is the one
directly responsible for the accident and death, he should in turn be made responsible to the registered owner for what
the latter may have been adjudged to pay. In operating the truck without transfer thereof having been approved by the
Public Service Commission, the transferee acted merely as agent of the registered owner and should be responsible to
him (the registered owner), for any damages that he may cause the latter by his negligence."

Trial court below erred in holding Panfilo Alajar, rather than Josefina Gutierrez, as the one directly liable to Fe Perez for the
latter's injuries and the corresponding damages incurred. This Court notes moreover, that the court below inexplicably
failed to hold the driver (Leopoldo Cordero), whom it found guilty of reckless imprudence, jointly and solidarily liable with
Josefina Gutierrez to Fe Perez in accordance with the provisions of article 2184 in relation to article 2180 of the new Civil
Code.
3.2 Kabit system.
 Aberlardo Lim, et al. v. CA
Respondent Donato Gonzales purchased an Isuzu passenger jeepney from Gomercino Vallarta, holder of a certificate of
public convenience for the operation of public utility vehicles plying the Monumento-Bulacan route. Gonzales did not have
the registration of the vehicle transferred in his name nor did he secure for himself a certificate of public convenience for its
operation. Thus Vallarta remained on record as its registered owner and operator.

On 22 July 1990, while the jeepney was running northbound along the North Diversion Road somewhere in Meycauayan,
Bulacan, it collided with a ten-wheeler-truck owned by petitioner Abelardo Lim and driven by his co-petitioner Esmadito
Gunnaban. Gunnaban owned responsibility for the accident, explaining that while he was traveling towards Manila the
truck suddenly lost its brakes.he smashed into a Ferroza automobile, and later, into private respondent's passenger jeepney
driven by one Virgilio Gonzales. The impact caused severe damage to both the Ferroza and the
passenger jeepney and left one (1) passenger dead and many others wounded.

Petitioner Lim shouldered the costs for hospitalization of the wounded, compensated the heirs of the deceased passenger,
and had the Ferroza restored to good condition. He also negotiated with private respondent and offered him P40,000.00,
from the P20,000 offer he made earlier but private respondent was unyielding.

Private respondents filed for damages against petitioners

In his answer Lim denied liability by contending that he exercised due diligence in the selection and supervision of his
employees. He further asserted that as the jeepney was registered in Vallartas name, it was Vallarta and not private
respondent who was the real party in interest.
the trial court upheld private respondent's claim and awarded him P236,000.00 with legal interest from 22 July 1990 as
compensatory damages and P30,000.00 as attorney's fees, which was affirmed in toto by the Court of Appeals.

In upholding the decision of the court a quo the appeals court concluded that while an operator under thekabit system
could not sue without joining the registered owner of the vehicle as his principal, equity demanded that the present case be
made an exception.
Hence, this petition.
Issue:
Whether or not the new owner have any legal personality to bring the action, or is he the real party in interest in the suit,
despite the fact that he is not the registered owner under the certificate of public convenience.

Held:
Yes. Private respondent has the right to proceed against petitioners for the damage caused on his passenger jeepney as well
as on his business.
Although petitioners' attempt to illustrate that an affirmance of the appealed decision could be supportive of the pernicious
kabit system does not persuade, the evil sought to be prevented in enjoining the kabit system does not exist. 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. 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 the present case, 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.

Kabit system- definition, liability of owner and driver

Lita Enterprises, Inc. v. IAC

FACTS:

Ocampo and Garcia purchased in installment from the Delta Motor Sales Corporation 5 Toyota Corona Standard cars to
be used as taxicabs; they had no franchise to operate taxicabs, so they contracted with Lita Enterprises for the use of the
latters certificate of public convenience in consideration of an initial payment of 1,000.00 and a monthly rentalof 200.00
per taxicab unit; the aforesaid cars were then registered in the name of LitaEnterprises
one of the taxicabs driven by Ocampo and Garcias employee, Emeterio Martin, collided with a motorcycle whose driver,
Florante Galvez, died from the head injuries sustained therefrom. a criminal case was filed against the driver Martin, while a
civil case for damages wasinstituted by heir of the victim against Lita Enterprises

ISSUE:
WON Lita Enterprises is liable to the heir of the victim who died as a result of the gross negligence of Ocampo and Garcias
driver while driving one private respondentstaxicabs

HELD:
Yes. kabit system system whereby a person who has been granted a certificate of convenience allows another person
who owns motors vehicles to operate under suchfranchise for a fee; contrary to public policy and, therefore, void and
inexistent underArticle 1409 of the Civil Code; as a result, the court will not aid either party to enforce anillegal contract,
but will leave them both where it finds them (pari delicto rule)

Art. 1412: If the act in which the unlawful or forbidden cause consists does not constitutea criminal offense, the following
rules shall be observed; (1) when the fault, is on the partof both contracting parties, neither may recover what he has given
by virtue of thecontract, or demand the performance of the others undertaking.

the defect of inexistence of a contract is permanent and incurable, and cannot be cured byratification or by prescription

Mariano C Mendoza and Lim v. SPS Gomez and Gomez

Topic: Liability of a registered owner of a vehicle
Facts: As a result of a vehicular collision resulting from the drivers negligence, respondents suffered physical injuries and
the Isuzu truck sustained extensive damages. Hence, this case for damages. Respondents argued that although the
registered owner of the bus was Lim, the actual owner of the bus was Cirilo Enriquez (Enriquez), who had the bus attached
with Mayamy Transportation Company (Mayamy Transport) under the so-called "kabit system." Respondents then
impleaded both Lim and Enriquez.
Issue: Who is liable? Who is deemed as Mendozas (driver) employer? Is it Enriquez, the actual owner of the bus or Lim, the
registered owner of the bus?
Ruling:
The registered owner is deemed the employer of the negligent driver, and is thus vicariously liable under Article 2176, in
relation to Article 2180, of the Civil Code. The registered owner of the motor vehicle is the employer of the negligent driver,
and the actual employer is considered merely as an agent of such owner. Thus, whether there is an employer-employee
relationship between the registered owner and the driver is irrelevant in determining the liability of the registered owner
who the law holds primarily and directly responsible for any accident, injury or death caused by the operation of the vehicle
in the streets and highways

As such, there can be no other conclusion but to hold Lim vicariously liable with Mendoza.
This does not mean, however, that Lim is left without any recourse against Enriquez and Mendoza. Under the civil law
principle of unjust enrichment, the registered owner of the motor vehicle has a right to be indemnified by the actual
employer of the driver; and under Article 2181 of the Civil Code, whoever pays for the damage caused by his dependents or
employees may recover from the latter what he has paid or delivered in satisfaction of the claim.
[Supplementary Notes:]
Generally, when an injury is caused by the negligence of a servant or employee, there instantly arises a presumption of law
that there was negligence on the part of the master or employer either in the selection of the servant or employee (culpa in
eligiendo) or in the supervision over him after the selection (culpa vigilando), or both.
The presumption is juris tantum and not juris et de jure; consequently, it may be rebutted. Accordingly, the general rule is
that if the employer shows to the satisfaction of the court that in the selection and supervision of his employee he has
exercised the care and diligence of a good father of a family, the presumption is overcome and he is relieved of liability.
However, with the enactment of the motor vehicle registration law, the defenses available under Article 2180 of the Civil
Code - that the employee acts beyond the scope of his assigned task or that it exercised the due diligence of a good father
of a family to prevent damage are no longer available to the registered owner of the motor vehicle, because the motor
vehicle registration law, to a certain extent, modified Article 2180.
(Basically, as long as youre the registered owner of the vehicle, you along with the driver are liable.)
3.3 Pari Delicto Rule.
Kabit System: In Pari Delicto
Teja Marketing v. IAC

Facts: Pedro Nale bought from Teja Marketing a motorcycle with complete accessories and a sidecar. A chattel mortgage
was constituted as a security for the payment of the balance of the purchase price. The records of the Land Transportation
Commission show that the motorcycle sold to the defendant was first mortgaged to the Teja Marketing by Angel Jaucian
though the Teja Marketing and Angel Jaucian are one and the same, because it was made to appear that way only as the
defendant had no franchise of his own and he attached the unit to the plaintiffs MCH Line.

The agreement also of the parties here was for the plaintiff to undertake the yearly registration of the motorcycle with the
Land Transportation Commission. The plaintiff, however failed to register the motorcycle on that year on the ground of
failure to comply with some requirements such as the payment of theinsurance premiums and the bringing of the
motorcycle to the LTC for stenciling, the plaintiff said that the defendant was hiding the motorcycle from him.

Lastly, the plaintiff also explained that though the ownership of the motorcycle was already transferred to the defendant,
the vehicle was still mortgaged with the consent of the defendant to the Rural Bank of Camaligan for the reason that all
motorcycle purchased from the plaintiff on credit was rediscounted with the bank. Teja Marketing made demands for the
payment of the motorcycle but just the same Nale failed to comply, thus forcing Teja Marketing to consult a lawyer and file
an action for damage before the City Court of Naga. Teja Marketing also claimed that as of 20 February 1978, the total
account ofNale was already P2,731,05 as shown in a statement of account; includesnot only the balance of P1, 700.00 but
an additional 12% interest per annumon the said balance from 26 January 1976 to 27 February 1978; a 2% servicecharge;
and P546.21 representing attorneys fees. On his part, Nale did notdispute the sale and the outstanding balance of
P1,700.00 still payable toTeja Marketing; but contends that because of this failure of Teja Marketing tocomply with his
obligation to register the motorcycle, Nale suffered damages when he failed to claim any insurance indemnity which would
amount to no less than P15,000.00 for the more than 2 times that the motorcycle figured in accidents aside from the loss of
the daily income of P15.00 as boundary feebeginning October 1976 when the motorcycle was impounded by the LTC for not
being registered.

On 18 July 1983, the appellate court set asidethe decision under review on the basis of doctrine of "pari delicto,"
andaccordingly, dismissed the complaint of Teja Marketing, as well as thecounterclaim of Nale; without pronouncements as
to costs. Hence, thepetition for review was filed by Teja Marketing and/or Angel Jaucian.

Issue: Whether the defendant can recover damages against the plaintiff?

Held: Unquestionably, the parties herein operated under an arrangement,commonly known as the "kabit system" whereby
a person who has beengranted a certificate of public convenience allows another person who ownsmotor vehicles to
operate under such franchise for a fee. A certificate ofpublic convenience is a special privilege conferred by the government.
Abuseof this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been identified as one of
the root causes of theprevalence of graft and corruption in the government transportation offices.Although not out rightly
penalized as a criminal offense, the kabit system isinvariably recognized as being contrary to public policy and, therefore,
void and inexistent under Article 1409 of the Civil Code. It is a fundamentalprinciple that the court will not aid either party
to enforce an illegal contract, but will leave both where it finds then. Upon this premise it would be error toaccord the
parties relief from their predicament.

Aircrafts and vessels.

Estela Crisostomo v. CA
 4. Boundary System.

Laws and Jurisprudence:

Gregorio George Amante and Vicente Amante vs. Bibiano Serwelas
Gregorio George Amante and Vicente Amante vs. Bibiano Serwelas
(useless case, no principle related to transportation except presumption of ownership)
Facts: Danilo Bicomong was the registered owner of a 1990 Isuzu Jitney. He was employed as plant supervisor of Amante
Motors. Bicomong sold the vehicle for P200,000 to respondent in a deed of absolute sale. On October 7, 1992, respondent
had the vehicle registered in his name, as shown in certificate of registration no. 14058314.[4] He then operated it as a
common carrier on a boundary system.

On December 9, 1993, the vehicle was seized by the police highway patrol group in General Mariano Alvarez, Cavite
without a warrant, upon the request of petitioner Gregorio Amante, the manager of Amante Motors.

The vehicle was brought to Camp Vicente Lim in Laguna and, after being subjected to macro-etching examination by SPO1
Elfin B. Rico of the Philippine National Police Crime Laboratory Service, was later released to petitioner Gregorio Amante.
Despite respondents demand, Gregorio Amante refused to return the vehicle. Hence, respondent instituted a replevin suit
with the trial court. Asserting ownership of the vehicle, petitioner Vicente Amante, the proprietor of Amante Motors,
intervened in the suit.

On April 29, 1996, the trial court rendered a decision declaring respondent as the lawful owner of the vehicle:

The illegal seizure of the vehicle was triggered by the suspicion of the defendant that [the] said vehicle was spirited out of
Amante Motors by Danilo [Bicomong] who was formerly the plant supervisor therein.

Aside from the suspicion and the inconclusive conclusion of the technician that the chassis number of the vehicle in
question was re-stamped no other evidence like registration certificate was adduced by defendant/intervenor, to support
the claim of ownership.

xxx xxx xxx

Besides, it was not shown that the certificate of registration of Danilo was spurious or fake. It was not also shown that the
subject vehicle was registered in the name of either the defendant or intervenor or Amante Motors. Now, between the
plaintiff who purchased the vehicle in good faith and for value and with supporting genuine documents and the
defendant/intervenor who merely presumed that they owned the chassis, the choice is clear.

The trial court also awarded damages to respondent for lost earnings amounting to P103,200 plus P37,963 as premium for
the replevin bond of respondent.

On appeal, the Court of Appeals affirmed the trial courts decision holding respondent as the rightful owner of the vehicle. It
ruled that respondent had established ownership of the vehicle to the exclusion of the whole world. [14] It also affirmed
the award of damages as unrealized earnings[15] but deleted the award for replevin bond premium since no claim for it was
made in the complaint.

Petitioners motion for reconsideration was denied. Hence, this recourse.

Petitioners impute errors involving questions of fact which we are not at liberty to review. Our jurisdiction is generally
limited to reviewing errors of law that may have been committed by the Court of Appeals. We reiterate the oft-repeated
but not so well-heeded rule that findings of fact of the Court of Appeals, especially when they are in agreement with those
of the trial court, are accorded not only respect but even finality, and are binding on this Court. Barring a showing that the
findings complained of were devoid of support, they must stand for this Court is not expected or required to examine or
refute the oral and documentary evidence submitted by the parties. The trial court, having heard the witnesses and
observed their demeanor and manner of testifying, is in a better position to assess their credibility.

In any event, we carefully reviewed the records of this case and found no compelling reason to disturb the findings and
conclusions of the trial court and the appellate court.

Respondents ownership of the vehicle was proven by the certificate of registration in his name. Petitioner Vicente Amante,
on the otherhand, could not present any certificate of registration to support his claim. Between one who is armed with a
certificate of registration clearly establishing his ownership and another whose claim is supported only by unconvincing
allegations, we do not hesitate to rule for the former.

A certificate of registration of a motor vehicle creates a strong presumption of ownership in favor of one in whose name it
is issued, unless proven otherwise. In this case, we have not found sufficient proof to destroy the presumption. Petitioners
seek to dispel the presumption by alleging that the vehicle was stolen by Bicomong from them and therefore the
respondent was a buyer in bad faith. There is no clear indication that the vehicle was stolen by Bicomong, much less that
respondent had knowledge thereof. Hence, the presumption of ownership created by respondents certificate of
registration stands.

More telling are the following observations.

The fact that Bicomong was only a supervisor at Amante Motors did not conclusively prove that he never at any time owned
a jeepney for sale. That was pure speculation. Ones wealth is not measured solely by his occupation. There are so many
possibilities which might have explained how Bicomong managed to own one although that is no longer within the extent of
our review.

Next, as supervisor of Amante Motors, Bicomong was clothed with authority to deal and transact with customers. When
respondent was shown the vehicles on display, it was not necessary for him to verify in whose names the vehicles were
registered. What a customer normally does under such circumstances is to take a look at the items and take his pick.

Petitioners wish to establish bad faith on the part of respondent for purchasing a jeepney which was registered not to
Amante Motors but to Danilo Bicomong. Was this sufficient proof of bad faith on the part of a purchaser? Whatever
internal arrangement the motor shop may have had with Bicomong regarding why the latters vehicle was among those on
display in its premises was not the responsibility of respondent buyer to inquire into. What was crucial was the valid
certificate of registration in Bicomongs name, true and clean on its face. Respondent buyer was not required to go beyond
that.

Petitioners also assert that the delivery of the vehicle to respondents residence should have made him suspicious. We do
not agree. In order to attract buyers, sellers are known to extend all kinds of gimmicks and accommodations, one of which
could have been the delivery of the vehicle right at a buyers doorstep.

Next, in an attempt to prove that the vehicle was stolen from them, petitioners presented evidence such as the police
report on the macro-etching examination conducted on the vehicle. There is something legally anomalous about this,
however. The seizure of the vehicle on December 9, 1993 by the highway patrol group (which led to such examination) was
done without a court warrant. Obviously, Gregorio Amante could not have effected the seizure without the cooperation of
his friendly contacts in the police force. This, on the mere suspicion that it was spirited out of the Amante Motor Shop
sometime in 1992. How are we supposed to rule on this in the light of the Bill of Rights guaranteed by the Constitution?
One of the most protected rights of every person is the right against unreasonable searches and seizures. The fundamental
law mandates that these must be carried out only on the strength of a judicial warrant, otherwise evidence secured
therefrom is deemed tainted. In the language of the fundamental law, it is inadmissible in evidence for any purpose in any
proceeding.

Although the exclusionary rule admits of some exceptions such as customs searches, searches of moving vehicles, seizure of
evidence in plain view, consented searches, searches incidental to a lawful arrest and stop and frisk measures, the case at
bar does not fall under any of the foregoing.

Moreover, the element of immediacy between the time of the commission of the offense and the time of the seizure was
missing. The alleged commission of the theft was in 1992 while the seizure was effected only in 1993. There was thus no
compelling reason for the haste in seizing the vehicle because petitioner Gregorio Amante could have easily obtained a
warrant if he really believed that the vehicle had been stolen from them.

We rule therefore that the reports, based as they were on chattel illegally seized, were inadmissible in evidence and thus
carried no weight.

Finally, the resolution of San Pablo City Assistant Prosecutor Esperidion Gajitos could not but strengthen respondents claim
of good faith. Petitioner Gregorio Amantes criminal complaint for violation of RA 6539 and the Anti-Fencing Law was filed in
court only against Bicomong. Respondent was exonerated of any liability whatsoever.

All told, we find no reason to disturb the findings of both the court a quo and the appellate court on the good faith of
respondent.

Oscar Villarama Jr v. CARegistered Owner/Boundary System

Boundary System
FACTS:
- Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole proprietorship engaged in assembling passenger jeepneys
with a public utility franchise to operate along the Baclaran-Sucat route. By 1995, Villamaria stopped assembling jeepneys
and retained only nine, four of which operated by employing drivers on a boundary basis. One of those drivers was
respondent Bustamante.
- Bustamante remitted 450 a day to Villamaria as boundary and kept the residue of his daily earnings as compensation for
driving the vehicle. In August 1997, Villamaria verbally agreed to sell the jeepney to Bustamante under a boundary-hulog
scheme, where Bustamante would remit to Villamaria P550 a day for a period of 4 years; Bustamane would then become
the owner of the vehicle and continue to drive the same under Villamarias franchise, but with Php 10,000 downpayment.
- August 7, 1997, Villamaria executed a contract entitled Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng Boundary
Hulog. The parties agreed that if Bustamante failed to pay the boundary- hulog for 3 days, Villamaria Motors would hold
on to the vehicle until Bustamante paid his arrears, including a penalty of 50 a day; in case Bustamante failed to remit the
daily boundary-hulog for a period of one week, the Kasunduan would cease to have the legal effect and Bustamante would
have to return the vehicle to Villamaria motors.
- In 1999, Bustamante and other drivers who also had the same arrangement failed to pay their respective boundary-hulog.
The prompted Villamaria to serve a Paalala. On July 24, 2000. Villamaria took back the jeepney driven by Bustamante and
barred the latter from driving the vehicle.
- Bustamante filed a complaint for Illegal Dismissal.

DECISION OF LOWER COURTS:

*Labor Arbiter: petition dismissed.
*NLRC: dismissed appeal.
*CA: reversed NLRC, awarded Bustamante separation pay and backwages.
Hence, this petition for review on certiorari.

ISSUES:
(1) WON the existence of a boundary-hulog agreement negates the employer-employee relationship between the vendor
and vendee
(2) WON the Labor Arbiter has jurisdiction over a complaint for illegal dismissal in such a case.
HELD:
(1) NO. Under the boundary-hulog scheme, a dual juridical relationship is created; that of employer- employee and
vendor-vendee. The Kasanduan did not extinguish the employer employee relationship of the parties existing before the
execution of said deed.
a. Under this system the owner/operator exercises control and supervision over the driver. It is unlike in lease of chattels
where the lessor loses complete control over the chattel leased but the lessee is still ultimately responsible for the
consequences of its use. The management of the business is still in the hands of the owner/operator, who, being the holder
of the certificate of public convenience, must see to it that the driver follows the route prescribed by the franchising and
regulatory authority, and the rules promulgated with regard to the business operations.
b. The driver performs activities which are usually necessary or desirable in the usual business or trade of the
owner/operator. Under the Kasunduan, respondent was required to remit Php 550 daily to petitioner, an amount which
represented the boundary of petitioner as well as respondents partial payment (hulog) of the purchase price of
the jeepney. Thus, the daily remittances also had a dual purpose: that of petitioners boundary and respondents partial
payment (hulog) for the vehicle.
c. The obligation is not novated by an instrument that expressly recognizes the old one, changes only the terms of payment
and adds other obligations not incompatible with the old provisions or where the contract merely supplements the previous
one.
d. The existence of an employment relation is not dependent on how the worker is paid but on the presence or absence of
control over the means and method of the work. The amount earned in excess of the boundary hulog is equivalent to
wages and the fact that the power of dismissal was not mentioned in the Kasunduan did not mean that private respondent
never exercised such power, or could not exercise such power.

OTHER NOTES:
(1) The rule is that the nature of an action and subject matter thereof, as well as, which court or agency of the government
has jurisdiction and the character of the reliefs prayed for, whether or not the complainant/plaintiff is entitled to any or all
of such reliefs.
(2) Not every dispute between an employer and employee involves matters that only the Labor Arbiter and the NLRC can
resolve in the exercise of their adjudicatory or quasi-judicial powers. Actions between employers and employees where the
employer-employee relationship is merely incidental is within the exclusive original jurisdiction of the regular courts.

Martin Lantaco et al. v. City Judge Francisco R. Llamas

Boundary System-not lease, EE-Er Relationship

Martin Lantaco et al. v. City Judge Francisco R. Llamas

An investigating special counsel of the City Fiscal's Office of Pasay City, filed Criminal Cases all for estafa against
Ricardo Paredes, an officer of the PASCAMASCON, an association of jeepney operators, for
"nonremittance of SSS contribution premiums." These cases were assigned to respondent Judge. After the prosecution
had rested its case, the defense moved to dismiss all the criminal cases on the ground that the evidence presented by the
prosecution is insufficient to convict the accused beyond reasonable doubt. The prosecution opposed the
motion. According to the complainants, the respondent set the promulgation of his decision but postponed it twice, and at
about 9:45 in the morning, upon respondent's instruction, his clerk of court read the dispositive portion thereof acquitting
the accused of all four estafa cases on the ground of reasonable doubt.

SC: We found that respondent committed grave abuse of authority in refusing to give the complainants a copy of his
decision in Criminal Cases Nos. 95647-95650. xxx (not important-freedom of information)
WE have carefully read, examined and analyzed the decision submitted by the respondent. WE found that in sustaining the
motion to dismiss on the ground of insufficiency of evidence after the prosecution rested its case, respondent committed
several errors bordering on gross ignorance of the law.

I.Xxx (not important- SSS law- duty to remit- judge found grossly ignorant)
II. Xxx (not important- Social Security Act- deductions for SSS pension)

III. For, as early as March 23, 1956, in National Labor Union vs. Benedicto Dinglasan (L-7945), this Court already ruled that
there is employer-employee relation between jeepney owners/operators and jeepney drivers under the boundary
system arrangement, and enunciated:

"The main question to determine is whether there exists a relationship of employer-employee between the drivers of
the jeeps and the owner thereof.

Xxx (principles same as other cases referring to dinglasan case)

The drivers did not invest a single centavo in the business and the respondent is the exclusive owner of the jeeps. The
management of the business is in the respondent's hands. For even if the drivers of the jeeps take material possession of
the jeeps, still the respondent as owner thereof and holder of a certificate of public convenience is entitled to exercise, as
he does and under the law he must, supervision over the drivers by seeing to it that they follow the route prescribed by
the Public Service Commission and the rules and regulations promulgated by it as regards their operation. And when
they pass by the gasoline station of the respondent checking by his employees on the water tank, oil and tire pressure is
done. The only features that would make the relationship of lessor and lessee between the respondent and the drivers,
members of the union, as contended by the respondent, are the fact that he does not pay them any fixed wage but their
compensation is the excess of the total amount of P7.50 which they agreed to pay to the respondent, the owner of the
jeeps, and the fact that the gasoline burned by the jeeps is for the account of the drivers. These two features are not,
however, sufficient to withdraw the relationship between them from that of employer-employee, because the estimated
earnings for fares must be over and above the amount they agreed to pay to the respondent for a ten-hour shift or
ten-hour a day operation of the jeeps.

Not having any interest in the business because they did not invest anything in the acquisition of the jeeps and did not
participate in the management thereof, their service as drivers of the jeeps being their only contribution to the business,
the relationship of lessor and lessee cannot be sustained [In the matter of the Park Floral Company, etc., 19 NLRB
403; Radley et al. vs. Commonwealth, 161 SW (2d) 417; Jones vs. Goodson et al., 121 Fed. Rep. (2d)
176; Mitchel vs. Gibbson et al., 172 Fed. Rep. (2d) 970]. In the lease of chattels the lessor loses complete control over the
chattel leased although the lessee cannot make bad use thereof, for he would be responsible for damages to
the lessor should he do so. In this case there is a supervision and a sort of control that the owner of the jeeps exercises
over the drivers. It is an attempt by ingenious scheme to withdraw the relationship between the owner of the jeeps and
the drivers thereof from the operation of the labor laws enacted to promote industrial peace." (98 Phil. 650, 651-53).

On April 30, 1963, this Court reiterated this doctrine in Magboo, et al. vs. Bernardo (L-16790, 7 SCRA 952) and stated:
"Appellant assails said decision, assigning three errors which boil down to the question of whether or not an
employer-employee relationship exists between a jeepney-owner and a driver under a 'boundary system'
arrangement. Appellant contends that the relationship is essentially that of lessor and lessee.

"A similar contention has been rejected by this Court in several cases. In National Labor Union v. Dinglasan, 52 O.B., No. 4,
1933, it was held that the features which characterize the 'boundary system' - namely, the fact that the driver does not
receive a fixed wage but gets only the excess of the receipt of fares collected by him over the amount he pays to the
jeep-owner and that the gasoline consumed by the jeep is for the account of the driver -- are not sufficient to withdraw
the relationship between them from that of employer and employee. The ruling was subsequently cited and applied
in Doce v. Workmen's Compensation Commission, L-9417, December 22, 1958, which involved the liability of a bus owner
for injury compensation to a conductor working under the 'boundary system.' " (7 SCRA 953-54).

Indeed, considering that about nineteen (19) years before July 31, 1975, when respondent rendered his decision in the
four estafa cases, it was a settled doctrine that an employer-employee relationship exists
between jeepney owners/operators and jeepney drivers under the boundary system arrangement, of which rule
respondent was obviously ignorant (Section 1, Rule 129, Rules of Court, and in line with Municipal Board of Manila vs.
Agustin, 65 Phil. 144).

Since an employer-employee relationship subsists between the jeepney owners/operators and jeepney drivers under the
boundary system arrangement, SSS coverage "shall be compulsory" (Sec. 9, Social Security Act), the SSS's deduction would
follow as a matter of law (Sec.18, supra), and the accused in the four estafa cases, without previous demand by
the jeepney drivers, is under legal obligation to remit the driver's contribution to the SSS.

Decisions of the Supreme Court need not be proved as they are matters of judicial notice (Sec. 1, Rule 129, Rev. Rules of
Court; V Moran, Rules of Court, 1970 ed., pp. 38-39). Ignorance of the law excuses no one (Art. 3, New Civil Code) and
judicial decisions applying or interpreting the law or the Constitution are part of the legal system (Art. 8, New Civil Code).
 In the light of the above discussion, respondent gravely erred in sustaining the motion to dismiss the estafa cases by
conveniently relying on the accepted axiom that the prosecution cannot rely on the weakness of the defense to gain
conviction, for conviction can only rest upon the strength of the prosecution evidence (Duran vs. Court of Appeals, L-39758,
May 7, 1976, citing People vs. Barrera, 82 Phil. 391), and, as a consequence, material and moral damages had been inflicted
on the numerous complaining drivers whose rights to refile the criminal cases for estafa against the accused are now
foreclosed by the rule on double jeopardy.
Isabelo Doce v. WCC and Dadao Jadao

EMPLOYER AND EMPLOYEE; OWNER OF BUS AND CONDUCTOR UNDER BOUNDARY SYSTEM
Not lessor-lessee
1. EMPLOYER AND EMPLOYEE; OWNER OF BUS AND CONDUCTOR UNDER BOUNDARY SYSTEM. The relationship of
employer and employee exists between the owner of a bus and its conductor operating under the boundary system within
the meaning of the law and as such the case comes under the jurisdiction of the Court of Industrial Relations.

The facts as found by the Commission are: Dado Jadao was a conductor of Bus No. 9 of the B-Twelve Liner owned and
operated by Isabelo Doce who was paid under the boundary system. His average daily earnings as conductor was P4.00,
working five days a week. On June 11, 1953, while acting as such conductor, Jadao was pinned by two buses on Quezon
Boulevard, Manila, suffering injuries on the right leg, head and left ear.

It was also proven that under the boundary system adopted by petitioner and respondent, the driver and conductor of the
bus gave to the owner a fixed amount out of the daily earnings derived from its operation. In this case, the conductor and
the driver used to give to respondent P15.00 daily. The owner supplied the gasoline at the beginning but its cost is later
reimbursed out of the earnings of the day. After deducting the cost of the gasoline and the rental of P15.00, the remainder
is divided between the conductor and the driver.

The issue to be determined is whether the employer-employee relationship existed between the owner of the bus and the
conductor considering that the latter worked under a boundary system as explained above and is not paid directly by the
former.

Held:
in National Labor Union v. Dinglasan, SC held that a driver of a jeep who operates the same under the boundary system is
considered an employee within the meaning of the law and as such the case comes under the jurisdiction of the Court of
Industrial Relations. In that case, Benedicto Dinglasan was the owner and operator of TPU jeepneys which were driven by
petitioners under verbal contracts that they will pay P7.50 for 10 hours use under the so- called "boundary system." The
drivers did not receive salaries or wages from the owner. Their days earnings were the excess over the P7.50 they paid for
the use of the jeepneys. In the event that they did not earn more, the owner did not have to pay them anything. In
holding that the employer-employee relationship existed between the owner of the jeepneys and the drivers even if the
latter worked under the boundary system, this Court said:

"The only features that would make the relationship of lessor and lessee between the respondent, owner of the jeeps, and
the drivers, members of the petitioner union, are the fact that he does not pay them any fixed wage but their compensation
is the excess of the total amount of fares earned or collected by them over and above the amount of P7.50 which they
agreed to pay to the respondent, and the fact that the gasoline burned by the jeeps is for the account of the drivers. These
two features are not, however, sufficient to withdraw the relationship between them from that of employer-employee,
because the estimated earnings for fares must be over and above the amount they agreed to pay to the respondent for a
ten-hour shift or ten-hour a day operation of the jeeps. Not having any interest in the business because they did not invest
anything in the acquisition of the jeeps and did not participate in the management thereof, their service as drivers of the
jeeps being their only contribution to the business, the relationship of lessor and lessee cannot be sustained."

The contention of petitioner that the relation that existed between him and the respondent is only one of lessor and lessee
cannot therefore be sustained.

Rodolfo J. Serrano v. Severino Santos Transit and/or Severino Santos

Boundary System - SIL, retirement benefits, not field employees

FACTS: Petitioner Rodolfo Serrano has been an employee of Severino Santos Transit for 14 years. Petitioner applied for
optional retirement from the company whose representative advised him that he must first sign the already prepared
Quitclaim before his retirement pay could be released. As petitioners request to first go over the computation of his
retirement pay was denied, he signed the Quitclaim on which he wrote "U.P." (under protest) after his signature, indicating
his protest to the amount of P75,277.45 which he received, computed by the company at 15 days per year of service.
Petitioner soon after filed a complaint before the Labor Arbiter, alleging that the company erred in its computation since
under Republic Act No. 7641, otherwise known as the Retirement Pay Law, his retirement pay should have been computed
at 22.5 days per year of service to include the cash equivalent of the 5-day service incentive leave (SIL) and 1/12 of the 13th
month pay which the company did not. The company maintained, however, that the Quitclaim signed by petitioner barred
his claim and, in any event, its computation was correct since petitioner was not entitled to the 5-day SIL and pro-rated
13th month pay for, as a bus conductor, he was paid on commission basis. The Labor Arbiter ruled in favor of Serrano. In
the same Labor Advisory on Retirement Pay Law, it was likewise decisively made clear that "the law expanded the concept
of "one-half month salary" from the usual one-month salary divided by two. However, the National Labor Relations
Commission (NLRC) to which respondents appealed reversed the Labor Arbiters ruling and dismissed petitioners
complaint.

ISSUE: Whether or not petitioner is entitled to the computation of retirement pay as given by RA 7641

HELD: Yes. Admittedly, petitioner worked for 14 years for the bus company which did not adopt any retirement scheme.
Even if petitioner as bus conductor was paid on commission basis then, he falls within the coverage of R.A. 7641 and its
implementing rules. As thus correctly ruled by the Labor Arbiter, petitioners retirement pay should include the cash
equivalent of the 5-day SIL and 1/12 of the 13th month pay. For purposes, however, of applying the law on SIL, as well as
on retirement, the Court notes that there is a difference between drivers paid under the "boundary system" and
conductors who are paid on commission basis. In practice, taxi drivers do not receive fixed wages. They retain only those
sums in excess of the "boundary" or fee they pay to the owners or operators of the vehicles.

Conductors, on the other hand, are paid a certain percentage of the bus earnings for the day. A careful perusal of said
provisions of law will result in the conclusion that the grant of service incentive leave has been delimited by the
Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly excluded by Section
1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply to employees classified as "field
personnel." The phrase "other employees whose performance is unsupervised by the employer" must not be understood as
a separate classification of employees to which service incentive leave shall not be granted. Rather, it serves as an
amplification of the interpretation of the definition of field personnel under the Labor Code as those "whose actual hours of
work in the field cannot be determined with reasonable certainty." The same is true with respect to the phrase "those who
are engaged on task or contract basis, purely commission basis." Said phrase should be related with "field personnel,"
applying the rule on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms
that they follow.

Hence, employees engaged on task or contract basis or paid on purely commission basis are not automatically exempted
from the grant of service incentive leave, unless, they fall under the classification of field personnel. As a general rule, [field
personnel] are those whose performance of their job/service is not supervised by the employer or his representative, the
workplace being away from the principal office and whose hours and days of work cannot be determined with reasonable
certainty; hence, they are paid specific amount for rendering specific service or performing specific work. If required to be
at specific places at specific times, employees including drivers cannot be said to be field personnel despite the fact that
they are performing work away from the principal office of the employee.

Probationary Status of Fixed Term

 Part 2 Obligation of Parties
Obligation of the Carrier
Philam Insurance Co. v. Chartis Phil Insurance July 23, 2014
Facts: Shipment was rejected because the goods were wet, and the container was rusty and could contaminate the goods. Freight
forwarder and Ship containing the container adjudged solidarily liable.

"[C]ommon carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated
or got lost or destroyed. That is, unless they prove that they exercised extraordinary diligence in transporting the goods.
Inorder to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such
diligence."42 Further, under Article 1742 of the Civil Code, even if the loss, destruction, or deterioration of the goods should be
caused by the faulty nature of the containers, the common carrier must exercise due diligence to forestall or lessen the loss.

JINSUK engaged the services of Protop Shipping Corporation (PROTOP), a freight forwarder likewise based in South Korea,
to forward the goods to NOVARTIS. The Bill of Lading states that the cargo was on freight prepaid basis and on "shippers load
and count" which means that the "container [was] packed with cargo by one shipper where the quantity, description and
condition of the cargo is the sole responsibility of the shipper."4 the name Sagawa Express Phils., Inc., (SAGAWA) is
designated as the entity in the Philippines which will obtain the delivery contract.

PROTOP shipped the cargo through DONGNAMA which in turn loaded the same to a vessel owned and operated by Heung-A
Shipping Corporation, a Korean corporation, pursuant to a slot charter agreement whereby a space in the latters vessel was
reserved for the exclusive use of the former. Wallem is the ship agent of HEUNG-A in the Philippines. NOVARTIS insured the
shipment with Philam Insurance Company, Inc. (PHILAM, now Chartis Philippines Insurance, Inc.) under All Risk Marine
Open Insurance Policy No. MOP-0801011828 against all loss, damage, liability, or expense before, during transit and even
after the discharge of the shipment from the carrying vessel until its complete delivery to the consignees premises. The vessel
arrived at the port ofManila, South Harbor, on December 27, 2000 and the subject shipment contained in Sea Van Container No.
DNAU 420280-9 was discharged without exception into the possession, custody and care of Asian Terminals, Inc. (ATI) as the
customs arrastre operator.

The shipment was thereafter withdrawn on January 4, 2001, by NOVARTIS appointed broker, Stephanie Customs Brokerage
Corporation (STEPHANIE) from ATIs container yard.

The shipment reached NOVARTIS premises on January 5, 2001 and was thereupon inspected by the companys Senior
Laboratory Technician, Annie Rose Caparoso (Caparoso).5

Upon initial inspection, Caparoso found the container van locked with its load intact. After opening the same, she inspected its
contents and discovered that the boxes of the shipment were wet and damp. The boxes on one side of the van were in disarray
while others were opened or damaged due to the dampness. Caparoso further observed that parts of the container van were
damaged and rusty. There were also water droplets on the walls and the floor was wet. Since the damaged packaging materials
might contaminate the product they were meant to hold, Caparoso rejected the entire shipment.

Aggrieved, NOVARTIS demanded indemnification for the lost/damaged shipment from PROTOP, SAGAWA, ATI and
STEPHANIE but was denied. subrogated all the rights and claims of NOVARTIS against the parties liable for the lost/damaged
shipment to philam.

In the alternative, WALLEM averred that any liability which may be imputed to it is limited only to US$8,500.00 pursuant to
the Carriage of Goods by Sea Act (COGSA).19

HEUNG-A argued that it is not the carrier insofar as NOVARTIS is concerned. The carrier was either PROTOP, a freight
forwarder considered as a non-vessel operating common carrier or DONGNAMA which provided the container van to
PROTOP.20 HEUNG-A denied being the carrier of the subjectshipment and asserted that its only obligation was to provide
DONGNAMA a space on board M/V Heung-A Bangkok V-019.

PROTOP failed to file an answer to the complaint despite having been effectively served with alias summons. It was declared in
default in the RTC Order dated June 6, 2002.21

Ruling of the RTC

In a Decision22 dated February 26, 2007, the RTC ruled that the damage to the shipment occurred onboard the vessel while in
transit from Korea to the Philippines.
HEUNG-A was adjudged as the common carrier of the subject shipment by virtue of the admissions of WALLEMs witness,
Ronald Gonzales (Gonzales) that despite the slot charter agreement with DONGNAMA, it was still the obligation of
HEUNG-A to transport the cargo from Busan, Korea to Manila and thus any damage to the shipment is the responsibility of the
carrier to the consignee.

The RTC further observed that HEUNG-A failed to present evidence showing that it exercised the diligence required of a
common carrier in ensuring the safety of the shipment.

The RTC discounted the slot charter agreement between HEUNG-A and DONGNAMA, and held that it did not bind the
consignee who was not a party thereto. Further, it was HEUNG-As duty to ensure that the container van was in good condition
by taking an initiative to state in its contract and demand from the owner of the container van that it should be in a good
condition all the time. Such initiative cannot be shifted to the shipper because it is in no position to demand the same from the
owner of the container van.

WALLEM was held liable as HEUNG-As ship agent in the Philippines while PROTOP was adjudged liable because the
damage sustained by the shipment was due to the bad condition of the container van. Also, based on the statement at the backof
the bill of lading, it assumed responsibility for loss and damage as freight forwarder, viz:

6.1 The responsibility of the Freight Forwarder for the goods under these conditions covers the period from the time the Freight
Forwarder has taken the goods in his charge to the time of the delivery.

6.2 The Freight Forwarde[r] shall beliable for loss or damage to the goods as well as for delay in delivery if the occurrence
which caused the loss, damage, delay in delivery took place while the goods were in his charge as defined in clause 2.1.a unless
the Freight Forwarder proves that no fault or neglect of his own servants or agents or any other person referred to in Clause 2.2
has caused or contributed to such loss, damage or delay. However, the Freight Forwarder shall only be liable for loss following
from delay in delivery if the Consignor has made a declaration of interest in timely delivery which has been accepted by the
Freight Forwarder and stated in this FBL.23

PHILAM was declared to havebeen validly subrogated in NOVARTIS stead and thus entitled to recover the insurance claims
it paid to the latter.

ATI and STEPHANIE were exonerated from any liability. SAGAWA was likewise adjudged not liable for the loss/damage to
the shipment by virtue of the phrase "Shippers Load and Count" reflected in the bill of lading issued by PROTOP. Since the
container van was packed under the sole responsibility of the shipper in Korea, SAGAWA, which is based in the Philippines,
had no chance to check if the contents were in good condition or not. The RTC concluded that SAGAWA cannot be expected to
observe the diligence or care required of a carrier or ship agent. SAGAWA, ATI and STEPHANIEs counterclaims for
attorneys fees were granted and PHILAM was ordered to pay the same for having been filed a shotgun case against them.

As the carrier of the subject shipment, HEUNG-A was bound to exercise extraordinary diligence in conveying the same and its
slot charter agreement with DONGNAMA did not divest it of such characterization nor relieve it of any accountability for the
shipment.

A charter party has been defined in Planters Products, Inc. v. Court of Appeals35 as:

[A] contract by which an entire ship, orsome principal part thereof, is let by the owner to another person for a specified time or
use; a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other
person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. x x x.36 (Citations
omitted)

Second, charter by demise or bareboat charter under which the whole vessel is let to the charterer with a transfer to him of its
entire command and possession and consequent control over its navigation, including the master and the crew, who are his
servants.39 The charterer mans the vessel with his own people and becomes, in effect, the owner for the voyage or service
stipulated and hence liable for damages or loss sustained by the goods transported.40

Clearly then, despite its contract of affreightment with DONGNAMA, HEUNG-A remained responsible as the carrier, hence,
answerable for the damages incurred by the goods received for transportation. "[C]ommon carriers, from the nature of their
business and for reasons of public policy, are bound to observe extraordinary diligenceand vigilance with respect to the safety
of the goods and the passengers they transport. Thus, common carriers are required to render service with the greatest skill and
foresight and to use all reasonable means to ascertain the nature and characteristics of the goods tendered for shipment, and
toexercise due care in the handling and stowage, including such methods as their nature requires."41

"[C]ommon carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported deteriorated
or got lost or destroyed. That is, unless they provethat they exercised extraordinary diligence in transporting the goods. Inorder
to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such
diligence."42 Further, under Article 1742 of the Civil Code, even if the loss, destruction, or deterioration of the goods should be
caused by the faulty nature of the containers, the common carrier must exercise due diligence to forestall or lessen the loss.

Here, HEUNG-A failed to rebut this prima faciepresumption when it failed to give adequate explanation as to how the shipment
inside the container van was handled, stored and preserved to forestall or prevent any damage or loss while the same was inits
possession, custody and control.

PROTOP is solidarily liable with HEUNG-A for the lost/damaged shipment in view of the bill of lading the former issued to
NOVARTIS. "A bill of lading is a written acknowledgement of the receipt of goods and an agreement to transport and to deliver
them at a specified place to a person named or on his or her order. It operates both as a receipt and as a contract. It is a receipt for
the goods shipped and a contract to transport and deliver the same as therein stipulated." PROTOP breached its contract with
NOVARTIS when it failed to deliver the goods in the same quantity, quality and description as stated in Bill of Lading No.
PROTAS 200387.

The CA did not err in applying the provisions of the COGSA specifically, the rule on Package Liability Limitation.

Under Article 1753 of the Civil Code, 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. Since the subject shipment was being transported from South
Korea to the Philippines, the Civil Code provisions shall apply. In all mattersnot regulated by the Civil Code, the rights and
obligations of common carriers shall be governed by the Code of Commerce and by special laws, such as the COGSA.

While the Civil Code contains provisions making the common carrier liable for loss/damage to the goods transported, it failed
to outline the manner of determining the amount of suchliability. Article372 of the Code of Commerce fills in this gap, thus:

Article 372. The value of the goods which the carrier must pay in cases if loss or misplacement shall be determined in
accordance with that declared in the bill of lading, the shipper not being allowed to present proof that among the goods declared
therein there were articles of greater value and money.

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

In case, however, of the shippers failure to declare the value of the goods in the bill of lading, Section 4, paragraph 5 of the
COGSA 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 facieevidence, but shall be conclusive on the carrier.

Gregorio Anuran, Maria Maligaya v. Buno et al May 20 1966

passenger jeepney was negligently parked on the road to Taal, Batangas. A motor truck speeding along, negligently bumped it
from behind, with such violence that three of its passengers died, even as two others (passengers too) suffered injuries that
required their confinement at the Provincial Hospital for many days.

The Batangas Court of First Instance, after trial, rendered judgment absolving the driver of the jeepney and its owners, but it
required the truck driver and the owners thereof to make compensation.

The plaintiffs insisted that the driver and the owners of the jeepney should also be made liable for damages. It must be
remembered that the obligation of the carrier to transport its passengers safely is such that the New Civil Code requires "utmost
diligence" from the carriers (Art. 1755) who are "presumed to have been at fault or to have acted negligently, unless they prove
that they have observed extraordinary diligence" (Art. 1756). In this instance, this legal presumption of negligence is confirmed
by the Court of Appeals' finding that the driver of the jeepney in question was at fault in parking the vehicle improperly. It must
follow that the driver and the owners of the jeepney must answer for injuries to its passengers.

The principle about the "last clear chance" would call for application in a suit between the owners and drivers of the two
colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce its contractual
obligations. For it would be inequitable to exempt the negligent driver of the jeepney and its owners on the ground that the other
driver was likewise guilty of negligence.
 Duty to accept
FC Fisher v. Yangco Steamship Co. G.R. No. 8095 November 5
1914 31 Phil 1

The real question involved in these proceedings is whether the refusal of the owners and officers of a steam vessel, duly
licensed to engage in the coastwise trade of the Philippine Islands and engaged in that trade as a common carrier, to accept for
carriage "dynamite, powder or other explosives" from any and all shippers who may offer such explosives for carriage can be
held to be a lawful act without regard to any question as to the conditions under which such explosives are offered to carriage,
or as to the suitableness of the vessel for the transportation of such explosives, or as to the possibility that the refusal to accept
such articles of commerce in a particular case may have the effect of subjecting any person or locality or the traffic in such
explosives to an undue, unreasonable or unnecessary prejudice or discrimination.

the directors of the company Yangco Steamship Company adopted a resolution, "expressly declaring and providing that the
classes of merchandise to be carried by the company in its business as a common carrier do not include dynamite, powder or
other explosives, and expressly prohibiting the officers, agents and servants of the company from offering to carry, accepting
for carriage"

respondent Acting Collector of Customs demanded and required of the company the acceptance and carriage of such
explosives; that he has refused and suspended the issuance of the necessary clearance documents of the vessels of the
company unless and until the company consents to accept such explosives for carriage;

the respondent Attorney-General of the Philippine Islands and the respondent prosecuting attorney of the city of Manila
intend to institute proceedings under the penal provisions of sections 4, 5, and 6 of Act No. 98 of the Philippine
Commission against the company, its managers, agents and servants, to enforce the requirements of the Acting
Collector of Customs as to the acceptance of such explosives for carriage Sections 2, 3 and 4 of the Act are as follows:

SEC. 2. It shall be unlawful for any common carrier engaged in the transportation of passengers or property as above set forth to
make or give any unnecessary or unreasonable preference or advantage to any particular person, company, firm, corporation or
locality, or any particular kind of traffic in any respect whatsoever, or to subject any particular person, company, firm,
corporation or locality, or any particular kind of traffic, to undue or unreasonable prejudice or discrimination whatsoever, and
such unjust preference or discrimination is also hereby prohibited and declared to be unlawful.

SEC. 3. No common carrier engaged in the carriage of passengers or property as aforesaid shall, under any pretense
whatsoever, fail or refuse to receive for carriage, and as promptly as it is able to do so without discrimination, to carry
any person or property offering for carriage, and in the order in which such persons or property are offered for carriage, nor
shall any such common carrier enter into any arrangement, contract or agreement with any other person or corporation whereby
the latter is given an exclusive or preferential or monopolize the carriage any class or kind of property to the exclusion or partial
exclusion of any other person or persons, and the entering into any such arrangement, contract or agreement, under any form or
pretense whatsoever, is hereby prohibited and declared to be unlawful.

SEC. 4. Any willful violation of the provisions of this Act by any common carrier engaged in the transportation of passengers or
property as hereinbefore set forth is hereby declared to be punishable by a fine not exceeding five thousand dollars money of the
United States, or by imprisonment not exceeding two years, or both, within the discretion of the court.

Held:

That whatever may have been the rule at the common law, common carriers in this jurisdiction 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 of the 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."
 Valid grounds for non- acceptance
Article 356-357-358 of the Code of Commerce(COC)
Article 1742 of the NCC

Duty to deliver goods

Consequences of delay
Article 1740 NCC
Article 1747 NCC
A. 370 COC
A. 371 COC
A. 372 COC
A. 373 COC
A. 374 COC

Rights of passengers in case of delay

Article 698 COC

Trans-asia Shipping Lines, Inc. v. CA

Facts: ship bound for cagayan de oro returned to cebu after it stopped midway for repairs. Lawyer plaintiff (private respondent)
sued for damages, tort, bad faith that incurred him additional expenses and loss of income for his extended stay in Cebu. After
due trial, the trial court rendered its decision and ruled that the action was only for breach of contract, with Articles 1170, 1172,
and 1173 of the Civil Code as applicable law - not Article 2180 of the same Code. It was of the opinion that Article 1170 made
a person liable for damages if, in the performance of his obligation, he was guilty of fraud, negligence, or delay, or in any
manner contravened the tenor thereof; moreover, pursuant to Article 2201 of the same Code, to be entitled to damages, the
non-performance of the obligation must have been tainted not only by fraud, negligence, or delay, but also bad faith, malice,
and wanton attitude.

the Court of Appeals reversed the trial courts decision by applying Article 1755 in relation to Articles 2201, 2208, 2217, and
2232 of the Civil Code and, accordingly, awarded compensatory, moral, and exemplary damages but did not grant damages for
delay stating that he could have asked the captain if the ship will still sail.

SC: The stoppage was not to start and synchronized [sic] the engines of the vessel as claimed by defendant-appellee. It
was because one of the engines of the vessel broke down; it was because of the disability of the vessel which from the very
beginning of the voyage was known to defendant-appellee.
Defendant-appellee from the very start of the voyage knew for a fact that the vessel was not yet in its sailing condition
because the second engine was still being repaired. Inspite of this knowledge, defendant-appellee still proceeded to sail with
only one engine running.
Defendant-appellee at that instant failed to exercise the diligence which all common carriers should exercise in
transporting or carrying passengers. The law does not merely require extraordinary diligence in the performance of the
obligation. The law mandates that common carrier[s] should exercise utmost diligence in the transport of passengers.
Article 1755 of the New Civil Code provides:

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.
 Utmost diligence of a VERY CAUTIOUS person dictates that defendant-appellee should have pursued the voyage only
when its vessel was already fit to sail. Defendant-appellee should have made certain that the vessel [could] complete the
voyage before starting [to] sail. Anything less than this, the vessel [could not] sail x x x with so many passengers on board it.
However, defendant-appellant [sic] in complete disregard of the safety of the passengers, chose to proceed with its
voyage even if only one engine was running as the second engine was still being repaired during the voyage.
Defendant-appellee disregarded the not very remote possibility that because of the disability of the vessel, other problems
might occur which would endanger the lives of the passengers sailing with a disabled vessel.
As expected, x x x engine trouble occurred. Fortunate[ly] for defendant-appellee, such trouble only necessitated the
stoppage of the vessel and did not cause the vessel to capsize. No wonder why some passengers requested to be brought back
to Cebu City. Common carriers which are mandated to exercise utmost diligence should not be taking these risks.
On this premise, plaintiff-appellant should not be faulted why he chose to disembark from the vessel with the other
passengers when it returned back to Cebu City. Defendant-appellee may call him a very panicky passenger or a nervous
person, but this will not relieve defendant-appellee from the liability it incurred for its failure to exercise utmost
diligence.[13]
xxx xxx xxx
As to the second assigned error, we find that plaintiff-appellant is entitled to the award of moral and exemplary damages
for the breach committed by defendant-appellee.
As discussed, defendant-appellee in sailing to Cagayan de Oro City with only one engine and with full knowledge of the
true condition of the vessel, acted in bad faith with malice, in complete disregard for the safety of the passengers and only for
its own personal advancement/interest.
The Civil Code provides:

Art 2201. xxxIn case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which
may be reasonably attributed to the non-performance of the obligation.

Plaintiff-appellant is entitled to moral damages for the mental anguish, fright and serious anxiety he suffered during the
voyage when the vessels engine broke down and when he disembarked from the vessel during the wee hours of the morning
at Cebu City when it returned.[14]
Moral damages are recoverable in a damage suit predicated upon a breach of contract of carriage where it is proved that
the carrier was guilty of fraud or bad faith even if death does not result.[15]
Fraud and bad faith by defendant-appellee having been established, the award of moral damages is in order.[16]
To serve as a deterrent to the commission of similar acts in the future, exemplary damages should be imposed upon
defendant-appellee.[17] Exemplary damages are designed by our civil law to permit the courts to reshape behavior that is
socially deleterious in its consequence by creating x x x negative incentives or deterrents against such behavior.[18]
Moral damages having been awarded, exemplary damages maybe properly awarded. When entitlement to moral
damages has been established, the award of exemplary damages is proper.[19]
The petitioner then instituted this petition and submitted the question of law earlier adverted to.
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.[20]
Under Article 1733 of the Civil Code, the petitioner was bound to observe extraordinary diligence in ensuring the safety
of the private respondent. That meant that the petitioner was, pursuant to Article 1755 of the said Code, bound to carry the
private respondent safely as far as human care and foresight could provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances. In this case, we are in full accord with the Court of Appeals that the
petitioner failed to discharge this obligation.
Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder head of one of the
vessels engines. But even before it could finish these repairs, it allowed the vessel to leave the port of origin on only one
functioning engine, instead of two. Moreover, even the lone functioning engine was not in perfect condition as sometime
after it had run its course, it conked out. This caused the vessel to stop and remain adrift at sea, thus in order to prevent the
ship from capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even before the voyage began. 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 its vessel involved in a contract of carriage is a
clear breach of is duty prescribed in Article 1755 of the Civil Code.
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.[22]
In contracts or quasi-contracts, the obligor is liable for all the damages which may be reasonably attributed to the
non-performance of the obligation if he is guilty of fraud, bad faith, malice, or wanton attitude.[23]
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.[24] 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.[25]
Exemplary damages are imposed by way of example or correction for the public good, in addition to moral, temperate,
liquidated or compensatory damages.[26] In contracts and quasi-contracts, exemplary damages may be awarded if the
defendant acted in a wanton fraudulent, reckless, oppressive or malevolent manner.[27] It cannot, however, be considered as
a matter of right; the court having to decide whether or not they should be adjudicated.[28] Before the court may consider an
award for exemplary damages, the plaintiff must first show that he is entitled to moral, temperate or compensatory damages;
but it is not necessary that he prove the monetary value thereof.[29]
The Court of Appeals did not grant the private respondent actual or compensatory damages, reasoning that no delay was
incurred since there was no demand, as required by Article 1169 of the Civil Code. This article, however, finds no application
in this case because, as found by the respondent Court, there was in fact no delay in the commencement of the contracted
voyage. If any delay was incurred, it was after the commencement of such voyage, more specifically, when the voyage was
subsequently interrupted when the vessel had to stop near Kawit Island after the only functioning engine conked out.
As to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent. 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.
Of course, this does not suffice for a resolution of the case at bench for, as earlier stated, the cause of the delay or
interruption was the petitioners failure to observe extraordinary diligence. Article 698 must then be read together with
Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the Civil Code. So read, it means that the petitioner is liable
for any pecuniary loss or loss of profits which the private respondent may have suffered by reason thereof. For the private
respondent, such would be the loss of income if unable to report to his office on the day he was supposed to arrive were it not
for the delay. This, however, assumes that he stayed on the vessel and was with it when it thereafter resumed its voyage; but
he did not. As he and some passengers resolved not to complete the voyage, the vessel had to return to its port of origin and
allow them to disembark. The private respondent then took the petitioners other vessel the following day, using the ticket he
had purchased for the previous days voyage.
Any further delay then in the private respondents arrival at the port of destination was caused by his decision to
disembark. Had he remained on the first vessel, he would have reached his destination at noon of 13 November 1991, thus
been able to report to his office in the afternoon. He, therefore, would have lost only the salary for half of a day. But actual or
compensatory damages must be proved,[30] which the private respondent failed to do. There is no convincing evidence that
he did not receive his salary for 13 November 1991 nor that his absence was not excused.
We likewise fully agree with the Court of Appeals that the petitioner is liable for moral and exemplary damages. In
allowing its unseaworthy M/V Asia Thailand to leave the port of origin and undertake the contracted voyage, with full
awareness that it was exposed to perils of the sea, it deliberately disregarded its solemn duty to exercise extraordinary
diligence and obviously acted with bad faith and in a wanton and reckless manner. On this score, however, the petitioner
asserts that the safety of the vessel and passengers was never at stake because the sea was calm in the vicinity where it
stopped as faithfully recorded in the vessels log book (Exhibit 4). Hence, the petitioner concludes, the private respondent was
merely over-reacting to the situation obtaining then.[31]
We hold that the petitioners defense cannot exculpate it nor mitigate its liability. On the contrary, such a claim
demonstrates beyond cavil the petitioners lack of genuine concern for the safety of its passengers. It was, perhaps, only
providential that the sea happened to be calm. Even so, the petitioner should not expect its passengers to act in the manner it
desired. The passengers were not stoics; becoming alarmed, anxious, or frightened at the stoppage of a vessel at sea in an
unfamiliar zone at nighttime is not the sole prerogative of the faint-hearted. More so in the light of the many tragedies at sea
resulting in the loss of lives of hopeless passengers and damage to property simply because common carriers failed in their
duty to exercise extraordinary diligence in the performance of their obligations.

Marina regulation Mem. Circular no. 112

Place of delivery
A. 360 COC
A. 368 COC
A. 369 COC

To whom delivered

Delay to transport Passengers

Marina Memorandum Circular no. 112 December 15, 1995
 Duty to Exercise Extra-ordinary Diligence
1.1 Code of commerce provisions
1.2 Presumption of negligence
1.3 Duration of Duty in Carriage of Goods
1.4 Commencement of Duty in Carriage of Passengers

Laws and jurisprudence:

a. Article 1733 of the NCC
b. Artilc 1755 of the NCC
c. Article 1736 of the NCC
d. Article of 1737 of the NCC
e. Article of 1738 of the NCC

Mariano v. Calleja July 31, 2009

Facts:

Petitioner Herminio Mariano, Jr. is the surviving spouse of Dr. Frelinda Mariano who was a passenger of a
Celyrosa Express bus bound for Tagaytay when she met her death. Respondent Ildefonso C. Callejas is the registered
owner of Celyrosa Express, while respondent Edgar de Borja was the driver of the bus on which the deceased was a
passenger.
The Celyrosa Express bus, carrying Dr. Mariano as its passenger, collided with an Isuzu truck with trailer. The
passenger bus was bound for Tagaytay while the trailer truck came from the opposite direction, bound for Manila. The
trailer truck bumped the passenger bus on its left middle portion. Due to the impact, the passenger bus fell on its right
side on the right shoulder of the highway and caused the death of Dr. Mariano and physical injuries to four other
passengers. Dr. Mariano was 36 years old at the time of her death. She left behind three minor children, aged four, three
and two years.
The respondent said that the proximate cause of the accident was the recklessness of the driver of the trailer
truck which bumped their bus while allegedly at a halt on the shoulder of the road in its rightful lane. Thus, respondent
Callejas filed a third-party complaint against the trailer truck, for indemnity in the event that he would be held liable
for damages to petitioner.

Respondents owner and driver appealed to the Court of Appeals, contending that the trial court erred in holding them
guilty of breach of contract of carriage.

Held:
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.

This Court interpreted the above quoted provisions in Pilapil v. Court of Appeals.[12] 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.
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.

Belgian Overseas Chartering and Shipping v. Phil. First Ins. Co.,

Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their destination
constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to how the
loss, the destruction or the deterioration of the goods happened, the carrier shall be held liable therefor.
The Facts
The factual antecedents of the case are summarized by the Court of Appeals in this wise:

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. On July 28, 1990, MN Anangel Sky arrived at the port of Manila and, within the subsequent days,
discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the
four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading
Corporation declared the same as total loss.

The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof
required by law. In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage
of the goods shipped, because they had failed to overcome the presumption of negligence imposed on common
carriers.
Held :Petitioners contend that the presumption of fault imposed on common carriers should not be applied on the basis
of the lone testimony offered by private respondent. The contention is untenable.

Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they
transport.[13] Thus, common carriers are required to render service with the greatest skill and foresight and to use all
reason[a]ble means to ascertain the nature and characteristics of the goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their nature requires.[14] The extraordinary responsibility
lasts from the time the goods are unconditionally placed in the possession of and received for transportation by the
carrier until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive
them.

This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract, the
riding public enters into a contract of transportation with common carriers.[16] Even if it wants to, it cannot submit its
own stipulations for their approval.[17] Hence, it merely adheres to the agreement prepared by them.

Owing to this high degree of diligence required of them, common carriers, as a general rule, are presumed to have
been at fault or negligent if the goods they transported deteriorated or got lost or destroyed.[18] That is, unless they prove
that they exercised extraordinary diligence in transporting the goods.[19] In order to avoid responsibility for any loss or
damage, therefore, they have the burden of proving that they observed such diligence.[20]

However, the presumption of fault or negligence will not arise[21] if the loss is due to any of the following causes:
(1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in war,
whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of the goods
or defects in the packing or the container; or (5) an order or act of competent public authority.[22] This is a closed list. If
the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is liable
therefor.[23]
 Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their
arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no
adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the
transporter shall be held responsible.[24]

That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a review of
the records and more so by the evidence adduced by respondent.[25]

First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg,
Germany.[26]
Second, prior to the unloading of the cargo, an Inspection Report[27] prepared and signed by representatives of both
parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof
exposed and rusty.
Third, Bad Order Tally Sheet No. 154979[28] issued by Jardine Davies Transport Services, Inc., stated that the four coils
were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a
presumed loss or damage.[29]
Fourth, the Certificate of Analysis[30] stated that, based on the sample submitted and tested, the steel sheets found in bad
order were wet with fresh water.
Fifth, petitioners -- in a letter[31] addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 --
admitted that they were aware of the condition of the four coils found in bad order and condition. These facts were
confirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency. All these conclusively prove the fact of
shipment in good order and condition and the consequent damage to the four coils while in the possession of
petitioner,[33] who notably failed to explain why.[34]

Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the law
requires a common carrier to know and to follow, to avoid damage to or destruction of the goods entrusted to it for safe
carriage and delivery.[35]

True, the words metal envelopes rust stained and slightly dented were noted on the Bill of Lading; however, there
is no showing that petitioners exercised due diligence to forestall or lessen the loss.[36] Having been in the service for
several years, the master of the vessel should have known at the outset that metal envelopes in the said state would
eventually deteriorate when not properly stored while in transit.[37] Equipped with the proper knowledge of the nature of
steel sheets in coils and of the proper way of transporting them, the master of the vessel and his crew should have
undertaken precautionary measures to avoid possible deterioration of the cargo. But none of these measures was
taken.[38] Having failed to discharge the burden of proving that they have exercised the extraordinary diligence required
by law, petitioners cannot escape liability for the damage to the four coils.[39]
In their attempt to escape liability, petitioners further contend that they are exempted from liability under Article
1734(4) of the Civil Code. They cite the notation metal envelopes rust stained and slightly dented printed on the Bill of
Lading as evidence that the character of the goods or defect in the packing or the containers was the proximate cause of
the damage. We are not convinced.
From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to the
condition noted on the Bill of Lading.[40] The aforecited exception refers to cases when goods are lost or damaged while
in transit as a result of the natural decay of perishable goods or the fermentation or evaporation of substances liable
therefor, the necessary and natural wear of goods in transport, defects in packages in which they are shipped, or the
natural propensities of animals.[41] None of these is present in the instant case.
Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary
observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the goods
notwithstanding such condition.[42] Thus, petitioners have not successfully proven the application of any of the
aforecited exceptions in the present case.[43]

Ganzon v. CA G.R. No. L-48757 May 30, 1998

FACTS: Gelacio > Ganzon (via Capt. Niza) > Lighter Batman (common carrier) (loaded half)
November 28, 1956: Gelacio Tumambing (Gelacio) contracted the services of of Mauro B. Ganzon to haul
305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the light LCT Batman
December 1, 1956: Gelacio delivered the scrap iron to Filomeno Niza, captain of the lighter, for loading
which was actually begun on the same date by the crew of the lighter under the captains supervisor.
When about half of the scrap iron was already loaded, Mayor Jose Advincula of Mariveles, Bataan arrived
and demanded P5000 from Gelacio
Upon resisting, the Mayor fired at Gelacio so he had to be taken to the hospital
Loading of the scrap iron was resumed
December 4, 1956: Acting Mayor Basilio Rub (Rub), accompanied by 3 policemen, ordered captain
Filomeno Niza and his crew to dump the scrap iron where the lighter was docked
Later on Rub had taken custody of the scrap iron
 RTC: in favor of Gelacio and against Ganzon
ISSUE: W/N Ganzon should be held liable under the contract of carriage

HELD: YES. Petition is DENIED.

Ganzon thru his employees, actually received the scraps is freely admitted.
Pursuant to Art. 1736, such extraordinary responsibility would cease only upon the delivery, actual or
constructive, by the carrier to the consignee, or to the person who has a right to receive them.
The fact that part of the shipment had not been loaded on board the lighter did not impair the said
contract of transportation as the goods remained in the custody and control of the carrier, albeit still
unloaded.
failed to show that the loss of the scraps was due to any of the following causes enumerated in Article
1734 of the Civil Code, namely:

(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 or act of competent public authority.
Hence, the petitioner is presumed to have been at fault or to have acted negligently.
By reason of this presumption, the court is not even required to make an express finding of fault or negligence
before it could hold the petitioner answerable for the breach of the contract of carriage.
exempted from any liability had he been able to prove that he observed extraordinary diligence in the vigilance
over the goods in his custody, according to all the circumstances of the case, or that the loss was due to an
unforeseen event or to force majeure. As it was, there was hardly any attempt on the part of the petitioner to
prove that he exercised such extraordinary diligence.
We cannot sustain the theory of caso fortuito - "order or act of competent public authority"(Art. 1174 of the Civil
Code)
no authority or power of the acting mayor to issue such an order was given in evidence. Neither has it been
shown that the cargo of scrap iron belonged to the Municipality of Mariveles.
Ganzon was not duty bound to obey the illegal order to dump into the sea the scrap iron.
Moreover, there is absence of sufficient proof that the issuance of the same order was attended with such force
or intimidation as to completely overpower the will of the petitioner's employees. The mere difficulty in the
fullfilment of the obligation is not considered force majeure.

Saludo v. CA

TLDR

Republic of the Philippines v. Lorenzo Shipping February 7, 2005

the Department of Health (DOH), and the Cooperative for American Relief Everywhere, Inc. (CARE) signed
an agreement wherein CARE would acquire from the United States government donations of non-fat dried
milk and other food products from January 1, 1987 to December 31, 1989. In turn, the Philippines would
transport and distribute the donated commodities to the intended beneficiaries in the country.

The government entered into a contract of carriage of goods with herein petitioner National Trucking and
Forwarding Corporation (NTFC). Thus, the latter shipped 4,868 bags of non-fat dried milk through herein
respondent Lorenzo Shipping Corporation (LSC) from September to December 1988. The consignee named
in the bills of lading issued by the respondent was Abdurahman Jama, petitioners branch supervisor in
Zamboanga City.

On reaching the port of Zamboanga City, respondents agent, Efren Ruste4 Shipping Agency, unloaded the
4,868 bags of non-fat dried milk and delivered the goods to petitioners warehouse. Before each delivery,
Rogelio Rizada and Ismael Zamora, both delivery checkers of Efren Ruste Shipping Agency, requested
Abdurahman to surrender the original bills of lading, but the latter merely presented certified true copies
thereof. Upon completion of each delivery, Rogelio and Ismael asked Abdurahman to sign the delivery
receipts. However, at times when Abdurahman had to attend to other business before a delivery was
completed, he instructed his subordinates to sign the delivery receipts for him.

Notwithstanding the precautions taken, the petitioner allegedly did not receive the subject goods. Thus, in a
letter dated March 11, 1989, petitioner NTFC filed a formal claim for non-delivery of the goods shipped
through respondent.

In its letter of April 26, 1989, the respondent explained that the cargo had already been delivered to
Abdurahman Jama. The petitioner then decided to investigate the loss of the goods. But before the
investigation was over, Abdurahman Jama resigned as branch supervisor of petitioner.

Noting but disbelieving respondents insistence that the goods were delivered, the government through the
DOH, CARE, and NTFC as plaintiffs filed an action for breach of contract of carriage, against respondent as
defendant, with the RTC of Manila.

After trial, the RTC rendered judgment in favor of the defendant and against the plaintiffs, dismissing the
latters complaint, and ordering the plaintiffs, pursuant to the defendants counterclaim, to pay, jointly and
solidarily, to the defendant, actual damages in the amount of P50,000.00, and attorneys fees in the amount
of P70,000.00, plus the costs of suit.

The Court of Appeals found that the trial court did not commit any reversible error. It dismissed the appeal,
and affirmed the assailed decision in toto.

Undaunted, petitioner raised (1) Is respondent presumed at fault or negligent as common carrier for the loss
or deterioration of the goods? and (2) Are damages and attorneys fees due respondent?

Anent the first issue, petitioner contends that the respondent is presumed negligent and liable for failure to
abide by the terms and conditions of the bills of lading; that Abdurahman Jamas failure to testify should not
be held against petitioner; and that the testimonies of Rogelio Rizada and Ismael Zamora, as employees of
respondents agent, Efren Ruste Shipping Agency, were biased and could not overturn the legal presumption
of respondents fault or negligence.

For its part, the respondent avers that it observed extraordinary diligence in the delivery of the goods. Prior to
releasing the goods to Abdurahman, Rogelio and Ismael required the surrender of the original bills of lading,
and in their absence, the certified true copies showing that Abdurahman was indeed the consignee of the
goods. In addition, they required Abdurahman or his designated subordinates to sign the delivery receipts
upon completion of each delivery.

We rule for respondent.

Article 17338 of the Civil Code demands that a common carrier observe extraordinary diligence over the
goods transported by it. Extraordinary diligence is that extreme measure of care and caution which persons of
unusual prudence and circumspection use for securing and preserving their own property or rights.9 This
exacting standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales
in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for
shipment. Hence, in case of loss of goods in transit, the common carrier is presumed under the law to have
been at fault or negligent.10 However, the presumption of fault or negligence, may be overturned by
competent evidence showing that the common carrier has observed extraordinary diligence over the goods.

In the instant case, we agree with the court a quo that the respondent adequately proved that it exercised
extraordinary diligence. Although the original bills of lading remained with petitioner, respondents 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. . . .

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, .
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
respondent did.

We also note that some delivery receipts were signed by Abdurahmans subordinates and not by
Abdurahman himself as consignee. Further, delivery checkers Rogelio and Ismael testified that Abdurahman
was always present at the initial phase of each delivery, although on the few occasions when Abdurahman
could not stay to witness the complete delivery of the shipment, he authorized his subordinates to sign the
delivery receipts for him. This, to our mind, is sufficient and substantial compliance with the requirements.

We further note that, strangely, petitioner made no effort to disapprove Abdurahmans resignation until after
the investigation and after he was cleared of any responsibility for the loss of the goods. With Abdurahman
outside of its reach, petitioner cannot now pass to respondent what could be Abdurahmans negligence, if
indeed he were responsible.

Regional Container Lines v. Netherlands Insurance Co. September 4, 2009

For our resolution is the petition for review on certiorari filed by petitioners Regional Container Lines of Singapore (RCL)
and EDSA Shipping Agency (EDSA Shipping) to annul and set aside the decision[1] and resolution[2] of the Court of Appeals
(CA) dated May 26, 2004 and May 10, 2005, respectively, in CA-G.R. CV No. 76690.

RCL is a foreign corporation based in Singapore. It does business in the Philippines through its agent, EDSA Shipping, a
domestic corporation organized and existing under Philippine laws. Respondent Netherlands Insurance Company
(Philippines), Inc. (Netherlands Insurance) is likewise a domestic corporation engaged in the marine underwriting business.

FACTUAL ANTECEDENTS

The pertinent facts, based on the records are summarized below.

On October 20, 1995, 405 cartons of Epoxy Molding Compound were consigned to be shipped from Singapore to Manila for
Temic Telefunken Microelectronics Philippines (Temic). U-Freight Singapore PTE Ltd.[3] (U-Freight Singapore), a
forwarding agent based in Singapore, contracted the services of Pacific Eagle Lines PTE. Ltd. (Pacific Eagle) to transport the
subject cargo. The cargo was packed, stored, and sealed by Pacific Eagle in its Refrigerated Container No. 6105660 with Seal
No. 13223. As the cargo was highly perishable, the inside of the container had to be kept at a temperature of 0 Celsius.
Pacific Eagle then loaded the refrigerated container on board the M/V Piya Bhum, a vessel owned by RCL, with which Pacific
Eagle had a slot charter agreement. RCL duly issued its own Bill of Lading in favor of Pacific Eagle.

To insure the cargo against loss and damage, Netherlands Insurance issued a Marine Open Policy in favor of Temic,
as shown by MPO-21-05081-94 and Marine Risk Note MRN-21 14022, to cover all losses/damages to the shipment.

On October 25, 1995, the M/V Piya Bhum docked in Manila. After unloading the refrigerated container, it was plugged to the
power terminal of the pier to keep its temperature constant. Fidel Rocha (Rocha), Vice-President for Operations of Marines
Adjustment Corporation, accompanied by two surveyors, conducted a protective survey of the cargo. They found that based
on the temperature chart, the temperature reading was constant from October 18, 1995 to October 25, 1995 at 0
Celsius. However, at midnight of October 25, 1995 when the cargo had already been unloaded from the ship the temperature
fluctuated with a reading of 33 Celsius. Rocha believed the fluctuation was caused by the burnt condenser fan motor of the
refrigerated container.

On November 9, 1995, Temic received the shipment. It found the cargo completely damaged. Temic filed a claim
for cargo loss against Netherlands Insurance, with supporting claims documents. The Netherlands Insurance paid Temic the
sum of P1,036,497.00 under the terms of the Marine Open Policy. Temic then executed a loss and subrogation receipt in
favor of Netherlands Insurance.

Seven months from delivery of the cargo or on June 4, 1996, Netherlands Insurance filed a complaint for subrogation of
insurance settlement with the Regional Trial Court, Branch 5, Manila, against the unknown owner of M/V Piya
Bhum and TMS Ship Agencies (TMS), the latter thought to be the local agent of M/V Piya Bhums unknown owner.[4] The
complaint was docketed as Civil Case No. 96-78612.
 Netherlands Insurance amended the complaint on January 17, 1997 to implead EDSA Shipping, RCL, Eagle Liner
Shipping Agencies, U-Freight Singapore, and U-Ocean (Phils.), Inc. (U-Ocean), as additional defendants. A third amended
complaint was later made, impleading Pacific Eagle in substitution of Eagle Liner Shipping Agencies.

TMS filed its answer to the original complaint. RCL and EDSA Shipping filed their answers with cross-claim and
compulsory counterclaim to the second amended complaint. U-Ocean likewise filed an answer with compulsory counterclaim
and cross-claim. During the pendency of the case, U-Ocean, jointly with U-Freight Singapore, filed another answer with
compulsory counterclaim. Only Pacific Eagle and TMS filed their answers to the third amended complaint.

The defendants all disclaimed liability for the damage caused to the cargo, citing several reasons why Netherland Insurances
claims must be rejected. Specifically, RCL and EDSA Shipping denied negligence in the transport of the cargo; they
attributed any negligence that may have caused the loss of the shipment to their co-defendants. They likewise asserted that no
valid subrogation exists, as the payment made by Netherlands Insurance to the consignee was invalid. By way of affirmative
defenses, RCL and EDSA Shipping averred that the Netherlands Insurance has no cause of action, and is not the real
party-in-interest, and that the claim is barred by laches/prescription.

After Netherlands Insurance had made its formal offer of evidence, the defendants including RCL and EDSA
Shipping sought leave of court to file their respective motions to dismiss based on demurrer to evidence.

RCL and EDSA Shipping, in their motion, insisted that Netherlands Insurance had (1) failed to prove any valid subrogation,
and (2) failed to establish that any negligence on their part or that the loss was sustained while the cargo was in their custody.

On May 22, 2002, the trial court handed down an Order dismissing Civil Case No. 96-78612 on demurrer to evidence. The
trial court ruled that while there was valid subrogation, the defendants could not be held liable for the loss or damage, as their
respective liabilities ended at the time of the discharge of the cargo from the ship at the Port of Manila.

Netherlands Insurance seasonably appealed the order of dismissal to the CA.

On May 26, 2004, the CA disposed of the appeal as follows:

WHEREFORE, in view of the foregoing, the dismissal of the complaint against defendants Regional Container Lines and
Its local agent, EDSA Shipping Agency, is REVERSED and SET ASIDE. The dismissal of the complaint against
the other defendants is AFFIRMED. Pursuant to Section 1, Rule 33 of the 1997 Rules of Civil Procedure, defendants
Regional Container Lines and EDSA Shipping Agency are deemed to have waived the right to present evidence.

As such, defendants Regional Container Lines and EDSA Shipping Agency are ordered to reimburse plaintiff in the sum
of P1,036,497.00 with interest from date hereof until fully paid.
No costs.

SO ORDERED. [Emphasis supplied.]

The CA dismissed Netherland Insurances complaint against the other defendants after finding that the claim had already been
barred by prescription.[5]

Having been found liable for the damage to the cargo, RCL and EDSA Shipping filed a motion for reconsideration, but the
CA maintained its original conclusions.

The sole issue for our resolution is whether the CA correctly held RCL and EDSA Shipping liable as common carriers
under the theory of presumption of negligence.

THE COURTS RULING

The present case is governed by the following provisions of the Civil Code:

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.

Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and
7, while the extraordinary diligence for the safety of the passengers is further set forth in articles1755 and 1756.

ART. 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 of 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 or act of competent public authority.
ART. 1735. In all cases other that 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 by article 1733.

ART. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the sane 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 provisions of articles 1738.

ART. 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.

ART. 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.

In Central Shipping Company, Inc. v. Insurance Company of North America, [6] 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. [7]
In the present case, RCL and EDSA Shipping disclaim any responsibility for the loss or damage to the goods in
question. They contend that the cause of the damage to the cargo was the fluctuation of the temperature in the reefer van,
which fluctuation occurred after the cargo had already been discharged from the vessel; no fluctuation, they point out, arose
when the cargo was still on board M/V Piya Bhum. As the cause of the damage to the cargo occurred after the same was
already discharged from the vessel and was under the custody of the arrastre operator (International Container Terminal
Services, Inc. or ICTSI), RCL and EDSA Shipping posit that the presumption of negligence provided in Article 1735 of the
Civil Code should not apply. What applies in this case is Article 1734, particularly paragraphs 3 and 4 thereof, which
exempts the carrier from liability for loss or damage to the cargo when it is caused either by an act or omission of the shipper
or by the character of the goods or defects in the packing or in the containers. Thus, RCL and EDSA Shipping seek to lay the
blame at the feet of other parties.

We do not find the arguments of RCL and EDSA Shipping meritorious.

A common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance
over the goods it transported.[8] When the goods shipped are either lost or arrived in damaged condition, a presumption arises
against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it
liable.[9]

To overcome the presumption of negligence, the common carrier must establish by adequate proof that it
exercised extraordinary diligence over the goods. It must do more than merely show that some other party could be
responsible for the damage.[10]

In the present case, RCL and EDSA Shipping failed to prove that they did exercise that degree of diligence required by law
over the goods they transported. Indeed, there is sufficient evidence showing that the fluctuation of the temperature in the
refrigerated container van, as recorded in the temperature chart, occurred after the cargo had been discharged from the vessel
and was already under the custody of the arrastre operator, ICTSI. This evidence, however, does not disprove that the
condenser fan which caused the fluctuation of the temperature in the refrigerated container was not damaged while the cargo
was being unloaded from the ship. It is settled in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier;[11]RCL and EDSA Shipping failed to dispute this.

RCL and EDSA Shipping could have offered evidence before the trial court to show that the damage to the condenser fan did
not occur: (1) while the cargo was in transit; (2) while they were in the act of discharging it from the vessel; or (3) while they
were delivering it actually or constructively to the consignee. They could have presented proof to show that they exercised
extraordinary care and diligence in the handling of the goods, but they opted to file a demurrer to evidence. As the order
granting their demurrer was reversed on appeal, the CA correctly ruled that they are deemed to have waived their
right to present evidence,[12] and the presumption of negligence must stand.

It is for this reason as well that we find RCL and EDSA Shippings claim that the loss or damage to the cargo was caused by a
defect in the packing or in the containers. To exculpate itself from liability for the loss/damage to the cargo under any of the
causes, the common carrier is burdened to prove any of the causes in Article 1734 of the Civil Code claimed by it by a
preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier is
negligent.[13] RCL and EDSA Shipping, however, failed to satisfy this standard of evidence and in fact offered no evidence at
all on this point; a reversal of a dismissal based on a demurrer to evidence bars the defendant from presenting evidence
supporting its allegations.
WHEREFORE, we DENY the petition for review on certiorari filed by the Regional Container Lines of Singapore and
EDSA Shipping Agency. The decision of the Court of Appeals dated May 26, 2004 in CA-G.R. CV No. 76690
is AFFIRMED IN TOTO. Costs against the petitioners.
SO ORDERED.

Defenses of Common Carriers

Proximate Causation
New Civil Code Provisions
Defense in Carriage of Passengers
Fortuitous event
Public enemy
Improper Packing
Order of Public Authority
Defenses of Carriage of Passengers
Acts of Employees

Sabena Belgian World Airlines vs. CA

Plaintiff-appellee Concepcion F. Fule purchased three round trip tickets for herself and two children, Estrella and Gemma,
from the defendant-appellant Sabena World Airlines for the routes covering Manila-Brussels-Barcelona-Madrid. She and her
children took the Sabena flight No. 274, arriving in Brussels, Belgium at 6:00 o'clock in the morning of March 30, 1979. Just
before the flight arrived in Brussels, it was announced that the city would be cloudy and rainy and in fact when the plane
arrived there was a slight drizzle. Before disembarking, the plaintiff- appellees put on their sweaters and winter coats but did
not cover their heads. Mrs. Fule thought there would be a shuttle bus or a ground steward with umbrella to bring them to the
terminal building. However, there was none and the plaintiff-appellees had to walk towards the terminal building which was
about 20 to 30 meters from the plane. As a result, their winter coats got wet, as did the front portion of Mrs. Fule's dress as she
could not hold her coat to keep it from opening. (Id., pp. 7-8; 10-12)

The plaintiff-appellees waited for about 5 hours in the transit area of the airport terminal for their connecting flight to
Barcelona, Spain. When their flight was announced, they had to walk again in the rain without head covers. (Id., pp. 17-18) In
Barcelona, while the luggages of her children were recovered, Mrs. Fule's luggage was missing. She went to Sabena office but
found it closed. After 40 minutes of waiting a Sabena personnel arrived and advised her to wait for the next flight from
Brussels because her luggage might be in it. But when the flight arrived it was not among those which were carried. (TSN, pp.
19-22, Jan. 16, 1980) So, she returned to Sabena office but it was already closed. She then went to Iberia Airlines Office
where she was asked to prepare a reclaimation letter and advised to go to her hotel and wait for a call. (Id., pp. 22-24, 30)

Plaintiff-appellees checked in at Hotel Dante, (Id., p. 31) As Mrs. Fule wanted to change her clothes, she bought a dress and a
nightgown at a department store, El Cortes Ingles, for which she paid 5,000 pesetas. Afterwards, she made an overseas call to
her daughter in Manila, who was working at Air France, to find out whether her luggage had not been left in Manila. For the
Telephone call she paid 2,775 pesetas. (Exh. E)

Then at 10:30 in the evening, Iberia Airlines called and informed her that her luggage had arrived. She, therefore, took a cab
to the airport and the round trip taxi fare amounted to 920 pesetas.

At the hotel, Mrs. Fule asked for a doctor because she felt sick, lost her voice and had an attack of asthma. Her children
developed fever due to colds, attributed to the rainy weather condition upon their arrived and departure from Brussels. The
doctor gave them injections and prescribed medicines for them. Plaintiff-appellees incurred medical expenses amounting to
3,000 pesetas. Plaintiff- appellees also incurred hotel expenses amounting to 14,320 pesetas.

After reaching Madrid, Mrs. Fule made a letter-complaint to the Sabena office which she gave to Angel Yancha who told her
that the letter would be forwarded to Brussels, as the Madrid office could not do anything about it. The total claim for actual
damages was 26,015 pesetas.

A few weeks later, Yancha informed her that the Madrid office would pay about half of what she was asking, and the balance
would be paid in Manila. She received a check amounting to 8,620 pesetas and signed a document written in French, a
language she did not understand. (Id., pp. 21-26) Yancha did not explain the contents of the document to her and it was only
upon her return to Manila that she learned that the document was a quitclaim. Her daughter, who spoke French, explained its
content to her. The plaintiff-appellee made a demand on the Manila office of Sabena for the balance of their claim for 26,015
pesetas and P 200,000.00 as moral damages. (Exh. M)

During the trial, the defendant-appellant airline company presented Angel Yancha as its witness. Yancha confirmed that Mrs.
Fule had talked to him about the problem she and her children had encountered in Brussels and Barcelona and that she wanted
to make a claim against Sabena for the expenses she had incurred. Upon Yancha's advice, Fule wrote a demand letter to the
airline. This letter was given to Alejandro Abeledo, the Madrid office sales manager, who sent it to the airline's general
manager. Sabena's Madrid office got a reply from Brussels, directing it to pay Mrs. Fule about 8,000 pesetas. Yancha gave the
check and a letter to Mrs. Fule, telling her that she was being paid only such amount and not the total amount of her claim. He
asked Mrs. Fule to sign the letter, written in French (which turned out to be a quitclaim), to serve as a receipt for the amount
paid to her. (TSN, pp. 3-10, Nov. 27, 1980) Yancha said he did not ask Mrs. Fule whether she understood French. The letter
was not translated to her. He also told Mrs. Fule to contact the Manila Office for information about the difference in her claim.

On the basis of these facts, the lower court found the defendant-appellant liable. The dispositive portion of its decision states:
WHEREFORE, all the foregoing considered, this Court sentences defendant Sabena World Airlines to pay plaintiffs the
following amounts:
a. P l,981.21-as actual damage representing the l7,395 pesetas balance of plaintiffs claim that was not settled in Madrid.
b. P 50,000.00-as moral damages for the serious anxiety and fright caused plaintiffs' incident in Mrs. Fule's missing maleta
and the trouble she was placed in retrieving the same late at night in Barcelona. .
c. P 50,000.00-as exemplary damages for defendant's callous indifference in protecting plaintiffs from the inclement weather
when disembarking from and embarking on its airplane in Brussels when the nose-loader could not be used and for its bad
faith in deceiving Mrs. Fule signing a document in French that purportedly was merely a receipt that was in reality a
quitclaim.
d. P 10,000.00-by way of attorney's fees under the provisions of sub-paragraphs (1), (2), and (11), Art. 2208 of the Civil Code.
e. Pay the costs of suit. (pp. 31-34, Rollo)
On appeal to the respondent Court of Appeals, the decision was modified. The appellate court reduced the amount of moral
and exemplary damages from P 50,000.00 to P 25,000.00 each. In all other respects, the appealed decision was affirmed.
On March 30, 1988, the petitioner went to this Court on petition for review on certiorari presenting its alleged pivotal issues,
namely:
1. WHETHER THE DOCUMENT (EXHIBIT "L" AND EXHIBIT "1") ACCOMPANYING THE CHECK IS JUST A
RECEIPT, OR A VALID QUITCLAIM WHICH FORECLOSES PRIVATE RESPONDENTS' CAUSES OF ACTION
AGAINST THE PETITIONER.
2. WHETHER THE PETITIONER COMMITTED AN ACT OF DUPLICITY AND BAD FAITH IN LETTING PRIVATE
RESPONDENT CONCEPCION FULE SIGN THE DOCUMENT (EXHIBIT "L" AND EXHIBIT "1") WHEN SHE
RECEIVED THE CHECK.
3. HAVING RULED THAT THE AWARD FOR MORAL DAMAGES IS NOT PROPER AND UNJUSTIFIED,
WHETHER OR NOT THE RESPONDENT HON. COURT OF APPEALS (SEVENTH DIVISION) SERIOUSLY ERRED
FOR STILL AWARDING MORAL DAMAGES BY SIMPLY MODIFYING THE AWARD FOR MORAL DAMAGES
PREVIOUSLY MADE BY THE TRIAL COURT.
4. HAVING RULED THAT THE AWARD FOR EXEMPLARY DAMAGES IS NOT PROPER AND UNJUSTIFIED,
WHETHER OR NOT THE RESPONDENT HON. COURT OF APPEALS (SEVENTH DIVISION) GRAVELY ERRED
FOR STILL AWARDING EXEMPLARY DAMAGES BY SIMPLY MODIFYING THE AWARD FOR EXEMPLARY
DAMAGES PREVIOUSLY MADE BY THE TRIAL COURT. (pp. 15-16, Rollo)
We affirm the appealed decision.
A perusal of the first two issues mentioned above shows that the same are factual. After going over the various arguments of
the petitioner on these issues, we reiterate the established rule that this Court is not a trier of facts (Korean Airlines, Ltd. v.
Court of Appeals, 154 SCRA 211 [1987]). The conclusions and findings of fact by the trial court are entitled to great weight
on appeal and should not be disturbed unless for strong and cogent reasons. The fact that the appellate court adopted the
findings of the trial court make the same binding upon this Court for the factual findings of the appellate court are generally
binding on the Supreme Court. The findings of the Court of Appeals when supported by substantial evidence are almost
always beyond the power of review by the Supreme Court. (Rebuleda v. Intermediate Appellate Court, 155 SCRA 520 [1987])
The petitioner has failed to show that its case should be an exception to these established principles.

To be sure, however, the examination of the provisions of the document in question revealed that the appellate court did not
err in considering that while it may have been also a quitclaim, Mrs. Fule did not know that she was made to sign a quitclaim.
The document, in its English translation which the petitioner insists is the binding translation for lack of opposition from the
respondents, states the following:

I, the undersigned, Mrs. Concepcion Foronda de Fule, (address) declare to have received from Sabena (Societe Anonymo
Belgo d'Exploitation de la Navigation Adrienne) the sum of Pesetas 8,620.00 (Eight thousand six hundred twenty) as
settlement on account of all claims whether legally founded or not, which may have been introduced, will be introduced, or
will have been introduced in the future, in relation to:
various expenses incurred in Brussels,
and guarantees to Sabena, its co-transporters, its agents and its managers against any recourse which may be introduced
against them directly or indirectly, and I will undertake to absorb any expenses which may arise from this.

This payment is effected without any burden or responsibility on the part of Sabena, its co-transporters, its agents and
in-charge. In case this payment is effected to compensate for loss of goods, Sabena has the right to retain said goods if found,
until an agreement is reached as to the amount involved. I declare to subrogate Sabena, up to the above-agreed amount, from
all rights whatsoever, vis-a-vis and authorize the use of my name for the appropriate means of valuing said rights and I will
undertake to furnish all necessary documents and information to this purpose.
The present release subrogation is effective only when the abovementioned sum is released to Mrs. Concepcion Foronda de

Fule in the following manner: Cheque Bank of Santander No. C-536.690.

Place & date: Madrid, 31, May 1979

Signature: Signed by Mrs. C.F. de Fule (p. 78, Rollo)
The foregoing provisions clearly show that the document is both a receipt and a quitclaim as it settles upon receipt of the
mentioned sum of money "all claims whether legally founded or not, which may have been introduced, will be introduced or
will have been introduced in the future, in relation to various expenses incurred in Brussels . . .
The issue, however, is not what was written in French in the document but what Yancha represented to Mrs. Fule when he
induced her to sign it. As stated by the Court of Appeals, citing Air France v. Carrascoso (18 SCRA 155 [1966]), the
misconduct on the part of the carrier's employees toward a passenger gives the latter an action for damages against the carrier.
We also note that in its appeal to the Court of Appeals, the petitioner alleged in its brief the following assignment of error:
"The trial court erred in not holding that by the quitclaim (Exh. L; Exhs. 1 and 1-a) the plaintiff- appellees have no cause of
action against the defendant-appellant for moral and exemplary damages and in not sustaining the validity of the said
quitclaim." (p. 52, Rollo) In its discussion, the petitioner insisted that the trial court erred in concluding that Exhibit L is only
a receipt and that the respondent understood it as such. It argued that the rest of the document recites a quitclaim and the
respondent understood French because she received her schooling in Spain where French is taught. In the present petition,
however, the petitioner alleges that it is both a receipt and a quitclaim but it does not foreclose the respondent's right to collect
the balance of her claim. It is obvious that the petitioner is taking inconsistent positions which this Court may not allow.
In the last two issues, the petitioner argues that the appellate court erred in still awarding moral and exemplary damages
inspire of its express declaration that the petitioner did not act in bad faith. This allegation is misleading because the Court of
Appeals did not declare the petitioner entirely faultless. The appellate court held:
But we do not think the award of moral damages for the trouble which Mrs. Fule had gone through as a result of the delay in
the delivery of her luggage in Barcelona is justified. In cases of breach of contracts, moral damages can be awarded only
where the defendant has acted fraudulently or in bad faith. (Civil Code, art. 2220, Fores v. Miranda, 105 Phil. 266 [1959];
Necesito v. Paras, 104 Phil. 75 [1957]) Mere negligence, even if thereby the plaintiff suffers mental anguish or serious fright
is not a ground for awarding moral damages. In Laguna Tayabas Bus Co. v. Cornista, 11 SCRA 181 [1964]), cited by the
plaintiff-appellees to justify the award to them of moral damages, the failure of the carrier to cover the side of its bus as a
result of which, and the bus driver's reckless operation of the bus, a passenger fell, was held to be not mere negligence but a
'misconduct', warranting the award of moral damages. So was the neglect of the airline in Air France v. Carrascoso, 18 SCRA
155 [1966]), the other case cited by the plaintiffs-appelles, simple negligence but a 'malfeasance' whereby a first class
passenger was down graded into a third class passenger on the onward flight of an airline, just so as a 'white man' could be
accommodated. The case at bar cannot be analogized to these cases.
Indeed, the flaw in the trial court's decision is its assumption that every case of mental anguish or fright or serious anxiety
calls for the award of moral damages. While the enumeration of cases in Art. 2219 is not exclusive, the defendant's act must
be wrongful or wanton or done in bad faith to justify the imposition of moral damages. Here, there is no finding that the
carrier's delay in delivering Mrs. Fule's luggage was wrongful or due to bad faith.
Nonetheless, an award of P 25,000.00 for the airline's bad faith in making Mrs. Fule sign a quitclaim without informing her of
its contents, which were written in French, is in our opinion justified.
With respect to the award for exemplary damages, the amount of P 50,000.00 must be reduced by half. The trial court gave
this award for (1) the defendant-appellant's 'callous indifference in protecting plaintiffs from the inclement weather when
disembarking from and embarking on its plane in Brussels' and (2) for deceiving Mrs. Fule into signing a quitclaim by
representing it to be merely a receipt for partial payment of her claims.
While we hold that the failure of the defendant-appellant to protect the plaintiff-appellees from the rain in disembarking from
the plane for the stopover in Brussels and again in reboarding it for the onward flight to Barcelona constitutes a neglect of its
duty to its passengers, we do not think that its neglect was so gross as to amount to bad faith or wantonness. (Civil Code, Art.
2232) The award of exemplary damages cannot be justified. In the Airlines Cases in which the Supreme Court awarded moral
and exemplary damages, the airlines concerned were found guilty of either gross neglect or malfeasance or even malice. In
contrast, what is involved in this case was simple negligence, considering that the rain through which the plaintiff-appellees
had to walk was a 'slight drizzle.' If it was driving rain or heavy snow, perhaps there would be basis for finding the defendant-
appellant guilty of gross negligence, in light of the duty of air carriers to observe 'utmost or extraordinary diligence,' (Zulueta
v. Pan American World Airway, Inc., 49 SCRA 1, 14, [1973]).
With respect to the award of exemplary damages for alleged duplicity of the airlines employee, we hold that the trial court's
decision is correct. Accordingly, the award of P 50,000.00 must be reduced to P 25,00.00. (pp. 40-41, Rollo)
We find no reversible error in the foregoing conclusions. The appellate court's finding that the negligence in this case does not
amount to bad faith finds support in a recent decision of this Court. In the case of China Airlines, Ltd. v. Intermediate
Appellate Court, et al. (G.R. No. 73835, January 17, 1989), this Court passed upon the issue of damages brought about by the
airlines' failure to carry out a promised immediate flight connection from San Francisco, U.S.A to Los Angeles, U.S.A due to
inefficient means of communication. The Court ruled that "while petitioner may have been remiss in its total reliance upon the
telex communications and therefore considered negligent in view of the degree of diligence required of it as a common carrier,
such negligence cannot under the circumstances be said to be so gross as to amount to bad faith." (Ibid, at p. 10) In the same
case, however, the Court ruled that "[W]ith respect to moral damages, the rule is that the same are recoverable in a damage
suit predicated upon a breach of contract of carriage only where (1) the mishap results in the death a of passenger and (2) it is
proved that the carrier was guilty of fraud and bad faith, even if death does not result." (Ibid, at p. 13) As the appellate court
found the petitioner guilty of bad faith in letting the respondent sign a quitclaim without her knowledge or understanding and
contrary to what she was planning to do, the reduced award of moral and exemplary damages is proper and legal.
WHEREFORE, IN VIEW OF ALL FOREGOING, the petition is hereby DISMISSED for lack of merit. The appealed
decision is AFFIRMED,

SO ORDERED.
 Leopoldo Poblete vs. Donato Fabros

This is an action for damages, arising from a vehicular accident, filed by the plaintiff Godofredo Poblete as
owner of the damaged taxicab against the driver and owner of the allegedly offending vehicle, Donato Fabros
and Godofredo de la Cruz, respectively.

After trial on the merits, and the case submitted for decision, the trial court, the Court of First Instance of
Davao, Judge Vicente Cusi, Jr., presiding, dismissed the case on the ground that from the allegation of the
complaint, the action is one to hold Donato Fabros, as the employer of the allegedly negligent driver,
Godofredo de la Cruz, subsidiarily liable for the damage caused the plaintiff, and is, therefore, premature,
there having been no criminal action filed against the driver who had died during the pendency of the case at
bar, and, in effect, states no cause of action. A motion for reconsideration was filed to the order of dismissal,
but to no avail. Hence, this appeal.

The question raised is whether on the basis of the allegation of the complaint, the action is one to enforce the
subsidiary liability of the employer of the negligent driver as provided in Article 103 of the Revised Penal Code,
as held by the court a quo, or it is an action based on quasi-delict. In the first case, the action would be
premature and would, accordingly, be wanting in a cause of action before a judgment of conviction has been
rendered against the negligent driver, for, while a separate civil action may be filed for damages arising from
the criminal offense of the accused for negligence, upon proper reservation of said action (Section 2, Rule III,
Rules of Court), the same may not be heard separately in advance or ahead of the criminal action. While in
the second case, the action, being for liability based on quasi-delict, not for liability arising from crime, may
proceed independently from the criminal action. It is also for a different purpose, the liability sought to be
imposed on the employer being a primary and direct liability, not merely subsidiary. Civil liability for
quasi-delict and that arising out of a crime are clearly different and distinct from each other, as lucidly
demonstrated and discussed in Barredo vs. Garcia, et al., 78 Phil. 607.

Examining the allegations of the complaints, to determine what is made the basis thereof for the relief sought,
which is to impose a "joint and several" liability on the defendants (p. 5 Record on Appeal; Page 26, Rollo),
there is absolutely no reason to exclude and rule out, as the court a quo did, the fact that the action is one
based on quasi delict and hold, as again the court did, that the action is based on the criminal offense of
negligence, as defined in the Revised Penal Code, committed by the driver alone, and concluding that the
purpose of the action is to impose the subsidiary liability on the employer as provided in the same Code.

The court a quo said:

As it is, the complaint really states no cause of action against Donato Fabros in his capacity as employer of
Godofredo de la Cruz. Stated differently, the complaint against Donato Fabros is premature, because he is
only subsidiarily liable under the Penal Code. His subsidiary liability should not be litigated in the civil action
against de la Cruz. It follows that the third-party complaint that he filed is also premature.

From the above observation of the Court, it is crystal clear that the court itself has found that the
employer-employee relation of the two defendants has been sufficiently alleged; otherwise, it would have no
basis for saying that the complaint is "against Donato Fabros in his capacity as employer of Godofredo de la
Cruz." The defendant Donato Fabros has himself correctly perceived the basis of the complaint against him,
as one based on quasi-delict, for instead of filing a motion for a bill of particulars if he deemed the allegations
vague or ambiguous, he interposed in his answer the defense of a "due diligence of a good father of a family
in the selection, employment and supervision of his driver." (Page 8, Record on Appeal; Page 26, Rollo).

In the second place, in alluding to the subsidiary liability of the employer, Donato Fabros, the court a quo has,
likewise, found sufficiently alleged negligence as the basis for the action. The complaint expressly and clearly
alleges that the accident was "due solely to the gross negligence, carelessness and unskillful driving of
defendant Godofredo de la Cruz" (Page 3, Record on Appeal, Page 20, Rollo).

With the allegation of negligence against the driver, Godofredo de la Cruz, and that of an employer-employee
relation between him and his co-defendant, Donato Fabros, the complaint clearly and unmistakably makes
out a case based on quasi-delict, as explicitly provided in Article 2180 of the Civil Code which, inter alia,
provides:
... The owners and managers of an establishment or enterprise are likewise responsible for damages caused
by their employees in the service of the branches in which the latter are employed or on the occasion of their
functions.

What needs only to be alleged under the aforequoted provision is that the employee (driver) has, by his
negligence (quasi-delict) caused damage to make the employer, likewise, responsible for the tortious act of
the employee, and his liability is, as earlier observed, primary and solidary. (Bachrach Motor Co. vs. Gamboa,
L-10296, May 21, 1957; Malipol vs. Tan, 55 SCRA 202: Barredo vs. Garcia and Almario, 73 Phil. 607; Vinluan
vs. Court of Appeals, et al., 16 SCRA 742; Anuran, et al. vs. Buno et al. 17 SCRA 224).

It is such a firmly established principle, as to have virtually formed part of the 'law itself, that the negligence of
the employee gives rise to the presumption of negligence on the part of the employer. This is the presumed
negligence in the selection and supervision of the employee. The theory of presumed negligence, in contrast
with the American doctrine of respondent superior, where the negligence of the employee
is conclusively presumed to be the negligence of the employer, is clearly deducible from the last paragraph of
Article 2180 of the Civil Code which provides that the responsibility therein mentioned shall cease if the
employers prove that they observed all the diligence of a good father of a family to prevent damages (12
Manresa, 657; Balica vs. Litonjua and Leynes, 30 Phil. 624; Cangco vs. Manila Railroad Co., 38 Phil. 768), as
observed in the same cases just cited.

From what has been said, the error of the court a quo in dismissing the case on his mistaken notion that the
action is based on crime, not quasi-delict, becomes very patent. How the court concluded that the action is to
enforce the subsidiary liability of Donato Fabros as the employer of the negligent driver Godofredo de la Cruz
is inconceivable, with the plain and explicit prayer of the complaint to declare the defendants "jointly and
severally" liable for damages, a concept antagonistic to that of subsidiary liability. The death of defendant,
Godofredo de la Cruz, the driver, is therefore, no hindrance to the present action, at least as against the
employer, Donato Fabros, taking its course to final judgment, which the court a quo should have rendered,
the trial of the case having been terminated, instead of dismissing the case, without even a motion to dismiss,
with the evidence, in an probability, supportive of an action on quasi-delict, which the pleadings, both the
complaint and the answer, raised as the specific issue involved and as joined by said pleadings.

A word of advice at least as a reminder, may be meet at this juncture, for judges to give a deeper study and
reflection in the disposition of cases, so that undue delay which could very well be avoided, as in this case,
had the judge been more circumspect and analytical, would not cause injustice to litigants, under the familiar
maxim that justice delayed is justice denied, which should constantly sound its stern warning to all dispensers
of justice.

WHEREFORE, the order of dismissal dated April 17, 1968 is hereby set aside, and let this case be remanded
to the court of origin for the rendition of the judgment on the merits based on the evidence adduced during the
trial. This judgment shall be immediately executory upon its promulgation.

Collin A. Morris vs. CA

Petitioners appeal via certiorari from the decision[1] of the Court of Appeals, which reversed the decision of the trial court
and ordered the dismissal of petitioners complaint for damages against respondent for breach of contract of air carriage.
On February 14, 1978, petitioners filed with the Regional Trial Court, Makati, Branch 143 an action for damages for
breach of contract of air carriage against respondent airline because they were bumped off from SAS Flight SK 893,
Manila-Tokyo, on February 14, 1978, despite a confirmed booking in the first class section of the flight.
Petitioners Collin A. Morris and Thomas P. Whittier were American citizens; the vice-president for technical services
and the director for quality assurance, respectively, of Sterling Asia, a foreign corporation with regional headquarters at No.
8741 Paseo de Roxas, Makati City.
Respondent Scandinavian Airline System (SAS for brevity) is and at times material hereto has been engaged in the
commercial air transport of passengers globally.
Petitioner Morris and co-petitioner Whittier had a series of business meetings with Japanese businessmen in Japan from
February 14 to February 22, 1978. They requested their travel agent, Staats Travel Service, Inc. to book them as first class
passengers in SAS Manila-Tokyo flight on February 14, 1978. Respondent booked them as first-class passengers on Flight
SK 893, Manila-Tokyo flight on February 14, 1978, at 3:50 in the afternoon.
 At 1:30 in the afternoon of February 14, 1978, a limousine service of the travel agency fetched petitioner Morris at his
house in Urdaneta Village, Makati City. Thereafter, they went to Merville Park, Paraaque and fetched petitioner Whittier,
arriving there at around 2:00 in the afternoon. From Paraaque, they went to the Manila International Airport and arrived at
2:35 in the afternoon.
Upon arrival at the airport, representatives of the travel agency met petitioners. It took petitioners two to three minutes
to clear their bags at the customs section. After that, they proceeded to the SAS check-in counter and presented their tickets,
passports, immigration cards and travel documents to Ms. Erlinda Ponce at the reception desk.
After about fifteen (15) minutes, petitioners noticed that their travel documents were not being processed at the check-in
counter. They were informed that there were no more seats on the plane for which reason they could not be accommodated on
the flight.
Petitioner Morris contacted Staats Travel Service and asked the latter to contact the management of SAS to find out
what was the problem. After ten (10) minutes, Staats Travel Service called and confirmed their booking.Thereafter,
petitioners Morris and Whittier returned to respondents check-in counter anticipating that they would be allowed to
check-in. However, the check-in counter was closed. When they informed Ms. Ponce, in-charge at the check-in counter that
arrangements had been made with respondents office, she ignored them. Even respondents supervisor, Raul Basa, ignored
them and refused to answer their question why they could not be accommodated in the flight despite their confirmed booking.
When petitioners went to the supervisors desk to check the flight manifest, they saw that their names on top of the list of
the first class section had been crossed out. They pressed the supervisor to allow them in the flight as they had confirmed
tickets. Mr. Basa informed them that it could not be done because the flight was closed and it was too late to
do anything. They checked in at exactly 3:10 in the afternoon and the flight was scheduled to leave Manila International
Airport at 3:50 in the afternoon.[2]
Petitioner Morris said that they were advised to be at the airport at least an hour before departure time. This has been
respondents policy in petitioners previous travels abroad.[3]
Ms. Erlinda Ponce, SAS employee on duty at the check-in counter on February 14, 1978 testified that the economy class
of SAS Flight SK 893 was overbooked; however, the first class section was open. She met petitioners, who were booked in
the first class section, when they approached the counter to check-in. They were not accommodated on the flight because they
checked-in after the flight manifest had been closed, forty (40) minutes prior to the planes departure. Petitioners seats were
given to economy class passengers who were upgraded to first class.[4]
Upon cross-examination, Ms. Ponce said that petitioners might have arrived at the airport earlier than 3:10 in the
afternoon when the flight manifest was closed; she was sure that they arrived at the check-in counter at past 3:10 in the
afternoon. The first class seats of petitioners were given to upgraded economy class passengers three (3) minutes before the
flight manifest was closed.[5]
Raul Cruz Basa, a supervisor of respondent airline company, testified that SAS Flight SK 893 on February 14, 1978 was
overbooked in the economy class. Petitioner Morris and Whittier were among the names listed in the first class section of the
flight manifest. However, their names were crossed out and the symbols NOSH, meaning NO SHOW, written after their
names. The NO SHOW notation could mean either that the booked passengers or his travel documents were not at the
counter at the time of the closing of the flight manifest.
Mr. Basa said that he talked to petitioners at about 3:20 in the afternoon after receiving a radio call from the ground staff
at the check-in counter about complaints from passengers.
He learned from Ms. Ponce that petitioners checked in late after the flight manifest had been closed, after which time
waitlisted passengers from the economy class had been upgraded. He explained to petitioners that they could not be
accommodated on the plane because the seats were all filled up. He admitted that there were about six (6) passengers in the
counter who were refused boarding because waitlisted passengers had been accepted. Most of those who were refused
boarding came in late.[6]
Alice Magtulac, another witness of the respondent, testified that she was supervisor of ticketing and reservation
section. She said that petitioners Morris and Whittier had confirmed reservation tickets to the first class section of SAS Flight
SK 893, Manila-Tokyo flight, on February 14, 1978. She confirmed that Ms. Thelma Lorraine Sayer was one of the economy
class passengers who was not able to leave because the flight was overbooked on the economy class.
Ms. Magtulac said that it was not SAS policy to upgrade economy passengers to first class if passengers booked for first
class did not show up.[7]
On August 24, 1988, the trial court rendered a judgment against respondent and in favor of petitioners Morris and
Whittier. The dispositive portion reads:

WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiffs and against defendant,
ordering the latter to pay the former the following:

1) Moral damages to plaintiff Collin A. Morris in the amount of P1,000,000.00 and to plaintiff Thomas P. Whittier the sum of
P750,000.00;
2) Exemplary damages in the sum of P200,00.00;

3) Attorneys fees in the amount of P300,000.00, plus the costs of suit.

SO ORDERED.

Makati, Metro Manila, August 24, 1988.

[ORIGINAL SIGNED]
TEOFILO GUADIZ, JR.
J u d g e[8]
On October 5, 1988, respondent filed a notice of appeal.[9]
Meanwhile, on October 6, 1988, petitioners Morris and Whittier moved for reconsideration of the decision as regards
the award of damages.
On November 2, 1988, respondent opposed the motion for reconsideration.[10]
On February 26, 1992, the trial court issued an order granting petitioners motion for reconsideration, the decretal portion
of which is quoted herein, to wit:

WHEREFORE, in view of the foregoing, the Court hereby grants the Motion for Reconsideration. The dispositive portion of
the Decision is hereby amended with respect to the amount of moral damages, ordering the defendant to pay moral damages
to Collin Morris in the amount of P1,500,000.00 and to Thomas Whittier the amount of P1,000,000.00.

SO ORDERED.

Makati, Metro Manila, February 26, 1992.

[ORIGINAL SIGNED]
TEOFILO GUADIZ, JR.
J u d g e[11]
Respondents appeal rested mainly on the ground that the trial court misappreciated the facts and evidence adduced
during the trial. The thrust of its defense was petitioners lack of cause of action, considering that they checked-in at the SAS
counter at the Manila International Airport after the flight manifest was closed and after their first class seats were given to
waitlisted economy class passengers.[12]
On January 21, 1997, the Court of Appeals promulgated a decision reversing the decision of the court a quo, and
ordering the dismissal of the complaint for damages. The dispositive portion of the decision provides:

WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE and another one rendered dismissing
plaintiffs-appellees complaint.

SO ORDERED.[13]

In reversing the trial courts decision, the Court of Appeals found petitioners statements self-serving. Petitioners failed to
prove that they checked-in on time. The appellate court lent credence to respondents claim that petitioners were denied
boarding on SAS Flight SK 893 because of their late arrival for check-in at the international airport. Respondents employee,
Ms. Erlinda Ponce, testified that petitioners checked in after the flight manifest was closed.
Hence, this petition.[14]
Petitioners allege that the Court of Appeals gravely erred in dismissing their complaint for damages and in finding their
testimonies self-serving. They contend that the trial court did not act arbitrarily in lending credence to their testimonies and
finding their evidence sufficient to warrant the award of damages against respondent. In sum, they claim to be entitled to the
award for damages because, as found by the trial court, they were wrongfully and in bad faith, bumped-off from SAS Flight
SK 893 on February 14, 1978, despite their timely arrival at the airport for check-in and confirmed bookings as first class
passengers.[15]
The petition has no merit.
To begin with, it must be emphasized that a contract to transport passengers is quite different in kind and degree from
any other contractual relations, and this is because of the relation, which an air carrier sustains with the public. Its business is
mainly with the travelling public. It invites people to avail [themselves] of the comforts and advantages it offers. The contract
of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carriers employees
naturally could give ground for an action for damages.[16]
 In awarding moral damages for breach of contract of carriage, the breach must be wanton and deliberately injurious or
the one responsible acted fraudulently or with malice or bad faith.[17] Where in breaching the contract of carriage the
defendant airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and
probable consequences of the breach of obligation which the parties had foreseen or could have reasonably foreseen. In that
case, such liability does not include moral and exemplary damages.[18] 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.[19]
The award of exemplary damages has likewise no factual basis. It is a requisite that the act must be accompanied by bad
faith or done in wanton, fraudulent or malevolent manner--circumstances which are absent in this case. In addition,
exemplary damages cannot be awarded as the requisite element of compensatory damages was not present."[20]
In the instant case, assuming arguendo that breach of contract of carriage may be attributed to respondent, petitioners
travails were directly traceable to their failure to check-in on time, which led to respondents refusal to accommodate them on
the flight.
The rule is that moral damages are recoverable in a damage suit predicated upon a breach of contract of carriage only
where (a) the mishap results in the death of a passenger and (b) it is proved that the carrier was guilty of fraud and bad faith
even if death does not result.[21]
For having arrived at the airport after the closure of the flight manifest, respondents employee could not be faulted for
not entertaining petitioners tickets and travel documents for processing, as the checking in of passengers for SAS Flight SK
893 was finished. There was no fraud or bad faith as would justify the courts award of moral damages.
Bad faith does not simply connote bad judgment or negligence, it imports a dishonest purpose or some moral obliquity
and conscious doing of a wrong, a breach of known duty through some motive or interest or ill will that partakes of the nature
of fraud.[22]
In the instant case, respondents denial of petitioners boarding on SAS Flight SK 893 was not attended by bad faith or
malice.
To the contrary, facts revealed that they were not allowed to board the plane due to their failure to check-in on
time. Petitioner Morris admitted that they were at the check-in counter at around 3:10, exactly the same time that the flight
manifest was closed, but still too late to be accommodated on the plane. Respondents supervisor, Raul C. Basa, testified that
he met petitioners at about 3:20 in the afternoon after receiving a radio call from the ground staff regarding petitioners
complaints. Clearly, petitioners did not arrive on time for check-in.
As we find petitioners not entitled to moral damages, an award of exemplary damages is likewise baseless.[23] Where
the award of moral and exemplary damages is eliminated, so must the award for attorneys fees be deleted.[24]
WHEREFORE, the Court DENIES the petition for lack of merit. The Court AFFIRMS in toto the decision of the Court
of Appeals in CA-G. R. CV. No. 38684.
No costs.
SO ORDERED.

Antonia Maranan vs. Pascual Perez, et al,

Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab owned and operated by Pascual Perez when he was stabbed and killed
by the driver, Simeon Valenzuela.
Valenzuela was prosecuted for homicide in the Court of First Instance of Batangas. Found guilty, he was sentenced to suffer imprisonment and
to indemnify the heirs of the deceased in the sum of P6,000. Appeal from said conviction was taken to the Court of Appeals. 1wph1.t

On December 6 1961, while appeal was pending in the Court of Appeals, Antonia Maranan, Rogelio's mother, filed an action in the Court of
First Instance of Batangas to recover damages from Perez and Valenzuela for the death of her son. Defendants asserted that the deceased
was killed in self-defense, since he first assaulted the driver by stabbing him from behind. Defendant Perez further claimed that the death was
a caso fortuito for which the carrier was not liable.
The court a quo, after trial, found for the plaintiff and awarded her P3,000 as damages against defendant Perez. The claim against defendant
Valenzuela was dismissed. From this ruling, both plaintiff and defendant Perez appealed to this Court, the former asking for more damages and
the latter insisting on non-liability. Subsequently, the Court of Appeals affirmed the judgment of conviction earlier mentioned, during the
pendency of the herein appeal, and on May 19, 1964, final judgment was entered therein. (Rollo, p. 33).
Defendant-appellant relies solely on the ruling enunciated in Gillaco v. Manila Railroad Co., 97 Phil. 884, that the carrier is under no absolute
liability for assaults of its employees upon the passengers. The attendant facts and controlling law of that case and the one at bar are very
different however. In the Gillaco case, the passenger was killed outside the scope and the course of duty of the guilty employee. As this Court
there found:
x x x when the crime took place, the guard Devesa had no duties to discharge in connection with the transportation of the deceased from
Calamba to Manila. The stipulation of facts is clear that when Devesa shot and killed Gillaco, Devesa was assigned to guard the Manila-San
Fernando (La Union) trains, and he was at Paco Station awaiting transportation to Tutuban, the starting point of the train that he was engaged to
guard. In fact, his tour of duty was to start at 9:00 two hours after the commission of the crime. Devesa was therefore under no obligation to
safeguard the passengers of the Calamba-Manila train, where the deceased was riding; and the killing of Gillaco was not done in line of duty.
The position of Devesa at the time was that of another would be passenger, a stranger also awaiting transportation, and not that of an employee
assigned to discharge any of the duties that the Railroad had assumed by its contract with the deceased. As a result, Devesa's assault can not
be deemed in law a breach of Gillaco's contract of transportation by a servant or employee of the carrier. . . . (Emphasis supplied)
Now here, the killing was perpetrated by the driver of the very cab transporting the passenger, in whose hands the carrier had entrusted the
duty of executing the contract of carriage. In other words, unlike the Gillaco case, the killing of the passenger here took place in the course of
duty of the guilty employee and when the employee was acting within the scope of his duties.
Moreover, the Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present Civil Code, did not impose
upon common carriers absolute liability for the safety of passengers against wilful assaults or negligent acts committed by their employees. The
death of the passenger in the Gillaco case was truly a fortuitous event which exempted the carrier from liability. It is true that Art. 1105 of the old
Civil Code on fortuitous events has been substantially reproduced in Art. 1174 of the Civil Code of the Philippines but both articles clearly
remove from their exempting effect the case where the law expressly provides for liability in spite of the occurrence of force majeure. And herein
significantly lies the statutory difference between the old and present Civil Codes, in the backdrop of the factual situation before Us, which
further accounts for a different result in the Gillaco case. Unlike the old Civil Code, the new Civil Code of the Philippines expressly makes the
common carrier liable for intentional assaults committed by its employees upon its passengers, by the wording of Art. 1759 which categorically
states that
Common carriers are liable for the death of or injuries 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.
The Civil Code provisions on the subject of Common Carriers 1 are new and were taken from Anglo-American Law.2There, the basis of the
carrier's liability for assaults on passengers committed by its drivers rests either on (1) the doctrine of respondeat superior or (2) the principle
that it is the carrier's implied duty to transport the passenger safely.3
Under the first, which is the minority view, the carrier is liable only when the act of the employee is within the scope of his authority and duty. It is
not sufficient that the act be within the course of employment only. 4
Under the second view, upheld by the majority and also by the later cases, it is enough that the assault happens within the course of the
employee's duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier's orders.5 The
carrier's liability here is absolute in the sense that it practically secures the passengers from assaults committed by its own employees. 6
As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows the rule based on the second view. At least three very
cogent reasons underlie this rule. As explained in Texas Midland R.R. v. Monroe, 110 Tex. 97, 216 S.W. 388, 389-390, and Haver v. Central
Railroad Co., 43 LRA 84, 85: (1) the special undertaking of the carrier requires that it furnish its passenger that full measure of protection
afforded by the exercise of the high degree of care prescribed by the law, inter alia from violence and insults at the hands of strangers and other
passengers, but above all, from the acts of the carrier's own servants charged with the passenger's safety; (2) said liability of the carrier for the
servant's violation of duty to passengers, is the result of the formers confiding in the servant's hands the performance of his contract to safely
transport the passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed by law; and (3) as between
the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier's employees against passengers, since
it, and not the passengers, has power to select and remove them.
Accordingly, it is the carrier's strict obligation to select its drivers and similar employees with due regard not only to their technical competence
and physical ability, but also, no less important, to their total personality, including their patterns of behavior, moral fibers, and social attitude.
Applying this stringent norm to the facts in this case, therefore, the lower court rightly adjudged the defendant carrier liable pursuant to Art. 1759
of the Civil Code. The dismissal of the claim against the defendant driver was also correct. Plaintiff's action was predicated on breach of
contract of carriage7 and the cab driver was not a party thereto. His civil liability is covered in the criminal case wherein he was convicted by final
judgment.
In connection with the award of damages, the court a quo granted only P3,000 to plaintiff-appellant. This is the minimum compensatory
damages amount recoverable under Art. 1764 in connection with Art. 2206 of the Civil Code when a breach of contract results in the
passenger's death. As has been the policy followed by this Court, this minimal award should be increased to P6,000. As to other alleged actual
damages, the lower court's finding that plaintiff's evidence thereon was not convincing,8 should not be disturbed. Still, Arts. 2206 and 1764
award moral damages in addition to compensatory damages, to the parents of the passenger killed to compensate for the mental anguish they
suffered. A claim therefor, having been properly made, it becomes the court's duty to award moral damages. 9 Plaintiff demands P5,000 as
moral damages; however, in the circumstances, We consider P3,000 moral damages, in addition to the P6,000 damages afore-stated, as
sufficient. Interest upon such damages are also due to plaintiff-appellant. 10
Wherefore, with the modification increasing the award of actual damages in plaintiff's favor to P6,000, plus P3,000.00 moral damages, with
legal interest on both from the filing of the complaint on December 6, 1961 until the whole amount is paid, the judgment appealed from is
affirmed in all other respects. No costs. So ordered.

Act of Other Passengers and 3rd persons

Jose Pilapil vs. CA

This is a petition to review on certiorari the decision* rendered by the Court of Appeals dated 19 October
1979 in CA-G.R. No. 57354-R entitled "Jose Pilapil, plaintiff-appellee versus Alatco Transportation Co., Inc.,
defendant-appellant," which reversed and set aside the judgment of the Court of First Instance of Camarines
Sur in Civil Case No. 7230 ordering respondent transportation company to pay to petitioner damages in the
total sum of sixteen thousand three hundred pesos (P 16,300.00).

The record discloses the following facts:

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

Considering that the sight of his left eye was impaired, petitioner was taken to Dr. Malabanan of Iriga City
where he was treated for another week. Since there was no improvement in his left eye's vision, petitioner
went to V. Luna Hospital, Quezon City where he was treated by Dr. Capulong. Despite the treatment
accorded to him by Dr. Capulong, petitioner lost partially his left eye's vision and sustained a permanent scar
above the left eye.

Thereupon, petitioner instituted before the Court of First Instance of Camarines Sur, Branch I an action for
recovery of damages sustained as a result of the stone-throwing incident. After trial, the court a quo rendered
judgment with the following dispositive part:

Wherefore, judgment is hereby entered:

1. Ordering defendant transportation company to pay plaintiff Jose Pilapil the sum of P 10,000.00, Philippine
Currency, representing actual and material damages for causing a permanent scar on the face and injuring
the eye-sight of the plaintiff;

2. Ordering further defendant transportation company to pay the sum of P 5,000.00, Philippine Currency, to
the plaintiff as moral and exemplary damages;

3. Ordering furthermore, defendant transportation company to reimburse plaintiff the sum of P 300.00 for his
medical expenses and attorney's fees in the sum of P 1,000.00, Philippine Currency; and

4. To pay the costs.

SO ORDERED 1

From the judgment, private respondent appealed to the Court of Appeals where the appeal was docketed as
CA-G.R. No. 57354R. On 19 October 1979, the Court of Appeals, in a Special Division of Five, rendered
judgment reversing and setting aside the judgment of the court a quo.

Hence the present petition.

In seeking a reversal of the decision of the Court of Appeals, petitioner contends that said court has decided
the issue not in accord with law. Specifically, petitioner argues that the nature of the business of a
transportation company requires the assumption of certain risks, and the stoning of the bus by a stranger
resulting in injury to petitioner-passenger is one such risk from which the common carrier may not exempt
itself from liability.

We do not agree.

In consideration of the right granted to it by the public to engage in the business of transporting passengers
and goods, a common carrier does not give its consent to become an insurer of any and all risks to
passengers and goods. It merely undertakes to perform certain duties to the public as the law imposes, and
holds itself liable for any breach thereof.

Under Article 1733 of the Civil Code, common carriers are required to observe extraordinary diligence for the
safety of the passenger transported by them, according to all the circumstances of each case. The
requirement of extraordinary diligence imposed upon common carriers is restated in 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 due regard for all the circumstances." Further, in case of
death of or injuries to passengers, the law presumes said common carriers to be at fault or to have acted
negligently. 2

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. 3

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.

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. 4

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. 5
Petitioner contends that respondent common carrier failed to rebut the presumption of negligence against it
by proof on its part that it exercised extraordinary diligence for the safety of its passengers.

We do not agree.

First, as stated earlier, the presumption of fault or negligence against the carrier is only a disputable
presumption. It gives in where contrary facts are established proving either that the carrier had exercised the
degree of diligence required by law or the injury suffered by the passenger was due to a fortuitous event.
Where, as in the instant case, the injury sustained by the petitioner was in no way due to any defect in the
means of transport or in the method of transporting or to the negligent or willful acts of private respondent's
employees, and therefore involving no issue of negligence in its duty to provide safe and suitable cars as well
as competent employees, with the injury arising wholly from causes created by strangers over which the
carrier had no control or even knowledge or could not have prevented, the presumption is rebutted and the
carrier is not and ought not to be held liable. To rule otherwise would make the common carrier the insurer of
the absolute safety of its passengers which is not the intention of the lawmakers.

Second, while as a general rule, common carriers are bound to exercise extraordinary diligence in the safe
transport of their passengers, it would seem that this is not the standard by which its liability is to be
determined when intervening acts of strangers is to be determined directly cause the injury, while the contract
of carriage Article 1763 governs:

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 carrier's employees through the
exercise of the diligence of a good father of a family could have prevented or stopped the act or omission.

Clearly under the above provision, a tort committed by a stranger which causes injury to a passenger does
not accord the latter a cause of action against the carrier. The negligence for which a common carrier is held
responsible is the negligent omission by the carrier's employees to prevent the tort from being committed
when the same could have been foreseen and prevented by them. Further, under the same provision, it is to
be noted that when the violation of the contract is due to the willful acts of strangers, as in the instant case,
the degree of care essential to be exercised by the common carrier for the protection of its passenger is only
that of a good father of a family.

Petitioner has charged respondent carrier of negligence on the ground that the injury complained of could
have been prevented by the common carrier if something like mesh-work grills had covered the windows of
its bus.

We do not agree.

Although the suggested precaution could have prevented the injury complained of, the rule of ordinary care
and prudence is not so exacting as to require one charged with its exercise to take doubtful or unreasonable
precautions to guard against unlawful acts of strangers. The carrier is not charged with the duty of providing
or maintaining vehicles as to absolutely prevent any and all injuries to passengers. Where the carrier uses
cars of the most approved type, in general use by others engaged in the same occupation, and exercises a
high degree of care in maintaining them in suitable condition, the carrier cannot be charged with negligence in
this respect. 6

Finally, petitioner contends that it is to the greater interest of the State if a carrier were made liable for such
stone-throwing incidents rather than have the bus riding public lose confidence in the transportation system.

Sad to say, we are not in a position to so hold; such a policy would be better left to the consideration of
Congress which is empowered to enact laws to protect the public from the increasing risks and dangers of
lawlessness in society.

WHEREFORE, the judgment appealed from is hereby AFFIRMED.

SO ORDERED.

Passengers baggages
1.5 Define baggage
1.6 Checked-in-Baggage
1.7 Hand Carried baggage
 Philippine Airlines Inc. vs. CA

This is definitely not a case of first impression. The incident which eventuated in the present controversy is a
drama of common contentious occurrence between passengers and carriers whenever loss is sustained by
the former. Withal, the exposition of the factual ambience and the legal precepts in this adjudication may
hopefully channel the assertiveness of passengers and the intransigence of carriers into the realization that at
times a bad extrajudicial compromise could be better than a good judicial victory.
Assailed in this petition for review is the decision of respondent Court of Appeals in CA-G.R. CV No.
42744 which affirmed the decision of the lower court finding petitioner Philippine Air Lines, Inc. (PAL) liable
[1] [2]

as follows:

ACCORDINGLY, judgment is hereby rendered ordering defendant Philippine Air Lines, Inc., to pay plaintiff Gilda C.
Mejia:

(1) P30,000.00 by way of actual damages of the microwave oven;

(2) P10,000.00 by way of moral damages;

(3) P20,000.00 by way of exemplary damages;

(4) P10,000.00 as attorneys fee;

all in addition to the costs of the suit.

Defendants counterclaim is hereby dismissed for lack of merit. [3]

The facts as found by respondent Court of Appeals are as follows:

On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine Airlines, one (1) unit microwave oven,
with a gross weight of 33 kilograms from San Francisco, U.S.A. to Manila, Philippines. Upon arrival, however, of said
article in Manila, Philippines, plaintiff discovered that its front glass door was broken and the damage rendered it
unserviceable. Demands both oral and written were made by plaintiff against the defendant for the reimbursement of
the value of the damaged microwave oven, and transportation charges paid by plaintiff to defendant company. But
these demands fell on deaf ears.

On September 25, 1990, plaintiff Gilda C. Mejia filed the instant action for damages against defendant in the lower
court.

In its answer, defendant Airlines alleged inter alia, by way of special and affirmative defenses, that the court has no
jurisdiction over the case; that plaintiff has no valid cause of action against defendant since it acted only in good faith
and in compliance with the requirements of the law, regulations, conventions and contractual commitments; and that
defendant had always exercised the required diligence in the selection, hiring and supervision of its employees. [4]

What had theretofore transpired at the trial in the court a quo is narrated as follows:

Plaintiff Gilda Mejia testified that sometime on January 27, 1990, she took defendants plane from San Francisco, U.S.A.
for Manila, Philippines (Exh. F). Amongst her baggages (sic) was a slightly used microwave oven with the brand name
Sharp under PAL Air Waybill No. 0-79-1013008-3 (Exh. A). When shipped, defendants office at San
Francisco inspected it. It was in good condition with its front glass intact. She did not declare its value upon the advice
of defendants personnel at San Francisco.

When she arrived in Manila, she gave her sister Concepcion C. Dio authority to claim her baggag(e) (Exh. G) and took
a connecting flight for Bacolod City.

When Concepcion C. Dino claimed the baggag(e) (Exh. B) with defendant, then with the Bureau of Customs, the front
glass of the microwave oven was already broken and cannot be repaired because of the danger of radiation.They
demanded from defendant thru Atty. Paco P30,000.00 for the damages although a brand new one costs P40,000.00, but
defendant refused to pay.
Hence, plaintiff engaged the services of counsel. Despite demand (Exh. E) by counsel, defendant still refused to pay.

The damaged oven is still with defendant. Plaintiff is engaged in (the) catering and restaurant business. Hence, the
necessity of the oven. Plaintiff suffered sleepless nights when defendant refused to pay her (for) the broken oven and
claims P 10,000.00 moral damages, P20,000.00 exemplary damages, P10,000.00 attorneys fees plus P300.00 per court
appearance and P15,000.00 monthly loss of income in her business beginning February, 1990.

Defendant Philippine Airlines thru its employees Rodolfo Pandes and Vicente Villaruz posited that plaintiffs claim was
not investigated until after the filing of the formal claim on August 13, 1990 (Exh. 6 also Exh. E). During the
investigations, plaintiff failed to submit positive proof of the value of the cargo. Hence her claim was denied.

Also plaintiffs claim was filed out of time under paragraph 12, a(1) of the Air Waybill (Exh. A, also Exh. 1) which
provides: (a) the person entitled to delivery must make a complaint to the carrier in writing in case: (1) of visible
damage to the goods, immediately after discovery of the damage and at the latest within 14 days from the receipt of the
goods.[5]

As stated at the outset, respondent Court of Appeals similarly ruled in favor of private respondent by
affirming in full the trial courts judgment in Civil Case No. 6210, with costs against petitioner. Consequently,
[6]

petitioner now impugns respondent appellate courts ruling insofar as it agrees with (1) the conclusions of the
trial court that since the air waybill is a contract of adhesion, its provisions should be strictly construed against
herein petitioner; (2) the finding of the trial court that herein petitioners liability is not limited by the provisions
of the air waybill; and (3) the award by the trial court to private respondent of moral and exemplary damages,
attorneys fees and litigation expenses.
The trial court relied on the ruling in the case of Fieldmens Insurance Co., Inc. vs. Vda.
De Songco, et al. in finding that the provisions of the air waybill should be strictly construed against
[7]

petitioner. More particularly, the court below stated its findings thus:

In this case, it is seriously doubted whether plaintiff had read the printed conditions at the back of the Air Waybill
(Exh. 1), or even if she had, if she was given a chance to negotiate on the conditions for loading her microwave
oven. Instead she was advised by defendants employee at San Francisco, U.S.A., that there is no need to declare the
value of her oven since it is not brand new. Further, plaintiff testified that she immediately submitted a formal claim for
P30,000.00 with defendant. But their claim was referred from one employee to another th(e)n told to come back the
next day, and the next day, until she was referred to a certain Atty. Paco. When they got tired and frustrated of coming
without a settlement of their claim in sight, they consulted a lawyer who demanded from defendant on August 13,
1990 (Exh. E, an[d] Exh. 6).

The conclusion that inescapably emerges from the above findings of fact is to concede it with credence. x x x. [8]

Respondent appellate court approved said findings of the trial court in this manner:

We cannot agree with defendant-appellants above contention. Under our jurisprudence, the Air Waybill is a contract of
adhesion considering that all the provisions thereof are prepared and drafted only by the carrier (Sweet Lines v. Teves,
83 SCRA 361). The only participation left of the other party is to affix his signature thereto (BPI Credit
Corporation vs. Court of Appeals, 204 SCRA 601; Saludo, Jr. vs. C.A., 207 SCRA 498; Maersk vs. Court of Appeals,
222 SCRA 108, among the recent cases). In the earlier case of Angeles v. Calasanz, 135 SCRA 323, the Supreme Court
ruled that the terms of a contract (of adhesion) must be interpreted against the party who drafted the same. x xx. [9]

Petitioner airlines argues that the legal principle enunciated in Fieldmens Insurance does not apply to
the present case because the provisions of the contract involved here are neither ambiguous nor
obscure. The front portion of the air waybill contains a simple warning that the shipment is subject to the
conditions of the contract on the dorsal portion thereof regarding the limited liability of the carrier unless a
higher valuation is declared, as well as the reglementary period within which to submit a written claim to the
carrier in case of damage or loss to the cargo. Granting that the air waybill is a contract of adhesion, it has
been ruled by the Court that such contracts are not entirely prohibited and are in fact binding regardless of
whether or not respondent herein read the provisions thereof. Having contracted the services of petitioner
carrier instead of other airlines, private respondent in effect negotiated the terms of the contract and thus
became bound thereby. [10]

Counsel for private respondent refutes these arguments by saying that due to her eagerness to ship the
microwave oven to Manila, private respondent assented to the terms and conditions of the contract without
any opportunity to question or change its terms which are practically on a take-it-or-leave-it basis, her only
participation therein being the affixation of her signature. Further, reliance on the Fieldmensinsurance case is
misplaced since it is not the ambiguity or obscurity of the stipulation that renders necessary the strict
interpretation of a contract of adhesion against the drafter, but the peculiarity of the transaction wherein one
party, normally a corporation, drafts all the provisions of the contract without any participation whatsoever on
the part of the other party other than affixment of signature. [11]

A review of jurisprudence on the matter reveals the consistent holding of the Court that contracts of
adhesion are not invalid per se and that it has on numerous occasions upheld the binding effect thereof. As [12]

explained in Ong Yiu vs. Court of Appeals, et al., supra:

x x x. Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger
regardless of the latters lack of knowledge or assent to the regulation. It is what is known as a contract of adhesion, in
regards which it has been said that contracts of adhesion wherein one party imposes a ready-made form of contract on
the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract
is in reality free to reject it entirely; if he adheres, he gives his consent. x x x, a contract limiting liability upon an
agreed valuation does not offend against the policy of the law forbidding one from contracting against his own
negligence.

As rationalized in Saludo, Jr. vs. Court of Appeals, et al., supra:

x x x, it should be borne in mind that a contract of adhesion may be struck down as void and unenforceable, for being
subversive of public policy, only when the weaker party is imposed upon in dealing with the dominant bargaining party
and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal
footing. x x x.

but subject to the caveat that

x x x. Just because we have said that Condition No. 5 of the airway bill is binding upon the parties to and fully
operative in this transaction, it does not mean, and let this serve as fair warning to respondent carriers, that they can at
all times whimsically seek refuge from liability in the exculpatory sanctuary of said Condition No. 5 x x x.

The peculiar nature of such contracts behooves the Court to closely scrutinize the factual milieu to which
the provisions are intended to apply. Thus, just as consistently and unhesitatingly, but without categorically
invalidating such contracts, the Court has construed obscurities and ambiguities in the restrictive provisions
of contracts of adhesion strictly albeit not unreasonably against the drafter thereof when justified in light of the
operative facts and surrounding circumstances. [13]

We find nothing objectionable about the lower courts reliance upon the Fieldmens Insurance case, the
principles wherein squarely apply to the present petition. The parallelism between the aforementioned case
and this one is readily apparent for, just as in the instant case, it is the binding effect of the provisions in a
contract of adhesion (an insurance policy in Fieldmens Insurance) that is put to test.
A judicious reading of the case reveals that what was pivotal in the judgment of liability against petitioner
insurance company therein, and necessarily interpreting the provisions of the insurance policy as ineffective,
was the finding that the representations made by the agent of the insurance company rendered it impossible
to comply with the conditions of the contract in question, rather than the mere ambiguity of its terms. The
extended pronouncements regarding strict construction of ambiguous provisions in an adhesion contract
against its drafter, which although made by the Court as an aside but has perforce evolved into a judicial
tenet over time, was actually an incidental statement intended to emphasize the duty of the court to protect
the weaker, as against the more dominant, party to a contract, as well as to prevent the iniquitous situation
wherein the will of one party is imposed upon the other in the course of negotiation.
Thus, there can be no further question as to the validity of the terms of the air waybill, even if the same
constitutes a contract of adhesion. Whether or not the provisions thereof particularly on the limited liability of
the carrier are binding on private respondent in this instance must be determined from the facts and
circumstances involved vis-a-vis the nature of the provisions sought to be enforced, taking care that equity
and fair play should characterize the transaction under review.
On petitioners insistence that its liability for the damage to private respondents microwave oven, if any,
should be limited by the provisions of the air waybill, the lower court had this to say:

By and large, defendants evidence is anchored principally on plaintiffs alleged failure to comply with paragraph 12, a(1)
(Exh. 1-C-2) of the Air waybill (Exh. A, also Exh. 1), by filing a formal claim immediately after discovery of the
damage. Plaintiff filed her formal claim only on August 13, 1990 (Exh. 6, also Exh. E). And, failed to present positive
proof on the value of the damaged microwave oven. Hence, the denial of her claim.
This Court has misgivings about these pretensions of defendant.

xxx xxx xxx

Finally, the Court finds no merit to defendants contention that under the Warsaw Convention, its liability if any, cannot
exceed U.S. $20.00 based on weight as plaintiff did not declare the contents of her baggage nor pay additional charges
before the flight.
[14]

The appellate court declared correct the non-application by the trial court of the limited liability of therein
defendant-appellant under the Conditions of the Contract contained in the air waybill , based on the ruling
in Cathay Pacific Airways, Ltd. vs. Court of Appeals, et al., which substantially enunciates the rule that while
[15]

the Warsaw Convention has the force and effect of law in the Philippines, being a treaty commitment by the
government and as a signatory thereto, the same does not operate as an exclusive enumeration of the
instances when a carrier shall be liable for breach of contract or as an absolute limit of the extent of liability,
nor does it preclude the operation of the Civil Code or other pertinent laws.
Petitioner insists that both respondent court and the trial court erred in finding that petitioners liability, if
any, is not limited by the provisions of the air waybill, for, as evidence of the contract of carriage between
petitioner and private respondent, it substantially states that the shipper certifies to the correctness of the
entries contained therein and accepts that the carriers liability is limited to US$20 per kilogram of goods lost,
damaged or destroyed unless a value is declared and a supplementary charge paid. Inasmuch as no such
declaration was made by private respondent, as she admitted during cross-examination, the liability of
petitioner, if any, should be limited to 28 kilograms multiplied by US$20, or $560. Moreover, the validity of
these conditions has been upheld in the leading case of Ong Yiu vs. Court of Appeals, et al., supra, and
subsequent cases, for being a mere reiteration of the limitation of liability under the. Warsaw Convention,
which treaty has the force and effect of law. [16]

It is additionally averred that since private respondent was merely advised, not ordered, that she need
not declare a higher value for her cargo, the final decision of refraining from making such a declaration fell on
private respondent and should not put the petitioner in estoppel from invoking its limited liability. [17]

In refutation, private respondent explains that the reason for the absence of a declaration of a higher
value was precisely because petitioners personnel in San Francisco, U.S.A. advised her not to declare the
value of her cargo, which testimony has not at all been rebutted by petitioner. This being so, petitioner
is estopped from faulting private respondent for her failure to declare the value of the microwave oven. [18]

The validity of provisions limiting the liability of carriers contained in bills of lading have been consistently
upheld for the following reason:

x x x. The stipulation in the bill of lading limiting the common carriers liability to the value of goods appearing in the
bill, unless the shipper or owner declares a greater value, is valid and binding. The limitation of the carriers liability is
sanctioned by the freedom of the contracting parties to establish such stipulations, clauses, terms, or conditions as they
may deem convenient, provided they are not contrary to law, morals, good customs and public policy. x x x. [19]

However, the Court has likewise cautioned against blind reliance on adhesion contracts where the facts
and circumstances warrant that they should be disregarded. [20]

In the case at bar, it will be noted that private respondent signified an intention to declare the value of the
microwave oven prior to shipment, but was explicitly advised against doing so by PALs personnel in San
Francisco, U.S.A., as borne out by her testimony in court:
xxx xxx xxx

Q Did you declare the value of the shipment?

A No. I was advised not to.

Q Who advised you?

A At the PAL Air Cargo. [21]

It cannot be denied that the attention of PAL through its personnel in San Francisco was sufficiently
called to the fact that private respondents cargo was highly susceptible to breakage as would necessitate the
declaration of its actual value. Petitioner had all the opportunity to check the condition and manner of packing
prior to acceptance for shipment, as well as during the preparation of the air waybill by PALsAcceptance
[22]

Personnel based on information supplied by the shipper, and to reject the cargo if the contents or the
[23]

packing did not meet the companys required specifications. Certainly, PAL could not have been otherwise
prevailed upon to merely accept the cargo.
 While Vicente Villaruz, officer-in-charge of the PAL Import Section at the time of incident, posited that
there may have been inadequate and improper packing of the cargo, which by itself could be a ground for
[24]

refusing carriage of the goods presented for shipment, he nonetheless admitted on cross-examination that
private respondents cargo was accepted by PAL in its San Francisco office:
ATTY. VINCO

So that, be that as it may, my particular concern is that, it is the PAL personnel that accepts the baggage?

WITNESS

Yes, sir.

ATTY. VINCO

Also, if he comes from abroad like in this particular case, it is the PAL personnel who accepts the baggage?

WITNESS

Yes, sir.

ATTY. VINCO

And the PAL personnel may or may not accept the baggage?

WITNESS

Yes, sir.

ATTY. VINCO

According to what is stated as in the acceptance of the cargo, it is to the best interest of the airlines, that is, he
want(s) also that the airlines would be free from any liability. Could that be one of the grounds for not admitting
a baggage?

WITNESS

Safety is number one (I)

xxx xxx xxx

ATTY. VINCO

So, this baggage was accepted and admitted in San Francisco?

WITNESS

Yes, sir.

ATTY. VINCO

And you could not show any document to the Court that would suggest that this baggage was denied
admittance by your office at San Francisco?

WITNESS

No, I cannot show.

ATTY. VINCO

Now, can you show any document that would suggest that there was insufficient pac(k)aging on this particular
baggage from abroad?

WITNESS

No, sir. [25]

In response to the trial courts questions during the trial, he also stated that while the passengers
declaration regarding the general or fragile character of the cargo is to a certain extent determinative of its
classification, PAL nevertheless has and exercises discretion as to the manner of handling required by the
nature of the cargo it accepts for carriage. He further opined that the microwave oven was only a general, not
a fragile, cargo which did not require any special handling. [26]

There is no absolute obligation on the part of a carrier to accept a cargo. Where a common carrier
accepts a cargo for shipment for valuable consideration, it takes the risk of delivering it in good condition as
when it was loaded. And if the fact of improper packing is known to the carrier or its personnel, or apparent
upon observation but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss
or injury resulting therefrom. [27]

The acceptance in due course by PAL of private respondents cargo as packed and its advice against the
need for declaration of its actual value operated as an assurance to private respondent that in fact there was
no need for such a declaration. Petitioner can hardly be faulted for relying on the representations
of PALs own personnel.
In other words, private respondent Mejia could and would have complied with the conditions stated in the
air waybill, i.e., declaration of a higher value and payment of supplemental transportation charges, entitling
her to recovery of damages beyond the stipulated limit of US$20 per kilogram of cargo in the event of loss or
damage, had she not been effectively prevented from doing so upon the advice of PALspersonnel for
reasons best known to themselves.
As pointed out by private respondent, the aforestated facts were not denied by PAL in any of its
pleadings nor rebutted by way of evidence presented in the course of the trial, and thus in effect it judicially
admitted that such an advice was given by its personnel in San Francisco, U.S.A. Petitioner, therefore,
is estopped from blaming private respondent for not declaring the value of the cargo shipped and which
would have otherwise entitled her to recover a higher amount of damages. The Courts bidding in
the Fieldmens Insurance case once again rings true:

x x x. As estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall an
innocent party due to its injurious reliance, the failure to apply it in this case would result in gross travesty of justice.

We likewise uphold the lower courts finding that private respondent complied with the requirement for the
immediate filing of a formal claim for damages as required in the air waybill or, at least, we find that there was
substantial compliance therewith.
Private respondent testified that she authorized her sister, Concepcion Dio, to claim her cargo consisting
of a microwave oven since the former had to take a connecting flight to Bacolod City on the very same
afternoon of the day of her arrival. As instructed, Concepcion Dio promptly proceeded to PALs Import
[28]

Section the next day to claim the oven. Upon discovering that the glass door was broken, she immediately
filed a claim by way of the baggage freight claim on which was duly annotated the damage sustained by the
[29]

oven. [30]

Her testimony relates what took place thereafter:

ATTY. VINCO

So, after that inspection, what did you do?

WITNESS

After that annotation placed by Mr. Villaruz, I went home and I followed it up the next day with the Clerk of PAL
cargo office.

ATTY. VINCO

What did the clerk tell you?

WITNESS

She told me that the claim was being processed and I made several phone calls after that. I started my
follow-ups February up to June 1990.

ATTY. VINCO

And what results did those follow-ups produce?

WITNESS

All they said (was) that the document was being processed, that they were waiting for Atty. Paco to report to
the office and they could refer the matter to Atty. Paco.

ATTY. VINCO

Who is this Atty. Paco?

WITNESS

He was the one in-charge of approving our claim.

ATTY. VINCO

Were you able to see Atty. Paco?

WITNESS

Yes, sir. I personally visited Atty. Paco together with my auntie who was a former PAL employee.

xxx xxx xxx

ATTY. VINCO
 So, what did you do, did you make a report or did you tell Atty. Paco of your scouting around for a possible
replacement?

WITNESS

I did call him back at his office. I made a telephone call.

ATTY. VINCO

And what answer did Atty. Paco make after you have reported back to him?

WITNESS

They told me that they were going to process the claim based on the price that I gave them but there was no
definite result.

ATTY. VINCO

How many times did you go and see Atty. Paco regarding the claim of your sister?

WITNESS

I made one personal visit and several follow-up calls. With Atty. Paco, I made one phone call but I made
several phone calls with his secretary or the clerk at PAL cargo office and I was trying to locate him but
unfortunately, he was always out of his office. [31]

PAL claims processor, Rodolfo Pandes, confirmed having received the baggage freight claim
*

on January 30, 1990 and the referral to and extended pendency of the private respondents claim with the
[32]

office of Atty. Paco, to wit:

ATTY. VINCO:

Q And you did instruct the claimant to see the Claim Officer of the company, right?

WITNESS:

A Yes, sir.

ATTY. VINCO:

Q And the Claim Officer happened to be Atty. Paco?

WITNESS:

A Yes, sir.

ATTY. VINCO:

Q And you know that the plaintiff thru her authorized representative Concepcion Dio, who is her sister had many
times gone to Atty. Paco, in connection with this claim of her sister?

WITNESS:

A Yes, sir.

ATTY. VINCO:

Q As a matter of fact even when the complaint was already filed here in Court the claimant had continued to call
about the settlement of her claim with Atty. Paco, is that correct?

xxx xxx xxx

WITNESS:

A Yes, sir.

ATTY. VINCO.

Q You know this fact because a personnel saw you in one of the pre-trial here when this case was heard before
the sala of Judge Moscardon, is that correct?

WITNESS:

A Yes.

ATTY. VINCO:

Q In other words, the plaintiff rather had never stop(ped) in her desire for your company to settle this claim, right?

WITNESS

A Yes, sir. [33]

Considering the abovementioned incidents and private respondent Mejias own zealous efforts in
following up the claim, it was clearly not her fault that the letter of demand for damages could only be filed,
[34]

after months of exasperating follow-up of the claim, on August 13, 1990. If there was any failure at all to file
[35]
the formal claim within the prescriptive period contemplated in the air waybill, this was largely because
of PALs own doing, the consequences of which cannot, in all fairness, be attributed to private respondent.
Even if the claim for damages was conditioned on the timely filing of a formal claim, under Article 1186 of
the Civil Code that condition was deemed fulfilled, considering that the collective action of PALspersonnel in
tossing around the claim and leaving it unresolved for an indefinite period of time was tantamount to
voluntarily preventing its fulfillment. On grounds of equity, the filing of the baggage freight claim, which
sufficiently informed PAL of the damage sustained by private respondents cargo, constituted substantial
compliance with the requirement in the contract for the filing of a formal claim.
All told, therefore, respondent appellate court did not err in ruling that the provision on limited liability is
not applicable in this case. We, however, note in passing that while the facts and circumstances of this case
do not call for the direct application of the provisions of the Warsaw Convention, it should be stressed that,
indeed, recognition of the Warsaw Convention does not preclude the operation of the Civil Code and other
pertinent laws in the determination of the extent of liability of the common carrier. [36]

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 [37]

therein contained, specifically on the limitation of carriers liability, are operative in the Philippines but only in
appropriate situations.
Petitioner ascribes ultimate error in the award of moral exemplary damages and attorneys fees in favor
of private respondent in that other than the statement of the trial court that petitioner acted in bad faith in
denying private respondents claim, which was affirmed by the Court of Appeals, there is no evidence on
record that the same is true. The denial of private respondents claim was supposedly in the honest belief that
the same had prescribed, there being no timely formal claim filed; and despite having been given an
opportunity to submit positive proof of the value of the damaged microwave oven, no such proof was
submitted. Petitioner insists that its failure to deliver the oven in the condition in which it was shipped could
hardly be considered as amounting to bad faith. [38]

Private respondent counters that petitioners failure to deliver the microwave oven in the condition in
which it was received can be describe as gross negligence amounting to bad faith, on the further
consideration that it failed to prove that it exercised the extraordinary diligence required by law, and that no
explanation whatsoever was given as to why the front glass of the oven was broken. [39]

The trial court justified its award of actual, moral and exemplary damages, and attorneys fees in favor of
private respondent in this wise:

Since the plaintiffs baggage destination was the Philippines, Philippine law governs the liability of the defendant for
damages for the microwave oven.

The provisions of the New Civil Code on common carriers are Article(s) 1733, 1735 and 1753 x x x.

xxx xxx xxx

In this case, defendant failed to overcome, not only the presumption but more importantly, plaintiffs evidence that
defendants negligence was the proximate cause of the damages of the microwave oven. Further, plaintiff has
established that defendant acted in bad faith when it denied the formers claim on the ground that the formal claim was
filed beyond the period as provided in paragraph 12 (a-1) (Exh. 1-C-2) of the Air Waybill (Exh. 1, also Exh A), when
actually, Concepcion Dio, sister of plaintiff has immediately filed the formal claim upon discovery of the damage. [40]

Respondent appellate court was in full agreement with the trial courts finding of bad faith on the part of
petitioner as a basis for the award of the aforestated damages, declaring that:

As to the last assigned error, a perusal of the facts and law of the case reveals that the lower courts award of moral and
exemplary damages, attorneys fees and costs of suit to plaintiff-appellee is in accordance with current laws and
jurisprudence on the matter. Indeed, aside from the fact that defendant-appellant acted in bad faith in breaching the
contract and in denying plaintiffs valid claim for damages, plaintiff-appellee underwent profound distress, sleepless
nights, and anxiety upon knowledge of her damaged microwave oven in possession of defendant-appellant, entitling her
to the award of moral and exemplary damages (Cathay Pacific Airways, Ltd. vs. C.A., supra; Arts. 2219 & 2221, New
Civil Code), and certainly plaintiff-appellants unjust refusal to comply with her valid demand for payment, thereby also
entitling her to reasonable attorneys fees [Art. 2208 (2) and (11), id.].
[41]

It will be noted that petitioner never denied that the damage to the microwave oven was sustained while
the same was in its custody. The possibility that said damage was due to causes beyond the control of PAL
has effectively been ruled out since the entire process in handling of the cargo - from the unloading thereof
from the plane, the towing and transfer to the PAL warehouse, the transfer to the Customs examination area,
and its release thereafter to the shipper - was done almost exclusively by, and with the intervention or, at the
very least, under the direct supervision of a responsible PAL personnel. [42]

The very admissions of PAL, through Vicente Villaruz of its Import Section, as follows:
ATTY. VINCO

So that, you now claim, Mr. Witness, that from the time the cargo was unloaded from the plane until the time it
reaches the Customs counter where it was inspected, all the way, it was the PAL personnel who did all these
things?

WITNESS

Yes, however, there is also what we call the Customs storekeeper and the Customs guard along with the
cargo.

ATTY. VINCO

You made mention about a locator?

WITNESS

Yes, sir.

ATTY. VINCO

This locator, is he an employee of the PAL or the Customs?

WITNESS

He is a PAL employee. [43]

lead to the inevitable conclusion that whatever damage may have been sustained by the cargo is due to
causes attributable to PALs personnel or, at all events, under their responsibility.
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. Neither did it prove that the damage to the microwave oven was because of any of
the exceptingcauses under Article 1734, all of the same Code. Inasmuch as the subject item was received in
apparent good condition, no contrary notation or exception having been made on the air waybill upon its
acceptance for shipment, the fact that it was delivered with a broken glass door raises the presumption
that PALs personnel were negligent in the carriage and handling of the cargo. [44]

Furthermore, there was glaringly no attempt what so ever on the part of petitioner to explain the cause of
the damage to the oven. The unexplained cause of damage to private respondents cargo constitutes gross
carelessness or negligence which by itself justifies the present award of damages. The equally unexplained
[45]

and inordinate delay in acting on the claim upon referral thereof to the claims officer, Atty. Paco, and the
noncommittal responses to private respondents entreaties for settlement of her claim for damages belies
petitioners pretension that there was no bad faith on its part. This unprofessional indifference
of PALs personnel despite full and actual knowledge of the damage to private respondents cargo, just to be
exculpated from liability on pure technicality and bureaucratic subterfuge, smacks of willful misconduct and
insensitivity to a passengers plight tantamount to bad faith and renders unquestionable petitioners liability
[46]

for damages. In sum, there is no reason to disturb the findings of the trial court in this case, especially with its
full affirmance by respondent Court of Appeals.
On this note, the case at bar goes into the annals of our jurisprudence after six years and recedes into
the memories of our legal experience as just another inexplicable inevitability. We will never know exactly
how many man-hours went into the preparation, litigation and adjudication of this simple dispute over an oven,
which the parties will no doubt insist they contested as a matter of principle. One thing, however, is
certain. As long as the first letter in principle is somehow outplaced by the peso sign, the courts will always
have to resolve similar controversies although mutual goodwill could have dispensed with judicial recourse.
IN VIEW OF ALL OF THE FOREGOING, the assailed judgment of respondent Court of Appeals is
AFFIRMED in toto.
SO ORDERED.

British Airways vs. CA

 In this appeal by certiorari, petitioner British Airways (BA) seeks to set aside the decision of respondent Court of
Appeals promulgated on September 7, 1995, which affirmed the award of damages and attorneys fees made by the Regional
[1]

Trial Court of Cebu, 7th Judicial Region, Branch 17, in favor of private respondent GOP Mahtani as well as the dismissal of its
third-party complaint against Philippine Airlines (PAL).
[2]

The material and relevant facts are as follows:

On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the
services of a certain Mr. Gumar to prepare his travel plans. The latter, in turn, purchased a ticket from BA where
the following itinerary was indicated: [3]

CARRIER FLIGHT DATE TIME STATUS

MANILA MNL PR 310Y 16 APR 1730 OK

HONGKONG HKG BA 20 M 16 APR 2100 OK
BOMBAY BOM BA 19 M 23 APR 0840 OK
MANILA MNL"

Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrival
in Hongkong he had to take a connecting flight to Bombay on board BA.

Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his clothings
and personal effects, confident that upon reaching Hongkong, the same would be transferred to the BA flight bound for
Bombay.

Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from
the BA representatives, he was told that the same might have been diverted to London. After patiently waiting for his luggage
for one week, BA finally advised him to file a claim by accomplishing the Property Irregularity Report.[4]

Back in the Philippines, specifically on June 11, 1990, Mahtani filed his complaint for damages and attorneys fees against
[5]

BA and Mr. Gumar before the trial court, docketed as Civil Case No. CEB-9076.

On September 4, 1990, BA filed its answer with counter claim to the complaint raising, as special and affirmative
[6]

defenses, that Mahtani did not have a cause of action against it. Likewise, on November 9, 1990, BA filed a third-party
complaint against PAL alleging that the reason for the non-transfer of the luggage was due to the latters late arrival in
[7]

Hongkong, thus leaving hardly any time for the proper transfer of Mahtanis luggage to the BA aircraft bound for Bombay.

On February 25, 1991, PAL filed its answer to the third-party complaint, wherein it disclaimed any liability, arguing that
there was, in fact, adequate time to transfer the luggage to BA facilities in Hongkong.Furthermore, the transfer of the luggage to
Hongkong authorities should be considered as transfer to BA. [8]

After appropriate proceedings and trial, on March 4, 1993, the trial court rendered its decision in favor of Mahtani, the [9]

dispositive portion of which reads as follows:

WHEREFORE, premises considered, judgment is rendered for the plaintiff and against the defendant for
which defendant is ordered to pay plaintiff the sum of Seven Thousand (P7,000.00) Pesos for the value of
the two (2) suit cases; Four Hundred U.S. ($400.00) Dollars representing the value of the contents of
plaintiffs luggage; Fifty Thousand (P50,000.00) Pesos for moral and actual damages and twenty percent
(20%) of the total amount imposed against the defendant for attorneys fees and costs of this action.
The Third-Party Complaint against third-party defendant Philippine Airlines is DISMISSED for lack of
cause of action.

SO ORDERED.

Dissatisfied, BA appealed to the Court of Appeals, which however, affirmed the trial courts findings. Thus:

WHEREFORE, in view of all the foregoing considerations, finding the Decision appealed from to be in
accordance with law and evidence, the same is hereby AFFIRMED in toto, with costs against
defendant-appellant.
SO ORDERED. [10]

BA is now before us seeking the reversal of the Court of Appeals decision.

In essence, BA assails the award of compensatory damages and attorneys fees, as well as the dismissal of its third-party
complaint against PAL. [11]

Regarding the first assigned issue, BA asserts that the award of compensatory damages in the separate sum
of P7,000.00 for the loss of Mahtanis two pieces of luggage was without basis since Mahtani in his complaint stated the
[12]

following as the value of his personal belongings:

8. On said travel, plaintiff took with him the following items and its corresponding value, to wit:
1. personal belonging - - - - - - - - - - - - - - P10,000.00
 2. gifts for his parents and relatives - - - - - $5,000.00
Moreover, he failed to declare a higher valuation with respect to his luggage, a condition provided for in the ticket, which
reads:[13]

Liability for loss, delay, or damage to baggage is limited unless a higher value is declared in advance and
additional charges are paid:
1. For most international travel (including domestic corporations of international journeys) the liability limit
is approximately U.S. $9.07 per pound (U.S. $20.00) per kilo for checked baggage and U.S. $400 per
passenger for unchecked baggage.
Before we resolve the issues raised by BA, it is needful to state that the nature of an airlines contract of carriage partakes
of two types, namely: a contract to deliver a cargo or merchandise to its destination and a contract to transport passengers to
their destination. A business intended to serve the travelling public primarily, it is imbued with public interest, hence, the law
governing common carriers imposes an exacting standard. Neglect or malfeasance by the carriers employees could
[14]

predictably furnish bases for an action for damages. [15]

In the instant case, it is apparent that the contract of carriage was between Mahtani and BA. Moreover, it is indubitable
that his luggage never arrived in Bombay on time. Therefore, as in a number of cases we have assessed the airlines
[16]

culpability in the form of damages for breach of contract involving misplaced luggage.

In determining the amount of compensatory damages in this kind of cases, it is vital that the claimant satisfactorily prove
during the trial the existence of the factual basis of the damages and its causal connection to defendants acts. [17]

In this regard, the trial court granted the following award as compensatory damages:

Since plaintiff did not declare the value of the contents in his luggage and even failed to show receipts of
the alleged gifts for the members of his family in Bombay, the most that can be expected for
compensation of his lost luggage (2 suit cases) is Twenty U.S. Dollars ($20.00) per kilo, or a combined
value of Four Hundred ($400.00) U.S. Dollars for Twenty kilos representing the contents plus Seven
Thousand (P7,000.00) Pesos representing the purchase price of the two (2) suit cases.
However, as earlier stated, it is the position of BA that there should have been no separate award for the luggage and the
contents thereof since Mahtani failed to declare a separate higher valuation for the luggage, and therefore, its liability is limited,
[18]

at most, only to the amount stated in the ticket.

Considering the facts of the case, we cannot assent to such specious argument.

Admittedly, in a contract of air carriage a declaration by the passenger of a higher value is needed to recover a greater
amount. Article 22(1) of the Warsaw Convention, provides as follows:
[19]

xxxxxxxxx

(2) In the transportation of checked baggage and goods, the liability of the carrier shall be limited to a sum
of 250 francs per kilogram, unless the consignor has made, at the time the package was handed over to
the carrier, a special declaration of the value at delivery and has paid a supplementary sum if the case so
requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he
proves that the sum is greater than the actual value to the consignor at delivery.
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, such tariff being binding on the passenger regardless of the
passengers lack of knowledge thereof or assent thereto. This doctrine is recognized in this jurisdiction.
[20] [21]

Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesion contracts where the facts
and circumstances justify that they should be disregarded. [22]

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. [23]

Given the foregoing postulates, the inescapable conclusion is that BA had waived the defense of limited liability when it
allowed Mahtani to testify as to the actual damages he incurred due to the misplacement of his luggage, without any
objection. In this regard, we quote the pertinent transcript of stenographic notes of Mahtanis direct testimony: [24]

Q - How much are you going to ask from this court?

A - P100,000.00.

Q - What else?

A - Exemplary damages.

Q - How much?

A - P100,000.00.

Q - What else?

A - The things I lost, $5,000.00 for the gifts I lost and my

 personal belongings, P10,000.00.

Q - What about the filing of this case?

A - The court expenses and attorneys fees is 30%.

Indeed, it is a well-settled doctrine that where the proponent offers evidence deemed by counsel of the adverse party to be
inadmissible for any reason, the latter has the right to object. However, such right is a mere privilege which can be
waived. Necessarily, the objection must be made at the earliest opportunity, lest silence when there is opportunity to speak may
operate as a waiver of objections. BA has precisely failed in this regard.
[25]

To compound matters for BA, its counsel failed, not only to interpose a timely objection, but even conducted his own
cross-examination as well. In the early case of Abrenica v. Gonda, we ruled that:
[26] [27]

x x x (I)t has been repeatedly laid down as a rule of evidence that a protest or objection against the
admission of any evidence must be made at the proper time, and that if not so made it will be understood
to have been waived. The proper time to make a protest or objection is when, from the question
addressed to the witness, or from the answer thereto, or from the presentation of proof, the inadmissibility
of evidence is, or may be inferred.
Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are entitled to great respect. Since
[28]

the actual value of the luggage involved appreciation of evidence, a task within the competence of the Court of Appeals, its
ruling regarding the amount is assuredly a question of fact, thus, a finding not reviewable by this Court. [29]

As to the issue of the dismissal of BAs third-party complaint against PAL, the Court of Appeals justified its ruling in this
wise, and we quote: [30]

Lastly, we sustain the trial courts ruling dismissing appellants third-party complaint against PAL.
The contract of air transportation in this case pursuant to the ticket issued by appellant to
plaintiff-appellee was exclusively between the plaintiff Mahtani and defendant-appellant BA. When
plaintiff boarded the PAL plane from Manila to Hongkong, PAL was merely acting as a subcontractor or
agent of BA. This is shown by the fact that in the ticket issued by appellant to plaintiff-appellee, it is
specifically provided on the Conditions of Contract, paragraph 4 thereof that:
4. x x x carriage to be performed hereunder by several successive carriers is regarded as a
single operation.
The rule that carriage by plane although performed by successive carriers is regarded as a single
operation and that the carrier issuing the passengers ticket is considered the principal party and the other
carrier merely subcontractors or agent, is a settled issue.
We cannot agree with the dismissal of the third-complaint.

In Firestone Tire and Rubber Company of the Philippines v. Tempengko, we expounded on the nature of a third-party
[31]

complaint thus:

The third-party complaint is, therefore, a procedural device whereby a third party who is neither a party
nor privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of court,
by the defendant, who acts as third-party plaintiff to enforce against such third-party defendant a right for
contribution, indemnity, subrogation or any other relief, in respect of the plaintiffs claim.The third-party
complaint is actually independent of and separate and distinct from the plaintiffs complaint. Were it not for
this provision of the Rules of Court, it would have to be filed independently and separately from the
original complaint by the defendant against the third-party. But the Rules permit defendant to bring in a
third-party defendant or so to speak, to litigate his separate cause of action in respect of plaintiffs claim
against a third-party in the original and principal case with the object of avoiding circuitry of action and
unnecessary proliferation of law suits and of disposing expeditiously in one litigation the entire subject
matter arising from one particular set of facts.
Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract of carriage. Yet,
BA adamantly disclaimed its liability and instead imputed it to PAL which the latter naturally denies. In other words, BA and PAL
are blaming each other for the incident.

In resolving this issue, it is worth observing that the contract of air transportation was exclusively between Mahtani and BA,
the latter merely endorsing the Manila to Hongkong leg of the formers journey to PAL, as its subcontractor or agent. In fact, the
fourth paragraph of the Conditions of Contracts of the ticket issued by BA to Mahtani confirms that the contract was one of
[32]

continuous air transportation from Manila to Bombay.

4. x x x carriage to be performed hereunder by several successive carriers is regarded as a single

operation.
Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani from Manila to Hongkong acted
as the agent of BA.

Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that an agent is also responsible
for any negligence in the performance of its function and is liable for damages which the principal may suffer by reason of its
[33]

negligent act. Hence, the Court of Appeals erred when it opined that BA, being the principal, had no cause of action against
[34]

PAL, its agent or sub-contractor.

 Also, it is worth mentioning that both BA and PAL are members of the International Air Transport Association (IATA),
wherein member airlines are regarded as agents of each other in the issuance of the tickets and other matters pertaining to their
relationship. Therefore, in the instant case, the contractual relationship between BA and PAL is one of agency, the former
[35]

being the principal, since it was the one which issued the confirmed ticket, and the latter the agent.

Our pronouncement that BA is the principal is consistent with our ruling in Lufthansa German Airlines v. Court of
Appeals. In that case, Lufthansa issued a confirmed ticket to Tirso Antiporda covering five-leg trip aboard different
[36]

airlines. Unfortunately, Air Kenya, one of the airlines which was to carry Antiporda to a specific destination bumped him off.

An action for damages was filed against Lufthansa which, however, denied any liability, contending that its responsibility
towards its passenger is limited to the occurrence of a mishap on its own line.Consequently, when Antiporda transferred to Air
Kenya, its obligation as a principal in the contract of carriage ceased; from there on, it merely acted as a ticketing agent for Air
Kenya.

In rejecting Lufthansas argument, we ruled:

In the very nature of their contract, Lufthansa is clearly the principal in the contract of carriage with
Antiporda and remains to be so, regardless of those instances when actual carriage was to be performed
by various carriers. The issuance of confirmed Lufthansa ticket in favor of Antiporda covering his entire
five-leg trip aboard successive carriers concretely attest to this.
Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone, and not PAL, since
the latter was not a party to the contract. However, this is not to say that PAL is relieved from any liability due to any of its
negligent acts. In China Air Lines, Ltd. v. Court of Appeals, while not exactly in point, the case, however, illustrates the
[37]

principle which governs this particular situation. In that case, we recognized that a carrier (PAL), acting as an agent of another
carrier, is also liable for its own negligent acts or omission in the performance of its duties.

Accordingly, to deny BA the procedural remedy of filing a third-party complaint against PAL for the purpose of ultimately
determining who was primarily at fault as between them, is without legal basis. After all, such proceeding is in accord with the
doctrine against multiplicity of cases which would entail receiving the same or similar evidence for both cases and enforcing
separate judgments therefor. It must be borne in mind that the purpose of a third-party complaint is precisely to avoid delay and
circuity of action and to enable the controversy to be disposed of in one suit. It is but logical, fair and equitable to allow BA to
[38]

sue PAL for indemnification, if it is proven that the latters negligence was the proximate cause of Mahtanis unfortunate
experience, instead of totally absolving PAL from any liability.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV No. 43309 dated September 7,
1995 is hereby MODIFIED, reinstating the third-party complaint filed by British Airways dated November 9, 1990 against
Philippine Airlines. No costs.

SO ORDERED

Philippine Airlines Inc. vs. Hon. Adriano Savillo, et. al.,

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision1 dated
17 August 2001, rendered by the Court of Appeals in CA-G.R. SP No. 48664, affirming in toto the
Order2 dated 9 June 1998, of Branch 30 of the Regional Trial Court (RTC) of Iloilo City, dismissing the Motion
to Dismiss filed by petitioner Philippine Airlines Inc. (PAL) in the case entitled, Simplicio Grio v. Philippine
Airlines, Inc. and Singapore Airlines, docketed as Civil Case No. 23773.

PAL is a corporation duly organized under Philippine law, engaged in the business of providing air carriage
for passengers, baggage and cargo.3

Public respondent Hon. Adriano Savillo is the presiding judge of Branch 30 of the Iloilo RTC, where Civil Case
No. 23773 was filed; while private respondent Simplicio Grio is the plaintiff in the aforementioned case.

The facts are undisputed.

Private respondent was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament held in
Jakarta, Indonesia. He and several companions decided to purchase their respective passenger tickets from
PAL with the following points of passage: MANILA-SINGAPORE-JAKARTA-SINGAPORE-MANILA. Private
respondent and his companions were made to understand by PAL that its plane would take them from Manila
to Singapore, while Singapore Airlines would take them from Singapore to Jakarta.4

On 3 October 1993, private respondent and his companions took the PAL flight to Singapore and arrived at
about 6:00 oclock in the evening. Upon their arrival, they proceeded to the Singapore Airlines office to
check-in for their flight to Jakarta scheduled at 8:00 oclock in the same evening. Singapore Airlines rejected
the tickets of private respondent and his group because they were not endorsed by PAL. It was explained to
private respondent and his group that if Singapore Airlines honored the tickets without PALs endorsement,
PAL would not pay Singapore Airlines for their passage. Private respondent tried to contact PALs office at
the airport, only to find out that it was closed.5

Stranded at the airport in Singapore and left with no recourse, private respondent was in panic and at a loss
where to go; and was subjected to humiliation, embarrassment, mental anguish, serious anxiety, fear and
distress. Eventually, private respondent and his companions were forced to purchase tickets from Garuda
Airlines and board its last flight bound for Jakarta. When they arrived in Jakarta at about 12:00 oclock
midnight, the party who was supposed to fetch them from the airport had already left and they had to arrange
for their transportation to the hotel at a very late hour. After the series of nerve-wracking experiences, private
respondent became ill and was unable to participate in the tournament. 6

Upon his return to the Philippines, private respondent brought the matter to the attention of PAL. He sent a
demand letter to PAL on 20 December 1993 and another to Singapore Airlines on 21 March 1994. However,
both airlines disowned liability and blamed each other for the fiasco. On 15 August 1997, private respondent
filed a Complaint for Damages before the RTC docketed as Civil Case No. 23773, seeking compensation for
moral damages in the amount of P1,000,000.00 and attorneys fees.7

Instead of filing an answer to private respondents Complaint, PAL filed a Motion to Dismiss 8 dated 18
September 1998 on the ground that the said complaint was barred on the ground of prescription under
Section 1(f) of Rule 16 of the Rules of Court.9 PAL argued that the Warsaw Convention,10 particularly Article
29 thereof,11 governed this case, as it provides that any claim for damages in connection with the international
transportation of persons is subject to the prescription period of two years. Since the Complaint was filed on
15 August 1997, more than three years after PAL received the demand letter on 25 January 1994, it was
already barred by prescription.

On 9 June 1998, the RTC issued an Order12 denying the Motion to Dismiss. It maintained that the provisions
of the Civil Code and other pertinent laws of the Philippines, not the Warsaw Convention, were applicable to
the present case.

The Court of Appeals, in its assailed Decision dated 17 August 2001, likewise dismissed the Petition for
Certiorari filed by PAL and affirmed the 9 June 1998 Order of the RTC. It pronounced that the application of
the Warsaw Convention must not be construed to preclude the application of the Civil Code and other
pertinent laws. By applying Article 1144 of the Civil Code,13 which allowed for a ten-year prescription period,
the appellate court declared that the Complaint filed by private respondent should not be dismissed.14

Hence, the present Petition, in which petitioner raises the following issues:

THE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THE PETITION AS RESPONDENT
JUDGE COMMITED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURSIDICTION IN
DENYING PALS MOTION TO DISMISS.

II

THE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISIONS OF THE WARSAW
CONVENTION DESPITE THE FACT THAT GRIOS CAUSE OF ACTION AROSE FROM A BREACH OF
CONTRACT FOR INTERNATIONAL AIR TRANSPORT.

III

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COMPLAINT FILED BY GRIO
BEYOND THE TWO (2)-YEAR PERIOD PROVIDED UNDER THE WARSAW CONVENTION IS ALREADY
BARRED BY PRESCRIPTION.15

The petition is without merit.

In determining whether PALs Motion to Dismiss should have been granted by the trial court, it must be
ascertained if all the claims made by the private respondent in his Complaint are covered by the Warsaw
Convention, which effectively bars all claims made outside the two-year prescription period provided under
Article 29 thereof. If the Warsaw Convention covers all of private respondents claims, then Civil Case No.
23773 has already prescribed and should therefore be dismissed. On the other hand, if some, if not all, of
respondents claims are outside the coverage of the Warsaw Convention, the RTC may still proceed to hear
the case.

The Warsaw Convention applies to "all international transportation of persons, baggage or goods performed
by any aircraft for hire." It seeks to accommodate or balance the interests of passengers seeking recovery for
personal injuries and the interests of air carriers seeking to limit potential liability. It employs a scheme of strict
liability favoring passengers and imposing damage caps to benefit air carriers.16 The cardinal purpose of the
Warsaw Convention is to provide uniformity of rules governing claims arising from international air travel; thus,
it precludes a passenger from maintaining an action for personal injury damages under local law when his or
her claim does not satisfy the conditions of liability under the Convention.17

Article 19 of the Warsaw Convention provides for liability on the part of a carrier for "damages occasioned by
delay in the transportation by air of passengers, baggage or goods." Article 24 excludes other remedies by
further providing that "(1) in the cases covered by articles 18 and 19, any action for damages, however
founded, can only be brought subject to the conditions and limits set out in this convention." Therefore, a
claim covered by the Warsaw Convention can no longer be recovered under local law, if the statute of
limitations of two years has already lapsed.

Nevertheless, this Court notes that jurisprudence in the Philippines and the United States also recognizes
that the Warsaw Convention does not "exclusively regulate" the relationship between passenger and carrier
on an international flight. This Court finds that the present case is substantially similar to cases in which the
damages sought were considered to be outside the coverage of the Warsaw Convention.

In United Airlines v. Uy,18 this Court distinguished between the (1) damage to the passengers baggage and
(2) humiliation he suffered at the hands of the airlines employees. The first cause of action was covered by
the Warsaw Convention which prescribes in two years, while the second was covered by the provisions of the
Civil Code on torts, which prescribes in four years.

Similar distinctions were made in American jurisprudence. In Mahaney v. Air France,19 a passenger was
denied access to an airline flight between New York and Mexico, despite the fact that she held a confirmed
reservation. The court therein ruled that if the plaintiff were to claim damages based solely on the delay she
experienced for instance, the costs of renting a van, which she had to arrange on her own as a
consequence of the delay the complaint would be barred by the two-year statute of limitations. However,
where the plaintiff alleged that the airlines subjected her to unjust discrimination or undue or unreasonable
preference or disadvantage, an act punishable under the United States laws, then the plaintiff may claim
purely nominal compensatory damages for humiliation and hurt feelings, which are not provided for by the
Warsaw Convention. In another case, Wolgel v. Mexicana Airlines,20the court pronounced that actions for
damages for the "bumping off" itself, rather than the incidental damages due to the delay, fall outside the
Warsaw Convention and do not prescribe in two years.

In the Petition at bar, private respondents Complaint alleged that both PAL and Singapore Airlines were
guilty of gross negligence, which resulted in his being subjected to "humiliation, embarrassment, mental
anguish, serious anxiety, fear and distress."21 The emotional harm suffered by the private respondent as a
result of having been unreasonably and unjustly prevented from boarding the plane should be distinguished
from the actual damages which resulted from the same incident. Under the Civil Code provisions on
tort,22 such emotional harm gives rise to compensation where gross negligence or malice is proven.

The instant case is comparable to the case of Lathigra v. British Airways.23

In Lathigra, it was held that the airlines negligent act of reconfirming the passengers reservation days before
departure and failing to inform the latter that the flight had already been discontinued is not among the acts
covered by the Warsaw Convention, since the alleged negligence did not occur during the performance of the
contract of carriage but, rather, days before the scheduled flight.

In the case at hand, Singapore Airlines barred private respondent from boarding the Singapore Airlines flight
because PAL allegedly failed to endorse the tickets of private respondent and his companions, despite PALs
assurances to respondent that Singapore Airlines had already confirmed their passage. While this fact still
needs to be heard and established by adequate proof before the RTC, an action based on these allegations
will not fall under the Warsaw Convention, since the purported negligence on the part of PAL did not occur
during the performance of the contract of carriage but days before the scheduled flight. Thus, the present
action cannot be dismissed based on the statute of limitations provided under Article 29 of the Warsaw
Convention.
Had the present case merely consisted of claims incidental to the airlines delay in transporting their
passengers, the private respondents Complaint would have been time-barred under Article 29 of the Warsaw
Convention. However, the present case involves a special species of injury resulting from the failure of PAL
and/or Singapore Airlines to transport private respondent from Singapore to Jakarta the profound distress,
fear, anxiety and humiliation that private respondent experienced when, despite PALs earlier assurance that
Singapore Airlines confirmed his passage, he was prevented from boarding the plane and he faced the
daunting possibility that he would be stranded in Singapore Airport because the PAL office was already
closed.

These claims are covered by the Civil Code provisions on tort, and not within the purview of the Warsaw
Convention. Hence, the applicable prescription period is that provided under Article 1146 of the Civil Code:

Art. 1146. The following actions must be instituted within four years:

(1) Upon an injury to the rights of the plaintiff;

(2) Upon a quasi-delict.

Private respondents Complaint was filed with the RTC on 15 August 1997, which was less than four years
since PAL received his extrajudicial demand on 25 January 1994. Thus, private respondents claims have not
yet prescribed and PALs Motion to Dismiss must be denied.

Moreover, should there be any doubt as to the prescription of private respondents Complaint, the more
prudent action is for the RTC to continue hearing the same and deny the Motion to Dismiss. Where it cannot
be determined with certainty whether the action has already prescribed or not, the defense of prescription
cannot be sustained on a mere motion to dismiss based on what appears to be on the face of the
complaint.24 And where the ground on which prescription is based does not appear to be indubitable, the
court may do well to defer action on the motion to dismiss until after trial on the merits.25

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of the Court of
Appeals in CA-G.R. SP No. 48664, promulgated on 17 August 2001 is AFFIRMED. Costs against the
petitioner.

SO ORDERED.

Obligations of Shipper, Consignee and Passenger

1.8 Negligence of Shipper or Passenger
1.9 Payment of Freight
1.10 Who will pay the freight
1.11 Time to pay the freight
1.12 Carriers lien
1.13 Payment of Demurrage
Part 3 Extraordinary Diligence of Common carriers
Laws and Jurisprudence:
a. Loadmasters Customs Services v. Glodel Brokerage Corporation and R&B Insurance
January 10, 2011, G.R No. 179446
b. Cesar Isaac v. A.L. Ammen Transportation Co., Inc. August 23, 1957 G.R No. L-9671
c. Jose Pilapil v. Hon. CA and Alatco Transportation Co. December 22, 1989
d. Herminio Nocum v. Laguna Tayabas Bus Company G.R. No. L-23733 October 31, 1969
e. Batangas Transportation Co. v. Gregorio Caguimbal et al. G.R. No. L-22985 January
24, 1968
f. Loadmasters Customs Services v. Glodel Brokerage Corporation and R&B Insurance
G.R. No. 179446 January 10, 2011
g. Pedro Guzman v CA December 22, 1988
h. Estela Crisostomo v. CA and Caravan Travel & Tours, G.R. No. 138334, August 25,
2003
i. American Home Assurance Co. v. The Court of Appeals, G.R. No. 94149, May 5, 1992
j. Amparo C. Servando, Claro Uy Bico v. Philippine Steam Navigation October 23, 1982
k. Vda. De Abeto v. Philippine Airlines, Inc. 115 SCRA 489
l. R. Transport Corporation v. Pante September 15, 2009
m. Asian Terminals, Inc. v. Simon Enterprise, Inc. G.R. No. 177116 February 27, 2013
3.1 LIABILITIES OF COMMON CARRIERS
> Victorino Cusi and Pilar Pobre v. Philippine National Railways, G.R. No. L-29889 May 31, 1979
> Loadstar Shipping Co., Inc. vs. Court of Appeals, G.R. No. 131621, September 28, 1999)
Light Rail Transit Authority & Rodolfo Roman vs. Marjorie Navidad, G.R. No. 145804,
6 February 2003
Lita Enterprises, Inc. vs. Intermediate Appellate Court, G.R. No. L-64693, 27 April
1984)
(Victor Juaniza vs. Eugenio Jose, G.R. No.L-50127-28, 30 March 1979)
(Ma. Luisa Benedicto vs. Hon. Intermediate Appellate Court, G.R. No. 70876, 19 July
1990)
(Angel Jereos vs. Hon. Court of Appeals, G.R. No. L-48747, 30 September 1982)
(Equitable Leasing Corporation vs. Lucita Suyom et al., G.R. No. 143360, 5 September
2002)
(William Tiu, doing business under the name and style of D Rough Riders, vs.
Pedro A. Arriesgado, G.R. No. 138060, 1 September 2004)
(Spouses Cesar & Suthira Zalamea vs. Court of Appeals, G.R. No. 104235 November
18, 1993)
(Singapore Airlines Limited vs. Fernandez, G.R. No. 142305, December 10, 2003)
(Philippine Airlines, Inc., vs. Court of Appeals, G.R. No. 119641, May 17, 1996)
(Philippine Airlines, Inc. vs. Court of Appeals, G.R. No. 120262, July 17, 1997)
(Carlos Singson vs. Court of Appeals, G.R. No. 119995, November 18, 1997)
(Cathay Pacific Airways, Ltd., vs. Spouses Daniel Vazquez And Maria Luisa Madrigal
Vazquez, G.R. No. 150843, March 14, 2003)
(Philippine Airlines Inc. vs. Court of Appeals, G.R. No. 123238, September 22, 2008)
The Heirs of the late Ruben Reinoso, Sr. vs. Court of Appeals, GR No. 116121, July 18,
2011
Heirs of Josemaria Ochoa vs. G&S Transport Corporation, March 19, as affirmed in
the July 16, 2012 decision
3.2 VIGILANCE OVER GOODS
1. Exempting Causes
1.1 Requirement of Absence of Negligence
Cases:
(Saturnino Bayasen vs. Court of Appeals, G.R. No.L-25785, 26 February 1981)
(Alberta Yobido vs. Court of Appeals, G.R. No. 113003, 17 October 1997)
(Bachelor Express, Incorporated vs. The Honorable Court of Appeals (Sixth
Division), G.R. No. 85691, 31 July 1990)
(Sweet Lines, Inc. vs. The Honorable Court of Appeals, Micaela b. Quintos, et al., G.R.
No. L-43640, 28 April 1983
(Vicente Vergara vs. The Court of Appeals, G.R. No. 77679, 30 September 1987)
(Mauro Ganzon vs. Court of Appeals, G.R. no. L-48757, 30 May 1988)
(Fortune Express, Inc. vs. Court of Appeals, G.R. No. 119756, 18 March 1999)
(Pedro Vasquez, et al., vs. The Court of Appeals, G.R. No. L-42926, 13 September
1985)
(Loadstar Shipping Co., Inc. vs. Court of Appeals, G.R. No. 131621, 28 September
1999)
(Smith Bell Dodwell Shipping Agency Corporation vs. Catalino Borja, G.R. No.
143008. June 10, 2002)

3.3 LIABILITY OF SHIP OWNERS AND SHIPPING AGENTS

Cases:
(Aboitiz Shipping Corporation vs. General Accident Fire and Life Assurance
Corporation Ltd., 217 SCRA 359, 1993)
(Luzon Stevedoring Corporation vs. Court of Appeals, G.R. No. L-58897, 3 December
1987)
(Chua Yek Hong vs. Intermediate Appellate Court, G.R. No. 74811, 30 September
1988)
Dela Torre vs. Court of Appeals, GR No. 160088, July 13, 2011
Also read
ALSO READ:
3.4 Extra ordinary diligence in Carriage by Sea
Seaworthiness
Meaning of seaworthiness
Deviation
Negligence of Captain and Crew
Rules on passengers safety
Transshipment

Part 4 Bill of Lading and Other Formalities

4.1 Concepts
4.2 Definition
4.3 Kind of Bill of lading
4.4 Nature of Bill of lading
4.5 When effective
4.6 Bill of lading as Contract
 Parties
Contract of adhesion
Parol evidence rule
Bill of lading as evidence
Bill of lading as actionable document
Shipment terms

PART 5 ACTIONS AND DAMAGES IN CASE OF BREACH

5.1 Distinctions CULPA CONTRACTUAL V. CULPA AQUILIANA
5.2 Concurrent causes of actions
Concurrence with 3rd persons
Solidary liability
Alternative compensation scheme
5.3 Notice of claim and prescriptive period
Claim in overland Transportation and coastwise shipping
Prescription in Overland Transportation and coastwise shipping
Claim in International carriage of goods by sea
Prescription in International Carriage of goods
5.4 Recoverable Damages
Extent of recovery
Kinds of damages
1. Actual or Compensatory Damages
2. Attorneys fees
3. Interest
4. Moral damages
5. Nominal damages
6. Temperate or moderate damages
7. Liquidated damages
8. Exemplary or corrective damages

PART 6 MARITIME LAW

Maritime law defined
Real and Hypothecary Nature
Protest
Admiralty jurisdiction
Maritime pollution
Marine insurance

PART 7 VESSELS
PART 8 CHARTER PARTIES
8.1 Definition
8.2 Different kinds of charter parties
Bareboat charter
Contract of affreightment
8.3 Effect of charter on character of carrier
8.4 Persons who may make charter
Charterer
Part owners
 Ship agents
Captain or master
8.5 Requisites of a valid charter party
8.6 Freight
8.7 Port of unloading
8.8 Demurrage

PART 9 LOANS ON BOTTOMRY AND RESPODENTIA

PART 10 AVERAGES
PART 11 COLLISSIONS
PART 12 ARRIVAL UNDER STRESS AND SHIPWRECKS
PART 13 SALVAGE
PART 14 - COGSA