Transpo Reviewer

TRANSPORTATION AND MARITIME LAW
Based on the outline of Prof. Rodrigo Quimbo
bidding documents necessary for the public bidding of the development,

mgmt., and operation of the Manila Intl. Container Terminal (MICT) and
authorized the Board Chairman Secretary Reyes to oversee and implement
the project.
_______________
I. General Considerations
A. Public Utilities
1. Article XII, 1987 Constitution
Art. XII, Section 11. No franchise, certificate or any other
form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines at least 60%
of whose capital is owned by such citizens, nor shall such franchise,
certificate or authorization be exclusive in character or for a longer
period than fifty years. Neither shall any franchise or right be granted
except under the condition that it shall be subject to amendment,
alteration or repeal by the Congress when the common good so
requires. The State shall encourage equity participation in public
utilities by the general public. The participation of foreign investors in
the governing body of any public utility enterprise shall be limited to
their proportionate share in its capital, and all the executive and
managing officers of such corporation or association must be citizens
of the Philippines.
Section 17. In times of national emergency, when the public
interest so requires, the State may, during the emergency and under
reasonable terms prescribed by it, temporarily take over or direct the
operation of any privately owned public utility or business affected
with public interest.
Section 18. The State may, in the interest of national welfare
or defense, establish and operate vital industries and, upon payment
of just compensation, transfer to public ownership utilities and other
private enterprises to be operated by the Government.
Section 19. The State shall regulate or prohibit monopolies
when the public interest so requires. No combinations in restraint of
trade or unfair competition shall be allowed.
(a) What is a public utility?
A public utility is a business or service engaged in regularly
supplying the public with some commodity or service of public consequence
such as electricity, gas, water, transportation, telephone or telegraph
service. Apart from statutes which define the public utilities that are within
the purview of such statutes, it would be difficult to construct a definition of a
public utility which would fit every conceivable case. As its name indicates,
however, the term public utility implies a public use and service to the
public. (Am. Jur. 2d V. 64, p.549.) (Albano vs Reyes)
(b) What is a public service?
The Public Service Act (CA No. 146 as amended) provides that
the term public service "includes every person that now or hereafter may
own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, sub-way motor
vehicle, either for freight or passenger, or both with or without fixed route
and whatever may be its classification, freight or carrier service or any
class, express service, steamboat, or steamship line, pontines, ferries, and
water craft, engaged in the transportation of passengers and freight or both,
shipyard, marine repairshop, [warehouse], 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 system, wire or wireless broadcasting stations and
other similar public services..." [Sec. 13(b)] (Albano vs Reyes)
Albano vs Reyes 175 SCRA 264
F:
On 20 April 1987, the Phil. Ports Authority (PPA) adopted a
resolution directing mgmt. to prepare the Invitation to Bid and all relevant
Secretary Reyes created a 7-man MICT Bidding Committee to

evaluate all bids and recommend to the Board the best bid. The PPA
published the Invitation to Bid with the reservation that it had the right to
reject any bid and to accept such bid it may deem advantageous to the
govt.
Seven companies submitted bids.
The Committee
recommended that the contract be awarded to Intl. Container Terminal
Services (ICTSI) on the ground that it offered the best technical and
financial proposal. Secretary Reyes awarded the contract to ICTSI. Before
the contract could be signed, two cases were filed questioning the legality or
regularity of the bidding. The first was a special action for prohibition with
prelim injunction filed by Alo, a concerned taxpayer. The second was a civil
case for prohibition with prayer for TRO filed by Sharp Co. which actively
participated in the bidding.
The President approved the proposed MICT contract. The PPA
and ICTFSI perfected the contract. Rodolfo Albano, a member of the House
of Representatives filed the present case assailing the award of the contract
on the ground that since the MICT is a public utility, it needs a legislative
franchise before it can legally operate as a public utility.
Issue : WON a legislative franchise is necessary.
Held : NO. Petition dismissed.
A franchise specially granted by Congress is not necessary for
the operation of the MICT by a private entity. A contract entered into by the
PPA and such entity is substantial compliance with the law. 1. Executive
Order No. 30 authorized the PPA to take over, manage and operate the
MICT in accordance with PD 857 (Revised Charter of the PPA). PD 857
expressly empowers the PPA to provide services within Port Districts
"whether on its own, by contract or otherwise." Therefore, under EO 30 and
PD 857, the PPA may contract with ICTSI for the mgmt., operation and devt.
of the MICT.
2. Even if the MICT be considered a public utility or a public service on the
theory that it is a wharf or a dock as contemplated by the Public Service
Act, its operation would not necessarily call for a legislative franchise.
Legislative franchises are not required before each and every public utility
may operate. The law has granted certain administrative agencies the
power to grant licenses for or to authorize the operation of certain public
utilities.
That the Consti provides that the issuance of a franchise for the
operation of a public utility shall be subject to amendment, alteration or
repeal by Congress does not necessarily imply that only Congress has the
power to grant such authorization. There are several laws granting specified
agencies in the Executive Dept. the power to issue such authorization for
certain classes of public utilities. [ 1. LTFRB wrt Certificates of Public
Convenience authorizing the operation of public land transportation services
provided by motorized vehicles; 2. ERB wrt operation of electric power
utilities and services except electric coops]
Reading EO 30 and PD 857 together, the PPA has been
empowered to undertake by itself or to authorize the operation and mgmt. of
the MICT by another by contract. The latter power having been delegated to
the PPA, a legislative franchise is no longer necessary. In this case, the
PPA's contracting with ICTSI is wholly within its jurisdiction and powers.
3. The award of the contract to ICTSI is all the authorization that is
necessary. The award made by the PPA and the President enjoys the
presumption of validity and regularity of official action. There is no evidence
to the contrary.
4. Albano has standing to assail the contract. While the expenditure of
public funds may not be involved under the contract, public interest is
definitely involved considering the important role of the MICP in the
economic devt. of the country and the magnitude of the amount involved.
He has sufficient standing since a public right (disclosure provision) is
sought to be enforced.
5. There in no conflict among the 3 branches of govt. The Executive Dept.
has not contravened an act of Congress. There is no usurpation of powers
of another branch.
6. The determination of the winning bid should be left to the sound
judgment of the PPA. It is in the best position to evaluate the bids. It has
the technical expertise which neither the Court nor Congress has. No abuse
of discretion has been shown.
2. CA 146, as amended, Sec 13 (b)
The term public service includes every person that now or
hereafter may 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, sub-way
motor vehicle, either for freight or passenger, or both with or without
fixed route and whatever may be its classification, freight or carrier
service or any class, express service, steamboat, or steamship line,
pontines, ferries, and water craft, engaged in the transportation of
passengers and freight or both, shipyard, marine repairshop,
[warehouse], 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
system, wire or wireless broadcasting stations and other similar public
services: Provided, however, that a person engaged in agriculture, not
otherwise a public service, who owns a motor vehicle and uses it
personally and/or enters into a special contract whereby said motor
vehicle is offered for hire or compensation to a third party or third
parties engaged in agriculture, not itself or themselves a public
service, for operation by the latter for a limited time and for a specific
purpose directly connected with the cultivation of his or their farm, the
transportation, processing, and marketing of agricultural products of
such third party or third parties shall not be considered as operating a
public service for the purposes of this Act.
Philippines, and whatever other person or entities that may own or

possess or operate public services.
Section 14. The ff. are exempted from the provisions of the
preceding section :
(a) Warehouses;
(b) Vehicles drawn by animals and bancas moved by oar or
sail, and tugboats and lighters;
(c) Airships within the Philippines except as regards the
fixing of their maximum rates on freight and passengers;
(d) Radio companies except with respect to the fixing of
rates;
(e) Public services owned or operated by any instrumentality
of the Natl. Govt. or by any GOOC, except with respect to the fixing of
rates.
Section 15. With the exception of those enumerated in the
preceding section, no public service shall operate in the Philippines
without possessing a valid and subsisting certificate from the PSC
known as the certificate of public convenience, or certificate of public
convenience and necessity as the case may be, to the effect that the
operation of said service and the authorization to do business will
promote the public interests in a proper and suitable manner.
The Commission may prescribe as a condition for the
issuance of the certificate provided in the preceding paragraph that the
service can be acquired by the Republic of the Philippines or any
instrumentality thereof upon payment of the cost price of its useful
eqpt., less reasonable depn.; and likewise, that the certificate shall be
valid only for a definite period of time; and that the violation of any of
these conditions shall produce the immediate cancellation of the
certificate without the necessity of any express action on the part of
the Commission.
In estimating the depn., the effect of the use of the eqpt., its
actual condition, the age of the model, or other circumstances
affecting its value in the market shall be taken into consideration.
The foregoing is likewise applicable to any extension or
amendment of certificates actually in force and to those which may
hereafter be issued, to permit to modify itineraries and time schedules
of public services, and to authorizations to renew and increase eqpt.
and properties.
B. Transportation
1. Definition - A contract of transportation is one
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.
2. Public Nature
(a) Public Service Act
Section 13 (a) The Commission (PSC) shall have jurisdiction,
supervision, and control over all public services and their franchises,
eqpt., and other properties, and in the exercise of its authority, it shall
have the necessary powers and the aid of the public force: Provided,
That public services owned or operated by govt. entities or GOOCs
shall be regulated by the Commission in the same way as privately
owned public services, but certificates of public convenience or
certificates of public convenience and necessity shall not be required
of such entities or corporations: And provided, further, That it shall
have no authority to require steamboats, motorships and steamship
lines, whether privately owned or owned or operated by any govt.
controlled corporation or instrumentality to obtain certificates of
public convenience or to prescribe their definite routes or lines of
service.
Section 16. Proceedings of the Commission, upon notice

and hearing. The Commission shall have power, upon proper notice
and hearing in accordance with the rules and provisions of this Act,
subject to the limitations and exceptions mentioned and saving
provisions to the contrary.
(a) To issue certificates ... authorizing the operation of public
services within the Philippines, whenever the Commission finds that
the operation of the public service proposed and the authorization to
do business will promote the public interest in a proper and suitable
manner. Provided, that certificates will be granted only to citizens of
the Philippines or of the US or to corps., co-partnerships, associations
or joint stock companies constituted and organized under the laws of
the Philippines; Provided, that 60% of the stock or paid-up capital ...
must belong entirely to citizens of the Philippines or of the US;
Provided, further, that no such certificate shall be issued for a period
of more than 50 years.
(b) The term public service includes every person that now
or hereafter may 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,
sub-way motor vehicle, either for freight or passenger, or both with or
without fixed route and whatever may be its classification, freight or
carrier service or any class, express service, steamboat, or steamship
line, pontines, ferries, and water craft, engaged in the transportation of
passengers and freight or both, shipyard, marine repairshop,
warehouse, 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
system, wire or wireless broadcasting stations and other similar public
services: Provided, however, that a person engaged in agriculture, not
otherwise a public service, who owns a motor vehicle and uses it
personally and/or enters into a special contract whereby said motor
vehicle is offered for hire or compensation to a third party or third
parties engaged in agriculture, not itself or themselves a public
service, for operation by the latter for a limited time and for a specific
purpose directly connected with the cultivation of his or their farm, the
transportation, processing, and marketing of agricultural products of
such third party or third parties shall not be considered as operating a
public service for the purposes of this Act.
(b) To approve, subject to constitutional limitations any

franchise, privilege granted under the provisions of Act No. 667, as
amended by Act. No. 1022, by any political subdivision of the
Philippines when, in the judgment of the Commission, such franchise
or privilege will properly conserve the public interests xxx
(c) To fix and determine individual or joint rates, tolls,
charges, classifications, or schedules thereof, as well as commutation,
mileage, kilometrage, and other special rates which shall be imposed,
observed and followed thereafter by any public service ; Provided,
further that in case the public service equipment of an operator is used
principally or secondarily for the promotion of a private business, the
net profits of said business shall be considered in relation with the
public service of such operator for the purpose of fixing the rates.
(d) To fix just and reasonable standards, classifications,
regulations, practices, measurements, or service to be furnished,
imposed, observed, and followed thereafter by any public service.
(c) The word "person" includes every individual, copartnership, joint stock co. or corporation, whether domestic or
foreign, their lessees, trustees, or receivers, as well as any
municipality, province, city, GOOC, or agency of the govt. of the
(e) To ascertain and fix adequate and serviceable standards

for the measurement of quantity, quality, pressure, initial voltage, or
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other condition pertaining to the supply of the product or service
rendered by any public service, and to prescribe reasonable
regulations for the examination and test of such product or service
and for the measurement thereof.
(o) To fix, determine, and regulate, as the convenience of the

state may require, a special type for auto buses, trucks and motor
trucks, to be hereafter constructed, purchased, and operated by
operators after the approval of this act; to fix and determine a special
registration fee for auto-buses, trucks and motor trucks so
constructed, purchased, and operated: Provided, that said fees shall
be smaller than those charged for auto- buses, trucks, and motor
trucks of types not made regulation under this subsection.
(f) To establish reasonable rules, regulations, instructions,

specifications, and standards, to secure the accuracy of all meters and
appliances for measurements.
(g) To compel any public service to furnish safe, adequate,
and proper service as regards the manner of furnishing the same as
well as the maintenance of the necessary material and eqpt.
Section 17. Proceedings of commission without previous

hearing:
(a) To investigate, upon its own initiative, or upon complaint
in writing, any matter concerning any public service as regards
matters under its jurisdiction; to require any public service to furnish
safe, adequate and proper service as the public interest may require
and warrant; to enforce compliance with any standard xxx and to
prohibit or prevent any public service from operating without first
securing a certificate of public convenience or public necessity and
convenience xxx and require existing public services to pay the fees
provided for in this act for the issuance of the proper certificate xxx
under the penalty, in the discretion of the commission, of the
revocation and cancellation of any acquired right.
(h) To require any public service to establish, construct,

maintain and operate any reasonable extension of its existing facilities,
where, in the judgment of said commission, such extension is
reasonable and practicable, and will furnish sufficient business to
justify the construction and maintenance of the same, and when the
financial condition of the said public service reasonably warrants the
original expenditure required in making and operating such extension.
(i) To direct any railroad, street, railway or traction co. to
establish and maintain at any junction or point of connection or
intersection with any other line of said road or track, or with any other
line of any other railroad, street, railway or traction co., such just and
reasonable connection as shall be necessary to promote the
convenience of shippers of property, or of passengers, and in like
manner to direct any railroad, street railway or traction co. engaged in
carrying merchandise, to construct, maintain and operate, upon
reasonable terms, a switch connection with any private sidetrack
which may be constructed by any shipper to connect with the railroad,
street railway or traction company line where, in the judgment of the
commission, such connection is reasonable and practicable, and can
be put in with safety, and will furnish sufficient business to justify the
construction and maintenance of the same.
(b) To require payment of actual expenses incurred in any

investigation if a violation shall be found; to assess costs not to
exceed 25% with reference to such investigation
(c) To appraise and value the property of any public service;
in relation thereto, to have access to and use any books, documents or
records in the possession of any govt. dept., bureau, office, or political
subdivision
(d) To provide, on motion by or at the request of any
consumer, for the examination and test of any appliance used for the
measuring of any product or service of a public service, to enter any
premises where said appliances may be, and other premises of the
public service, for the purpose of setting up and using on said
premises any apparatus necessary therefor, and to fix fees to be paid
by the consumer who may apply for such examination, and in case of
defect, to refund the fees paid
(j) To authorize, in its discretion, any railroad, street railway

of traction company to lay its tracks across tracks of any other
railroad, street railway or traction company, or across any public
highway.
(k) To direct any railroad or street railway co. to install such
safety devices or to adopt such other reasonable measures as may in
the judgment of the commission be necessary for the protection of the
public at passing grade crossings of (1) public highways and railroads,
(2) public highways and street railways, or (3) railroads and street
railways.
(e) To permit any street railway or traction company to

change its existing gauge to standard steam railroad gauge
(f) To grant any public service special permits to make extra
or special trips within the territory covered by its certificate and to
make special excursions outside if the public interest or special
circumstances so require; Provided where the public service cannot
render such extra service on its own line or in its own territory, a
special permit for such extra service may be granted to any other
public service
(l) To fix and determine the proper and adequate rates of

depn. of the property of any public service which will be observed in
proper and adequate depn. account to be carried for the protection of
stockholders, or bondholders or creditors, in accordance with such
rules, regulations, and forms of account as the commission may
prescribe. Said rates shall be sufficient to provide the amounts
required over and above the expenses of maintenance to keep such
property in a state of efficiency corresponding to the progress of the
industry. Each public service shall conform its depreciation accounts
to the rates so determined and fixed, and shall set aside the money so
provided for out of its earnings and carry the same in a depreciation
fund. The income from such investments of money in such fund shall
likewise be carried in such fund. This fund shall not be expended
otherwise than for depreciation, improvements, extensions, new
constructions or additions to the property of such public service.
(g) To require any public service to keep its books, records,

and accounts; to adopt a uniform system of accounting as approved
by the auditor general
(h) To require any public service to furnish annual reports of
finances and operations, covering the 12 month period ending
December 31
(i) To require every public service to file with the
commission a written, verified statement made by the owner, president
or secretary setting forth the officers, authority, power and duties of
every officer, as to disclose the source and origin of each
administrative act or rule
(j) To require any public service to comply with the laws of
the Philippines and with any local resolution or ordinance or its
charter
(m) To amend, modify or revoke at any time any certificate

under the provisions of this act, whenever the facts and circumstances
on the strength of which said certificate was issued have been
misrepresented or materially changed.
(n) To suspend or revoke any certificate issued under the
provisions of this act whenever the holder thereof has violated or
willfully and consumatedly refused to comply with any order, rule or
regulation of the commission or any provisions of this act: Provided,
that the commission for good cause, may prior to the hearing suspend
for a period not exceeding 30 days any certificate or the exercise of
any right or authority issued or granted under this act by order of the
commission, whenever such step shall in the judgment of the
commission be necessary to avoid serious and irreparable damage or
inconvenience to the public or to private interests.
(k) To investigate accidents directly or indirectly arising from

or connected with the maintenance or operation of the public service
(l) To require every public service to file a complete schedule
of every classification, individual or joint rate, toll, fare or charge, and
in case of public carriers, a complete statement of itineraries or routes
o Section 18 - It shall be unlawful for any individual, copartnership,
association, corporation or joint-stock company, their lessees, trustees
or receivers xxx to engage in any public service business without
having first secured from the commission a certificate, except grantees
PAGE 3

of legislative franchises expressly exempting such grantee from the
reqts of securing a certificate from the commission, as well as those
expressly exempted from the jurisdiction of the commission
consolidation to be approved, and that the same are not detrimental to

the public interest, and in case of a sale, the date on which the same is
to be consummated shall be fixed in the order of approval: Provided,
however, that nothing herein contained shall be construed to prevent
the transaction from being negotiated or completed before its approval
or to prevent the sale, alienation, or lease by any public service of any
of its property in the ordinary course of its business.
Section 19. Unlawful acts - It shall be unlawful for any

public service :
(a) To provide or maintain any service that is unsafe,
improper or inadequate ,or withhold or refuse any service which can
reasonably be demanded and furnished, as found and determined by
the commission in a final order which shall be conclusive and shall
take effect in accordance with this act, upon appeal or otherwise.
(h) To sell or register in its books the transfer or sale of

shares of its capital stock, if the result of that sale in itself or in
connection with another previous sale, shall be to vest in the
transferee more than 40% of the subscribed capital of said public
service. Any transfer made in violation of this provision shall be void
and of no effect and shall not be registered in the books of the public
service corporation. Nothing herein contained shall be construed to
prevent the holding of shares lawfully acquired.
(b) To make or give, directly or indirectly, by itself or through

its agents, attorneys or brokers, or any of them, discounts or rebates
on authorized rates, or grant credit for the payment of freight charges,
or any undue or unreasonable preference or advantage to any person
or corporation or to any locality or to any particular person or
corporation or locality or any particular description of traffic or
service, or subject any particular person or corporation or locality or
any particular description of traffic to any prejudice or disadvantage in
any respect whatsoever; to adopt, maintain, or enforce any regulation,
practice or measurement which shall be found or determined by the
commission to be unjust, unreasonable, unduly preferential, or
unjustly discriminatory, in a final order which shall be conclusive and
shall take effect in accordance with the provisions of this act, upon
appeal or otherwise.
(i) To sell, alienate or in any manner transfer shares of its

capital stock to any alien if the result of that sale, alienation, or
transfer in itself or in connection with another previous sale shall be
the reduction to less than 60% of the capital stock belonging to
Philippine citizens. Such sale, alienation or transfer shall be void and
of no effect and shall be sufficient cause for ordering the cancellation
of the certificate.
(b) The Certificate of Public Convenience
(CPC), the Certificate of Public Convenience and
Necessity (CPCN), and the Prior Operator Rule
(c) To refuse or neglect, when requested by the director of

posts or his authorized representative to carry public mail on the
regular trips of any public land transportation service maintained or
operated by any such public service, upon such terms and conditions
and for a consideration in such amount as may be agreed upon
between the Director of Posts and the public service carrier or fixed by
the commission in the absence of an agreement between the Director
of Posts and the carrier. In case the Director of Posts and the public
service carrier are unable to agree on the amount of the compensation
to be paid for the carriage of the mail, the Director of Posts shall
forthwith request the commission to fix a just and reasonable
compensation for such carriage and the same shall be promptly fixed
by the commission in accordance with section 16 of this act.
Difference between CPC and CPCN : A CPCN is issued by the PSC to a

public service to which any political subdivision has granted a franchise
under Act 667 after the PSC has approved the same under Section 16(b). A
CPC is any authorization to operate a public service issued by the PSC. A
CPC is an authorization issued by the Commission for the operation of
public services for which no franchise, either municipal or legislative, is
required by law (e.g. auto-trucks and motor vehicles). A CPCN is an
authorization issued by the PSC for the operation of public services for
which a franchise is required by law (e.g. electric, telephone services).
Nature of certificate : It constitutes neither a franchise nor a contract,
confers no property rights and is a mere license or privilege, and such
privilege is forfeited when the grantee fails to comply with his commitments
behind which lies the paramount interest of the public, for public necessity
cannot be made to wait, nor sacrificed for private convenience.
However, certificates represent property rights to the extent that if
the rights which any public utility is exercising pursuant to lawful orders of
the PSC has been invaded by another public utility, in appropriate cases
actions may be maintained by the complainant public utility. Owners of
public utilities have the right to maintain appropriate actions against other
public utilities not authorized to operate in competition with the complainant.
Certificates are considered as property as used in Civil
Procedure as they have material value and are material assets. They are
subject to attachment and seizure by legal process, and may be acquired by
purchase.
Section 20. Acts requiring the approval of the Commission Subject to established limitations and exceptions and saving
provisions to the contrary, it shall be unlawful for any public service or
for the owner, lessee or operator thereof, without the approval and
authorization of the Commission previously had (a) To adopt, establish, fix, impose, maintain, collect or carry
into effect any individual or joint rates, commutation, mileage or other
special rate, toll, fare, charge, classification or itinerary. The
Commission shall approve only those that are just and reasonable and
not nay that are unjustly discriminatory or unduly preferential, only
upon reasonable notice to the public services and other parties
concerned, giving them a reasonable opportunity to be heard and the
burden of the proof to show that the proposed rates or regulations are
just an reasonable shall be upon the public service proposing the
same.
Determination of WON an issuance of a certificate is for public convenience

- (1) financial responsibility of the applicant, (2) reliability of the applicant, (3)
priority of filing the application for a certificate, and (4) priority of operation
(b) To establish, construct, maintain or operate new units or

extend existing facilities or make any other addition to or general
extension of the service.
Prior operator rule - to carry out the purpose and intent for which the PSC
was created the law contemplates that the first licensee will be protected in
his investment and will not be subjected to a ruinous competition. It is not
therefore the policy of the law for the PSC to issue a CPC to a second
operator to cover the same field and in competition with a first operator who
is rendering sufficient, adequate and satisfactory service, and who in all
things and respects is complying with the rules and regulations of the PSC.
Accordingly, a CPC or CPCN ought not to be granted where there is no
complaint as to existing rates and the co. in the field is rendering adequate
services.
- regular operators are preferred over irregular operators
- prior operator is given opportunity to improve service
- prior operator given opportunity to extend lines
- basis of rule : to prevent ruinous and wasteful competition in order that the
interests of the public would be conserved and preserved; so long as the
operator complied with the terms and conditions of the license and the
reasonable demands of the public, it is the duty of the PSC to protect rather
than to destroy its investment
(e) Hereafter to issue any stock or stock certificates

representing an increase of capital; or issue any share of stock without
par value; or issue any bonds or other evidence of indebtedness
payable in more than one year from the issuance thereof, provided that
it shall be the duty of the Commission, after hearing, to approve any
such issue maturing in more than one year from the date thereof, when
satisfied that the same is to be made in accordance with law, and the
purpose of such issue be approved by the Commission.
(g) To sell, alienate, mortgage, encumber or lease its
property, franchises, certificates, privileges or rights or any part
thereof; or merge or consolidate its property, franchises, privileges or
rights, or any part thereof, with those of any public service. The
approval herein required shall be given, after notice to the public and
after hearing, if it be shown that there are just and reasonable grounds
for making the mortgage or encumbrance, for liabilities of more than
one year maturity, or the sale, alienation, lease , merger or
Raymundo vs Luneta Motor 58 Phil 889
PAGE 4

public, it has more or less of a vested and preferential right over another
who seeks to acquire a later license to operate over the same route.
To carry out the purpose and intent for which the PSC was
created, the law contemplates that the first license will be protected in his
investment and will not be subjected to ruinous competition.
The primary purpose of the PSC is to secure adequate,
sustained service for the public at the least possible cost and to protect and
conserve investments which have already been made for that purpose. A
CPCN for the operation of an auto truck line in occupied territory should not
be granted where there is no complaint as to existing rates and the co. in
the field is rendering adequate service. It is the duty of the PSC to protect
rather than to destroy the investment of a public utility.
The policy of regulation upon which the present public utility
commission plan is based and which tends to do away with competition
among public utilities as they are natural monopolies, is at once the reason
that the regulation of an existing system of transportation, which is properly
serving a given field, or may be required to do so, is to be preferred to
competition among several independent systems. While requiring a proper
service from a single system for a territory in consideration for protecting it
as a monopoly for all the service required and in conserving its resources,
no economic waste results and service may be furnished at a minimum
cost.
F:
Nicanor de Guzman signing as Guzco Transit purchased trucks
from Luneta Motor and executed PNs guaranteed by a chattel mortgage on
several trucks. Failing to pay the PNs, a suit for collection was filed. A writ
of attachment was issued and garnishment was served on the PSC
attaching the right, title, and participation of Guzco Transit in the CPC
covering the bus transportation lines between Manila and Rizal. The CFI
ordered the selling of these certificates in a public bidding in which Luneta
Motor was the highest bidder.
Nine days after the certificates were attached, these were sold to
Raymundo (including certificate No. 25951 which was not included in the
sale to Luneta Motor Co.). The approval of the sale was sought from the
PSC. The PSC approved the sale in the public bidding and disapproved the
sale to Raymundo except with respect to Certificate No. 25951 which
Raymundo could apply for its approval.
Issue : Which of the two sales should prevail? public auction by virtue of an
attachment vs voluntary sale
Held : Sale to Luneta Motor Co. in a public auction
The Public Service Law authorizes certificates of public
convenience to be secured by public service operators from the PSC. A
CPC grants a right in the nature of a limited franchise. The Code of Civil
Procedure does not exclude franchises or certificates from the word
"property." The test by which to determine WON a property can be
attached and sold upon execution is whether the judgment debtor has such
a beneficial interest therein that he can sell or otherwise dispose of it for
value. The Public Service Law permits the PSC to approve the sale,
alienation, mortgaging, encumbering or leasing of property, franchises,
privileges, or rights or any part thereof. If the holder of a certificate can
voluntary sell it, there is no reason why the same cannot be sold
involuntarily pursuant to court process.
CPCs have considerable material value. They are valuable
assets. They are subject to being sold for consideration as much as any
other property. They are even more valuable than ordinary properties,
taking into consideration that they are not granted to every one who applies
for them but only to those who undertake to furnish satisfactory and
convenient service to the public. Though intangible, they are of value and
are considered properties which can be seized through legal process.
Carmelo vs Monserrat 55 Phil 644

F:
Monserrat twice applied to Congress for an exclusive franchise to
operate a taxicab service in Manila. The Governor General twice vetoed the
bill. Monserrat then applied to the PSC for a CPC. It was granted.
Carmelo and Oriol then applied to the PSC for a CPC to operate
a taxicab service within Manila. Monserrat opposed. The PSC denied the
application.
Held : There is no valid, legal reason why Monserrat should have the
exclusive right of operating a taxicab service. In the granting and refusal of
a CPC, the question is what is for the best interest of the public. Tested by
that rule, it is hard to conceive how it would be for the best interests of the
public to have one taxicab service only, and how the public would be injured
by the granting of the certificate in question, for it must be conceded that
two companies in the field would stimulate the business, and the public
would much sooner and much easier become educated in the use of taxi.
Monserrat does not have a vested right in the business of any
person that might want the use of a taxi, for the simple reason that the use
of any taxi is the sole discretion of the customer. This is unlike the BTC
case which dealt with an autobus service with fixed schedules and routes.
Batangas Transportation Co. vs Orlanes 52 Phil 455

F:
Orlanes sought to have a CPC to operate a line of auto trucks
with fixed times of departure between Taal and Bantilan, with the right to
receive passengers and freight from intermediate points. The evidence is
conclusive that at the time of his application, Orlanes was an irregular
operator between Bantilan and Taal, and that BTC was a regular operator
between Batangas and Rosario. Orlanes sought to have his irregular
operation changed into a regular operation, and to set aside and nullify the
prohibition against him in his CPC that he shall not have or receive any
passengers or freight at any of the points served by the BTC which holds a
prior license from the PSC. His petition is based on the fact that to comply
with the growing demands of the public, the BTC applied for a permit to
increase the no. of trip hours at and between the same places and for an
order that all irregular operators be prohibited from operating unless they
should observe an interval of 2 hours before or one hour after the regular
hours of the BTC. The PSC granted the petition of Orlanes.
San Pablo vs Pantranco South Express, Inc. 153 SCRA 199

F:
Pantranco operates passenger buses from Metro Manila to Bicol
and Eastern Samar. It wrote to the Maritime Industry Authority (MARINA)
requesting authority to lease/purchase MV Black Double to be used in
operating a ferryboat service from Matnog, Sorsogon and Allen, Samar that
will provide service to co. buses and freight trucks that have to cross the
Bernardo Strait. MARINA denied the petition on the ground that the MatnogAllen run is adequately serviced by the Cardinal Shipping Corp. and Epitacio
San Pablo and that market conditions cannot support the entry of additional
tonnage.
Pantranco acquired the vessel. It then applied to BOT claiming
that it can operate a ferry service in connection with its franchise for bus
operation in the highway from Pasay City to Tacloban City for the purpose of
continuing the highway, which is interrupted by a small body of water, and
that the proposed ferry operation is merely a necessary and incidental
service to its main service and obligation of transferring passengers from
Pasay City to Tacloban City. Accdg. to it, there is no need to obtain a
separate CPC to operate a ferry service to cater exclusively to its passenger
buses and ferry trucks. Pantranco began operating its ferry service. The
BOT held that the ferryboat service is part of Pantranco's CPC and
amended Pantranco's CPC to provide so. The two other ferry boat services
filed motions for reconsideration.
Issue : WON a CPC should be issued to a second operator in a field where,

and in competition with, a first operator who is already operating a sufficient,
adequate and satisfactory service.
Held : NO. Decision of PSC is revoked.
An autobus line is a public utility, and as such, is a common
carrier and an impt. factor in the business affairs of the community.
The PSC has the power to specify and define the terms and
conditions upon which any public utility shall operate and to make
reasonable rules and regulations for its operation, and to fix the
compensation that it shall receive for its service to the public, and for good
cause may suspend or even revoke a license granted.
It is not the policy of the law for the PSC to issue a CPC to a
second operator to cover the same field and in competition with a first
operator who is rendering sufficient, adequate and satisfactory service, and
who in all things and respects is complying with the rules and regulations of
the PSC.
The power of the PSC to issue a CPC is founded on the
condition precedent that after a full hearing and investigation, it shall find as
a fact that the proposed operation is for the convenience of the public.
So long as the first operator keeps and performs his terms and
conditions of its license and complies with the reasonable demands of the
Issue : WON the sea can be considered as a continuation of the highway.

WON a land transpo co. can be authorized to operate a ferry service or
coastwise or interisland shipping service along its authorized route as an
incident to its franchise without the need of filing a separate application for
the same.
Held : The water transport service between Matnog and Allen is not a
ferryboat service but a coastwise or interisland shipping service. Before
private respondent may be issued a franchise or CPC for the operation of
the said service as a common carrier, it must comply with the usual reqts. of
PAGE 5

filing an application, payment of the fees, publication, adducing evidence at
a hearing and affording the oppositors the opportunity to be heard.
Considering the environmental circumstances of the case, the
conveyance of passengers from Matnog to Allen is not a ferryboat service
but a coastwise or interisland shipping service. Under no circumstances
can the sea between Matnog and Allen be considered a continuation of the
highway. While a ferryboat service has been considered as a continuation
of the highway when crossing rivers or even lakes, which are small body of
waters separating the land, however, when as in this case the two terminals
are separated by an open sea, it cannot be considered a continuation of the
highway. Pantranco must secure a separate CPC for the operation of an
interisland or coastwise shipping service. Its CPC cannot be merely
amended to include this water service under the guise that it is a mere
private ferry service.
Pantranco does not deny that it charges its passengers
separately from the charges for the bus trips and issues separate tickets
whenever they board the MV Black Double. It cannot pretend that it issued
tickets as a private carrier and not as a common carrier. It in fact accepts
walk in passengers during the trips. It cannot claim that it is both a private
carrier and a common carrier at the same time.
(b) guide govt. and private investments in the devt. of the

country's inter-modal transportation and communication system in a
most practical, expeditious, and orderly fashion for maximum safety,
service and cost effectiveness;
(c) impose appropriate measures so that technical,
economic and other conditions for the continuing economic viability
of the transportation and communication entities are not jeopardized
and do not encourage inefficiency and distortion of traffic patronage;
(d) develop an integrated plan for a nationwide transmission
system in accordance with national and intl. telecommunications
service reqts. including, among others, radio and television broadcast
relaying leased channel services and data transmission;
(e) guide govt. and private investments in the establishment,
operation and maintenance of an intl. switching system for incoming
and outgoing telecommunication services;
(f) encourage the devt. of a domestic telecommunications
industry in coordination with the concerned entities particularly, the
manufacture of communications/electronics equipment and
components to complement and support, as much as possible, the
expansion, development, operation and maintenance of the nationwide
telecommunication network;
(g) Provide for a safe, reliable and efficient postal system for
the country.
In the case of Javellana vs PSC, the Court differentiated between

ferry service and interisland or coastwide service. Ferry means service
either by barges or rafts, even by motor or steam vessels, between the
banks of a river or stream to continue the highway which is interrupted by a
body of water, or in some cases, to connect two points on opposite shores
of an arm of the sea such as a bay or lake which does not involve too great
a distance or too long a time to navigate. But where the line or service
involves crossing a body of water which is wide and dangerous with big
waves, then such line or service belongs properly to interisland or coastwide
trade.
3. Private nature: rights and obligations of parties
inter se arising from transactions relating to transportation
EO 125-A, Sec. 5. To accomplish its mandate, the Dept. shall

have the ff. powers and functions:
(a) formulate and recommend national policies and
guidelines for the preparation and implementation of integrated and
comprehensive transportation and communications systems at the
national, regional and local levels;
(b) establish and administer
comprehensive and integrated programs for transportation and
communications, xxx call on any agency, corp., or organization xxx to
participate and assist in the preparation and implementation of such
program;
(c) assess, review and provide direction to xxx research and
devt. programs of the govt xxx;
(d) administer and enforce all laws xxx in the field of
transportation and communication;
(e) coordinate with the DPWH in the design, location, devt,
rehabilitation, improvement, etc. of all infrastructure projects and
facilities of the Dept. xxx
(f) establish, operate and maintain a nationwide postal
system xxx;
(g) issue certificates of public convenience for the operation
of public land and rail transportation utilities and services;
(h) accredit foreign aircraft and manufactures xxx;
(i) establish and prescribe rules and regulations for
identification of routes, zones and/or areas of operation of particular
operator of public land services;
(j) establish and prescribe rules xxx for the establishment,
operation and maintenance of such telecommunication facilities in
areas not adequately served by the private sector xxx;
(k) establish and prescribe rules xxx operation and
maintenance of a nationwide postal system xxx;
(l) establish and prescribe rules xxx issuance of CPCs for
public land transportation utilities, such as motor vehicles, trimobiles,
and railways;
(m) establish and prescribe rules xxx inspection and
registration of air and land transportation facilities, such as motor
vehicles, trimobiles, and aircrafts;
(n) establish and prescribe rules xxx issuance of licenses
xxx;
(o) establish and prescribe rules xxx enforcement of laws
governing transportation xxx;
(p) determine, fix and/or prescribe charges and/or rates
pertinent to the operation of public air and land transportation utility
facilities and services xxx;
(q) establish and prescribe rules xxx accreditation of driving
schools;
(r) administer and operate the Civil Aviation Training Center
xxx;
(s) perform such other powers and functions as it may be
prescribed by law, or as may be necessary, incidental, or proper to its
mandate, or as may be assigned from time to time by the President.
(a) absent a transportation contract

(b) arising from a transportation contract
(i) contract of transportation,
defined - one whereby a certain person or
association of persons obligate themselves
to transport persons, things or news from
one place to another for a fixed price
(ii) contract of transportation,
elements
Parties to the contract :
1. shipper - one who gives rise to the contract of transportation
by agreeing to deliver the things or news to be transported, or to present his
own person or those of other or others in the case of transportation of
passengers
2. carrier or conductor - one who binds himself to transport
persons, things, or news as the case may be or one employed in or
engaged in the business of carrying goods for others for hire
Persons or corporations who undertake to transport or convey
goods, property, or persons from one place to another, gratuitously or for
hire, and are classified as private or special carriers and common or public
carriers
C. Regulation of the Transportation Industry
*
The
Department
of
Transportation
and
Communications
EO 125, Sec. 4. Mandate. The DOTC shall be the primary
policy, planning, programming, coordinating, implementing,
regulating, and administrative entity of the Executive Branch of the
govt. in the promotion, devt. and regulation of dependable and
coordinated networks of transportation and communication systems,
as well as in the fast, safe, efficient, and reliable postal, transportation
and communication services.
To accomplish such mandate, the Dept. shall have the ff.
objectives:
(a) promote the devt. of dependable and coordinated
networks of transportation and communication systems;
(a) Air
(i) Air Transportation Office
PAGE 6

EO 125, as amended by EO 125-A
Sec. 10. Assistant Secretaries and Service Chiefs.
xxx
h) Office of the Assistant Secretary for Air
Transportation
in domestic air commerce and/or air transportation shall be issued

only to citizens of the Philippines.
Sec. 11. xxx The present Airport Offices of the Bureau of Air
Transportation are hereby abolished and their functions are transferred
to the Dept. Airport Offices. xxx
EO 125-A
(b) Land
(i) Land Transportation Office
Section 9. Assistant Secretaries and Service Chiefs
xxx
e) Office of the Assistant Secretary for Land Transportation
Sec. 13. xxx

d) The Civil Aeronautics Board is hereby transferred from the
Dept. of Tourism to the Dept. as an attached agency xxx. The Secretary
of Transportation and Communications or his designated
representative shall be the Chairman of the Board xxx
Section 11. xxx The present Regional Offices of the Land

Transportation Commission are hereby abolished and their functions
are transferred to the respective Department Regional offices for Land
Transportation. xxx
Section 13 (a) The Land Transportation Commission is
hereby abolished and its staff functions are transferred to the service
offices of the Dept. Proper and line functions are transferred to the
Dept. Regional Offices for Land Transportation as provided in Section
11 herein. xxx The quasi-judicial powers and functions of the
Commission are transferred to the Dept. The corresponding position
structure and staffing pattern shall be approved and prescribed by the
Secretary xxx.
Sec. 25, RA 776. The Civil Aeronautics Administration shall

be under the administrative supervision and control of the Dept. of
Commerce and Industry (now the DOTC) xxx
(ii) Civil Aeronautics Board
RA 776, as amended
Section 5. The Civil Aeronautics Board shall be composed of
the Secretary of Commerce and Industry (now DOTC) as Chairman, the
CAB Administrator, the Commanding Officer of the Phil. Air Force, and
2 others to be appointed by the President xxx
Administrative Code of 1987, Title XV

Sec. 9. The Department shall have the following line offices :
(1) The Office of the Assistant Secretary for Land
Transportation.
xxx
Section 10 (A) Except as otherwise provided herein, the

Board shall have the power to regulate the economic aspect of air
transportation, and shall have the general supervision and regulation
of, and jurisdiction and control over, air carriers, as well as their
property, property rights, equipment, facilities, and franchise, in so far
as may be necessary for the purpose of carrying out the provisions of
this Act.
(ii)
Land
Transportation
Franchising and Regulatory Board

EO 202
Section 10 (C) Powers and Duties of the CAB

1. issue, deny, amend, revise, alter, modify, cancel,
suspend, or revoke xxx any temporary operating permit or CPCN xxx
2. fix and determine reasonable individual, joint or special
rates, charges, or fares which an air carrier may demand, collect or
receive for any service in connection with air commerce xxx
3. authorize charters whether domestic or intl. and special
air services or flights xxx;
4. approve or disapprove increase of capital, sale of
equipment of an air carrier engaged in air commerce, consolidation,
merger, purchase, lease, operating contract, or acquisition and control
between domestic air carriers xxx
5. inquire into the mgmt. of the business of any air carrier
xxx;
6. require annual, monthly, periodical and special reports
from any carrier xxx;
7. prescribe the forms of any and all accounts, records, and
memoranda of the movement of traffic, as well as of the receipt and
expenditures of money and the length of time such accounts, records,
and memoranda shall be preserved xxx;
8. require each officer and director of any air carrier to
transmit a report describing the shares of stock or other interest held
by such air carrier with any person engaged in any phase of
aeronautics, and the holding of the stock in, and control of, other
persons engaged in any phase of aeronautics.
Sec.1. There is hereby created in the DOTC, the Land

Transportation Franchising and Regulatory Board.
Sec.2. The Board shall be composed of a Chairman and 2
members with the same rank, salary and privileges of an Assistant
Secretary, xxx
Sec.4. The Secretary of Transportation and Communications,
through his duly designated Undersecretary, shall exercise
administrative supervision and control over the LTFRB.
Sec.5. Powers and functions:
a. prescribe and regulate routes of service, xxx zones or
areas of operation of public land transportation services provided by
motorized vehicles xxx;
b. issue, amend, revise, suspend or cancel CPCs or permits
authorizing the operation of public land transportation services
provided by motorized vehicles xxx;
c. determine, prescribe, approve and periodically review and
adjust reasonable fares, rates and other related charges, relative to the
operation of public land transportation services provided by motorized
vehicles;
d. issue preliminary or permanent injunction xxx;
e. punish for contempt of the Board, both direct and indirect
xxx;
f. issue subpoena and subpoena duces tecum and to
summon witnesses to appear in any proceedings of the Board, to
administer oaths and affirmations;
g. conduct investigations and hearings of complaints for
violation of the public service laws on land transportation and of the
Board's rules and regulations xxx;
h. to review motu proprio the decisions, actions of the
Regional Franchising and Regulatory Office herein created;
i. promulgate rules and regulations governing proceedings
before the Board and the Regional Franchising and Regulatory Office
xxx;
j. fix, impose, and collect, and periodically review and adjust
reasonable fees and other related charges for services rendered;
k. formulate, promulgate, administer, implement and enforce
rules and regulations on land transportation public utilities, standards
Section 11. A CPCN is a permit issued by the Board

authorizing a person to engage in air commerce and/or air
transportation, foreign and/or domestic.
Any permit may be altered, amended, modified, suspended,
canceled and revoked by the Board xxx whenever the Board finds such
action to be in the public interest.
There shall be attached to the exercise of the privileges xxx
such reasonable terms, conditions, or limitations as, in the judgment
of the Board, the public interest may require.
xxx
Section 12. Except as otherwise provided in the Constitution
and existing treaty or treaties, a permit authorizing a person to engage
PAGE 7

of measurements and/or design, and rules and regulations requiring
operators of any public land transportation service to equip, install
and provide in their utilities and in their stations such devices, eqpt.
facilities and operating procedures and techniques as may promote
safety, protection, comfort and convenience to persons and property in
their charges as well as the safety of persons and property within their
areas of operations;
l. coordinate and cooperate with other govt. agencies and
entities xxx;
m. perform such other functions and duties as may be
provided by law, or as may be necessary, or proper or incidental to the
purposes and objectives of this Executive Order.
12. coordinate and cooperate with other govt. agencies and

entities concerned with any aspect involving public land transportation
services xxx;
13. perform such other functions and duties as may be
provided by law, or as may be necessary, or proper or incidental to the
purposes and objectives of the Dept.
Sec.6. The Board xxx shall sit and render its decision en
banc; xxx concurrence and signature of at least 2 members xxx
The decision shall be appealable to the Secretary within 30
days from receipt of the decision; Provided, that the Secretary may
motu proprio review any decision or action of the Board before the
same becomes final.
Sec. 21. Regional Franchising and Regulatory Offices - hear

and decide uncontested applications/ petitions for routes xxx;
Sec. 20. The Board shall xxx sit and decide en banc;
concurrence and signature of at least 2 members; decision shall be
appealable to the Secretary within 30 days from receipt of the decision;
the Secretary may motu proprio review any decision or action of the
Board before it becomes final.
Sec. 22. decisions of the Regional Franchising and

Regulatory Offices shall be appealable to the Board within 30 days
from receipt of the decision.
Sec.7. There shall be a Regional Franchising and Regulatory

Office in each of the administrative regions of the country which shall
be headed by a Board Regional Manager having the rank, salary and
privileges of a Dept. Assistant Regional Director. The Regional
Franchising and Regulatory Offices shall hear and decide uncontested
applications/petitions for routes, within their respective administrative
regions: Provided, that applications/petitions for routes extending their
respective territorial jurisdictions shall be heard and decided by the
Board.
(c) Water
(i) Maritime Industry Authority
EO 125, Sec. 14 as amended by EO 125-A, Sec. 3
The Maritime Industry Authority is hereby retained and shall
have the ff. functions:
a. develop and formulate plans, policies, projects xxx geared
toward the promotion and devt. of the maritime industry, the growth
and effective regulation of shipping enterprises, and for the national
security objectives of the country;
b. establish, prescribe and regulate routes, zones and/or
areas of operation of particular operators of public water services;
c. issue CPCs for the operation of domestic and overseas
water carriers;
d. register vessels as well as issue certificates, licenses or
document necessary or incident thereto;
e. undertake the safety regulatory functions pertaining to
vessel construction and operation including the determination or
manning levels and issuance of certificates of competency to seamen;
f. enforce laws, prescribe and enforce rules and regulations,
including penalties for violations thereof, governing water
transportation and the Phil. merchant marine xxx;
g. undertake the issuance of licenses to qualified seamen
and harbor, bay and river pilots;
h. determine, fix, prescribe charges/rates pertinent to the
operation of public water transport utilities xxx;
i. accredit marine surveyors and maritime enterprises
engaged in shipbuilding, ship repair xxx;
j. issue and register the continuous discharge book of
Filipino seamen;
k. establish and prescribe rules and regulations, standards
and procedures for the efficient and effective discharge of the above
functions;
l. perform such other functions as may now or hereafter be
provided by law.
Administrative Code, Title XV

Sec. 15. The quasi-judicial powers and functions with
respect to land transportation shall be exercised through the Land
Transportation and Regulatory Board.
Sec. 16. The Board shall be composed of a Chairman and 2
members with the rank, salary and privileges of an Assistant Secretary,
all of whom shall be appointed by the President upon the
recommendation of the Secretary of Transportation
and
Communications xxx
Sec. 17. The Board shall have an Executive Director who
shall also be appointed by the President xxx. He shall have the rank,
salary and privileges of a Dept. Service Chief. He shall assist the Board
in the performance of its powers and functions.
The Board shall be supported by the Technical Evaluation
Division, Legal Division, Management Information Division,
Administrative Division and Finance Division.
Sec. 18. The Secretary
of Transportation and
Communications shall exercise administrative supervision and control
over the Board.
Sec. 19. Powers and functions of the Board:
1. prescribe and regulate routes xxx;
2. issue, amend, revise, suspend, or cancel CPCs or permits,
xxx;
II. Common Carriers
3. determine, prescribe, approve and periodically review and

adjust reasonable fares xxx;
4. issue injunctions xxx;
5. punish for contempt of the Board xxx;
6. issue subpoena and subpoena duces tecum and to
summon witnesses xxx;
7. conduct investigations and
hearings of complaints for violation of the public service laws on land
transportation xxx;
8. review motu proprio the decisions, actions of the Regional
Franchising and Regulatory Offices xxx;
9. promulgate rules and regulations governing proceedings
before the Board and the Regional Franchising and Regulatory Office
xxx;
10. fix, impose and collect, and periodically review and
adjust reasonable fees, and other related charges for services
rendered;
11. formulate, promulgate, administer, implement and
enforce rules and regulations on land transportation xxx;
A. In General
1. Definitions; essential elements
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.
Aguedo F. Agbayani, COMMERCIAL LAWS OF THE PHILIPPINES, vol. 4,
1989 ed. (hereinafter 4 Agbayani)
Transportation defined.-- a contract of transportation is one whereby a
certain person or association of persons obligate themselves to transport
persons, things, or news from one place to another for a fixed price
PAGE 8

Classification :
1. As to object: (1) things; (2) persons; (3) news
Test for a common carrier:
2. As to place of travel: (1) land; (2) water; (3) air
(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 persons generally as a business,
and not a casual occupation.
(2) He must undertake to carry goods of the kind to which his
business is confined.
(3) He must undertake to carry by the methods by which his
business is conducted, and over his established roads.
(4) The transportation must be for hire.
The true test 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
actually transacted, or the no. and character of the conveyances used in the
employment (the test is therefore the character of the business actually
carried on by the carrier.)
Parties to contract of transportation:

(1) shipper or consignor.-- person to be transported; one who
gives rise to the contract of transportation by agreeing to deliver the things
or news to be transported, or to present his own person or those of other or
others in the case of transportation of passengers
(2) carrier or conductor.-- one who binds himself to transport
persons, things, or news as the case may be; one employed in or engaged
in the business of carrying goods for other for hire
(3) consignee.-- the party to whom the carrier is to deliver the
things being transported; one to whom the carrier may lawfully make
delivery in accordance with its contract of carriage (but the shipper and the
consignee may be one person)
Case: an airplane owner is a common carrier where he undertakes for hire

to carry all persons who apply for passage indiscriminately as long as there
is room and no legal excuse for refusing; airlines engaged in the passenger
service on regular schedules on definite routes, who solicit patronage of the
traveling public, advertise schedules for routes, times of leaving and rates of
fare, and make the usual stipulation as to baggage are common carriers
Freight defined.-- The terms has been defined as: (1) the price or
compensation paid for the transportation of goods by a carrier, at sea, from
port to port. But the term is also used to denote (2) the hire paid for the
carriage of goods on land from place to place, or on inland streams or lakes.
The name is also applied to (3) the goods or merchandise transported at
sea, on land, or inland streams or lakes. Thus the term is used in 2 senses:
to designate the price for the carriage, also called freightage, or to designate
the goods carried.
Characteristics of common carriers:
Contracts through transportation agents.-- A contract of transportation is

not changed, altered or affected by the mere fact that the obligor avails of
other parties to effect the transportation agreed upon, as in the case of
transportation agents.
(1) The common carrier undertakes to carry for all people

indifferently; he holds himself out as ready to engage in the transportation of
goods for hire as a public employment and not as a casual occupation, and
he undertakes to carry for all persons indifferently, within the limits of his
capacity and the sphere of the business required of him, so that he is bound
to serve all who apply and is liable for refusal, without sufficient reason, to
do so
(2) The common carrier cannot lawfully decline to accept a
particular class of goods for carriage to the prejudice of the traffic in those
goods
Exception : for some sufficient reason, where the discrimination
in such goods is reasonable and necessary (substantial grounds)
(3) No monopoly is favored - the Commission has the power to
say what is a reasonable compensation to the utility and to make
reasonable rules and regulations for the convenience of the traveling public
and to enforce them
(4) Public convenience - for the best interests of the public
Carriers defined.-- Persons or corporations who undertake to transport or

convey goods, property or persons, from one place to another, gratuitously
or for hire, and are classified as private or special carriers, and common or
public carriers
Private carriers defined.-- Those who transport or undertake to transport in
a particular instance for hire or reward
Common carriers vs Private carriers:
(1) the common carrier holds
private carrier agrees
himself out in common, that is,
special case with some
to all persons who choose to emindividual to carry
ploy him, as ready to carry for
hire; no one can be a common
carrier unless he has held himself
out to the public as a carrier in
such a manner as to render him
liable to an action if he should
refuse to carry for anyone who
wished to employ him
(1)
in
the
some
Meaning of Public use.-- It is not confined to privileged individuals, but is

open to the indefinite public; there must be a right which the law compels
the owner to give to the general public. Public use is not synonymous with
public interest. The true criterion is whether the public may enjoy it by right
or only by permission
private
for hire
(2) a common carrier is bound to

private carrier is not
carry all who offer such goods as
carry for any reason,
it is accustomed to carry and
unless it enter into a special
tender reasonable compensation
to do so
for carrying them
(2)
bound
to
(3) a common carrier is a public service

private carrier does not
and is therefore subject to regulation
out as engaged in
(3)
The law prohibits unreasonable discrimination by common carriers.-The law requires common carriers to carry for all persons, either passengers
or property, for exactly the same charge for a like or contemporaneous
service in the transportation of like kind of traffic under substantially similar
circumstances or conditions. The law prohibits common carriers (CC) from
subjecting any person, etc. or locality, or any kind of traffic, to any undue or
unreasonable prejudice or discrimination whatsoever.
Exception: When the actual cost of handling and transporting is
different, then different rates may be charged
Cases : (1) merchandise of like quantity may not be considered alike - the
quantity, kind and quality may be exactly the same, and yet not be alike, so
far as the cost of transportation is concerned
(2) shipments may be alike although composed of different
classes of merchandise - difference in the charge for handling and
transporting may only be made when the difference is based upon actual
cost
agreement
hold itself
Determination of justifiable refusal:
the business for the public,
This involves a consideration of the following--
and is therefore not subject
(1) suitability of the vessels of the company for the transportation

of such products;
to regulation as a common carrier
PAGE 9

(2) reasonable possibility of danger or disaster, resulting from
their transportation in the form and under the conditions in which they are
offered for carriage;
(3) the general nature of the business done by the carrier;
(4) all the attendant circumstances which might affect the
question of the reasonable necessity for the refusal by the carrier to
undertake the transportation of this class of merchandise
to personal acts or negligence of said owner or its managers, as

distinguished from agents or employees. No personal act or negligence has
been proved.
In a charter of the entire vessel, the bill of lading issued by the
master to the charterer, as shipper, is in fact and legal contemplation merely
a receipt and a document of title and not a contract, for the contract is the
charter party.
Case: The mere fact that the carriage of dynamites may lead to destructive
explosions is not sufficient to justify refusal if it can be proven that in the
condition in which it is offered for carriage there is no real danger to the
carrier nor reasonable ground to fear that the vessel and those on board will
be exposed to unnecessary or unreasonable risks
De Guzman vs CA, 168 SCRA 612
US vs Tan Piaco, 40 Phil 853

F:
Tan Piaco rented two automobile trucks and was using them
upon the highways of Leyte for the purpose of carrying some passengers
and freight. He carried passengers and freight under a special contract in
each case and had not held himself out to carry all passengers and freight
for all persons who might offer passengers and freight. He was convicted
for violation of the Public Utility Law for operating a public utility without
permission from the Public Utility Commission.
F:
Cendana was a junk dealer and was engaged in buying used
bottles and scrap materials in Pangasinan and brought these to Manila for
resale. He used two 6-wheeler trucks. On the return trip to Pangasinan, he
would load his vehicles with cargo which various merchants wanted
delivered to Pangasinan. For that service, he charged freight lower than
regular rates. General Milk Co. contracted with him for the hauling of 750
cartons of mild. On the way to Pangasinan, one of the trucks was hijacked
by armed men who took with them the truck and its cargo and kidnapped
the driver and his helper. Only 150 cartons of milk were delivered. The Milk
Co. sued to claim the value of the lost merchandise based on an alleged
contract of carriage. Cendana denied that he was a common carrier and
contended that he could not be liable for the loss since it was due to force
majeure. The TC ruled that he was a common carrier. The CA reversed.
Issue : WON Cendana is a common carrier. YES.
Issue: WON defendant operated a public utility. NO.

Held: There is no public use. The trucks were used under special
agreements to carry particular persons and property.
Under the Public Service Law, two things are necessary : (1) the
individual, co-partnership, etc. must be a public utility; and (2) the business
in which such individual, co-partnership, etc. is engaged must be for public
use. "Public use" means the same as "use by the public." The essential
feature of public use is that it is not confined to privileged individuals, but is
open to the indefinite public. 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.
Held : Cendana is properly characterized as a common carrier even though

he merely backhauled goods for other merchants, and even if it was done
on a periodic basis rather than on a regular basis, and even if his principal
occupation was not the carriage of goods.
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 an ancillary activity. It also avoids making a
distinction between a person or enterprise offering transportation services
on a regular or scheduled basis and one offering service on an occasional,
episodic or unscheduled basis. Neither does it make a distinction 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 population.
The fact that Cendana does not hold a CPC is no excuse to
exempt him from incurring liabilities as a CC. Otherwise, it would be to
reward persons who fail to comply with applicable statutory reqts. and would
be offensive to public policy. The 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.
Home Insurance Co. vs American Steamship Agencies, 23 SCRA 24
Issue : WON Cendana may be held liable for the loss of the milk. NO.
F:
A Peruvian firm shipped fishmeal through the SS Crowborough
consigned to the SMB and insured by the Home Insurance Co. The cargo
arrived with shortages. SMB demanded and Home Insurance Co. paid
P14,000 in settlement of SMB's claim. Home Insurance filed for recovery
from Luzon Stevedoring and American Steamship Agencies. Luzon
Stevedoring claimed that it merely delivered what it received from the carrier
in the same condition it received it. American Steamship contended that it
was not liable because of a stipulation in the charter party that the charterer
and not the shipowner was to be liable for any loss or damage to the cargo.
The CFI absolved Luzon Stevedoring but ordered American Steamship to
reimburse the P14,000 to Home Insurance, declaring that Art. 587 of the
Code of Commerce makes the ship agent civilly liable for damages in favor
of third persons due to the conduct of carrier's captain and that the
stipulation in the charter party exempting owner from liability is against
public policy under Art. 1744 of NCC.
Held: Common carriers by the very nature of their business and for reasons
of public policy are held to a very high degree of care and diligence (extraordinary diligence) in the carriage of goods as well as passengers. Article
1734 establishes the general rule that CC are responsible for the loss,
destruction, or deterioration of the goods which they carry unless the same
is due to the causes enumerated therein. Such enumeration is a closed list.
Causes falling outside the list, even if they are force majeure, fall within the
scope of Art. 1735 which provides that CC are presumed to have been at
fault or to have acted negligently, unless they prove that they observed
extraordinary diligence required under Art. 1733.
However, Art. 1745 provides that a CC cannot be allowed to
divest or diminish his responsibility even for acts of strangers like thieves or
robbers, except where such thieves or robbers acted with grave or
irresistible threat, violence or force. The limits of extraordinary diligence are
reached where there is grave or irresistible threat, violence or force. In this
case, the loss was quite beyond the control of the CC. Even CC are not
made absolute insurers against all risks of travel and of transport of goods,
and are not liable for acts or events which cannot be foreseen or are
inevitable, provided that they shall have complied with the rigorous standard
of extraordinary diligence.
Issue : Is the stipulation valid? YES.

Held : The provisions of our Civil Code on common carriers were taken
from Anglo-American law. Under American jurisprudence, a common carrier
undertaking to carry a special cargo or chartered to a special person only,
becomes a private carrier. As a private carrier, a stipulation exempting the
owner from liability for the negligence of its agents is not against public
policy and is deemed valid.
The Civil Code provisions on common carriers should not be
applied where the carrier is not acting as such but as a private carrier. The
stipulation in the charter party absolving the owner from liability for loss due
to the negligence of the agent would be void only if the strict public policy
governing CC is applied. Such policy has no force where the public at large
is not involved, as in the case of a ship totally chartered (as in this case) for
the use of a single party. Based on the stipulation, recovery cannot be had,
for loss or damage to the cargo against shipowners, unless the same is due
Planters Products vs CA, G.R. 101503 (Sept. 15, 1993)

F:
Planters purchased urea fertilizer from Mitsubishi, New York.
The fertilizer was shipped on MV Sun Plum, which is owned by KKKK, from
Alaska to San Fernando, La Union. A time charter party was entered into
between Mitsubishi as shipper/charterer and KKKK as shipowner. Upon
arrival in the port, PPI unloaded the cargo. It took PPI 11 days to unload the
cargo. PPI hired a marine and cargo surveyor to determine if there was any
shortage. A shortage and contamination of the fertilizer was discovered.
PPI sent a claim letter to SSA, the resident agent of KKKK for the amount of
PAGE 10

the loss. An action for damages was filed. SSA contended that the
provisions on CC do not apply to them because they have become private
carriers by reason of the charter-party. The TC awarded damages. The CA
reversed.
Issue : Does a charter party between a shipowner and a charterer transform
a CC into a private one as to negate the civil law presumption of negligence
in case of loss or damage to its cargo? NO.
Held : 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. There are 2 kinds: (1) contract of affreightment which involves
the use of shipping space or vessels leased by the owner in part or as a
whole, to carry goods for others; and (2) charter by demise or bareboat
charter where 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.
It is not disputed that the carrier operates as a CC in the ordinary
course of business. When PPI chartered the vessel, the ship captain, its
officers and crew were under the employ of the shipowner and therefore
continued to be under its direct supervision and control. Thus it continued
to be a public carrier.
It is therefore imperative that a public carrier shall remain as
such, notwithstanding the charter of the whole or portion of a vessel,
provided the charter is limited to the ship only, as in the case of a timecharter or a voyage-charter. It is only when the charter includes both the
vessel and the crew, as in a bareboat or demise that a CC becomes private,
insofar as such particular voyage is concerned.
Issue : WON the carrier is liable for damages. NO.
Held : The presumption of negligence on the part of respondent carrier has
been overcome by the showing of extraordinary zeal and assiduity
exercised by the carrier in the care of the cargo. 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.
Coastwise Lighterage Corp. vs. CA, GR No. 114167, July 12, 1995
F:
Pag-asa Sales, Inc. entered into a contract to transport molasses
from Negros to Mla. w/ Coastwise, using the latter's dumb barges. The
barges were towed in tandem by the tugboat MT Marcia, w/c is likewise
owned by Coastwise.
Upon reaching Mla. Bay, while approaching Pier 18, one of the
barges, "Coastwise 9," struck an unknown sunken object. The forward
buoyancy compartment was damaged, and water gushed in through a hole
2 inches wide and 22 inches long. As a consequence, the molasses at the
cargo tanks were contaminated and rendered unfit for the use it was
intended. This prompted the consignee, Pag-asa to reject the shipment of
molasses as a total loss. Thereafter, Pag-asa filed a formal claim w/ the
insurer of its cargo, herein pvt. resp., Phil. Gen. Insurance Co. (Philgen) and
against the carrier, herein petitioner Coastwise. Coastwise denied the claim
and it was Philgen w/c paid the consignee the amount of P700,000
representing the value of the damaged cargo of molasses.
In turn, Phil-gen filed an action agsint Coastwise bef. RTC-Mla.
seeking to recover the P700,000 it paid to Pag-asa. RTC ruled in favor of
Philgen. CA affirmed the RTC decision. Hence, this petition.
RULINGS: (1) Bareboat charter and contract of affreightment, difference;
Coastwise, by the contract of affreightment, was not converted into a
private carrier, but remained a common carrier.-- Under the demise or
bareboat charter of the vessel, the charterer will generally be regarded as
the owner of the voyage or service stipulated. The charterer mans the
vessel w/ his own people and becomes the owner pro hac vice, subject to
liability to others for damages caused by negligence. To create a demise,
the owner of a vessel must completely and exclusively relinquish
possession, command and navigation thereof to the charterer; anything
short of such a complete transfer is a contract of affreightment (time or
voyage charter party) or not a charter party at all.
A contract of affreightment is one in w/c the owner of the vessel
leases part or all of its space to haul goods for others. It is a contract for
special service to be rendered by the owner of the vessel and under such
contract the general owner retains the possession, command and navigation
of the ships, the charterer or freighter merely having use of the space in the
vessel in return for his payment of the charter hire. xxx
xxx
Although a charter party may transform a common carrier into a

private one, the same, however, is not true in a contract of affreightment on
account of the aforementioned distinctions bet. the two.
Petitioner admits that the contract it entered into w/ the
consignee was one of afreightment. We agree. Pag-asa only leased 3 of
petitioner's vessels, in order to carry cargo from one point to another, but the
possession, command and navigation of the vessels remained w/ petitioner.
(2) Petitioner is liable for breach of contract of carriage, having
failed to overcome the presumption of negligence w/ the loss and
destruction of goods it transported, by proof of its exercise of extraordinary
diligence.-- Mere proof of delivery of goods to a carrier and the subsequent
arrival of the same goods at the place of destination in bad order makes for
a prima facie case against the carrier. Jesus Constantino, the patron of the
vessel "Coastwise 9" admitted that he was not licensed. This violates the
rule in the Code of Commerce (Art. 609) w/c requires that patrons must
"have the legal capacity to contract in accordance w/ this code, and prove
the skill, capacity and qualifications necessary to command and direct the
vessel xxx and must be qualified xxx for the discharge of the duties of the
position. xxx" Coastwise cannot safely claim to have extraordinary
diligence, by placing a person whose navigational skills are questionable, at
the helm of the vessel w/c eventually met the fateful accident. xxx Had the
patron been licensed, he could be presumed to have both the skill and the
knowledge that would have prevented the vessel's hitting the sunken
derelict ship that lay on their way to Pier 8. RAM.
2. Nature of business; power of State to regulate
Art. 1765. The [Public Service Commission] Board of
Transportation may, on its own motion or on petition of any interested
party, after due hearing, cancel the certificate of public convenience
granted to any common carrier that repeatedly fails to comply with his
or its duty to observe extraordinary diligence as prescribed in this
Section.
4 Agbayani:
Common carriers are subject to legislative regulation.-- The business of
a common carrier holds such a peculiar relation to the public interest that
there is superinduced upon it the right of public regulation. The business of
a common carrier is affected with public interest. When, therefore, one
devotes his property to a use in which the public has an interest, he, in
effect, grants to the public an interest in that use, and must submit to be
controlled by the public for the common good, to the extent of the interest
he had thus created.
Limitation on power to regulate.-- Such regulations must not have the
effect of depriving an owner of his property without due process of law, nor
of confiscating, or appropriating private property without just compensation,
nor of limiting or prescribing irrevocably vested rights or privileges lawfully
acquired under a charter or franchise [just compensation, due process of
law]
When judiciary may interfere with legislative regulation of common
carriers.-- The judiciary ought not to interfere with legislative regulations
unless they are so plainly and palpably unreasonable as to make their
enforcement equivalent to the taking of property for public use without such
compensation as under all circumstances is just both to the owner and to
the public.
Pantranco vs PSC, 70 Phil 221
F:
Pantranco has been engaged for the past 20 years in the
business of transporting passengers by means of motor vehicles in
accordance with the CPCN issued to it. It filed with the PSC an application
for authorization to operate 10 addtl. new trucks. The application was
granted with two conditions : (1) that the CPCN would be valid for only 25
years and (2) that the service can be acquired by the govt. upon payment of
cost price of its useful eqpt. less reasonable depreciation. Pantranco
challenged the constitutionality of Art. 15, CA 146 as an undue delegation of
legislative powers.
Issue : WON the PSC may prescribe the 2 conditions as a prerequisite to
the issuance of the CPCN.
Held : Yes. CA 146 provides a sufficient standard, which is public interest,
by which the PSC is guided in imposing such conditions.
PAGE 11

The business of a common carrier holds such a peculiar relation
to the public interest that there is superinduced upon it the right of public
regulation. When private property is affected with a public interest, it ceases
to be juris privati only. When, therefore, one devotes his property to a use in
which the public has an interest, he, in effect, grants to the public an interest
in that use, and must submit to be controlled by the public for the common
good, to the extent of the interest he had thus created. He may withdraw his
grant by discontinuing the use, but so long as he maintains the use, he must
submit to control. Indeed this right is so far beyond question that it is settled
that the power of the state to exercise legislative control over public utilities
may be exercised through the board of commissioners. This right of the
state to regulate public utilities is founded upon the police power, and
statutes for the control and regulation of utilities are a legitimate exercise
thereof, for the protection of the public as well as the utilities themselves.
Such statutes are not unconstitutional, either as impairing the obligation of
contracts, taking property without due process, or denying the equal
protection of the laws, especially inasmuch as the question WON private
property shall be devoted to a public use and the consequent burdens
assumed is ordinarily for the owner to decide; and if he voluntarily places his
property in public service he cannot complain that it becomes subject to the
regulatory powers of the state. This is more so in the light of authorities
which hold that a CPC constitutes neither a franchise nor a contract, confers
no property rights and is a mere license or privilege.
3. Nature and Basis of Liability
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 the
circumstances of each case.
Such extraordinary diligence in the vigilance over the goods
is further expressed in Articles 1734, 1735, and 1745, Nos. 5,6, and 7,
while the extraordinary diligence for the safety of the passengers is
further set forth in Articles 1755 and 1756.
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 packaging or in the containers;
(5) Order or act of competent public
authority.
Art. 1735. In all cases other than those
mentioned in Nos. 1, 2, 3, 4 and 5 of the preceding
article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to
have been at fault or to have acted negligently,
unless they prove that they observed
extraordinary diligence as required in Art. 1733.
Art. 1745. Any of the ff. or similar
stipulations shall be considered unreasonable,
unjust and contrary to public policy:
xxx
(5) That the common carrier shall not be
responsible for the acts or omissions of his or its
employees;
(6) That the common carrier's liability
for acts committed by thieves, or of robbers who
do not act with grave or irresistible threat,
violence or force, is dispensed with or diminished;
(7) That the common carrier is not
responsible for the loss, destruction, or
deterioration of goods on account of the defective
condition of the car, vehicle, ship, airplane or
other equipment used in the contract of carriage.
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 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.
4 Agbayani:
Extraordinary diligence required of common carriers.-- The law
requires CC to exercise extra-ordinary diligence which means that they must
render service with the greatest skill and utmost foresight. The extraordinary diligence required of carriers in the handling of the goods of the
shippers and consignees last from the time the cargoes are loaded in the
vessels until they are discharged and delivered to the consignees.
Reasons for requiring extra-ordinary diligence.-- The nature of the
business of common carriers and the exigencies of public policy demand
that they observe extra-ordinary diligence; the business of CC is impressed
with a special public duty and therefore subject to control and regulation by
the state. The public must of necessity rely on the care and skill of CC in
the vigilance over the goods and safety of the passengers
Rigorous law on common carriers not applicable to special
employment as carrier.-- The laws applicable to CC are rigorous and
should not be extended to a person who has neither expressly assumed that
character, nor by his conduct and from the nature of his business justified
the belief on the part of the public that he intended to assume it.
Registered owner primarily and solidarily liable with driver, under the
"kabit system."-- Registered owner is primarily and solidarily liable for the
damage caused by the vehicle registered in his name, even if the said
vehicle had already been sold, leased or transferred to another person who
was, at the time of the accident, actually operating the vehicle. The
operator of record continues to be the operator of the vehicle in
contemplation of law, as regards the public and third persons, and as such
is responsible for the consequences incident to its operation; such
owner/operator of record is held in contemplation of law as the employer of
the driver.
Kabit system.-- One whereby a person who has been granted a certificate
of public convenience allows other persons who own vehicles to operate
them under such license, for a fee or percentage of the earnings. This is
contrary to public policy, and therefore, void and inexistent; "this is a
pernicious system that cannot be too severely condemned; it constitutes an
imposition upon the good faith of the govt."
Reason for holding registered owner liable.-- The law does not relieve
the registered owner directly of the responsibility that the law fixes and
places upon him as an incident or consequence of registration -- where 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; in case of an accident,
the registered owner should not be allowed to disprove his ownership to the
prejudice of the person injured or to be relieved from responsibility
Cangco vs MRR, 38 Phil 768
F:
Jose Cangco, an employee of MRR, was riding on its train. As it
drew up to the station, the plaintiff made his exit. As he alighted, his foot
stepped on a sack of watermelons causing him to slip and his right arm was
crushed. This happened between 7 and 8 p.m. and as the railroad station
was lighted dimly by a single light, objects on the platform were difficult to
see.
Issue : WON MRR is liable to pay damages for the acts of its EEs.
Held : YES.
It cannot be doubted that the EEs of the railroad co. were guilty
of negligence in piling sacks on the platform; their presence constituted an
effective legal cause of the injuries sustained by Cangco.
It is impt. to note that the foundation of the legal liability of the
defendant is the contract of carriage, and that the obligation to respond for
the damage which plaintiff has suffered arises, if at all, from the breach of
PAGE 12

that contract by reason of the failure of defendant to exercise due care in its
performance. Its liability is direct and immediate (culpa contractual),
differing essentially, from that presumptive responsibility for the negligence
of its servants, which can be rebutted by proof of the exercise of due care in
the selection and supervision of EEs (culpa aquiliana).
The liability of masters and employers for the negligent acts or
omissions of their servants or agents, when such act or omissions cause
damage which amount to the breach of a contract, is not based upon a mere
presumption of the master's negligence in their selection or control, and
proof of exercise of the utmost diligence and care in this regard does not
relieve the master of his liability for the breach of his contract. When the
facts averred show a contractual undertaking by defendant for the benefit of
plaintiff, and it is alleged that plaintiff has failed or refused to perform the
contract, it is not necessary for plaintiff to specify in his pleadings whether
the breach of the contract is due to wilful fault or to negligence on the part
of the defendant, or of his servants or agents. Proof of the contract and of
its nonperformance is sufficient prima facie to warrant recovery.
The contract of defendant to transport plaintiff carried with it, by
implication, the duty to carry him in safety and to provide safe means of
entering and leaving its trains. That duty, being contractual, was direct and
immediate, and its nonperformance could not be excused by proof that the
fault was morally imputable to defendant's servants.
Principles as to liability of CC:

(1) the liability of a carrier is contractual and arises upon breach
of its obligation; there is breach if it fails to exert extra-ordinary diligence
accdg. to all the circumstances of each case
(2) a carrier is obliged to carry its passenger with the utmost
diligence of a very cautious person, having due regard for all the
circumstances
(3) a carrier is presumed to have been at fault or to have acted
negligently in case of death of, or injury to, passengers, it being it duty to
prove that it exercised extra-ordinary diligence
(4) the carrier is not an insurer against all risks of travel.
Medina vs Cresencia, 99 Phil 506
Issue : WON the approval of the PSC is necessary for the sale of a public
service vehicle even without conveying therewith the authority to operate
the same. YES.
F:
A passenger jeepney driven by Brigido Avorque smashed into a
Meralco post resulting in the death of Vicenta Medina, one of its
passengers. In a criminal case of homicide through reckless imprudence,
Avorque pleaded guilty. The right to file a separate action for damages was
reserved. Cresencia was still the registered operator of the jeepney in the
records of the Motor Vehicles Office and the PSC, while Rosario Avorque
was the owner at the time of the accident.
Fores vs Miranda, 105 Phil 266

F:
Respondent, a professor of Fine Arts, was a passenger of a jeep
registered in the name of Fores but actually operated by Carmen
Sackerman. While the jeep was descending at Sta. Mesa bridge at
excessive speed, the driver lost control of it causing it to swerve and hit the
bridge wall resulting to injuries to its passengers including respondent who
suffered a fracture of the upper right humerus. In an action for damages,
the CFI awarded actual damages. The CA reduced the actual damages and
added moral damages and attorney's fees.
Held : A transfer made without the requisite approval of the PSC is not
effective and binding in so far as the responsibility of the grantee under the
franchise in relation to the public is concerned. The law was designed
primarily for the protection of the public interest.
Issue : WON moral damages may be awarded.
Issue: WON Cresencia is liable for breach of the contract of carriage. YES.
Ratio: The law requires the approval of the PSC, in order that a franchise, or
any privilege pertaining thereto, may be sold or leased without infringing the
certificate issued to the grantee; and that if property covered by the
franchise is transferred or leased without this requisite approval, the transfer
is not binding against the public or the PSC; and in contemplation of law, the
grantee of record continues to be responsible under the franchise in relation
to the PSC and to the public. Since a franchise is personal in nature, any
transfer or lease thereof should be notified to the PSC so that the latter may
take proper safeguards to protect the interest of the public.
Plaintiff's action is based on the breach of the carrier's
contractual obligation to carry his passengers safely to their destination
(culpa contractual). The liability of the carrier is direct and immediate.
Held : In case of breach of contract (including one of transportation), proof

of bad faith or fraud, i.e., wanton or deliberately injurious conduct, is
essential to justify an award of moral damages. The exception to this is
when a mishap results in the death of a passenger, in which a CC is liable to
pay moral damages for the mental anguish by reason of the death of the
passenger. So where the injured passenger does not die, moral damages
are not recoverable unless it is proved that the carrier was guilty of malice or
bad faith.
Under the law, the presumption is that common carriers acted
negligently but not maliciously. The distinction between fraud, bad faith or
malice in the sense of deliberate or wanton wrong doing and negligence (as
mere carelessness) is too fundamental in our law to be ignored. A carrier's
bad faith is not to be lightly inferred from a mere finding that the contract
was breached through negligence of the carrier's employees.
Isaac vs A.L. Ammen Trans. Co., 101 Phil 1046

F:
Plaintiff boarded defendant's bus as a paying passenger from
Albay. The bus collided with a pick-up truck which was coming from the
opposite direction trying to swerve from a pile of gravel. As a result, his left
arm was completely severed. Plaintiff chose to hold defendant liable on its
contractual obligation. Plaintiff brought this action for damages which the
lower court dismissed holding the driver of the pick-up negligent and not that
of the bus.
Issue : WON defendant observed extra-ordinary diligence or the utmost
diligence of a very cautious person in avoiding the collision. YES.
Held : The facts of the case show that the bus and the pick-up were
approaching each other head-on. The bus swerved to the right and went
over a pile of stones and gravel. Despite the efforts of the bus driver, the
pick up car still hit the rear left side of the bus. The sense of caution one
should observe cannot always be expected from one who is placed
suddenly in a predicament where he is not given enough time to take the
proper course of action under ordinary circumstances. Furthermore, plaintiff
is guilty of contributory negligence since he placed his left elbow outside the
window.
Ratio: A CC 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 circumstances. This extra-ordinary diligence
required of common carriers is calculated to protect the passengers from
the tragic mishaps that frequently occur in connection with rapid modern
transportation. This high standard of care is imperatively demanded by the
preciousness of human life and by the consideration that every person must
in every way be safeguarded against all injury.
Phil. Rabbit Bus Lines vs IAC, 189 SCRA 159

F:
Several passengers boarded the jeepney owned by spouses
Mangune and driven by Manalo at Dau, Pampanga bound for Carmen,
Rosales, Pangasinan. Their contract with Manalo was P24 for the trip. Upon
reaching Tarlac, the right wheel of the jeepney was detached, so it was
running in an unbalanced position. Manalo stepped on the brake, making a
sudden U-turn and encroaching on the right of way of the other vehicles.
The Phil. Rabbit bus bumped from behind the jeepney. As a result of the
collision, 3 persons died while the others sustained injuries. Cases were
filed against the spouses Mangune, Manalo, Phil. Rabbit and De los Reyes
(driver).
Issue: Who should be held liable? the Mangunes and Filriters Guaranty
Assurance Corp. (Insurance co.)
Ratio: The principle of last clear chance would call for application in a suit
between the owners and drivers of two colliding vehicles. It does not arise
where a passenger demands responsibility from the carrier to enforce its
contractual obligations. For it would be inequitable to exempt the negligent
driver of the jeepney and its owners on the ground that the other driver was
likewise guilty of negligence.
On the presumption that the drivers who bump the rear of
another vehicle are guilty and the cause of the accident, unless contradicted
by other evidence, the SC held that the jeep made a sudden U-turn which
was so abrupt that the other driver de los Reyes did not anticipate the
sudden U-turn.
The proximate cause of the accident was the negligence of
Manalo and the spouses Mangune. In culpa contractual, the carrier is
PAGE 13

presumed to have been at fault or to have acted negligently, and this
disputable presumption may only be overcome by evidence that he had
observed extra-ordinary diligence or that the death or injury of the
passenger was due to a fortuitous event.
The driver cannot be held jointly liable with the owners of the jeep
in case of breach of the contract of carriage. The contract of carriage is
between the carrier and the passenger, and in the event of contractual
liability, the carrier is exclusively responsible therefore to the passenger,
even if such breach be due to the negligence of the driver. To make the
driver jointly liable would make the carrier's liability personal instead of
merely vicarious and consequently, the victim is entitled to recover only the
share which corresponds to the driver.
by respondent Nisshin Fire and Marine Insurance Co. and Dowa Fire &
Marine Insurance Co.
En route for Manila, the ship caught fire and sank. The insurers
paid the corresponding marine insurance values and were subrogated to the
rights of the latter as the insured. They filed suits against the petitioner
Carrier and won (affirmed by the CA). Petitioner carrier denies liability on
the ff. grounds:
(a) that the loss was due to an extraordinary fortuitous even
which is an exempting circumstance under Sec. 4(2)(b) of the Carriage of
Goods by Sea Act (COGSA);
(b) that when fire is established, the burden of proving negligence
is shifted to the cargo shipper.
Issues: (1)Which law should govern : the Civil Code or the Carriage of
Goods by Sea Act.
(2)Who has the burden of proof to show negligence of the carrier.
4. Classes of 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.
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 circumstances.
5. Laws applicable
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.
4 Agbayani:
New Civil Code primarily governs common carriers.-- The Provisions of
the Civil Code [1732-1766] primarily govern common carriers and the
provisions of the Code of Commerce [Overland Transportation and Maritime
Commerce] and special laws [Carriage of Goods by Sea Act; Salvage Act]
have only subsidiary application to common carriers.
Art. 1753, NCC. The law of the country to which the goods
are to be transported shall govern the liability of the common carrier
for their loss, destruction or deterioration.
The provisions of the NCC primarily govern contracts of carriage
of goods from foreign ports to Philippine ports
Ratio : (1) 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. As the cargoes in question were transported from Japan to
the Philippines, the liability of Petitioner Carrier is governed primarily by the
Civil Code. However, in all matters not regulated by said Code, the rights
and obligations of common carriers shall be governed by the Code of
Commerce and special laws. Thus, the COGSA, a special law, is
suppletory to the provisions of the Civil Code.
(2) Under the Civil Code, common carriers, from the nature of
their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over goods, accdg. to all the
circumstances of each case. Common carriers are responsible for the loss,
destruction, or deterioration of the goods unless the same is due to any of
the ff. causes only (Art. 1734, NCC):
"(1) Flood, storm, earthquake, lightning or other natural disaster
or calamity; xxx"
The Carrier claims that the loss of the vessel by fire exempts it
from liability under the phrase "natural disaster or calamity." However, we
are of the opinion that fire may not be considered a natural disaster or
calamity. This must be so as it arises almost invariably from some act of
man or by human means. It does not fall within the category of an act of
God unless caused by lightning or by other natural disaster or calamity. It
may even be caused by the actual fault or privity of the carrier.
As the peril of fire is not comprehended within the exceptions in
Article 1734, then Article 1735 provides that in all cases other than those
mentioned in Art. 1734, the CC shall be presumed to have been at fault or to
have acted negligently, unless it proves that it has observed the extraordinary diligence required by law.
In this case, the respective Insurers, as subrogees of the cargo
shippers, have proven that the transported goods have been lost. Petitioner
carrier has also proven that the loss was caused by fire. The burden then
is upon Petitioner carrier to prove that it has exercised the extra-ordinary
diligence required by law.
Having failed to discharge the burden of proving that it had
exercised the extra-ordinary diligence required by law, Petitioner Carrier can
not escape liability for the loss of the cargo.
And even if fire were to be considered a natural disaster within
the meaning of Art. 1734, it is required under Art. 1739 of the same Code
that the natural disaster must have been the proximate and only cause of
the loss, and that the carrier has exercised due diligence to prevent or
minimize the loss before, during or after the occurrence of the disaster. This
petitioner carrier has also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the
COGSA. It is provided therein that:
Eastern Shipping Lines vs IAC 150 SCRA 463

F:
These two cases, both for the recovery of value of cargo
insurance, arose from the same incident, the sinking of the M/S ASIATICA
when it caught fire, resulting in the total loss of ship and cargo.
In the first case, the M/S ASIATICA, a vessel operated by
petitioner Eastern Shipping Lines, loaded at Kobe, Japan for transportation
to Manila 5,000 pieces of colorized lance pipes in 28 packages valued at
P256,039 consigned to Phil. Blooming Mills and 7 cases of spare parts
valued at P92,361.75 consigned to Central Textile Mills. Both sets of goods
were insured against marine risk for their stated value with respondent Devt.
Insurance and Surety Corporation.
In the second case, the same vessel took on board 128 cartons
of garment fabrics and accessories, in 2 containers, consigned to Mariveles
Apparel Corporation, and 2 cases of surveying instruments consigned to
Aman Enterprises and General Merchandise. The 128 cartons were insured
"Sec.4 (2). Neither the carrier nor the ship shall be responsible
for loss or damage arising or resulting from: (b) Fire, unless caused by the
actual fault or privity of the carrier."
In this case, both the TC and the CA, in effect, found, as a fact,
that there was "actual fault" of the carrier shown by lack of diligence in that
when the smoke was noticed, the fire was already big; that the fire must
have started 24 hrs before the same was noticed; and that after the cargoes
were stored in the hatches, no regular inspection was made as to their
condition during the voyage.
The foregoing suffices to show that the circumstances under
which the fire originated and spread are such as to show that Petitioner
carrier or its servants were negligent in connection therewith. Consequently,
the complete defense afforded by the COGSA when the loss results from
fire is unavailing to petitioner carrier.
PAGE 14

for placing of conditions in a bill of lading does not relieve the vessels of
obligation to take appropriate care of the cargo.
B. Common Carriers
1. Liability and presumption of negligence
(read discussion under [3] Nature and basis of liability)
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 packaging or
in the containers;
(5) Order or act of competent public authority.
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3,
4 and 5 of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary
diligence as required in Art. 1733.
4 Agbayani:
Responsibility of common carriers.-In general, CC are responsible
for the loss, destruction, or deterioration of the goods carried by them. This
responsibility arises from contract, as the relation between a carrier and its
patrons is of a contractual nature. A failure on the carrier to use extraordinary care in carrying goods or passengers safely is a breach of contract
and constitutes culpa contractual not culpa aquiliana. While the liability of a
carrier as an insurer is not recognized in this jurisdiction, a carrier is liable
for damages suffered by goods carried if such damages arise from its
negligence. The carrier is also liable even in those cases where the cause
of the loss or damage is unknown.
Due extraordinary diligence required, carriers given wide discretion in
selection and supervision of persons to handle goods.-- The law
requires CC to exercise extra-o diligence which means that they must
render service with the greatest skill and utmost foresight. The extra-o
diligence required of CC in the handling of the goods of the shipper and the
consignees lasts from the time the cargoes are loaded in the vessels until
they are discharged and delivered to the consignees. To comply with this
obligation, CC should be afforded the right of having a wide discretion in the
selection and supervision of persons who will handle the goods.
Air carrier can terminate services of pilot for serious misconduct and
drunkenness, because of its duty of extraordinary dilignece.-- The CC
can terminate the services of its drivers, pilots and EEs for serious
misconduct and drunkenness because of its duty of extra-ordinary diligence.
Whenever a passenger dies or is injured the presumption is that the CC is at
fault notwithstanding the fact that it has exercised due diligence of a good
father of a family in the selection and supervision of its EEs. Thus, extraordinary measures and diligence should be exercised by it for the safety of
its passengers and their belongings. A CC can terminate an EE whose
continued service is inimical to its interests and the safety of the
passengers.
Carrier has duty to keep and care for goods carried.-- It is the duty of
the CC to properly and carefully handle, carry, keep and care for the goods
carried and to exercise due care to ascertain and consider the nature of the
goods offered for shipment and to use such methods for their care during
the voyage as their nature requires. The carrier is liable for injury to, or loss
of, cargo resulting from the failure to properly care for and handle the cargo
en route; and it is required to provide adequate ventilation for the safe
carriage of the cargo, and provide reasonable and ordinary inspection and
care in and about the transportation of cargo. A vessel should not accept
cargo unless it can be given the type of storage that its character requires,
Duty of carrier to deliver cargo in good condition as when loaded.-There is no absolute obligation for a CC to accept cargo. It should not be
accepted unless it can be given the type of storage that its character
requires. Where a vessel 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
his servants, or apparent upon ordinary observation, but it accepts the
goods notwithstanding such condition, it is not relieved of liability for loss or
injury resulting therefrom.
In the exercise of extra-ordinary diligence required by law, the
CC must give due regard to all circumstances and take all steps necessary
to insure the safety of the passengers and the goods given the
circumstances.
Presumption of negligence.-- Under Art. 1735, if the goods are proved to
have been lost, destroyed or deteriorated, CC are presumed to have been at
fault or to have acted negligently, unless they prove that they have observed
the extra-o diligence required by law.
The plaintiff needs only to prove that the goods he transported
have been lost, destroyed or deteriorated
CC must then prove that he has exercised extra-ordinary
diligence required by law or that the loss, etc. was due to accident or some
other circumstances inconsistent with its liability
Mere proof of delivery of goods in order to a carrier, and of their
arrival at the place of destination in bad order makes out a prima facie case
against the CC
Defenses available to CC:
1. Art. 1734
2. Art. 1735 (exercise of extra-ordinary diligence required by law)
3. Natural disaster: The CC is exempt from liability if he proves
that the loss or destruction of the merchandise was due to accident and
force majeure and not to fraud, fault or negligence on the part of the EEs
and owners of the CC.
CC cannot interpose the defense that it exercised due diligence
in the selection and supervision of EEs. The liability of the CC arises from
breach of the contract of carriage and not from culpa aquiliana. It is
however the duty of CC to teach their drivers not to overload vehicles, not to
exceed safe and legal speed limits, and other safety precautions.
Carrier not insurer.--CC are not required to exercise all the care, skill and
diligence of which the human mind can conceive nor such as will free the
transportation of passengers from all possible perils. A CC is not an insurer
of the safety of the passengers and is not absolutely and at all events to
carry them safely and without injury.
Ynchausti Steamship Co. vs Dexter 41 Phil 289
F:
The Govt. of the Philippines, acting through the Insular
Purchasing Agent, employed the services of petitioner, Ynchausti Steamship
Co., a common carrier for the transportation, on board the steamship Venus,
from the port of Manila to the port of Appari, Cagayan, of consignments of
merchandise, consisting of 30 cases of Wine Rose mineral oil of two 5gallon cans to the case. On another occasion, the Govt. also sent 96 cases
of Cock brand mineral oil, ten gallons to the case. The goods were
delivered by the shipper to the carrier which accordingly received them, and
to evidence the contract of transportation, the parties duly executed and
delivered what is popularly called Govt. bill of lading, whereby it was
stipulated that the carrier, Ynchausti, received the above-mentioned
supplies in apparent good condition, obliging itself to carry said supplies to
the place agreed upon.
Both shipments arrived with one case missing per shipment.
Ynchausti denied negligence. However, upon investigation, the Insular
Auditor decided that the leakages were due to Ynchausti's negligence. The
Insular Auditor deducted the amount of the lost goods from the entire
amount payable to Ynchausti. Petitioner refused to accept the warrant.
Hence, this action was filed.
Issue : Is Ynchausti liable for the loss? YES.
Ratio : Sec. 646 of the Administrative Code provided that when Govt.
property is transmitted from one source to another by carrier, it shall be
upon proper bill of lading or receipt, from such carrier; and it shall be the
duty of the consignee or his representative to make all notation of any
evidence of loss, shortage, or damage, on the bill of lading or receipt before
accomplishing it. It is admitted by petitioner that the consignee, at the time
PAGE 15

the goods were delivered, noted the losses in the respective bill of ladings.
Such notation made in obedience to the code, is competent evidence to
show that the shortage did exist. Inasmuch as the fact of loss was proven,
it results in the presumption that the petitioner was to blame for the loss;
and it was incumbent upon the petitioner to rebut that presumption by
proving that the loss was not due to any fault or negligence of the petitioner.
The mere proof of delivery of goods in good order to a carrier,
and of their arrival at the place of destination in bad order, makes out a
prima facie case against the carrier, so that if no explanation is given as to
how the injury occurred, the carrier must be held responsible. It is
incumbent upon the carrier to prove that the loss was due to accident or
some other circumstance inconsistent with its liability. Indeed, if the Govt.
had instituted an action in court against petitioner to recover the value of the
oil lost, it would, based on the facts, be entitled to judgment. In the absence
of proof showing that the carrier was not at fault for the loss, the Insular
Auditor was entitled to withhold the amount admittedly due to the petitioner
for the freight charges, a sum sufficient to cover the value of the oil lost in
transit.
Mirasol vs Dollar 53 Phil 124
F:
Mirasol was the owner of two cases of Encyclopedia Brittanica
shipped in good order and condition on board Dollar's steamship, President
Garfield, to be transported from New York to Manila. The books arrived in
bad order and damaged condition, resulting in total loss of one case and
partial loss of the other. Mirasol filed claims, but Dollar refused to pay
alleging that the damage was caused by sea water and that Mirasol entered
into a contract providing that Dollar will not be held liable for loss or damage
of merchandise resulting from "acts of God" or "perils of the sea," and that
in no case shall it be held liable beyond $250 for any article not enclosed in
a package unless a higher value is stated therein and ad valorem freight
paid or assessed thereon. The LC ruled in favor of Mirasol for payment of P
2,080.
Issue : WON Dollar may be held liable. YES.
Ratio: There was no claim or pretense that Mirasol signed the bill of lading
or that he knew of its contents. In that situation, he was not legally bound by
the clause limiting Dollar's liability. Where it appears that a bill of lading was
issued to a shipper containing a clause limiting the carrier's liability, printed
in fine letters on the back of the bill of lading, which the shipper did not sign
and of which he was not advised, the shipper is not bound by the clause
limiting liability and the stipulation is void or against public policy.
Shippers who are forced to ship goods in an ocean liner have
legal rights. When the goods are delivered on board the ship in good order
and condition and the carrier delivers them to the shipper in bad order and
condition, in an action for damages, the burden of proof shifted and it
devolves upon the carrier to both allege and prove that the goods were
damaged by reason of some act which legally exempts it from liability.
Having received the boxes in good condition, its legal duty was to
deliver them in the same condition as received. Dollar, having admitted that
the goods were damaged while in transit and in its possession, the burden
of proof then shifted and it devolved upon him to allege and prove that the
damage was caused by reason of some fact which exempted it from liability.
As to when and how the goods were damaged in transit is a matter
peculiarly within the knowledge of the carrier and its employees. To require
Mirasol to prove such, would force him to rely upon the EEs of Dollar's ship,
which in legal effect would be to say that he could not recover damages at
all.
Since Dollar was not even able to prove that the goods were wet
with sea water due to a fortuitous event, it must be presumed that the carrier
was liable.
2. Exemption from liability
Proof of the delivery of the goods in good order to a carrier, and
of their arrival at the place of destination short or in bad order, makes a
prima facie case; it is incumbent on the carrier, in order to exonerate itself,
to prove that the loss or injury was due to some circumstances inconsistent
with its liability
(a) Natural disaster
any of the ff. causes only:
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. The same duty is incumbent upon the common carrier in case of
an act of the public enemy referred to in Art. 1734 (2).
Art. 1740. If the CC negligently incurs in delay in
transporting the goods, a natural disaster shall not free such carrier
from responsibility.
Art. 361. Merchandise shall be transported at the risk and
venture of the shipper, if the contrary has not been expressly
stipulated.
As a consequence, all the losses and deteriorations which
the goods may suffer during the transportation by reason of fortuitous
event, force majeure, or the inherent nature and defect of the goods,
shall be for the account and risk of the shipper.
Proof of these accidents is incumbent upon the carrier.
(Code of Commerce.)
4 Agbayani:
Effect of New Civil Code.-- Transportation of the merchandise "at the risk
and venture of the shipper" means that the shipper will suffer losses and
deterioration arising from fortuitous event, force majeure, or inherent nature
and defects of the goods. It does not mean that the carrier is free from
liability for losses and deterioration arising from his negligence or fault, w/c
is presumed. Thus construed, par. 1 of Art. 361 is not inconsistent with Art.
1735 of the NCC.
Requisites for defense of natural disaster:
1. Art. 1739 -- natural disaster must have been the proximate and
only cause of the loss
2. The CC must exercise due diligence to prevent or minimize the
loss before, during and after the occurrence of flood, storm, or other natural
disaster. If the CC does not exercise due diligence in minimizing the loss,
he may yet be held liable notwithstanding the fact that the loss, destruction
or deterioration of the goods arose out of natural disaster.
3. Art. 1740 -- the CC must not be in delay. If the CC incurs in
delay, a natural disaster shall not free it from responsibility. Under Art. 1165
par. 3, if the obligor incurs delay, he shall be responsible for any fortuitous
event until he has effected delivery.
However, if between the delay or refusal of the CC to transport
the goods and the loss of the goods due to an act of God there intervened
the shipper's negligence, thus causing a break in the chain of causation
between the act of God which caused their loss and the CC's fault, the act
of God is the proximate cause of the loss and the carrier's delay or refusal
to transport the goods, is merely the remote cause. In such cases, the
shipper is not even entitled to set up the claim of contributory negligence. It
is then necessary that it be established that the CC was guilty of a willful or
negligent act and that between this willful or negligent act and the act of
God, no negligence on the part of the shipper intervened.
Accident due to defects of carrier not caso fortuito.-- Accidents caused
either by defects in the carrier or through the negligence of the carrier is not
caso fortuito. The passenger or shipper has every right to presume that the
carrier is perfectly in good condition and could transport him safely and
securely to his destination
Tan Chiong San vs Ynchausti & Co., 22 Phil 152
F:
Ynchausti and Co. received from Ong Bien Sip in Manila 205
bundles of goods to be conveyed by YC's steamer to Gubat in Sorsogon,
and there to be transhipped to another vessel belonging to YC and
transported to Catarman, in Samar. As the lorcha Pilar, which was to
transport the goods to Catarman was not yet in Gubat when the cargo
arrived, the cargo was stored in YC's warehouse.
Several days later, the lorcha arrived and the goods were loaded.
However, as the lorcha was being towed, a storm arose, drove the lorcha to
the shore and wrecked it, scattering the goods on the beach. YC's laborers
proceeded to gather up the goods. As it was impossible to preserve the
PAGE 16

goods, they were sold at a public auction. Plaintiff filed an action for
damages for P 20,000. LC decided that plaintiff was entitled only to P
14,642.63.
Issues: (1) WON the carrier is relieved from liability due to force majeure.
YES.
(2) WON the carrier is liable for the loss of the cargo and for
failure to deliver the same at the place of destination. NO.
Ratio: (1) It is a proven fact that the loss or damage to the goods shipped on
the said lorcha was due to the force majeure which caused the wreck of the
said craft. Accdg. to Art. 361 of the Code of Commerce, merchandise shall
be transported at the risk and venture of the shipper, unless the contrary be
expressly stipulated. No such stipulation appears of record, therefore, all
damages and impairment suffered by the goods in transportation, by reason
of accident, force majeure, or by virtue of the nature or defect of the articles,
are for the account and risk of the shipper. The carrier is exempt from
liability if he is able to prove, as he did prove, that the loss or destruction of
the merchandise was due to accident and force majeure and not to fraud,
fault or negligence on the part of the captain or owner of the ship -- that the
loss was a result of the stranding of Pilar because of the hurricane that
overtook it.
(2) The record bears no proof that said loss caused by the
destruction of Pilar occurred through the carelessness or negligence of the
defendant, its agents or patron of the lorcha. The defendant as well as its
agents and patron had a natural interest in preserving the craft -- an interest
equal to that of the plaintiff. The record discloses that Pilar was manned by
an experienced patron and a sufficient number of crewmen plus the fact that
it was fully equipped. The crewmen took all the precautions that any diligent
man should have taken whose duty it was to save the boat and its cargo,
and by the instinct of self- preservation of their lives. Considering,
therefore, the conduct of the men of the defendant Pilar and of its agents
during the disaster, the defendant has not incurred any liability whatsoever
for the loss of the goods, inasmuch as such loss was the result of a
fortuitous event or force majeure, and there was no negligence or lack of
care or diligence on the part of the defendant or its agents.
Loss of a ship and of its cargo, in a wreck due to accident or
force majeure must, as a general rule, fall upon their respective owners,
except in cases where the wrecking or stranding of the vessel occurred
through malice, carelessness or lack of skill on the part of the captain or
because the vessel put to sea is insufficiently repaired and prepared. (Art.
841, Code of Commerce)
Martini Ltd. vs Macondray & Co., 39 Phil 934
F:
Martini shipped on board the Easter, owned by the Australian
Steamship Co. represented in the Philippines by Macondray, 219 cases of
chemicals for Kobe, Japan. Upon arrival in Kobe, it was discovered that the
shipment was damaged by rain and sea water. Martini claims that it was the
ship's duty to stow the cargo in the hold and not to place it on the deck
exposed to the elements. Macondray denied any responsibility on the
ground that the contract of affreightment clearly states that the cargo was to
be carried on deck at shipper's risk as evidenced by the words "on deck at
shipper's risk" stamped on the bill of lading.
Ordinarily, when a shipper wishes to avail of space on board a
ship, he first obtains a shipping order from the ship owner. This shipping
order is authority for the ship's officers to accept the shipper's cargo. When
signed by the ship's mate, this would constitute the mate's receipt showing
that the cargo has been taken aboard. The shipper would then present this
receipt to the agent of the ship's company who would then issue the bill of
lading. However, in this case, the shipper obtained the bill of lading without
first presenting the mate's receipt (so as to expedite the negotiation of the
bill with the banks). By doing so, the shipper entered into a written guaranty,
binding himself to abide by the terms of the mate's receipt which in this case
obtained a stipulation that the cargo shall be shipped on or under the deck
at the option of the ship and at shipper's risk.
In this case, plaintiff protested the arrangement but when the
defendant informed them that the cargo could be discharged if they were
dissatisfied, plaintiff did not order its discharge. The CFI ruled for Martini.
had reserved the right to carry the cargo on deck. The bill of lading plainly
showed that the cargo would be so carried. The plaintiff was duly notified as
to the manner by which was the cargo was to be shipped. They only
protested after the bill had been negotiated at the bank and even when there
was time to stop the shipment, they failed to give the necessary instructions
thereby manifesting acquiescence.
In every contract of affreightment, losses by dangers of the seas
are excepted from the risk which the carrier takes upon himself whether the
exception is expressed in contract or not. The exception is made by law
and falls within the general principle that no one is responsible for fortuitous
events. But then this general law is subject to the exception that when the
inevitable accident is preceded by fault of the carrier, without which it would
not have happened, then he becomes responsible for it.
The carrier is responsible for safe and proper storage of the
cargo, and there is no doubt that by the general maritime law he is bound to
secure the cargo safely under deck. If he carries the goods on deck without
the consent of the shipper and the goods are damaged or lost in
consequence of being exposed, the carrier cannot protect himself by
showing that they were damaged or lost by the dangers of the sea. When
the shipper consents to his goods being carried on deck, he takes the risk
upon himself.
If goods shipped are found to have been damaged, the burden of
proof is on the carrier to show that the damage was due to fortuitous events.
But, even if the damage is caused by one of the excepted causes, the
carrier is still responsible if the injury might have been avoided by the
exercise of reasonable skill and attention on their part. However, in this
case, where the shipper consented to the conditions of carriage, the burden
of proof is shifted to the shipper.
As there is no allegation or proof of negligence on the part of the
carrier in protecting the cargo from rain or sea water and as the complaint
clearly indicates that the damage was due to it being kept on deck, and
such manner of carriage having been consented to by the plaintiff, the
defendant is absolved. It is not permissible for the court, in the absence of
any allegation or proof of negligence, to attribute negligence to the ship's
employees in the matter of protecting the goods from rains and storms.
Eastern Shipping Lines vs IAC, 150 SCRA 463
Issue: Should petitioner be exempted from liability under Art. 1734 on the
ground that the loss of the vessel by fire comes under the phrase "natural
disaster or calamity?" NO.
Ratio: Fire may not be considered a natural disaster or calamity. This must
be so as it arises almost invariably from some act of man or by human
means. It does not fall within the category of an act of God unless caused
by lightning or by another natural disaster or calamity. It may even be
caused by the actual fault or privity of the carrier. Art. 1680 which considers
fire as an extra-ordinary fortuitous event does not apply since it refers only
to leases of rural lands where a reduction of rent is allowed when more than
1/2 of the fruits have been lost due to such event.
As the peril of fire is not comprehended under Art. 1734, Art.
1735 applies and the CC shall be presumed to have been at fault or to have
acted negligently, unless it proves extra-ordinary diligence. The burden is
on the CC.
The LC and the CA found that there was lack of diligence on the
part of CC amounting to actual fault. Even if the fire were to be considered
a natural disaster under Art. 1734, it is required under Art. 1739 that the
disaster must have been the proximate and only cause of the loss, and that
the CC exercised due diligence to prevent or minimize the loss before,
during or after the occurrence of the disaster. Nor may petitioner seek
refuge under COGSA since fire is only an exempting circumstance if not
caused by actual fault or privity of the carrier.
Issue: On the $500 Per Package Limitation
Ratio: Petitioner carrier avers that its liability should not exceed $500 per
package as provided in Section 4(5) of the COGSA, which reads:
Issues: (1) WON plaintiff consented to having the cargo carried on deck.
YES.
(2) WON defendant was negligent and thus liable for the damage
to the cargo. NO.
"(5) 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 xxx 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."
Ratio: While Martini would have greatly preferred for the cargo to be carried
under the hatches, they nevertheless consented for it to go on deck.
Codina, an EE of Martini, if attentive to the interests of his company, must
have known from the tenor of the guaranty which he signed that defendant
Article 1749, NCC also allows the limitations of liability in that it

provides that "a stipulation that the CC's liability is limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is binding."
PAGE 17

It is to be noted that the Civil Code does not of itself limit the
liability of the CC to a fixed amount per package, although the Code
expressly permits a stipulation limiting such liability. Thus, the COGSA,
which is suppletory to the Civil Code, steps in and supplements the Code by
establishing a statutory provision limiting the carrier's liability in the absence
of a declaration of a higher value of the goods by the shipper in the bill of
lading. The provisions of the COGSA on limited liability are as much a part
of a bill of lading as though physically in it and as much a part thereof as
though placed therein by agreement of the parties.
In these cases, there is no stipulation in the respective bills of
lading limiting the carrier's liability for the loss or destruction of the goods.
Nor is there a declaration of a higher value of the goods. Hence, petitioner
carrier's liability should not exceed $500 per package, or its peso equivalent,
at the time of the payment of the value of the goods lost, but in no case
"more than the amount of damage actually sustained."
The liability was computed as: 128 cartons (shipping unit) x $500
= $64,000. The cartons and not the containers should be considered as the
shipping unit.
Dissenting : Yap, J.
There is no evidence that the containers were carrier- supplied.
The shipper must have saved on freight charges by using containers for
shipment. The containers should be considered as the shipping unit.

(4) The character of the goods or defects in the packaging or
in the containers;
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.
Art. 366. Within the twenty four hours following the receipt
of the merchandise, a claim may be brought against the carrier on
account of damage or average found therein on opening the packages,
provided that the signs of the damage or average giving rise to the
claim may not be known from the exterior part of the packages, and in
case that they may be so ascertained, said claim shall only be
admitted at the time of the receipt of the packages.
After the periods mentioned have elapsed, or after the
transportation charges have been paid, no claim whatsoever shall be
admitted against the carrier with regard to the condition in which the
goods transported were delivered. (Code of Commerce.)
Claims for damages must be made at the time the goods are
delivered unless the indications of the damage cannot be ascertained from
the exterior of the package, in which case such written claims must be
made w/in 24 hours from delivery
(b) Act of public enemy

xxx
civil;
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. The same duty is
incumbent upon the common carrier in case of an act of the public
enemy referred to in Art. 1734 (2).
4 Agbayani:
Acts of public enemy.-- This defense is not absolute. Under 1739, in
order for the CC to be exempted from liability, (1) the act of the public
enemy must have been the proximate and only cause; and (2) the CC must
have exercised due diligence to prevent or minimize the loss before, during
and after the act of the public enemy causing the loss, destruction or
deterioration of the goods.
(c) Act or omission of the shipper
xxx
Art. 1741. If the shipper or owner merely contributed to the
loss, destruction or deterioration of the goods, the proximate cause
thereof being the negligence of the common carrier, the latter shall be
liable in damages, which, however, shall be equitably reduced.
Act or omission of the shipper.-- The act or omission of the shipper must
be the proximate cause of the loss, destruction or deterioration of the goods.
If the shipper merely contributed to the loss,etc. and the proximate cause is
still the negligence of the CC, the CC shall still be liable for damages
although the damages shall be equitably reduced.
Rule: As long as the damage to the goods was due purely to the
inherent nature or defect of the goods or of the containers thereof, the CC
cannot be held responsible. However, under 1742, the CC must exercise
due diligence to forestall or lessen the loss for it to completely escape
liability.
Govt. vs Ynchausti, 40 Phil 219
F:
Plaintiff shipped a cargo of roofing tiles from Manila to Iloilo on a
vessel owned by Ynchausti. Defendant stamped on the bill of lading the
condition that the goods have been accepted for transportation subject to
the conditions prescribed by the Insular Collector of Customs. The tiles were
delivered by defendant to the consignee of the plaintiff at Iloilo. Upon
delivery, it was found that some of the tiles had been damaged. The LC
absolved the defendant from any liability since the defendant was able to
prove that the tiles were leaded, stored and discharged by hand labor and
not by any mechanical device. Defendant proved, without dispute from the
plaintiff, that there was no negligence on its part, the tiles being discharged
by handlabor and not by mechanical device.
Issue : WON the terms and conditions of the bill of lading were binding upon
the plaintiff. YES.
Ratio: The defendant placed said stamp upon the bill of lading before the
plaintiff shipped the tiles, and that having shipped the tiles under said bill,
with the terms and conditions of carriage stamped thereon, the govt. must
be deemed to have assented to said terms and conditions. The binding
effect of the conditions stamped on the bill of lading did not proceed from
the Collector of Customs, but from the actual contract which the parties
made. Each bill of lading is a contract and the parties thereto are bound by
its terms.
The defendant, to free itself from liability, was only obliged to
prove that the damages suffered by the tile were by virtue of the nature or
defect of the articles. The plaintiff, to hold the defendant liable, was obliged
to prove that the damage to the tiles, by virtue of their nature, occurred on
account of the defendant's negligence or because the latter did not take
precaution usually adopted by careful persons.
The defendant proved,and the plaintiff did not attempt to dispute
that the tiles were of a brittle and fragile nature and that they were delivered
to the defendant without any packing or protective covering. The plaintiff,
not having proved negligence on the part of the defendant, is not entitled to
recover damages.
Southern Lines vs CA, 4 SCRA 256
(d) Character of goods, etc.
F:
The city of Iloilo requisitioned for rice from NARIC in Manila.
NARIC shipped from Manila to Iloilo 1726 sacks of rice on board the SS
Gen. Wright belonging to Southern Lines. After the city paid for the rice, it
was noted that 41 sacks were missing. The city filed a complaint against
PAGE 18

NARIC and Southern Lines to recover the amount. The LC absolved NARIC
but ordered Southern Lines to pay. The CA affirmed.
Issue: WON petitioner is liable for the loss or shortage. YES.
Ratio: Under Art. 361 of the Code of Commerce, the carrier, in order to free
itself from liability, was only obliged to prove that the damage suffered by
the goods were by virtue of defects of the articles. Under Art. 362, the
plaintiff in order to hold the carrier liable, was obliged to prove that the
damage to the goods by virtue of their nature, occurred on account of the
carrier's negligence or because the carrier did not take the precaution
adopted by careful persons.
Petitioner claims exemption based on the fact that the sacks
were in bad condition and that rice was improperly packed causing a lot of
spillage of the rice while it was being loaded.
Southern Lines' contention is untenable, for if the fact of improper
packing is known to the carrier or its servants or apparent upon ordinary
observation, but it accepts the goods notwithstanding such condition, it is
not relieved of liability for loss or injury resulting therefrom. Furthermore,
the petitioner itself frankly admitted that the strings tying the bags of rice
were broken, that some bags were with holes and plenty of rice were spilled
inside the hull of the vessel, and that the boat personnel collected 26 sacks
of rice, which they distributed among themselves. This shows that the
shortage resulted from the negligence of the petitioner.
This is an action for refund of the amount paid in excess of
delivery and is not for damages. Therefore, the 24 hour rule under Art. 366
does not apply.
(e) Order of competent authority
xxx
(5) Order or act of competent public authority.
Art. 1743. If through order of public authority the goods are
seized or destroyed, the common carrier is not responsible, provided
said public authority had power to issue the order.
4 Agbayani:
Order or act of competent authority.-- Under 1743, the CC is not
responsible for the loss, etc. of the goods if the public authority had power
to issue the order. Where the officer acts without legal process, the CC will
be held liable.
Ganzon vs CA, 161 SCRA 646
F:
Gelacio Tumambing contracted the services of Ganzon to haul
305 tons of scrap iron from Mariveles, Bataan to the port of Manila on board
the lighter LCT Batman. When half of the scrap iron was already loaded, the
mayor of Mariveles arrived and demanded P 5,000 from Tumambing. An
argument resulted in the shooting of Tumambing. The loading of the scrap
iron was resumed but the acting mayor arrived and ordered Captain Niza to
dump the scrap iron. The acting mayor took the rest to the compound of
NASSCO and took custody of the scrap iron. Tumambing filed an action for
damages against Ganzon based on culpa contractual. The TC and CA held
Ganzon liable.
Held: Ganzon contended that the scrap iron had not been unconditionally
placed under his custody and control to make him liable. However, he
admitted that he received the scraps of iron which Tumambing delivered to
him. 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.
The carrier's extraordinary responsibility for the loss, destruction, or
deterioration of the goods commenced.
Pursuant to Art. 1736, such extra-ordinary responsibility would
cease only upon the delivery, actual or constructive, by the carrier to the
consignee or to the person who has the 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.
Ganzon failed to show that the loss was due to any causes under
Art. 1734. We cannot sustain the theory of caso fortuito. The carrier raised
the defense that the loss was due to an order or act of competent public
authority. The carrier, however, failed to show that the acting mayor had the
power to issue the disputed order or that it was lawful or issued under legal
process of authority. The order was part of the pressure by the mayor to
shakedown Tumambing for P 5,000. The order did not constitute valid
authority for Ganzon to carry out.
In any case, the intervention of the municipal officials was not of
a character that would render impossible the fulfillment by the carrier of its
obligation. The petitioner was not duty bound to obey the illegal order to
dump into the sea the scrap iron. There is absence of sufficient proof that
the issuance of the order was attended with such force or intimidation as to
completely overpower the will of the carrier's EEs.
Melencio-Herrera, Dissenting: Through the order or act of competent public
authority, the performance of the contract was rendered impossible. The
captain has no control over the situation just as Tumambing had no control
over the situation.
3. Duration of Extraordinary Responsibility
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
same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them, without
prejudice to the provisions of Art. 1738.
Art. 1737. The common carrier's duty to observe extraordinary diligence in the vigilance over the goods remains in full force
and effect even when they are temporarily unloaded or stored in
transit, unless the shipper or owner has made use of the right of
stoppage in transitu.
Art. 1738. The extra-ordinary 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
reasonable opportunity thereafter to remove them or otherwise
dispose of them.
4 Agbayani:
When carrier's responsibility begins.-- Under Art. 1738, the extra-o
responsibility of the CC begins from the time the goods are delivered to the
carrier. The delivery to the CC must place the goods to be transported
unconditionally in the possession of the CC and the CC must receive them.
Otherwise, the extra-ordinary responsibility of the CC will not commence.
When carrier's responsibility terminates.-- Under 1738, the extraordinary responsibility of the CC is terminated at the time the goods are
delivered to the consignee or the person who has a right to receive them
(actual or constructive delivery).
Constructive delivery: Notice by the CC that the cargo had
already arrived, placing them at the disposal of the shipper or consignee
releases CC from extra-ordinary responsibility. From such moment the
consignee or shipper should exercise over the cargo the ordinary control
pertinent to ownership (should unload cargo from the CC)
Shipper bound to observe all diligence in obtaining delivery of
goods.-- The shipper is bound to observe all diligence in obtaining delivery
of the goods. Once the goods are delivered, the extra-ordinary
responsibility of the CC ceases.
Liability of shipper for delay in obtaining delivery of goods,
demurrage.-- The shipper is liable for lost earnings occasioned by the
unnecessary delay in the use of the vehicles belonging to the carrier, due in
turn to the failure of the former, upon receipt of notice of the arrival of the
goods at the place of destination, to unload forthwith and take away the
cargo from the vehicles. This is a charge for demurrage (addtl. service
provided by CC)
Effect of storing in transit.-- Under 1737, the temporary unloading or
storage of the goods during the time that they are being transported does
not interrupt the extra-ordinary responsibility of the CC
Exception: Where the shipper or owner exercises its right of
stoppage in transitu (the act by which the unpaid vendor of goods stops
their progress and resumes possession of them, while they are in the
course of transit from him to the purchaser, and not yet actually delivered to
the latter. This is exercised when the buyer is or becomes insolvent.)
PAGE 19

Responsibility of carrier when right exercised.-- The extra-ordinary
responsibility of the CC ceases when the goods being transported are
temporarily unloaded or stored in transit be reason of the exercise of the
right of stoppage in transitu by the unpaid seller. The CC holds the goods in
the capacity of an ordinary bailee or warehouseman upon the theory that the
exercise of the right of stoppage in transitu terminates the contract of
carriage (ordinary diligence is required)
Effect of storage in warehouse of carrier.-- Under 1738, the extraordinary responsibility of the CC does not cease notwithstanding the fact
that the goods being transported are stored in the warehouse of the CC at
the place of destination. Extra-ordinary responsibility ceases only after the
consignee has been advised of the arrival of the goods and has had
reasonable opportunity to remove them or otherwise dispose of them.
Liability as a warehouseman (ordinary diligence) arises only
when the consignee has been advised of the arrival of the goods and has
had reasonable opportunity to remove them or otherwise dispose of them
Cia Maritima vs Insurance Co. of North America, 12 SCRA 213
F:
Macleod and Co. contracted the services of Cia Maritima for the
shipment of bales of hemp from Davao to Manila. The bales were loaded
into CC's lighters. One of the lighters sunk. The insurance co. paid Macleod
and filed to collect from CC. CC denied liability on the grounds that the
hemp was loaded on a barge owned by the CC free of charge, that there
was no bill of lading issued thereby resulting to the nonexistence of a
contract of carriage, that the sinking was due to a fortuitous event, and that
the insurance co. has no personality to sue.
Held: There was a complete contract of carriage the consummation of
which has already begun when the shipper delivered the cargo to the carrier
and the latter took possession of the same by placing it on a lighter manned
by its EEs, under which Macleod became entitled to the privilege secured to
him by law for its safe transportation and delivery, and the carrier to the full
payment of its freight upon completion of the voyage. The barges or lighters
were merely employed as the first step of the voyage, which is part of the
contract.
The receipt of the goods by the carrier has been said to lie at the
foundation of the contract to carry and deliver, and if no goods are received
there can be no such contract. The liability and responsibility of the carrier
under a contract for the carriage of goods commence on their actual delivery
to, or receipt by the carrier or an authorized agent, of the goods. The test as
to whether the relation of shipper and carrier had been established is: Had
the control and possession of the goods been completely surrendered by
the shipper to the CC. Whenever the control and possession of goods
passes to the carrier and nothing remains to be done by the shipper, then it
can be said with certainty that the relation of shipper and carrier has been
established.
The bill of lading is not indispensable to a contract of carriage. It
is merely documentary proof of the agreement of the parties.
There was no force majeure. The reason for the damage or the
loss was lack of adequate protections and measures taken by the carrier to
prevent the loss.
Lu Do vs Binamira, 101 Phil 120
F:
Delta Co. of NY shipped six cases of films and photographic
supplies consigned to Binamira. The shipped arrived in Cebu and
discharged her cargo, placing it in the possession and custody of the
arrastre operator appointed by the Bureau of Customs. The cargo was
checked both by the stevedoring co. as well as by the arrastre operator and
was found in good order. In the contract of carriage, however, it was
stipulated that the carrier is no longer liable for the cargo upon its delivery to
the hands of the custom authorities. The cargo was delivered to Binamira
and some goods were missing.
Held: The general rule is that CC's responsibility to observe extra-ordinary
diligence lasts from the time the goods are placed in the possession of the
carrier until they are delivered to the consignee. BUT this rule applies only
when the loss, destruction and deterioration of the goods takes place while
the goods are in the possession of the carrier and not after it has lost control
of them. While the goods are in its possession, it is but fair that it exercise
extra-ordinary diligence in protecting them from damage and if loss occurs,
the law presumes that it was due to its fault or negligence.
While delivery to the customs authorities is not delivery to the
consignee, the parties may however, agree to limit the liability of the carrier
considering that the goods have still to go through the inspection of the
customs authorities before they are actually turned over to the consignee.
This stipulation is not contrary to morals or public policy. This is a situation
where the CC loses control of the goods because of custom regulations and
it is unfair that it be made responsible for any loss or damage during such
interregnum.
APL vs Klepper, 110 Phil 243
F:
Klepper shipped one lift van containing personal and household
effects from Yokohama to Manila. While the lift van was being unloaded by
crane, it fell on the pier damaging its contents. The TC found for Klepper.
Held: APL does not question the finding that the damage was due its
negligence but contends that its liability cannot exceed $500 based on the
bill of lading and Sec 4(5) of the COGSA. Regardless of its negligence, the
carrier's liability would attach because being a CC, its responsibility is extraordinary and lasts from the time the goods are placed in its possession until
they are delivered, actually or constructively, to the consignee or to the
person who has a right to receive them.
The carrier should only pay $ 500; the shipper who accepted the
bill of lading is bound by its terms. COGSA is merely suppletory to the
provisions of the NCC which govern the contract.
4. Agreement Limiting Liability
(a) As to diligence required
Art. 1744. A stipulation between the common carrier and the
shipper or owner limiting the liability of the former for the loss or
destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the
service rendered by the CC; and
(3) Reasonable, just and not contrary to public policy.
Art. 1745. Any of the following or similar stipulations shall
be considered unreasonable, unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or
shipper;
(2) That the common carrier will not be liable for any loss,
destruction or deterioration of the goods;
(3) That the common carrier need not observe any diligence
in the custody of the goods;
(4) That the common carrier shall exercise a degree of
diligence less than that of a good father of a family, or of a man of
ordinary prudence in the vigilance over the movable transported;
(5) That the common carrier shall not be responsible for the
acts or omissions of his or its employees;
(6) That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or irresistible threat,
violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the defective
condition of the car, vehicle, ship, airplane or other equipment used in
the contract of carriage.
Art. 1751. The fact that the common carrier has no
competitor along the line or route, or a part thereof, to which the
contract refers shall be taken into consideration of the question of
whether or not a stipulation limiting the common carrier's liability is
reasonable, just and in accordance with public policy.
(b) As to amount liability
Art. 1749. A stipulation that the common carrier's liability is
limited to the value of the goods appearing in the bill of lading, unless
the shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered
by the owner or shipper for the loss, destruction, or deterioration of
the goods is valid, if it is reasonable and just under the circumstances,
and has been fairly and freely agreed upon.
Ysmael vs Barreto, 51 Phil 90
F:
Plaintiff sought to recover from defendant the alleged value of 4
cases of merchandise which it delivered to a vessel of defendant at the port
PAGE 20

of Manila to be shipped to Surigao, but which were never delivered to
consignee. Defendant relied on clause 7 of the bill of lading where it
provided that actions not brought within 60 days from the time the cause of
action accrued shall be barred, and on clause 12 which provided that the
defendant is not liable for any package in excess of P 300 unless the value
and contents of such package are correctly stated in the bill of lading at the
time of the shipment. Plaintiffs complaint was filed a little less than 6
months after the shipment was made.
The fact that the conditions are printed at the back of the ticket
stub in letters so small that they are hard to read would not warrant the
presumption that plaintiff was aware of those conditions such that he had
"fairly and freely agreed" to those conditions. PAL has admitted that
passengers do not sign the ticket. Also the carrier cannot limit his liability
for injury or loss of goods shipped when such injury or loss was caused by
its own negligence. (Arts. 1734, 1735)
Held: The evidence shows that 164 cases were shipped valued at P 2,500
a case. The limit of defendant's liability for each case for loss or damage
from any cause or for any reason, would put it in the power of the defendant
to take the whole cargo of 164 cases at a value of P 300/case, or less than
1/8 of its actual value. If that rule should be sustained, no silk would ever
be shipped. Such limitation of value is unconscionable and void as against
public policy.
The validity of stipulations limiting the carrier's liability is to be
determined by their reasonableness and their conformity to the sound public
policy. It cannot lawfully stipulate for exemption from liability unless such
exemption is just and reasonable and unless the contract is freely and fairly
made. No contractual limitation is reasonable which is subversive of public
policy. A CC cannot limit its liability for injury or loss where such is caused
by its own negligence, unskillfulness or carelessness of its EEs. The rule
rests on public policy. The shipper and CC are not on equal terms; the
shipper is entirely at the mercy of the CC unless protected by the law. Such
contracts are wanting in the element of voluntary assent.
The action was brought within reasonable time considering the
distance between Surigao and Manila and the fact that plaintiff had to make
a full investigation to determine liability. Stipulations limiting the time for
bringing suit must be reasonable, otherwise they can be declared void.
Ong Yiu vs CA, 91 SCRA 223
Heacock vs Macondray, 42 Phil 205

F:
Plaintiff shipped Edmonton clocks from NY to Manila on board
defendant's vessel. It was agreed in the bill of lading that the value of the
goods receipted do not exceed $500 per freight on or in proportion for any
part of a ton, unless the value be expressly stated in the bill and freight paid.
It was also agreed that in the event of claims for shortage or damage the
carrier shall not be liable for more than the net invoice price plus freight and
insurance less charges, and any loss or damage for which the carrier may
be liable shall be adjusted pro rata on said basis. The clocks were not
delivered despite demands. Plaintiff claimed P420 as the MV of the clocks,
while defendant claimed P76.36 as the proportionate freight ton value.
Held: Three kinds of stipulations have often been made in a bill of lading.
First, one exempting the carrier from any and all liability for loss or damage
occasioned by its own negligence. Second, one providing for an unqualified
limitation of such liability to an agree valuation. Third, one limiting the
liability of the carrier to an agreed valuation unless the shipper declares a
higher value and pays a higher rate of freight. The first and second
stipulations are invalid as contrary to public policy. The third is valid and
enforceable.
A stipulation in the bill of lading limiting the liability of the CC to a
specified amount unless the shipper declares a higher value and pays a
higher freight is valid and enforceable. If a CC gives to a shipper the choice
of 2 rates, the lower of them conditioned upon his agreeing to a stipulated
valuation of his property in case of loss, even by the carrier's negligence, if
the shipper makes the choice understandingly and freely, and names his
valuation, he cannot thereafter recover more than the value which he thus
places upon his property.
Shewaram vs PAL, 17 SCRA 606

F:
Plaintiff bought a plane ticket from Zamboanga to Manila. When
he arrived in Manila, his suitcase was tampered with and his camera and
radio were lost. PAL contended that plaintiff was bound by the conditions
printed at the back of his ticket which provided that the liability of PAL for
any loss is limited to the value of the thing unless the passenger declares in
advance a higher valuation and pays an additional charge, and that the
value is conclusively deemed not to exceed P 100/ticket.
Held : Two requisites must be fulfilled in order that the liability of PAL be
limited according to the stipulations behind the ticket stub : (1) the contract
is just and reasonable under the circumstances; and (2) it has been fairly
and freely agreed upon. (Art. 1750)
F:
Atty. Ong Yiu was a passenger on a PAL Cebu-Butuan flight to
attend court hearings in Butuan. His suitcase was accidentally sent to
Manila. PAL-Manila sent the suitcase to Butuan but the lock had been
opened and a folder containing court documents was missing. Plaintiff
refused to accept the luggage. PAL-Cebu delivered the luggage to Ong Yiu
with the promise to investigate the matter. Plaintiff sued and was awarded
moral and exemplary damages. CA reversed holding that PAL was guilty of
simple negligence and denied moral and exemplary damages but ordered
PAL to pay P100, the baggage liability assumed by it under the condition of
carriage printed on the back of the ticket.
Held: PAL incurred delay in the delivery of petitioner's luggage. However,
there was no bad faith. The liability of PAL was limited to the stipulations
printed on the back of the ticket.
While the passenger had not signed the plane ticket, he is
nevertheless bound by the provision thereof; such provisions have been
held to be part of the contract of carriage and valid and binding upon the
passenger regardless of the latter's lack of knowledge or assent to the
regulation. It is what is known as a contract of adhesion wherein one party
imposes a ready made form of contract on the other; it is 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. A contract limiting liability upon
an agree valuation does not offend against the policy of the law forbidding
one from contracting against his own negligence.
Considering that petitioner had failed to declare a higher value for
his baggage, he cannot be permitted a recovery in excess of P 100.00.
Besides, passengers are advised not to place valuable items inside their
baggage. Also, there is nothing in the evidence to show the actual value of
the goods allegedly lost by petitioner.
PAN AM vs IAC, 164 SCRA 268
F:
This is a petition filed by Pan Am to limit its liability for lost
baggage containing promotional and advertising materials for films to be
exhibited in Guam and the US, clutch bags, barong tagalogs and personal
belongings of Rene Pangan to the amount specified in the airline ticket
absent a declaration of a higher valuation and payment of additional
charges.
Pan Am contends that its liability for lost baggage is limited to
$600 ($20 x 30 kilos) as the latter did not declare a higher value for his
baggage. Such stipulation is printed at the back of the ticket.
Held : Pan Am cited Ong Yiu vs CA. Such case is squarely applicable in this
case. The ruling in Shewaram vs PAL is inapplicable since it was premised
on the fact that the conditions printed at the back of the ticket were so small
and hard to read.
Liability is limited to $600 as stipulated at the back of the ticket.
The SC reversed the CA ruling awarding respondent damages for
lost profits. The rule laid down in Mendoza vs PAL provides that before
damages can be awarded for loss of profits on account of delay or failure of
delivery, it must have appeared that CC had notice at the time of delivery to
him of the particular circumstances attending the shipment, and which
probably would lead to such special loss if he defaulted. In the absence of
a showing that Pan Am's attention was called to the special circumstances
requiring prompt delivery of the luggage, it cannot be held liable for the
cancellation of respondent's contracts as it could not have foreseen such an
eventuality when it accepted the luggage for transit.
Pan Am vs Rapadas, 209 SCRA 67
F:
Jose Rapadas was en route from Guam to Manila. While
standing in line to board the flight, he was ordered by Pan Am's handcarry
control agent to check in his Samsonite attache case. He protested on the
ground that other passengers were permitted to handcarry bulkier
baggages. He tried to check-in without having to register his attache case.
He was however forced to register his baggage. He gave his attache case
to his brother who checked it in for him without declaring its contents or the
PAGE 21

value of its contents. Upon arriving in Manila, he was given all his checkedin baggages except the attache case. Since he felt ill, he sent his son to
request for the search of the missing luggage. He sent letters of demand to
Pan Am.
Pan Am offered to settle the claim for $160, representing the
CC's alleged limit of liability for loss or damage to a passenger's personal
property. Rapadas filed this action for damages. He alleged that Pan Am
discriminated or singled him out in ordering that his luggage be checked in;
that Pan Am neglected its duty in the handling and safekeeping of his
attache case from the point of embarkation in Guam to his destination in
Manila; that the value of the lost attache case and its contents is
$42,403.90. According to him, the loss resulted in his failure to pay certain
obligations, failure to remit money sent through him to relatives, inability to
enjoy the fruits of his retirement and vacation pay and inability to return to
Tonga Construction Co. to comply with then existing contracts. During the
trial, he showed proof of the contents of his attache case.
Pan Am contended that the claim was subject to the Notice of
Baggage Liability Limitations attached to the ticket. Such notice was also
conspicuously posted in its offices. It alleged that its liability is limited to
$160 because Rapadas did not declare a higher value and did not pay the
corresponding additional charges.
The lower court ruled in favor of Rapadas. It however did not find
Pan Am guilty of discriminatory acts or bad faith. CA affirmed the decision.
Issue: WON a passenger is bound by the terms of a passenger ticket
declaring that the limitations of liability set forth in the Warsaw Convention
as amended by the Hague Protocol shall apply in case of loss, damage or
destruction to a registered luggage of a passenger. YES. Pan Am was
ordered to pay $400 and P 10,000 as attorney's fees and costs of suit.
Held: There is no dispute that there was a notice appearing on page 2 of
the ticket stating that the Warsaw Convention governs in case of death or
injury to a passenger or of loss, damage or destruction to a passenger's
luggage. Such notice should be sufficient notice showing the applicability of
the Warsaw limitations. The passenger, upon contracting with the airline and
receiving the plane ticket, was expected to be vigilant insofar as his luggage
is concerned. If the passenger fails to adduce evidence to overcome the
stipulations, he cannot avoid the application of the liability limitations.
The Warsaw Convention, as amended, specifically provides that
it is applicable to international carriage which it defines as "any carriage in
which, according to the agreement between the parties, the place of
departure and the place of destination xxx are situated either within the
territories of two High Contracting Parties or within the territory of a single
High Contracting Party if there is an agreed stopping place within the
territory of another State xxx." Nowhere in the Warsaw Convention is such
detailed notice of baggage liability limitations required. It is however a
common, safe and practical custom for air carriers to indicate beforehand
the precise sums equivalent to those fixed by Art. 22(2) of the Convention.
The facts show that Rapadas actually refused to register his
attache case. In attempting to avoid registering the luggage, he manifested
a disregard of airline rules on allowable handcarried baggages. Prudence
dictates that cash and jewelry should be removed from checked-in luggage
and placed in one's pockets or handcarried. The alleged lack of enough time
for him to make a declaration of a higher value and to pay the corresponding
supplementary charges cannot justify his failure to comply with the
requirement that will exclude the application of limited liability. Had he
readily complied with airline regulations from the start, this situation would
not have arisen.
While contracts of adhesion are not entirely prohibited, neither is
blind reliance on them encouraged. In the face of facts showing they should
be ignored because of their basically one- sided nature, the Court does not
hesitate to rule out blind adherence to their terms. The SC is not saying that
passengers are always bound to the stipulated amounts printed on a ticket,
found in a contract of adhesion, or printed elsewhere but referred to in
handouts or forms. The Court simply recognizes that the reasons behind
stipulations on liability limitations arise from the difficulty, if not impossibility,
of establishing with a clear preponderance of evidence the contents of a lost
suitcase. Unless the contents are declared, it will always be the word of a
passenger against that of the airline. If the loss of life or property is caused
by the gross negligence or arbitrary acts of the airline or the contents of the
lost luggage are proved by satisfactory evidence other than the self-serving
declarations of one party, the Court will not hesitate to disregard the fine
print in a contract of adhesion. Otherwise, the Court is constrained to rule
that we have to enforce the contract as it is the only reasonable basis to
arrive at a just award.
(c) Factors affecting agreement
Art. 1746. An agreement limiting the common carrier's

liability may be annulled by the shipper or owner if the CC refused to
carry the goods unless the former agree to such stipulation.
Art. 1747. If the common carrier, without just cause, delays
the transportation of the goods or changes the stipulated or usual
route, the contract limiting the common carrier's liability cannot be
availed of in case of the loss, destruction, or deterioration of the
goods.
Art. 1748. An agreement limiting the common carrier's
liability for delay on account of strikes or riots is valid.
Art. 1751. The fact that the common carrier has no
competitor along the line or route or a part thereof, to which the
contract refers shall be taken into consideration on the question of
whether or not a stipulation limiting the common carrier's liability is
reasonable, just, and in consonance with public policy.
Art. 1752. Even when there is an agreement limiting the
liability of the common carrier in the vigilance over the goods, the
common carrier is disputably presumed to have been negligent in case
of their loss, destruction or deterioration.
4 Agbayani:
Kinds of stipulation limiting liability.-- The following stipulations are often
made in a bill of lading bill of lading:
1. stipulation exempting the CC from any and all liability for loss
or damage occasioned by its own negligence - VOID
2. stipulation providing for an unqualified limitation of such
liability to an agreed stipulation - VOID
3. stipulation limiting the liability of the CC to an agreed valuation
unless the shipper declares a higher value and pays a higher rate of freight
-- VALID and ENFORCEABLE
When stipulation limiting liability valid.-- Under 1744, the shipper or
owner and the CC may stipulate to limit the liability of the CC for the loss,
destruction or deterioration of goods to a degree less than extra-ordinary
diligence :
1. the stipulation must be in writing and signed by both parties;
2. the stipulation must be supported by valuable consideration
other than the service rendered by the CC;
3. the stipulation must be reasonable, just and not contrary to
public policy. This applies only when the CC is acting as such but not when
it acts as a private carrier [in Home Insurance vs American Steamship Co.,
the SC held that the Civil Code provisions on CC should not be applied
where the CC is not acting as such but as a private carrier; such policy has
no force where the public at large is not involved]
The parties may stipulate that the diligence to be exercised by
the CC be less than extra-ordinary diligence, provided that the requirements
under Article 1744 are complied with. However, the parties cannot reduce
the diligence to less than that of a good father of a family. Art. 1745
provides for 7 stipulations which shall be considered unreasonable, unjust
and contrary to public policy.
Construction of stipulations limiting common carrier's liability.-- An
exemption in general words not expressly relating to negligence, even
though the words are wide enough to include loss by negligence or default
of CC's servants, must be construed as limiting the liability of the CC as
assurer, and not as relieving him from the duty of exercising reasonable skill
and care
Effect of lack of competitor to common carrier.-- Under 1751, the lack of
competition of the CC shall be considered in determining WON a stipulation
limiting CC's liability is reasonable, just and in consonance with public
policy.
Examples of valid stipulations:
1. 1748 - an agreement limiting the CC's liability for delay on
account of strikes or riots
2. 1749, Heacock vs Macondray - a stipulation that the CC's
liability is limited to the value of the goods appearing in bill of lading unless
the shipper or owner declares a greater value
3. 1750 - a contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction or deterioration of the goods, if it is
reasonable and just under the circumstances, and has been fairly and freely
agreed upon
PAGE 22

Under 1746, an agreement limiting the CC's liability may be annulled by the
shipper or owner if the CC refused to carry the goods unless the former
agreed to such stipulation. The effect of the shipper's consent obtained by
means of refusal on the part of the carrier to carry the goods is to make the
agreement limiting the CC's liability voidable at the instance of the shipper
Principles : [St. Paul Insurance vs Macondray, 70 SCRA 122]
1. A stipulation in the bill of lading limiting the CC's liability to the
value of the goods appearing in the bill, unless the shipper or owner
declares a greater value, is valid and binding.
2. The insurer who pays the insured on his claim for damage is
merely subrogated to the rights of the insured; therefore, said insurer cannot
collect from the CC more than what the insured can collect from the CC.
3. The obligation to pay the damage begins from the date it fails
to deliver the shipment in good condition to the consignee (on the basis of
the rate of exchange on that date).
Effect of delay in transportation, etc.-- Under 1747, the CC cannot avail
of the contract limiting his liability in these cases : (1) where the CC delays
the transportation of the goods; (2) where the CC changes the stipulated or
usual route [in both cases, the delay or change of route must be without just
cause]
Presumption as to negligence in case of limited liability.-- Under 1752,
the presumption continues even when there is an agreement limiting the
liability of the CC in the vigilance of the goods. This presumption is
disputable or rebuttable by evidence that the CC exercised extra-ordinary
diligence.
5. Applicable Law in foreign trade
Art. 1753. The law of the country to which the goods are to
be transported shall govern the liability of the common carrier for their
loss, destruction or deterioration.
4 Agbayani:
The Civil Code governs the liability of the CC in case of loss,
damage or deterioration. Under 1766, in all matters not regulated by the
Civil Code, the rights and obligations of CC shall be governed by the Code
of Commerce and by special laws which are suppletory to the provisions of
the Civil Code.
6. Rules on Passenger Baggage
Art. 1754. The provisions of Arts.1733 to 1753 shall apply to
the passenger's baggage which is not in his personal custody or in
that of his employees. As to other baggage, the rules in Articles 1998
and 2000 to 2003 concerning the responsibility of hotel keepers shall
be applicable.
Art. 1998. The deposit of effects made by travelers in hotels
and inns shall also be regarded as necessary. The keepers of hotels
and inns shall be responsible for them as depositaries, provided that
notice was given to them, or to their employees, of the effects brought
by the guests and that, on the part of the latter, they take the
precautions which said hotel-keepers or their substitutes advised
relative to the care and vigilance of their effects.
Art. 2000. The responsibility referred to in the preceding
article shall include the loss of, or injury to the personal property of
the guests caused by the servants or employees of the keepers of
hotels or inns as well as by strangers; but not that which may proceed
from any force majeure. The fact that travelers are constrained to rely
on the vigilance of the keeper of the hotel or inn shall be considered in
determining the degree of care required of him.
the articles brought by the guest. Any stipulation between the

hotelkeeper and the guest where the responsibility of the former as set
forth in Arts. 1998 to 2001 is suppressed or diminished shall be void.
Classes of baggage of passengers.-- The law makes a distinction
between (1) baggage in the custody of the passengers or their EEs; and (2)
baggage not in such custody but in that of the CC.
Liability for baggage in custody of passenger.-- Art. 1754 refers to Arts.
1998, 2000- 2003 concerning the responsibility of hotel keepers. Under
1998, the baggage of passengers in their personal custody or in that of their
EEs while being transported shall be regarded as necessary deposits. The
CC shall be responsible for such baggage as depositaries, provided that (1)
notice was given to them or to their EEs, of the baggage brought by their
passengers, and that (2) the passengers take the precautions which said
CCs advised relative to the care and vigilance of their baggage.
Responsibility for acts of EEs, thieves.-- Under 2000, a CC is
responsible as a depositary for the loss of or injury to the baggage in the
personal custody of passengers, caused by the CC's servants or EEs but
not those caused by force majeure.
Under 2001, the act of a thief or robber, who has entered the
CC's vehicle is not deemed force majeure, unless it is done with the use of
arms or through irresistible force.
Under 2002, the CC is not liable if the loss of the baggage in the
personal custody of the passenger is due to the acts of the passengers, his
family, servants or visitors, OR if the loss arises from the character of the
baggage.
Stipulations limiting liability.-- Under 2003, a CC cannot free
himself from responsibility by posting notices to the effect that he is not
liable for the baggage brought by the passengers. Any stipulation
diminishing the responsibility required under 1998 to 2001 shall be void.
Liability for baggage not in custody of passenger.-- This refers to
baggage delivered to the custody of the CC and received by him, to be
carried in the same manner as other goods being transported by him. As
the CC has custody of such baggage and are carried like any other goods,
the provisions on carriage of goods shall apply (extra-ordinary diligence in
the vigilance over the goods).
The moment the effects of a passenger are unconditionally
placed in the possession of and received by a carrier for conveyance, the
law immediately imposes on the CC extra-ordinary responsibility for the loss
thereof which lasts until the actual or constructive delivery of the effects to
the passenger as the person who has the right to receive them (presumption
of negligence exists but may be rebutted by proof of exercise of
extraordinary diligence or causes under 1734).
A CC is liable for the loss of baggage although not declared and
the charges not paid, if it accepted them for transportation
C. Common Carrier of Passengers
1. Nature and extent of responsibility
is further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7,
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 circumstances.
Art. 2001. The act of a thief or robber, who has entered the
hotel is not deemed force majeure, unless it is done with the use of
arms or through irresistible force.
4 Agbayani:
Art. 2002. The hotelkeeper is not liable for compensation if
the loss is due to the acts of the guest, his family, servants or visitors,
or if the loss arises from the character of the things brought into the
hotel.
Common carriers must exercise extraordinary diligence in carrying

passengers.-- Art. 1755 shows clearly the high degree of care and extra-o
diligence required of a CC with respect to its passengers.
Art. 2003. The hotelkeeper cannot free himself from

responsibility by posting notices to the effect that he is not liable for
Carrier's duty of extraordinary diligence extends also to crew

members.-- The duty to exercise the utmost diligence on the part of CCs is
PAGE 23

for the safety of passengers as well as for the members of the crew or the
complement operating the carrier. This must be so for any omission, lapse
or neglect thereof will certainly result to the damage, prejudice, injuries or
even death to all aboard the plane.
Cangco vs MRR, 38 Phil 768
Facts: supra. EE riding on train who stepped on watermelons.
Held: The conduct of plaintiff in undertaking to alight while the train was yet
slightly underway was not characterized by imprudence and that he was not
guilty of contributory negligence.
It is not negligence per se for a traveler to alight from a slowly moving train.
MRR failed to exercise due care in not providing for safe exit of
its passengers. It also failed to provide adequate lighting for its station.
It is impt. to note that the foundation of the legal liability of the
defendant is the contract of carriage, and that the obligation to respond for
the damage which plaintiff has suffered arises, if at all, from the breach of
that contract by reason of the failure of defendant to exercise due care in its
performance. Its liability is direct and immediate (culpa contractual),
differing essentially, from that presumptive responsibility for the negligence
of its servants, which can be rebutted by proof of the exercise of due care in
the selection and supervision of EEs (culpa aquiliana).
The liability of masters and employers for the negligent acts or
omissions of their servants or agents, when such act or omissions cause
damage which amount to the breach of a contract, is not based upon a mere
presumption of the master's negligence in their selection or control, and
proof of exercise of the utmost diligence and care in this regard does not
relieve the master of his liability for the breach of his contract. When the
facts averred show a contractual undertaking by defendant for the benefit of
plaintiff, and it is alleged that plaintiff has failed or refused to perform the
contract, it is not necessary for plaintiff to specify in his pleadings whether
the breach of the contract is due to willful fault or to negligence on the part
of the defendant, or of his servants or agents. Proof of the contract and of
its nonperformance is sufficient prima facie to warrant recovery.
The contract of defendant to transport plaintiff carried with it, by
implication, the duty to carry him in safety and to provide safe means of
entering and leaving its trains. That duty, being contractual, was direct and
immediate, and its nonperformance could not be excused by proof that the
fault was morally imputable to defendant's servants.
Strong vs Iloilo-Negros Air Express, 40 OG 269
F:
Plaintiff was a passenger aboard defendant's plane en route from
Iloilo to Manila. The plane's motors went dead and, notwithstanding the
efforts of its pilot, it plunged into the sea and sank. The passengers and the
pilot were rescued.
Ratio: A CC 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 circumstances. This extraordinary diligence
required of common carriers is calculated to protect the passengers from
the tragic mishaps that frequently occur in connection with rapid modern
transportation. This high standard of care is imperatively demanded by the
preciousness of human life and by the consideration that every person must
in every way be safeguarded against all injury.
Principles as to liability of CC:
(1) The liability of a carrier is contractual and arises upon breach
of its obligation; there is breach if it fails to exert extraordinary diligence
accdg. to all the circumstances of each case
(2) A carrier is obliged to carry its passenger with the utmost
diligence of a very cautious person, having due regard for all the
circumstances
(3) A carrier is presumed to have been at fault or to have acted
negligently in case of death of, or injury to, passengers, it being its duty to
prove that it exercised extraordinary diligence
(4) The carrier is not an insurer against all risks of travel
Landingin vs Pantranco, 33 SCRA 284
F:
Plaintiffs are parents of 2 girls who were passengers on a
Pantranco bus on an excursion trip from Dagupan to Baguio. The bus was
open on one side. The TC found that the crossjoint of the bus broke and the
bus started to roll back. Some passengers jumped out. The bus driver
maneuvered the bus safely to the mountainside. Two of the girls who
jumped were seriously injured and died.
Held : In Lasam vs Smith, the court held that accidents caused by defects
in the automobile are not caso fortuito. The rationale is that the passenger
has neither the choice nor control over the carrier in the selection and use
of the equipment and appliances in use by the carrier.
When the passenger dies or is injured, the presumption is that
the CC is at fault or acted negligently. This is only rebutted by proof on the
carrier's part that it observed extraordinary diligence required in Art. 1733
and the utmost diligence of very cautious persons required in Art. 1755.
It does not appear that the carrier gave due regard for all the
circumstances with cross joints' inspection the day previous to the accident.
The bus was heavily laden, and it would be traversing mountainous,
circuitous and ascending road. Thus the entire bus would naturally be taxed
more heavily than it would be under the ordinary circumstances. The mere
fact that the bus was inspected only recently and found to be in order would
not exempt carrier from liability unless it is shown that the particular
circumstances under which the bus would travel were also considered.
Landicho vs BTC, 52 OG 764
Held : In aviation, inevitable accident is defined as one that is not

occasioned in any degree remotely or directly by want of such skill or care
as the law holds for what man is bound to exercise. Airplane companies are
not required to exercise all the care. Passengers necessarily should take
upon the usual and ordinary perils to airplane travel. A carrier is not an
insurer against all risks.
A carrier is not liable for defects of ignition cables used on his
plane, nor of the installation thereof, which cables were purchased from a
competent and reputable manufacturer in the absence of a showing that it
knew those defects or that such kind of ignition cable is not ordinarily used
on the airplane operated by it.
The doctrine of res ipsa loquitor cannot be applied when there is
no proof that according to the general experience of mankind, the accident
was such that it does not usually occur in the ordinary course of events
without the negligence on the part of those in control.
Isaac vs A.L. Ammen Trans. Co., 101 Phil 1046
F:
supra. Passenger aboard a bus who placed his left arm on the
window lost his arm when the bus collided with a pick up.
Held : If the carrier's EE is confronted with a sudden emergency, he is not
held to the same degree of care he would otherwise be required in the
absence of such emergency.
By placing his left arm on the window, the passenger is guilty of
contributory negligence, and although contributory negligence cannot relieve
the carrier but can only reduce his liability (Art. 1762), this is a circumstance
which militates against plaintiff's position. It is negligence per se for
passengers to protrude any part of his body and that no recovery can be
had for an injury.
F:
Landicho boarded a BTC bus. Before he did so, the conductor
helped him in placing his two baskets of chicken inside the running board.
After a distance, he claimed that he noticed one cage falling and he called
the conductor's attention who did not respond. He tried to fix it himself
resulting in his fall in which he suffered injuries.
Held : The facts show that the cage was not about to fall. Plaintiff was
probably dizzy or sleepy that he fell from the truck.
It is true that defendant being a CC is bound to transport its
passengers from the point of origin to the place of destination, but the duty
does not encompass all the risks attendant to a passenger in transit, for
then the co. would be a good source of stipend for a family who would like
to end it all by simply boarding, paying the fare and intentionally falling off.
It is enough for the CC's EEs to see to it that the passenger places himself
safely inside the vehicle, that it is operated carefully and that its mechanism
is perfectly alright to prevent mishaps. It would be unreasonable to exact
upon operators to determine beforehand whether a passenger is likely to fall
dizzy or sleepy on the way, for that is the lookout of the passenger himself.
A passenger must see to it that he seats himself in a safe portion of the
vehicle.
Necesito vs Paras, 105 Phil 75
F:
A mother and son boarded a passenger autotruck of the Phil.
Rabbit Bus Lines. While entering a wooden bridge, its front wheels swerved
to the right, the driver lost control and the truck fell into a creek. The mother
drowned; the son was injured.
Held : While the carrier is not an insurer of the safety of the passengers, it
should nevertheless be held answerable for the flaws of its equipment if
such flaws were discoverable. The liability of the CC rests upon negligence
PAGE 24

or his failure to exercise the utmost degree of diligence that the law
requires. The rationale of CC's liability for manufacturing defects is the fact
that the passenger has neither choice nor control over the carrier in the
selection and use of the eqpt. and appliances in use by the carrier. Having
no privity whatever with the manufacturer or vendor of the defective eqpt,
the passenger has no remedy against him. In this case, the defect could
have been detected with the exercise of utmost diligence by the CC.
2. Duration of responsibility
fact that the person transported has been carried to his destination if the
person remains in the premises to claim his baggage.
The test is the existence of a reasonable cause as will justify the
presence of the passenger near the vessel.
A CC is bound to carry its passengers as far as human care and
foresight can provide, using the utmost diligence of a very cautious person
with due regard for all circumstances.
PAL vs CA, G.R. 82619, Sept. 1993
4 Agbayani:
When relationship of carrier and passenger terminates.-- The relation of
CC and passenger does not cease at the moment that the passenger alights
from the CC's vehicle at a place selected by the CC at the point of
destination, but continues until the passenger had reasonable time or a
reasonable opportunity to leave the CC's premises. What is a reasonable
time or a reasonable delay within this rule is to be determined from all the
circumstances
La Mallorca vs CA, 17 SCRA 739
F:
Husband and wife together with minor children boarded a La
Mallorca bus. They alighted from the bus. The father returned to the bus to
get their baggage. He was followed by his daughter. While the father was
still on the running board awaiting for the conductor to give his baggage, the
bus stated to run so that the father had to jump. His daughter was run over
and was killed. The bus co. contended that when she was killed, she was
no longer a passenger and the contract of carriage had terminated.
Held: Whether or not the relation between carrier and passenger does not
cease at the moment the passenger alights from the carrier's premises is to
be determined from the circumstances.
In this case, there was no utmost diligence. The driver stopped
the bus but did not turn off the engine. He started to run the bus even
before the conductor gave him the signal. The presence of passengers near
the bus was not unreasonable and the duration of the responsibility still
exists.
Bataclan vs Medina, 102 Phil 181
F:
The bus of Medina Trans left Cavite for Pasay with 18
passengers. Around dawn, the front tires burst and the vehicles began to
zigzag until it fell into a canal and turned turtle. Some passengers were
able to get out while four were trapped including Bataclan. Later, 10 men
came to help, one of them carrying a lighted torch, fueled by petroleum. A
fire started, burning the bus and the 4 passengers. Gas had leaked when
the bus overturned.
Held: The proximate cause of the death was the overturning of the vehicle
which was followed by the negligence of the driver and the conductor who
were on the road walking back and forth. They should have known that with
the position of the bus, leakage was possible aside from the fact that gas
when spilled can be smelled from a distance. The failure of the driver and
conductor to have cautioned or taken steps to warn rescuers not to bring a
lighted torch too near the bus constitutes negligence on the part of the
agents of the carrier.
Aboitiz vs CA 179 SCRA 95
F:
A farmer boarded a boat owned by Aboitiz at Mindoro bound for
Manila. When the vessel arrived, Pioneer Stevedoring took over control of
the cargoes loaded at the vessel and placed its crane alongside the vessel.
One hour after he disembarked, he went back to get his cargo but the crane
hit him and he died.
Held: Aboitiz is still liable for his death under the contract of carriage. The
relation of carrier and passenger continues until the passenger has been
landed at the port of destination and has left the vessel owner's dock. Once
created the relationship will not ordinarily terminate until the passenger has
safely alighted from the carrier's conveyance or had reasonable opportunity
to leave the carrier's premises. All persons who remain on the premises a
reasonable time after leaving the conveyance are to be deemed passengers
and what is reasonable time is to be determined from all circumstances and
includes a reasonable time to see after his baggage and prepare for his
departure. The CC-passenger relationship is not terminated merely by the
F:
Pedro Zapatos was among 21 passengers on a PAL flight from
Cebu to Ozamis. The flight was Cebu-Ozamis-Cotabato. Fifteen minutes
before landing in Ozamis, the pilot received a message that the airport was
closed due to heavy rains and inclement weather and that he should
proceed to Cotabato City. In Cotabato, PAL informed the passengers of
their options and that due to limited number of seats in the other flights, the
basis for priority would be the check-in sequence at Cebu. Zapatos chose to
return to Cebu but was not accommodated because he checked in as
passenger no. 9. However, his personal belongings including a camera
from Japan were still on board the flight to Manila. He tried to stop the
departure but his plea fell on deaf ears. He was given a free ticket to Iligan
City which he received under protest. He was left at the airport. PAL neither
provided him with transportation from the airport to the city proper nor food
and accommodation for his stay in Cotabato City. The next day, he
purchased a ticket to Iligan City. He informed PAL that he would not use the
free ticket because he was filing a case against PAL. His personal
belongings were never recovered.
PAL denied that it unjustifiably refused to accommodate Zapatos.
It alleged that there was simply no more seat for him on Flight 560 to
Manila; and that there was force majeure which was a valid justification for
the pilot to bypass Ozamis City and proceed directly to Cotabato City. PAL
contended that it did not unjustifiably deny his demand for priority over
confirmed passengers which they could not satisfy in view of the limited
seats. PAL also asserted that it should not be charged with the task of
looking after the passengers' comfort and convenience because the
diversion of the flight was due to a fortuitous event, and that if made liable,
an added burden is given to PAL which is over and beyond its duties under
the contract of carriage. It argued that granting there was negligence, PAL
cannot be liable in damages in the absence of fraud or bad faith.
The RTC held in favor of plaintiff. The CA affirmed.
Held: The passenger's complaint touched on PAL's indifference and
inattention to his predicament and not on PAL's refusal to comply with his
demand for priority over the other passengers. He claimed that he was
exposed to the peril of Muslim rebels and that he suffered mental anguish,
mental torture, social humiliation, besmirched reputation and wounded
feeling. He referred to PAL's apathy.
The contract of air carriage is a peculiar one. Being imbued with
public interest, the law requires common carriers 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. In Air France vs Carrascoso, the SC held that the contract
to transport passengers is quite different from any contractual relation in that
it invites people to avail of the comforts and advantages it offers. The
diversion of the flight was due to a fortuitous event. However, such did not
terminate PAL's contract with its passengers. Being in the business of air
carriage, PAL is deemed equipped to deal with situations like the case at
bar. The relation of carrier and passenger continues until the latter has been
landed at the port of destination and has left the CC's premises. Hence,
PAL necessarily would still have to exercise extraordinary diligence in
safeguarding the comfort, convenience and safety of the stranded
passengers until they have reached their final destination. PAL was
therefore remiss in its duty of extending utmost care to Zapatos while being
stranded in Cotabato City.
The CA held : "While the failure of Zapatos to reach his
destination xxx in accordance with the contract of carriage was due to the
closure of the airport on account of rain and inclement weather xxx it
becomes the duty of PAL to provide all means of comfort and convenience
to its passengers when they would have to be left in a strange place in case
of such by-passing. If the cause of non-fulfillment of the contract is due to a
fortuitous event, it has to be the sole and only cause. Since part of the
failure to comply with the obligation to deliver its passengers safely to their
destination lay in PAL's failure to provide comfort and convenience to its
stranded passengers using extraordinary diligence, the cause of nonfulfillment is not solely and exclusively due to fortuitous event, but due to
something that PAL could have prevented, PAL becomes liable to the
passenger." However the SC found that although PAL was remiss in its duty
of extending utmost care to Zapatos while being stranded in Cotabato City,
PAGE 25

there was no sufficient basis to conclude that PAL failed to inform him about
his other options.
3. Presumption of negligence
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.
4 Agbayani:
Presumption of negligence.-- CCs are presumed to have been at fault or
to have acted negligently in case of death or injuries to passengers. This
disputable presumption may only be overcome by superior evidence that he
had observed extraordinary diligence prescribed in 1733, 1755, 1756
Where death or injury results to the passenger because of the
negligence of the CC's Es, the CC is liable, notwithstanding the fact that he
had exercised all the diligence of a good father of a family, in the selection
and supervision of his EEs
xxx
Consequently, in an action for damages, the issue is not WON
the party seeking damages has adduced sufficient evidence to show the
negligence of the CC but WON the carrier has presented the required
quantum of proof to overcome the presumption that it has been at fault or
that it acted negligently in the performance of its duty.
In the exercise of extraordinary diligence, the CC must give due
regard for all circumstances in connection with the transport of passengers
How presumption of negligence overcome.-- To overcome such
presumption, it must be shown that the CC had observed the required
extraordinary diligence or that the accident was caused by fortuituos event.
In order to constitute caso fortuito that would exempt a person from
responsibility, it is necessary that :
1. The event must be independent of human will;
2. The occurrence must render it impossible for the obligor to
fulfill his obligation in a normal manner;
3. The obligor must be free of a concurrent or contributory fault
or negligence. [Estrada vs Consolacion, 71 SCRA 523]
Carrier not precluded from proving negligence of other carrier
involved in collision.-- While the plaintiff-passenger does not need to
prove the negligence of the CC, he may not preclude the CC from proving
the legal defense of negligence of the other vehicle involved in the collision
(the CC may file a third-party complaint against the other vehicle for
reimbursement)
"Last clear chance" rule not applicable to contracts of carriage.-- The
principle of last clear chance applies only in a suit between the owners and
drivers of two colliding vehicles; it does not apply where a passenger
demands responsibility from the CC to enforce its contractual obligation; it
would be iniquitous to exempt the driver and his ER on the ground that the
other driver was also negligent
Court need not make express finding of carrier's fault or negligence.-The court need not make an express finding of fault or negligence on the
part of the CC in order to hold it responsible to pay the damages sought by
the passenger. By the contract of carriage, the CC assumes the express
obligation to observe extraordinary diligence in transporting the passenger
This is an exception to general rule that negligence must be proved.
Carriers not ordinarily liable for injuries to passengers due to fires or
explosions caused by articles brought into conveyance by other
passengers.-- CC is not ordinarily liable for injuries to passengers due to
fires or explosions caused by articles brought into conveyance by other
passengers. Fairness demands that in measuring the CC's duty towards its
passengers, allowance should be given to the reliance that should be
reposed on the sense of responsibility of all the passengers in regard to
their common safety (that the passenger will not take with him anything
dangerous to his co-passengers.) For the carrier to be liable, he must be
aware, through his EEs of the nature of the article or must have had some
reason to anticipate danger therefrom (circumstances must show that there
are causes for apprehension that the passenger's baggage is dangerous
and that the CC fails to act in the fact of such evidence) [Nocum vs Laguna
Bus Co., 1969]
4. Force Majeure
Bachelor Express vs CA 188 SCRA 217

F:
Bus No. 800 owned by Bachelor Express and driven by
Cresencio Rivera was the situs of a stampede which resulted in the death of
passengers Beter and Rautrat. The bus came from Davao City on its way
to Cagayan de Oro passing Butuan City. While in Tabon-Tabon, Butuan, the
bus picked up a passenger. A passenger suddenly stabbed a PC soldier
which caused commotion and panic among the passengers. Two
passengers jumped out (finding of the TC which was reversed by the CA) of
the bus and were found dead as a result of head injuries. The passengerassailant ran away from the bus but was killed by the police. The parents of
the dead passengers filed a complaint for a sum of money against the CC,
the owner and the driver.
The CC denied liability and alleged that the driver was able to
transport his passengers safely to their respective places of destination
except for the two passengers who jumped off the bus without the
knowledge and consent, much less, the fault of the driver; that the CC
exercised due diligence in the choice of its EEs to avoid as much as
possible accidents; that the incident was not a traffic or vehicular accident
but was an incident very much beyond the control of the CC; that the CC
was not a party to the incident as it was an act of a third party who is not in
any way connected with the CC and of which they have no control and
supervision. The CC argued that the incident's proximate cause was the act
of the passenger who ran amuck and which triggered off the commotion and
panic.
The TC dismissed the complaint. The CA reversed and ordered
the CC, the owner and driver solidarily liable to the heirs of the deceased.
Held : The CC is liable for the death of the passengers.
Bachelor Express as a CC is bound to carry its passengers
safely as far as human care and foresight can provide using the utmost
diligence of very cautious person, with due regard for all the circumstances.
In this case where passengers suffered injuries which caused their death,
under 1756, the CC is presumed to have acted negligently unless it can
prove that it had observed extraordinary diligence. The CC raised the
defense of caso fortuito. Art. 1174 provides that no person shall be
responsible for those events which could not be foreseen or which though
foreseen were inevitable. In Lasam vs Smith, the SC held that a caso
fortuito must have the following elements: (1) The cause of the unforeseen
and unexpected occurrence must be independent of the human will; (2) It
must be impossible to foresee the event; (3) The occurrence must be so as
to render it impossible for the debtor to fulfill his obligation in a normal
manner; and (4) The obligor must be free from any participation in the
aggravation of the injury resulting to the creditor. The running amuck of the
passenger was the proximate cause of the incident and is within the context
of force majeure.
However, in order that a CC may be absolved from liability in
case of force majeure, it is not enough that the accident was caused by
force majeure. The CC must still prove that it was not negligent in causing
the injuries resulting from such accident. It must prove that there was no
negligence or lack of care and diligence on the part of the CC.
The TC and the CA had conflicting findings of fact. The SC
upheld the findings of the CA-- the driver did not immediately stop the bus at
the height of the commotion; the bus was speeding from a full stop; the
victims fell from the bus door when it was opened or gave way while the bus
was still running; the conductor panicked and blew his whistle after people
had already fallen off the bus; the bus was not properly equipped with doors
in accordance with law. It is therefore clear that the petitioners have failed
to overcome the presumption of fault and negligence found in the law
governing CCs.
The CC's argument that it is not an insurer of its passengers
deserves no merit in view of the failure of the CC to prove that the deaths of
the 2 passengers were exclusively due to force majeure and not to the
failure of the CC to observe extra-ordinary diligence in transporting safely
the passengers to their destinations as warranted by law.
5. Limitation of liability; validity of stipulations
Art. 1757. The responsibility of the common carrier for the
safety of passengers as required in Arts. 1733 and 1755 cannot be
dispensed with or lessened by stipulation, by the posting of notices,
by statements on tickets, or otherwise.
Art. 1758. When a passenger is carried gratuitously, a
stipulation limiting the common carrier's liability for negligence is
valid, but not for willful acts or gross negligence.
The reduction of fare does not justify any limitation of the
common carrier's liability.
PAGE 26

Ticket given to a passenger is a written contract.-- Ticket given to
passenger is a written contract with the ff. elements: (1) the consent of the
contracting parties manifested by the fact that the passenger boards the
ship and the shipper consents or accepts him in the ship for transportation;
(2) cause or consideration which is the fare paid by the passenger as stated
in the ticket; (3) object, which is the transportation of the passenger from
the place of departure to the place of destination which are stated in the
ticket.
Passenger bound notwithstanding his failure to sign ticket containing
stipulation limiting liability.-- Even if the passenger failed to sign the
ticket, he is nevertheless bound by the provisions thereof. Such provisions
are part of the contract of carriage, regardless of the passenger's lack of
knowledge or assent to the regulation. It is what is known as a contract of
adhesion which is not entirely prohibited by law. The one who adheres to
the contract is in reality free to reject it entirely; if he adheres, he gives his
consent. Accordingly, where the CC incurred delay, it is liable only for the
amount printed in the ticket the passenger not having declared a higher
value for his luggage nor paid addtl. charges.
Dispensing with or limiting liability.-- General rule: Under 1757, the
extraordinary diligence required under 1733 and 1755 for the carriage of
passengers cannot be dispensed with or lessened (1) by stipulation, (2) by
the posting of notices, (3) by statements on tickets, or (4) otherwise
What cannot be stipulated in a carriage of passengers :
(1) absolutely exempting the CC from liability from the
passenger's death or injuries;
(2) lessening the extraordinary diligence required by law to the
diligence of a good father of a family
Exception: Effect of gratuitous carriage.-- Under 1758, the CC
and the passenger may validly stipulate limiting the CC's liability for
negligence where the passenger is carried gratuitously (but the parties
cannot stipulate to entirely eliminate liability of CC)
Effect of reduction of fares.-- Under 1758 (2), the reduction of fare does
not justify any limitation of the CC's liability -- the law requires gratuitous
passage.
The law is much stricter with respect to carriage of passengers
as compared with carriage of goods: a stipulation limiting the CC's liability in
writing, signed by the parties, supported by sufficient consideration, not
contrary to law will still be void where the passenger is not carried
gratuitously.
Liability of owner of CC to accommodation passengers or invited
guests.-- [Lara vs Valencia, 1958] an owner of an automobile owes a guest
the duty to exercise ordinary or reasonable care to avoid injuring him; since
one riding in an automobile is no less a guest because he asked for the
privilege of doing so, the same obligation of care is imposed upon the driver
and owner as in the case of one expressly invited to ride
6. Responsibility for acts of EEs
Art. 1759. 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
carrier.
The liability of the common carrier does not cease upon
proof that they exercised all the diligence of a good father of a family
in the selection and supervision of their employees.
Art. 1760. The common carrier's responsibility prescribed in
the preceding article cannot be eliminated or limited by stipulation, by
the posting of notices, by statements on the tickets, or otherwise.
4 Agbayani:
Liability for negligence or willful acts of employees.-- Under 1759, CC
are held liable for the death or injuries to passengers caused by the
negligence or the willful acts of their EEs, although such EEs may have
acted beyond the scope of their authority or in violation of the orders of the
CC. The CC cannot escape liability by interposing the defense that its EEs
have acted without any authority or against the orders of the CC
The passenger is entitled to protection from personal violence by
the CC or its agents or EEs since the contract of transportation obligates the
CC to transport a passenger safely to his destination and a CC is
responsible for the misconduct of its EEs
Cardenas vs Fernando, 54 OG no. 4, p. 1043 (1957): (1) extraordinary

diligence required of CC: calculated to protect the passengers as demanded
by the preciousness of human life and by the consideration that every
person must in every way be safeguarded against all injury; (2) liability for
injury of passenger is based on a breach of contract of carriage for failure to
bring the passenger safely to his destination
Reason for making the CC liable for the misconduct of its EEs in their
own interest.-- The servant is clothed with delegated authority and charged
with the duty by the CC, to execute his undertaking to carry the passenger
safely; when the EE mistreats the passenger, he violates the contractual
obligation of the CC for which he represents the CC
Liability of CC for defects of its equipment.-- A passenger is entitled to
recover damages from a CC for an injury resulting from a defect in an
appliance purchased from a manufacturer, whenever it appears that the
defect would have been discovered by the CC if it had exercised the degree
of care which under the circumstances was incumbent upon it, with regard
to inspection and application of the necessary tests; for the purposes of this
doctrine, the manufacturer is considered as being in law the agent or
servant of the CC, as far as regards the work of constructing the appliance
Common carrier is exempt from acts of EE not done in line of duty.-The CC is exempt from liability where the EE was never in a position in
which it became his duty to his ER to represent him in discharging any duty
of the CC towards the passenger; the EE is deemed as a stranger or copassenger since his act was not done in the line of duty
Defense of diligence in selection, etc., of employees.-- CC cannot
escape liability by interposing defense that he exercised due diligence in the
selection and supervision of his EEs; his liability is based on culpa
contractual
When relationship of carrier and passenger terminates.-- The relation of
CC and passenger does not cease at the moment that the passenger alights
from the CC's vehicle at a place selected by the CC at the point of
destination, but continues until the passenger had reasonable time or a
reasonable opportunity to leave the CC's premises. What is a reasonable
time or a reasonable delay within this rule is to be determined from all the
circumstances
Elimination or limitation of carrier's liability.-- Under 1760, the CC's
liability for the negligence or willful acts of his EEs which cause death of or
injury to passengers cannot be eliminated or limited by (1) stipulation, (2) by
the posting of notice, (3) by statements on the tickets, or (4) otherwise
Bataclan vs Medina, 104 Phil 181
F:
supra. Bus turned turtle with gas leaking out. Rescuers brought
torches which resulted in fire.
Held : There was a breach of the contract of carriage and negligence on the
part of the agent of the CC, the driver. At the time of the blowout of the
tires, the bus was speeding. The proximate cause of the death was the
overturning of the vehicle which was followed by the negligence of the driver
and the conductor who were on the road walking back and forth. They
should have known that with the position of the bus, leakage was possible
aside from the fact that gas when spilled can be smelled from a distance.
The failure of the driver and conductor to have cautioned or taken steps to
warn rescuers not to bring a lighted torch too near the bus constitutes
negligence on the part of the agents of the carrier.
De Gillaco vs MRR, 97 Phil 884
F:
Plaintiff's husband was a passenger in the train from Calamba to
Manila. When the train reached the Paco Railroad, a train guard of MRR
was in the station waiting for the same train to take him to Tutuban to report
for duty. He had a long standing grudge against Gillaco and he shot and
killed him upon seeing him inside the train coach.
Held : While a passenger is entitled to protection from personal violence by
the CC or its agents or EEs, the responsibility of the CC extends only to
those acts that the CC could foresee or avoid through the exercise of the
degree of care and diligence required of it. The OCC did not impose upon
CC the absolute liability for assaults of their EEs upon the passengers.
The act of the guard was entirely unforeseeable by MRR which
had no means to ascertain or anticipate that the two would meet nor could it
foresee every personal rancor that might exist between its EEs and its
PAGE 27

passengers. The shooting was a caso fortuito, both being unforeseeable
and inevitable under the circumstances.
When the crime took place, the guard had no duties to discharge.
His position would be that of a passenger also waiting transportation and not
of an EE assigned to discharge duties.
CC would only be negligent if the tort caused by a third person could have
been foreseen and prevented by them.
The injury was in no way connected to the performance of the
obligation of the bus company. It was caused by a stranger, over which the
carrier had no control or even knowledge of, and which could not have been
prevented.
Maranan vs Perez, 20 SCRA 412

Bachelor Express vs CA, 180 SCRA 217
F:
A passenger in a taxicab was stabbed and killed by the driver.
The driver claimed self defense since accdg to him, he was stabbed first by
the passenger. The taxicab operator claimed caso fortuito.
F:
supra. A passenger stabbed a PC officer which caused a
commotion which resulted in the death of 2 passengers.
Held: The NCC unlike the OCC makes the CC absolutely liable for
intentional assaults committed by its EEs upon its passengers (Art. 1754).
The CC's liability is based on either (1) respondeat superior or (2) the CC's
implied duty to transport the passenger safely. Under respondeat superior
(w/c is the minority view), the CC is liable only when the act of the EE is
within the scope of his authority and duty. Under the second view, the CC is
liable as long as the assault occurs within the course of the performance of
the EE's duty. It is no defense that the act was done in excess of authority
or in disobedience of the CC's orders. The CC's liability is absolute in the
sense that it practically secures the passengers from assaults committed by
its own EEs. Three cogent reasons underlie this rule : (1) the special
undertaking of the CC requires that it furnish the passengers the full
measure of protection afforded by the exercise of the high degree of care
prescribed in the law, from violence and insults in the hands of strangers,
other passengers, and from its own servants charged with the passenger's
safety; (2) liability is based on the CC's 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 utmost care prescribed
by law; (3) as between the CC and the passenger, the CC must bear the risk
of wrongful acts or negligence of the CC's EEs against passengers since it
has the power to select and remove them.
It is the CC's obligation to select its drivers with due regard not
only to their technical competence and physical ability but also to their total
personality, including patterns of behavior, moral fiber, and social attitude.
Held: The CC raised the defense of caso fortuito. The running amuck of
the passenger was the proximate cause of the incident and is within the
context of force majeure. However, in order that a CC may be absolved from
liability in case of force majeure, it is not enough that the accident was
caused by force majeure. The CC must still prove that it was not negligent
in causing the injuries resulting from such accident. It must prove that there
was no negligence or lack of care and diligence on the part of the CC.
The TC and the CA had conflicting findings of fact. The SC
upheld the findings of the CA-- the driver did not immediately stop the bus
at the height of the commotion; the bus was speeding from a full stop; the
victims fell from the bus door when it was opened or gave way while the bus
was still running; the conductor panicked and blew his whistle after people
had already fallen off the bus; the bus was not properly equipped with doors
in accordance with law. It is therefore clear that the petitioners have failed
to overcome the presumption of fault and negligence found in the law
governing CCs.
The CC's argument that it is not an insurer of its passengers
deserves no merit in view of the failure of the CC to prove that the deaths of
the 2 passengers were exclusively due to force majeure and not to the
failure of the CC to observe extraordinary diligence in transporting safely the
passengers to their destinations as warranted by law.
7. Responsibility for acts of strangers and co-
Art. 1761. The passenger must observe the diligence of a

good father of a family to avoid injury to himself.
Art. 1763. A common carrier is responsible for injuries

suffered by a passenger on account of the willful acts or negligence of
other passengers or of strangers, if the common carrier's employees
through the exercise of the diligence of a good father of a family could
have prevented or stopped the act or omission.
Art. 1762. The contributory negligence of the passenger

does not bar recovery of damages for his death or injuries, if the
proximate cause thereof is the negligence of the common carrier, but
the amount of damages shall be equitably reduced.
passengers
8. Duty of passenger; effect of contributory negligence
Law does not protect negligence of passenger.-- Law does not protect
negligence of passenger to the extent of doing harm or damage upon a
public utility
4 Agbayani:
The CC is responsible for such willful acts or negligence of other
passengers or of strangers, provided that the CC's EEs could have
prevented or stopped the act or omission through the exercise of ordinary
diligence. If the injury could not have been avoided by the exercise of
ordinary diligence on the part of the EEs of the CC, the CC is not liable
Notice that the law speaks of injuries suffered by the passenger
but not his death. However, there appears to be no reason why the
common carrier should not be held liable under such circumstances. The
word "injuries" should be interpreted to include "death." (Aguedo F.
Agbayani, COMMERCIAL LAW REVIEWER, 1988 ed.)
Diligence required of passenger.-- Diligence of a good father of a family

to avoid injury to himself.
Effect of negligence of passenger.-- Where the proximate cause of the
death of or injury to the passenger is his own negligence, and not that of the
CC, the CC is exempted from liability
Pilapil vs CA 180 SCRA 546
Effect of passenger's contributory negligence.-- Contributory negligence

on the part of the passenger does not justify the CC's exemption from
liability. Where it is not the proximate cause of the death or injury, he or his
heirs are not barred from recovery of damages, provided of course that the
CC is the proximate cause of his death or injury
F:
While on a bus, an unidentified bystander hurled a stone at the
bus and hit Pilapil above his left eye. He sustained some injuries to his eye.
Cangco vs MRR 38 Phil 768
Held: The law does not make the CC an insurer of the absolute safety of its
passengers. Art. 1755 qualifies the duty of the CC in exercising vigilance to
only such as human care and foresight can provide. The presumption
created by law against the CC is rebuttable by proof that the CC had
exercised extraordinary diligence in the performance of its obligations and
that the injuries suffered were caused by fortuitous events. The liability of
the CC necessarily rests upon its negligence, or its failure to exercise the
degree of diligence required by law. Under Art. 1763, the diligence required,
with regards to its liability in cases when intervening acts of strangers
directly caused the injury, is the diligence only of a good father of a family
and not the extraordinary diligence generally required. The rule 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
F:
supra. EE riding on train who stepped on watermelons.
Held: The conduct of plaintiff in undertaking to alight while the train was yet
slightly underway was not characterized by imprudence and that he was not
guilty of contributory negligence.
The circumstances show that it was no means so risky for him to get off
while the train was yet moving. It is not negligence per se for a traveler to
alight from a slowly moving train.
Isaac vs A. L. Ammen
F:
supra. Passenger aboard a bus who placed his left arm on the
window lost his arm when the bus collided with a pick up.
PAGE 28

Held: By placing his left arm on the window, the passenger is guilty of
contributory negligence, and although contributory negligence cannot relieve
the carrier but can only reduce his liability (Art. 1762), this is a circumstance
which militates against plaintiff's position. It is negligence per se for
passengers to protrude any part of his body and that no recovery can be
had for an injury.
In this case, the bus driver had done what a prudent man could
have done to avoid the collision. The injury was due to passenger's fault.
Liability of air carrier under the Warsaw Convention (Oct. 12, 1929)
Art. 17. The carrier shall be liable for damages sustained in
the event of death or wounding of a passenger or any other bodily
injury suffered by a passenger, if the accident which caused the
damage so sustained took place on board the aircraft or in the course
of any of the operations of embarking or disembarking.
Art. 18. (1) The carrier shall be liable for damage sustained
in the event of the destruction or loss of, or of damage to, any checked
baggage or any goods, if the occurrence which caused the damage so
sustained took place during the transportation by air.
(2) The transportation by air within the meaning of the
preceding paragraph shall comprise the period during which the
baggage or goods are in the charge of the carrier, whether in an airport
or on board an aircraft, or, in case of a landing outside an airport, in
any place whatsoever.
(3) The period of the transportation by air shall not extend to
any transportation by land, by sea, or by river performed outside an
airport. If however, such transportation takes place in the performance
of a contract for transportation by air, for the purpose of loading,
delivery, or transshipment, any damage is presumed, subject to proof
to the contrary, to have been the result of an event which took place
during the transportation by air.
Art. 19. The carrier shall be liable for damages occasioned
by delay in the transportation by air of passengers, baggage or goods
SC has held that these provisions merely declare the carrier
liable for damages in the enumerated cases, if the conditions therein
specified are present. Neither said provisions nor others in the Convention
regulate or exclude liability for other breaches of contract by the carrier.
D. Damages Recoverable from Common Carriers
1. In general
Art. 1764. Damages in cases comprised in this Section shall
be awarded with the title XVIII of this book concerning damages.
Article 2206 shall also apply to the death of a passenger caused by the
breach of contract by a common carrier.
Art. 2197. Damages may be:
(1) Actual or compensatory;
(2) Moral;
(3) Nominal;
(4) Temperate or moderate;
(5) Liquidated;
(6) Exemplary or corrective.
2. Actual or compensatory
Art. 2199. Except as provided by law or by stipulation, one
is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Such compensation referred
to as actual or compensatory damages.
Art. 2201. In contracts and quasi-contracts, the damages for
which the obligor who acted in good faith is liable shall be those that
are natural and probable consequences of the breach of the obligation,
and which the parties have foreseen or could have reasonably
foreseen at the time the obligation was constituted.
In 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.
Art. 2203. The party suffering loss or injury must exercise

diligence of a good father of a family to minimize the damages
resulting from the act or omission in question.
Art. 1764. Damages in cases comprised in this Section shall
be awarded with the title XVIII of this book concerning damages.
Article 2206 shall also apply to the death of a passenger caused by the
breach of contract by a common carrier.
Art. 2206. The amount of damages for death caused by a
crime or quasi-delict shall be at least P 3,000 (now P50,000), even
though there may have been mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning
capacity of the deceased, and the indemnity shall be paid to the heirs
of the latter; such indemnity 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;
(2) If the deceased was obliged to give support according to
the provisions of article 291, the recipient who is not an heir called to
the decedent's inheritance by the law of testate or intestate
succession, may demand support from the person causing the death,
for a period not exceeding five years, the exact duration to be fixed by
the court;
(3) The spouses, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for mental
anguish by reason of the death of the deceased.
Cariaga vs LTBCo., 110 Phil 346
F:
Edgardo Cariaga, a fourth year medical student of UST, was a
passenger of an LTBC bus which bumped against a train of MRR on the
national highway crossing a railroad tract at Laguna de Bay. Cariaga
suffered severe injuries on the head making him unconscious during the first
35 days after the accident, reducing his intelligence by 50% and rendering
him in a helpless condition, virtually invalid, both physically and mentally.
LTBC paid all medical expenses plus allowance during convalescence.
Later, Cariaga's parents brought an action to recover damages from LTBC
and MRR in the amount of P 312,000 as actual, compensatory, moral and
exemplary damages. LTBC disclaimed liability and filed a cross-complaint
against MRR for recovery of expenses paid by it to the plaintiff placing MRR
negligent for not providing a crossing bar at the national highway railroad
track. Laguna CFI dismissed the cross-complaint against MRR and held
LTBC liable for P 10,000 as compensatory damages with interest. Plaintiff
and LTBC appealed.
Held: The train driver was not negligent. He sounded the train's whistle four
times before the intersection, which were heard even by the bus
passengers. The bus did not slow down but instead the bus driver tried to
pass the intersection before the train. In addition, another LTBC bus which
arrived ahead of the bus in this case, at the crossing heeded the train
whistle by stopping and allowing the train to pass. Clearly, the bus driver
was negligent in totally disregarding the warning. On the other hand, MRR
cannot be held to be contributorily negligent because LTBC was not able to
discharge its burden of proof when it alleged that MRR violated its charter
by failing to ring the locomotive bell.
The evidence shows that Ed C. had been rendered physically
and mentally invalid by the accident. He suffered head injuries specifically a
fractured right forehead necessitating the removal of all the right frontal lobe
of his brain, which reduced his intelligence by 50% so that he can no longer
finish his medical course. In addition, he has to lead a quiet and retired life
because if the tantalum plate which replaced a portion of his skull is pressed
in or dented, it would cause his death.
LTBC admitted that under Art. 2201, it is liable for damages that
are the natural and probable consequences of the breach and which the
parties had foreseen or could have reasonably foreseen at the time the
obligation was constituted. It however claims that the said provision
contemplates only the medical, hospital, and other expenses in the total
sum of P 17,719.75. The SC ruled that the income which Ed could earn if
he should finish the medical course, and pass the corresponding board
exams must be deemed included because they could have reasonably been
foreseen by the parties at the time he boarded the bus.
While his scholastic record may not be first rate, it is sufficient to
justify the assumption that he could have finished his course and would
have passed the board exams in due time. As regards the income that he
could possibly earn as a doctor, P 300 (accdg. to LTBC witness, Dr. Doria)
could easily be expected as minimum monthly income of Ed C. had he
finished his studies. Compensatory damages should be increased to P
25,000.
PAGE 29

The claim for moral damages could not be granted because Art.
2219 enumerates the instances when moral damages may be recovered
and the present case does not fall under any of them, even par. (2) thereof
because this case is not one of quasi-delict and could not be considered as
such because of a pre-existing contractual relation between Ed C. and
LTBC. Neither could LTBC be liable under Art. 2220 because it did not act
fraudulently or in bad faith. Attorney's fees could also not be granted
because this case does not fall under Art. 2208.
The claim by the parents for actual and compensatory damages
is also without merit because the present action is based upon a breach of
contract of carriage and the parents were not a party thereto, and were not
themselves injured as a result of the collision.
In determining the losses sustained by the dependents and heirs

of Quintos. they consist NOT of the full amount of his earnings but of the
support they would have received from him had he not died. In fixing said
amount, the necessary living expenses should therefore be deducted from
his earnings. The amount recoverable would therefore be the NET
earnings, which is the portion which the beneficiaries would have received.
To this sum must be added P12,000 pursuant to Art. 104 and 107 of the
RPC, in relation to Art. 2206, NCC and P 1,727.95 for the amount actually
spent by the sisters for his medical and burial expenses and
P 2, 500 attorney's fees.
PAL vs CA, 185 SCRA 110
Pan Am vs IAC, 164 SCRA 268

F:
supra.
Baggage containing promotional and advertising
materials for films to be exhibited in the US, clutch bags, barong tagalogs
and personal belongings was lost. PAN AM sought to limit its liability to the
amount specified in the ticket absent a declaration of higher valuation and
the payment of addtl. charges.
Held: On the basis of stipulations printed at the back of the ticket, Pan Am
contends that its liability for the lost baggage of Pangan is limited to $
600.00 ($20 x 30 kilos) as the latter did not declare a higher value for his
baggage and pay the corresponding charges.
The SC applied the ruling in Mendoza vs PAL: Before defendant
could be held to special damages, such as alleged loss of profits on account
of delay or failure of delivery, it must have appeared that he had notice at
the time of delivery to him of the particular circumstances attending the
shipment, and which probably would lead to such special loss if he
defaulted. In order to impose on the defaulting party further liability than for
damages naturally and directly, i.e. in the ordinary course of things, arising
from a breach of contract, such unusual or extraordinary damages must
have been brought within the contemplation of the parties as the probable
result of the breach at the time of or prior to contracting. In the absence of
proof that Pan Am's attention was called to the special circumstances
requiring prompt delivery of Pangan's luggages, petitioner cannot be held
liable for the cancellation of Pangan's contracts as it could not have
reasonably foreseen such eventuality when it accepted the luggage for
transit. Pan Am was not privy to the contracts of Pangan nor was its
attention called to the condition therein requiring delivery of the promotional
and advertising materials on or before a certain date.
No attorney's fees could be awarded since there was no
unjustified refusal by Pan Am to satisfy the passenger's just and valid claim.
Villa Rey Transit vs CA, 31 SCRA 511
F:
Policronio Quintos boarded a Villa Rey Transit bus at Lingayen,
Pangasinan for Manila and was seated on the first seat right side. When
they reached the national highway in Pampanga, the bus frontally hit the
rear side of a bull cart filled with hay. The end of the bamboo pole tied to
the cart hit the windshield and landed on the face of Quintos who was
seated in front. He died of cerebral injuries. His sisters and surviving heirs
brought an action against the bus co. The TC and CA held Villa Rey liable
for P 63,750.00.
Held: The determination of damages due is dependent on 2 factors : (1) on
the no. of years on the basis of which damages shall be computed (life
expectancy); and (2) rate at which the losses sustained should be fixed.
CA determined life expectancy accdg. to the American
Expectancy Table of Mortality; and since Quintos was around 30 years old
at the time of his death : 2/3 x [80 - 30] = 33 1/3 years. The bus co. wanted
to use the 4 year basis adopted in Alcantara vs Surro but the court held that
the case is not controlling as it did not lay down any rule on the length of
time to be used in the computation of damages. In fact, it declared that
there is no fixed basis for determination of indemnity and much is left to the
discretion of the court considering the material damages involved and that
there can be no exact or uniform rule for measuring the value of human life
and the measure of damages cannot be arrived at by precise mathematical
calculations.
Villa Rey impugns the decision on the ground that damages will
have to be paid NOW where most of those sought to be indemnified will be
suffered years later. This argument if offset by the fact that payment of the
award will take place upon the finality of the decision, fixed at the rate of P
2,184 per year and did not anymore compute the potentiality and capacity of
Quintos to increase his future income, upon conclusion of his training, when
he would be promoted and receive a higher salary.
F:
In 1960, Nicanor Padilla boarded the PAL flight from Iloilo to
Manila. The plane crashed on Mt. Baco, Mindoro. The plane, a PI-C133,
was manufactured in 1942 and was acquired by PAL in 1948. It had been
certified airworthy by the Civil Aeronautics Administration. As a result of
her son's
death, Mrs. Padilla demanded P 600,000 as actual and
compensatory damages plus exemplary damages and P 60,000 attorney's
fees.
Prior to his death, Nicanor Padilla was 29 years old, President
and General Manager of Padilla Shipping Co. at Iloilo City, and a legal
assistant of the Padilla Law Office. Upon learning of the death of her son,
she suffered shock and mental anguish, because her son who was still
single was living with her. Nicanor had life insurance of P 20,000, the
proceeds of which were paid to his sister. Eduardo Mate of the Allied
Overseas Trading Co. testified that the deceased was one of the
incorporators of the co. and also its VP with a monthly salary of P 455.
Isaac Reyes, auditor of Padilla Shipping Co., declared that the deceased
was President and General Manager and received a salary of P 1,500 per
month.
The RTC and the CA awarded damages of P 477,000 as
award for the expected income of the deceased, P 10,000 as moral
damages; P 10,000 as attorney's fees and to pay the costs. PAL appealed
the decision since accdg. to it, the court erred in computing the awarded
indemnity based on the life expectancy of the deceased rather than on the
life expectancy of the mother. Accdg. to it, the life expectancy of the
deceased or of the beneficiary, whichever is shorter, is used in computing
for amount of damages.
Held: Under Arts. 1764 and Article 2206 (1), the award of damages for
death is computed on the basis of the life expectancy of the deceased and
not of the beneficiary. In this case, the lower courts determined the
deceased gross annual income to be P 23,100 less P 9,200 as living
expenses, resulting in a net income of P 13,900. The lower court allowed
the deceased a life expectancy of 30 years. Multiplying his annual net
income by his life expectancy of 30 years, the product is P 417,000, which
is the death indemnity due to his mother and only forced heir.
Because of the long delay in this case, the mother already died
without being able to receive the indemnity she deserved. PAL is ordered to
pay her heirs the death indemnity with legal rate of interest of 6% per
annum.
3. Moral
Art. 2217. Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury. Though
incapable of pecuniary computation, moral damages may be recovered
if they are the proximate result of the defendant's wrongful act or
omission.
Art. 2216. No proof of pecuniary loss is necessary in order
that moral, nominal, temperate, liquidated or exemplary damages may
be adjudicated. The assessment of such damages, except liquidated
ones, is left to the discretion of the court, according to the
Art. 2219. Moral damages may be recovered in the following
analogous cases :
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
xxx
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29,
30, 32, 34 and 35.
xxx
PAGE 30

Art. 2220. Willful injury to property may be a legal ground
for awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule applies to
breaches of contract where the defendant acted fraudulently or in bad
faith.
Art. 2206. xxx
(3) The spouses, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for mental
anguish by reason of the death of the deceased.
Fores vs Miranda 105 Phil 266
F:
supra. While the jeepney was descending the Sta. Mesa bridge
at an excessive rate of speed, the driver lost control, causing it to swerve
and hit the bridge wall. Five of the passengers were injured, including the
respondent. The CA awarded moral damages.
Held: Art. 1764 makes it all the more evident that where the injured
passenger does not die, moral damages are not recoverable unless it is
proved that the CC was guilty of malice or bad faith. In the case at bar, there
is no other evidence of such malice to support an award of moral damages.
To award moral damages for breach of contract, without proof of bad faith or
malice on the part of the CC, as required by Art. 2220, would be to violate
the clear provisions of the law, and constitute unwarranted legislation. A
CC's bad faith is not to be lightly inferred from a mere finding that the
contract was breached through negligence of the CC's EEs. The exception
is a mishap resulting to the death of a passenger in which case Art. 1764
makes the CC subject to Art. 2206 (award of moral damages).
Air France vs Carrascoso, 18 SCRA 155
F:
Plaintiff, a civil engineer, was a member of a group of 48 Filipinos
that left Manila for Lourdes on March 30, 1958. Air France, through its
authorized agent, PAL, issued to plaintiff a first class round trip ticket from
Manila to Rome. From Manila to Bangkok, he traveled first class, but at
Bangkok, Air France forced him to vacate the first class seat that he was
occupying because there was a white man who had a better right to the
seat. There was a commotion when plaintiff first refused to give up his seat,
but he was pacified by his fellow Filipino passengers to give up his seat and
transfer to another class.
The lower court sentenced Air France to pay P 25,000 as moral
damages, P 10,000 as exemplary damages, the difference in fare between
first class and tourist class plus P 3,000 for attorney's fees and costs of suit.
The CA reduced the refund from P 393.20 to P 383.20.
Held: Air France contended that the issuance of the first class ticket was no
guarantee that he would have a first class ride, but such would depend upon
the availability of first class seats. The SC ruled that it could not understand
how a reputable firm like Air France could have the indiscretion to give out
tickets it never meant to honor at all. It received the corresponding amount
in payment of first-class tickets and yet it allowed the passenger to be at the
mercy of its EEs. Plaintiff was indeed confirmed for first class all the way to
Rome.
There was contract to furnish plaintiff a first class passage. Said
contract was breached when the CC failed to furnish the first class
transportation at Bangkok. Third, there was bad faith when petitioner's EE
compelled Carrascoso to leave his first class accommodation after he was
already seated and to take a seat in the tourist class by reason of which he
suffered inconvenience, embarrassments and humiliation, thereby causing
him mental anguish, serious anxiety, wounded feelings, and social
humiliation, resulting in moral damages. It is true that the complaint did not
use the term Bad Faith. But the interference of BF is there. The manager
not only prevented Carrascoso from enjoying his right to a first class seat;
worse, he imposed his arbitrary will; he forcibly ejected him from his seat,
made him suffer the humiliation of having to go to the tourist class
compartment -- just to give way to another passenger whose right thereto
has not been established. This is certainly BF. For the willful malevolent act
of CC's manager, the CC-ER must answer. Moral damages are
recoverable.
CC's contract with Carrascoso is attended with public duty. The
expulsion of Carrascoso is a violation of a public duty by the CC -- a case of
quasi-delict. Damages are proper. The manner of ejectment of Carrascoso
fits into the legal precept for awarding exemplary damages in addition to
moral damages.
F:
Plaintiffs made first class reservations with defendant air carrier,
in its Tokyo-SF flight, which reservation was confirmed and first class tickets
issued; but defendant's agent by mistake canceled plaintiff's reservations
and thereafter deliberately withheld from plaintiffs the information, letting
them go on believing that their first class reservations stood valid and
confirmed, expecting some cancellations of bookings would be made before
the flight time, which failed to occur. Upon arrival in Tokyo, only then were
the plaintiffs informed that there were no accommodations for them in the
first class, and they were constrained, due to pressing engagements in the
US, to take the flight as tourist passengers, which they did under protest.
Plaintiffs sued the defendant for moral and exemplary damages. The Rizal
CFI awarded the plaintiffs moral and exemplary damages and attorney's
fees. Upon plaintiff's MFR, said damages were increased in amount.
Held: In so misleading the plaintiffs into purchasing first class tickets in
conviction that they had confirmed reservations when in fact they had none,
defendant willfully and knowingly placed itself into position of having
breached its contract with plaintiffs.
Such actions of the defendant may indeed have been prompted
by nothing more than the promotion of its self-interest in holding on to
plaintiffs as passengers and foreclosing on their chances to seek the
service of other airlines that may have been able to afford to them first class
accommodations. All the same, in legal contemplation, such conduct
already amounts to action in BF. For bad faith means a breach of a known
duty through some motive of interest of ill will. It may not be humiliating to
travel as tourist passengers, but it is humiliating to be compelled to travel as
such, contrary to what is rightfully to be expected from the contractual
undertaking.
Plaintiffs are entitled to moral damages. Considering their
official, political, social and financial standing, they are awarded P 200,000
as moral damages, P 75,000 as exemplary damages all with interest, and
P 50,000 as attorney's fees considering the standing of plaintiff's counsel.
Ortigas vs Lufthansa, 64 SCRA 610
F:
Plaintiff took a first class accommodation on Lufthansa Airlines in
Rome for his trip to Manila, with confirmation of the airlines office, but its EE
on seeing plaintiff's Filipino nationality in his passport, disallowed him to
board the place and his seat was given to a Belgian. Plaintiff having a heart
ailment was advised by his physician to take only a first class seat, but he
was compelled to take an economy seat with a promise of the Lufthansa EE
that plaintiff will be transferred to first class in Cairo and onward to
Hongkong. Upon arrival in Cairo, the promise was not complied with.
Similar false representations were made to him at Dharnan and Calcutta.
Plaintiff sued the airlines for damages. TC awarded plaintiff moral and
exemplary damages.
Held: It is the opinion of the SC that moral damages should be raised from
P 100,000 to P 150,000 and exemplary damages be increased from P
30,000 to P 100,000. It is our considered view that when it comes to
contracts of common carriage, inattention and lack of care on the part of the
CC resulting in the failure of the passenger to be accommodated in the
class contracted for amounts to bad faith or fraud which entitles the
passenger to an award of moral damages in accordance with Art. 2220. In
this case, the breach appears to be of graver nature, since the preference
given to the Belgian passenger over plaintiff was done willfully and in
wanton disregard of plaintiff's rights and his dignity as a human being and as
a Filipino, who may not be discriminated against with impunity. Since both
Alitalia and Lufthansa are members of IATA and are agents of each other,
they are bound by the mistakes committed by a member such as the
mistake of the Alitalia EE to inform Ortigas that he could travel first class
instead of only being waitlisted. The award of higher damages is justified by
the aggravation of the situation when the Lufthansa EE at Rome falsely
noted on Ortigas' ticket that he was traveling economy from Rome to HK
and which was repeated four times. Also taken into consideration was the
heart condition of Ortigas which gave him added apprehension about
traveling economy against the advice of the doctor.
4. Exemplary
Art. 2229. Exemplary or corrective damages are imposed, by
way of example or correction for the public good, in addition to the
moral, temperate, liquidated or compensatory damages.
Art. 2232. In contracts and quasi contracts, the court may
award exemplary damages if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
Lopez vs Pan Am, 16 SCRA 431
PAGE 31

Art. 2233. Exemplary damages cannot be recovered as a
matter of right; the court will decide whether or not they should be
adjudicated.
Art. 2226. Liquidated damages are those agreed upon by the

parties to a contract, to be paid in case of breach thereof.
Art. 1757. The responsibility of a common carrier for the
safety of passengers as required in Arts. 1733 and 1755 cannot be
dispensed with or lessened by stipulation, by the posting of notices,
by statements on tickets, or otherwise.
Mecenas vs CA, 180 SCRA 83

F:
M/V Tacloban City (TC) left Amlan, Negros Oriental bound for
Manila. M/V Don Juan (DJ) left Manila bound for Bacolod. TC had visual
contact of DJ when they were about 5 miles apart and as a precaution, it
was steered to its left. DJ had radar contact of TC when they were four
miles apart and following R18 of the International Rules of the Road when a
collision is possible, it was steered to its right. At 10:30 PM, both collided
as a result of which DJ sank 15 minutes later and hundreds of its
passengers perished.
Petitioners, children of the victims, filed a case against Negros
Navigation, owner of DJ, based on quasi-delict. The RTC awarded
damages of P 400,000 for the death of plaintiffs' parents and P 15,000 for
attorney's fees. The CA modified the award to P 100,000 as actual and
compensatory damages.
Held: Before going into the issue, the SC ruled that the action which was
based on quasi-delict should be appropriately regarded as grounded on
contract, and indulged in the presumption of negligence on the part of the
CC although its EEs may have acted beyond the scope of their authority or
even in violation of its instructions. Its liability would include moral damages
(Art. 1764) and exemplary damages if the defendants acted recklessly or
with gross negligence (Art. 2332).
There is no question that the defendants are negligent. As found
by the CFI, DJ steered to the right while TC continued its course to the left.
There can be no excuse for them not to realize that with such maneuvers,
they will collide. They executed maneuvers inadequately and too late, to
avoid collision. The question is WON the defendants were recklessly or
grossly negligent. The SC ruled in the affirmative.
As for the captain, he was playing mahjong before and up to the
time of the collision. WON he was then off-duty is immaterial; there is, both
realistically speaking and in contemplation of law, no such thing as off-duty
hours for the master of a vessel at sea that is a CC upon whom the law
imposes the duty of extraordinary diligence. When the collision occurred,
the captain failed to supervise his crew in the process of abandoning the
ship and he failed to avail of measures to prevent the too rapid sinking of his
vessel, thus aggravating the casualties.
As for Negros Aviation, in permitting, or in failing to discover and
correct the regularity of the captain's mahjong sessions while DJ was at
sea, it must be deemed grossly negligent. It also sailed with an overload
(1,004 passengers and crewmembers).
As for the failure of TC to follow R18 by turning right instead of
left, the SC ruled that it is not applicable and will not relieve DJ from
responsibility if the collision could have been avoided by proper care and
skill on her part or even by a departure from the rules. DJ is still at fault
when, upon seeing TC turn to its left, it still turned to its right resulting in the
collision.
The SC awarded moral damages of P 307,000 and exemplary
damages of P 307,000 and attorney's fees of P 15,000 together with
actual and compensatory damages for wrongful death of P 126,000 and P
60,000 for a total of P 815,000. Although the petitioners only asked for P
400,000 award of damages granted by the CFI, the SC increased it to P
800,000 following the doctrine that the SC must consider and resolve all
issues which must be decided in order to render substantial justice to the
parties, including issues not explicitly raised by the parties affected.
In discussing the rule of exemplary damages in law, the SC looks
to it as an instrument to serve the ends of law and public policy by
reshaping socially deleterious behaviors, specifically, in the case, to compel
CC to control their EEs, to tame their reckless instincts, and to force them
to take adequate care of human beings and their property.
5. Nominal, Temperate and Liquidated
Art. 2221. Nominal damages are adjudicated in order that a
right of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the purpose
of indemnifying the plaintiff for any loss suffered by him.
Art. 2224. Temperate or moderate damages, which are more
than nominal but less than compensatory damages, may be recovered
when the court finds that some pecuniary loss has been suffered but
its amount cannot, from the nature of the case, be proved with
certainty.
Alitalia vs IAC, 192 SCRA 10

F:
Dr. Felipa Pablo, an associate professor of UP and a research
grantee of the Phil. Atomic Energy Association was invited to take part at a
meeting sponsored by the United Nations in Ispra, Italy. She accepted the
invitation and was then scheduled by the organizers to read her paper. She
was to be the 2nd speaker on the first day of the meeting. She then booked
passage with Alitalia. She arrived in Milan on the day before the meeting in
accordance with the itinerary set for her by Alitalia but her luggage was
delayed as it was in one of the succeeding flights from Rome to Milan.
However, the other flights from Rome did not have her baggage on board.
Her luggage consisted of 2 suitcases-- one for her clothing and personal
items and the other for her scientific papers, slides and other research
material.
Feeling desperate, she went to Rome to try to locate her bags.
She inquired about her suitcases in the international and domestic airports
and filled out the forms required by Alitalia for people in her predicament.
However, her baggage could not be found. Discouraged, she returned to
Manila without attending the meeting in Ispra, Italy.
In Manila, she demanded that Alitalia make reparation for
damages suffered by her. Alitalia offered her free airline tickets which she
rejected while instituting this action. Her bags were located and forwarded
to Ispra but only on the day after her scheduled appearance. As she was no
longer there to accept delivery, her bags were not actually returned to her
until after 11 months. The CFI awarded nominal damages of P 20,000 and
attorney's fees of P 5,000 plus costs of the suit. The IAC increased the
award of nominal damages to P 40,000. The increase was justified as
follows-- considering the negligence committed by defendant, the amount of
P20,000 under present inflationary conditions as awarded to plaintiff as
nominal damages is too little to make up for the plaintiff's frustration and
disappointment in not being able to appear at said conference, and for the
embarrassment and humiliation she suffered from the academic community
for failure to carry out an official mission for which she was singled out by
the faculty to represent her institution and the country.
Alitalia appealed on the following grounds: (1) That the Warsaw
Convention should have been applied to limit Alitalia's liability; and (2) That
there is no warrant in fact or in law for the award of nominal damages and
attorney's fees.
Held: Under the Warsaw Convention, an air carrier is made liable for
damages for: (1) The death, wounding or other bodily injury of a passenger
if the accident causing it took place on board the aircraft or in the course of
its operations of embarking or disembarking; (2)
The destruction, or loss of damage to, any registered luggage or goods, if
the occurrence causing it took place during the carriage by air; and (3)
Delay in the transportation by air of passengers, luggage or goods. The
Convention also limits the liability of the carriers for each passenger to
250,000 francs and for registered baggage and cargo to 250 francs per kg
unless the passenger has declared a higher rate and has paid additional
charges. The Warsaw Convention, however, denies to the carrier availment
of the provisions which exclude or limit his liability, if the damage is caused
by his wilful misconduct or by such default on his part as is considered to be
equivalent to wilful misconduct or if the damage is similarly caused by any
agent of the carrier acting within the scope of his employment. 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. Such proposition is not borne out by the language of the
Convention. The Convention should be deemed a 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. The Convention does not regulate or exclude liability for
other breaches of contract by the carrier. Otherwise, an air carrier would be
exempt from any liability for damages in the event of its absolute refusal, in
bad faith, to comply with a contract of carriage. The Warsaw Convention
has invariably been held inapplicable, or as not restrictive of the carrier's
liability, where there was satisfactory evidence of malice or bad faith
attributable to its officers and employees.
In the case at bar, no bad faith or otherwise improper conduct
may be ascribed to the EEs of Alitalia. Dr. Pablo's luggage was eventually
returned belatedly, but without appreciable damage. The fact is,
PAGE 32

nevertheless, that some special species of injury was caused to her
because Alitalia misplaced her baggage and failed to deliver it to her at the
time appointed -- a breach of its contract of carriage -- with the result that
she was unable to read her paper that she had painstakingly labored over.
The opportunity to claim honor or distinction for herself, for UP and for the
country, was irretrievably lost to her. She also underwent profound distress
and anxiety, which gradually turned into panic and despair, when she
learned that her suitcases were missing.
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. She is not entitled to be
compensated for loss or damage to her luggage since they were ultimately
delivered to her. She is however entitled to nominal damages, which 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 for any loss suffered.
As to the argument that she failed to include a specific claim for
nominal damages in her complaint, it suffices that her general prayer
includes "such other and further just and equitable relief in the premises."
Also absent any claim for actual or compensatory damages (she asked for
moral and exemplary damages and attorney's fees), and with proof of Dr.
Pablo's right being violated, the issue of nominal damages is raised.
The award of P 5,000 for attorney's fees is reasonable. The law
authorizes recovery of attorney's fees where the defendant's act or omission
has compelled the plaintiff to litigate with third person or to incur expenses
to protect his interest, or where the court deems it just and equitable.
Saludo vs CA 207 SCRA 498
F:
After the death of plaintiff's mother Crispina Galdo, Saludo in
Chicago, Pomierski and Son Funeral Home, made the necessary
preparations and arrangements for the shipment of the body from Chicago
to the Philippines. They had the body embalmed and secured a permit from
the Philippine Vice Consul in Chicago. The Phil. Vice Consul sealed the
shipping case on Oct. 26,1976. On the same date, Pomierski brought the
remains to the Continental Mortuary Air Service (CMAS) which made the
necessary arrangements such as flights, transfers,etc. CMAS is a national
service used by undertakers which furnishes the air pouch in which the
casket is enclosed in and they see to it that the remains are taken to the
proper air freigh terminal. CMAS booked the shipment with PAL, through its
agent Air Care International, with Pomierski as shipper and Maria Saludo as
consignee. PAL Airway Bill was issued for the route from Chicago to SF on
board TWA Flight 131 of Oct. 27, 1976, and from SF to Manila, on board
PAL Flight 107 of Oct. 27, 1976, and from Manila to Cebu on board PAL
Flight 149 of Oct. 29, 1976.
Maria Saludo and Saturnino Saludo, children of the deceased
were booked with United Airlines from Chicago to California and with PAL
from California to Manila. When she learned of her mother's arrangements,
she changed reservations from UA to TWA. She watched from the look-out
area but she saw no body being brought on the flight. She reluctantly took
the TWA flight with her cousin's assurance to look into the matter. Upon
arrival in SF, she went to the TWA counter to inquire about her mother's
remains but she was told that they did not know anything about it. She then
called Pomierski who then called CMAS which in a matter of 10 minutes told
him that the remains had been switched with another body and had been
sent to Mexico. Based on the facts, there was a mix-up in Chicago Airport
between the two bodies. Arrangements were made to send the body to
California through Texas. On October 28, 1976, the remains arrived in SF
and was received by PAL at 7:45 p.m. The shipment was immediately
loaded on PAL flight for Manila that same evening and arrived in Manila on
October 30, 1976, a day after its expected arrival on October 29, 1976.
Plaintiffs then filed a case against PAL and TWA before the CFI
of Leyte, praying for the award of actual damages of P 50,000, moral
damages of P 1,000,000, exemplary damages and attorney's fees and costs
of suit. The CFI and CA absolved the two airline companies. Plaintiffs then
appealed the decision on the ff. grounds: (1) That the delay in the delivery of
the remains was due to the fault of the airlines, (2) The one day delay in the
delivery constitutes breach of contract as would entitle them to damages,
(3) That damages are recoverable by petitioners for the humiliating,
arrogant, and indifferent acts of the EEs of TWA and PAL. The airlines
objected on the ground that this petition only raises factual questions. Since
it is precisely the soundness of the inferences or conclusions that may be
drawn from the factual issues which are here being assailed, the issues
raised in the petition indeed warrant a second look.
Held: (1) Petitioners allege that private respondents received the casketed
remains of petitioner's mother on Oct. 26, 1976 as evidenced by the
issuance of the PAL Airway Bill. From said date, private respondents were
charged with the responsibility to exercise extraordinary diligence so much
so that for the alleged switching of the caskets on Oct. 27, 1976, or one day
after private respondents received the cargo, the latter must necessarily be
liable. Petitioners relied on the doctrine that the issuance of the bill of lading
carries the presumption that the goods were delivered to the carrier issuing
the bill, for immediate shipment, and it is nowhere questioned that a bill of
lading is prima facie evidence of the receipt of the goods by the carrier. A
bill of lading is a written acknowledgment of the receipt of the goods and an
agreement to transport and deliver them at a specified place to a person
named or on his order. A bill of lading is a receipt as to the quantity and
description of the goods shipped and a contract to transport the goods to
the consignee or other person therein designated, on the terms specified in
such instrument.
SC: An airway bill estops the carrier from denying receipt of
goods. However, as between the shipper and the carrier, when no goods
have been delivered for shipment no recitals in the bill can estop the carrier
from showing the true facts. We must therefore allow the airline companies
to explain, why, despite the issuance of the airway bill and the date thereof,
they deny having received the remains of Saludo on Oct. 26, 1976.
As found by the CA, the airway bill was issued, not as evidence
of receipt of delivery but merely as confirmation for the booking made for the
SF-Manila flight scheduled on October 27, 1976. It was not until Oct. 28
that PAL received physical delivery of the body at SF. The extraordinary
responsibility of CC begins from the time the goods are delivered to the
carrier. This responsibility remains in force even when they are temporarily
unloaded or stored in transit, unless the shipper exercises the right of
stoppage in transitu, and terminates ony after the lapse of a reasonable time
for the acceptance of the goods by the consignee or other person entitled to
receive them. For such duty to commence, there must in fact have been
delivery of the cargo subject of the contract of carriage. Only when such
fact of delivery has been unequivocally esablished can the reqt. of
extraordinary responsibility arise.
As found by the CA, the body was really received by PAL on Oct.
28, 1976 and it was from such date that it became responsible for the
agreed cargo under the airway bill. Consequently, for the switching of
caskets prior thereto which was not caused by them and subsequent events
caused thereby, PAL cannot be held liable.
(2) Petitioners allege that even assuming CMAS was at fault, PAL would still
be liable because whoever brought the cargo to the airport or loaded it on
the plane did so as agent of PAL.
SC: This contention is without merit. When the cargo was
received from CMAS, Air Care Intl, PAL's agent and TWA had no way of
determining its actual contents, since the casket was hermetically sealed by
the Philippine Vice-Consul. They had to rely on the information given by
CMAS. No amount of inspection by the airlines could have guarded against
the switching that had taken place. They had no authority to unseal and
open the casket. It is the right of the carrier to require good faith on the part
of those persons who deliver goods to be carried by it. In the absence of
more definite information, the carrier has the right to accept shipper's marks
as to the contents of the package offered for transportation and is not bound
to inquire particularly about them. It can safely be said that a CC is entitled
to fair representation of the nature and value of the goods to be carried, with
the concomitant right to rely thereon, and that a carrier has no obligation to
inquire into the correctness or sufficiency of such information. The
consequent duty to conduct an inspection arises in the event that there
should be reason to doubt the veracity of such representations.
In this case, private respondents had no reason to doubt the truth
of the shipper's representations. The airway bill was issued on the basis of
such representations.
Neither can they be held accountable on the basis of petitioner's
theory that whoever brought the cargo to the airport or loaded it on the plane
did so as an agent of private respondents, so that even if CMAS was indeed
at fault, the liability would be attributed to the airlines. CMAS was not an
agent of private respondents. It was hired to handle all the necessary
shipping arrangements for the transportation of the remains. CMAS may be
classified as a forwarder, which is regarded as the agent of the shipper
(Pomierski) and not of the crrier. It merely contracts for the transportation of
goods by carriers and has no interest in the freight but receives
compensation from the shipper as his agent.
The facts of the case would point to CMAS as the culprit. In fact,
even the petitioners wrote CMAS entertaining serious doubts as to whether
they were responsible for the mix-up. But the court cannot rule on the
possible liability of CMAS as such is not at issue in this case and there has
not been convincing evidence on the matter.
(3) Petitioners contended that TWA by agreeing to transport the remains, it
made itself a party to the contract of carriage nad was therefore bound by
the airway bill. When TWA shipped the remains ten hours earlier than
scheduled, it allegedly violated the terms of the airway bill which
compounded, if not directly caused, the switching of the caskets. The EEs
PAGE 33

of TWA presumably caused the mix-up by loading the wrong casket on the
plane. TWA must be presumed negligent unless such is rebutted. TWA
contends that it faithfully complied with the obligations under the airway bill.
Said faithful compliance was not affected by the fact that the remains were
shipped on an earlier flight as there was no fixed time for completion of
carriage stipulated on. TWA did not undertake to carry the cargo aboard any
specified aircraft, in view of the condition on the back of the airway bill,
which provides that " xxx no time is fixed for the completion of the carriage,
xxx and that Carrier may without notice substitute alternate carriers or
aircrafts xxx."
SC : TWA's contention is tenable. TWA can use substitute
aircraft, even without notice and without the assumption of any obligation
whatsoever to carry the goods on any specified aircraft. This is clearly
sanctioned by the contract of carriage. When a CC undertakes to convey
goods, the law implies a contract that they shall be delivered at destination
within a reasonable time, in the absence of any agreement as to the time of
delivery. In case at bar, no special contract for prompt delivery was entered
into by the parties.
Condition No. 5 is binding on the plaintiff even if it is printed at
the back of the airway bill. This is in the nature of a contract of adhesion.
However, such condition only serves to insulate the carrier from liability in
those instances when the changes in routes, flights and schedules are
clearly justified by the peculiar circumstances of a particular cae, or by
general transportation practices, customs and usages, or by contingencies,
emergencies in aviation, such as weather turbulence, mechanical failure,
reqts. of national security and the like.
In this case, the delay in the
delivery of the remains cannot be attributed to the fault, negligence or
malice of private respondents. When TWA shipped the remains on an
earlier flight, it did so in the exercise of sound discretion and with
reasonable prudence -- they wanted to assure that the shipment would be
received in SF in sufficient time for transfer to PAL. TWA knew of the
urgency of the shipment due to the notation on the airway bill : "xxx Please
return bag first available flight to SFO."
(4) Petitioners alleged that private respondents are liable for tort on account
of humiliating, arrogant and indifferent acts of their officers and personnel.
They contended that there was no reason for the personnel to disclaim
knowledge of the arrival or whereabouts of the body other than their sheer
arrogance, indifference and extreme insensitivity to their feelings.
SC: It affirmed the CA's findings that TWA EEs did not deal with
petitioners in a grossly humiliating, arrogant or indifferent manner as to
amount to BF or malice. It must be pointed out that the lamentable
actuations of TWA's EEs leave much to be desired, particularly so given the
grief of petitioners, their tension and anxiety wrought by the confusion and
the fear about where their mother's remains were. Airline companies are
sternly admonished to strictly require their personnel to be more
accommodating to passengers and the general public.
Petitioners agonized for 5 hours unattended to and without any
assurance from the EEs of TWA. Common sense should have dictated that
they exert a little extra effort in making more extensive inquiry, by
themselves or through their superiors, rather than just shrug off the
promblem with a callous and uncaring remark that they had no knowledge
about it.
The foregoing observations do not appear to be applicable to PAl
and its EEs.
(5) In the absence of strong and positive evidence of fraud, malice or bad
faith, moral damages cannot be awarded. Neither can exemplary damages
nor attorney's fees, in the absence of proof that defendants acted with
malice, fraud or BF. The censurable conduct of TWA's EEs cannot be said
to have approximated the dimensions of fraud, malice or BF. Nonetheless,
the facts show that petitioners' right to be treated with due courtesy in
accordance with the degree of diligence required by law to be exercised by
every common carrier was violated by TWA and this entitles them, at least,
to nominal damages from TWA alone. Arts. 2221 and 2222 of the Civil Code
makes it clear that nominal damages are not intended for indemnification of
loss suffered but for the vindication or recognition of a right violated or
invaded. They are recoverable where some injury has been done but the
amount of which the evidence fails to show, the assessment of damages
being left to the discretion of the court accdg. to the circumstances of the
case. Nominal damages of P 40,000 to be paid by TWA was awarded in
favor of petitioners as a reasonable amount in the circumstances.
Art. 2208. In the absence of stipulation, attorney's fees and

expenses of litigation, other than judicial costs, cannot be recovered,
except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to protect
his interest;
(3) In criminal cases of malicious prosecution against the
plaintiff;
(4) In case of a clearly unfounded civil action or proceeding
against the plaintiff;
(5) Where the defendant acted in gross and evident BF in
refusing to satisfy the plaintiff's plainly valid, just and demandable
claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages or household
helpers, laboreres and skilled workers;
(8) In actions for indemnity under workmen's compensation
and employer's liability laws;
(9) In a separate civil action to recover civil liability arising
from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other cases where the court deems it just and
equitable that attorney's fees and expenses of litigation should be
recovered.
In all cases, the attorney's fees and expenses of litigation
must be reasonable.
Art. 2210. Interest may, in the discretion of the court, be
allowed upon damages awarded for breach of contract.
4 Agbayani:
Damages arising from death; factors to be considered
1. number of years on the basis of which the damages shall be
computed
2. the rate at which the losses sustained should be fixed. In the
determination of the losses or damages sustained by dependents and heirs
of the deceased, said damages consist not of the full amount of his
earnings, but of the support they received or would have received from him
had he not died in consequence of the negligence of defendant.
In fixing the amount of support, only net earnings are to be
considered-- total earnings less expenses necessary in the creation of such
earnings less living and incidental expenses
Damages recoverable when death occurs due to commission of
crime.-- (1) indemnity for the death of victim (P 50T); (2) indemnity for loss
of earning capacity of the deceased; (3) moral damages; (4) exemplary
damages; (5) attorney's fees and expenses of litigation; and (6) interest.
Indemnity arising from the fact of death is fixed whereas the others are still
subject to the determination of the court based on evidence presented;
indemnity for death is distinct and separate from the other forms of
indemnity
Common carrier not liable for moral damages to passenger injured
due to negligence of driver.-- A CC's bad faith is not to be lightly inferred
from a mere finding that the contract was breached through negligence of
the CC's employees (Fores vs Miranda)
Extent of liability of air carrier for death of passenger:
(1) where there was no satisfactory explanation on the part of PAL as to
how and why the accident occurred, the presumption is that it was at fault,
under Art. 1756
(2) liability for lost earnings are the deceased passenger's net
earnings during his expected length of life based on accepted mortality
tables (compensatory damages)
(3) PAL is not liable for exemplary damages where it was not
proven that it acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner
[Davila vs PAL]
Nature of liability of air carrier to its passengers:
[Zulueta vs Pan Am]
6. Attorney's Fees and Interest

F:
Filipino passenger who went to relieve himself was berated by
the captain for coming back late to the plane and was called a monkey.
PAGE 34

Held: A passenger is entitled to courteous treatment from the carrier and its
EEs and failure of the CC to comply with this obligation will entitle the
passenger to damages.
The relation between CC and passenger involves special and
peculiar obligations and duties, differing in kind and degree, from those of
almost every legal or contractual relation. On account of the peculiar
situation of the parties, the law implies a promise and imposes upon the CC
the corresponding duty of protection and courteous treatment. Therefore,
the CC is under the absolute duty of protecting his passengers from assault
or insult by himself or his servants.
A contract to transport passengers is quite different in kind and
degree from any other contractual relation. And this, because of the relation
which an air carrier sustains with the public. Its business is mainly with the
traveling public. It invites people to avail 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 CC's employees naturally
could give ground for an action for damages.
Passengers do not contract merely for transportation. They have
a right to be treated by the CC's EEs 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 rude or discourteous conduct on the part of
EEs towards a passenger gives the latter an action for damages against the
CC.
Damages caused by CC on third persons.-- Negligence refers to the
failure to observe for the protection of the interests of another person that
degree of care, precaution, and vigilance which the circumstances justify
demand, whereby such other person suffers injury
Common carrier is liable only for damages that are natural and
probable consequence of breach of contract.-- Where the CC is guilty of
a breach of contract, but acted in GF, it is liable only for the natural and
probable consequences of the breach and which the parties had foreseen or
could have reasonably foreseen at the time the obligation was constituted
(includes medical, hospital expenses)
Actual damages.-- (1) lost income.-- includes income to be earned by the
injured passenger or deceased passenger had he finished his course (could
have been foreseen)
(2) sum being carried by the deceased passenger which was lost
(3) funeral expenses
(4) attorney's fees
(5) loss of merchandise carried by the deceased
(6) loss of baggage and personal belongings
Exception to rule that CC is not liable for moral damages in breach of
contract:
(1) where the mishap results in death of the passenger
(2) where it is proved that the CC was guilty of fraud or BF, even
if death does not result
Ex. where because of the BF of the CC,
the passenger suffered social humiliation, wounded feelings, serious anxiety
and mental anguish
Under 2206, the heirs of the deceased passenger may demand
moral damages in an amount commensurate with the mental anguish
suffered by them
xxx
In a case where the passenger suffers physical injuries because
of the CC's injuries, he cannot recover moral damages for such breach of
contract since it does not fall under any of the cases where moral damages
are recoverable under Art. 2219
xxx
In determining the amount of moral damages, the TC may
consider the nature and extent of the injuries and the suffering occasioned
by them and the duration thereof. The appellate court should not interfere
unless such is palpably and scandalously excessive so as to indicate that it
was the result of passion, prejudice or corruption on the part of the TC
BF justifying moral damages must be in the securing, execution
and enforcement of contract of carriage. BF cannot be imputed but must be
alleged and proved; mere carelessness of the CC's driver does not per se
constitute or justify an inference of malice or BF on the part of the CC
xxx
CC is subsidiarily liable for moral damages in actions ex delicto
or where the action is based upon its liability arising from a crime
xxx
CC is not ordinarily liable for exemplary or corrective damages
based upon the wrongful act of its EE or driver where it did not have
anything to do with the wrongful act or had not previously authorized or
subsequently ratified such act (Art. 2332) This cannot be presumed but
must be proven by evidence; exemplary damages cannot be recovered as a

matter of right
Nominal and exemplary damages awarded for willful breach of
contract committed through agent or EE
xxx
Where the CC has incurred in delay in the delivery of the luggage
of the offended party, but it had not acted in BF nor been guilty of gross
negligence, the offended party is not entitled to moral nor exemplary
damages but only to the limited amount printed in the plane ticket where the
offended party had not declared a higher value nor paid addtl. transpo
charges
Liability of air carriers for moral and exemplary damages.-- [Ortigas vs
Lufthansa] (1) Under the pool arrangement among different airlines of the
IATA agreement of which Alitalia and Lufthansa are signatories, both airlines
are constituted as agents of each other in the issuing of tickets and other
matters pertaining to their relations with those who would need their
services.
(2) When it comes to contracts of common carriage, inattention
and lack of care on the part of the CC resulting in the failure of the
passenger to be accommodated in the class contracted for amounts to BF
or fraud which entitles the passenger to the award of moral damages.
Where the passenger's seat was given to a white passenger, there is willful
breach giving rise to an action for moral damages.
(3) Exemplary damages were awarded. Defendant as an airline
should be made to pay an amount that can really serve as a deterrent
against a seeming pattern of indifference and unconcern, and discrimination
for racial reasons, discernible in the treatment of air passengers.
[PAL vs CA, 106 SCRA 391] The duty to exercise the utmost diligence on
the part of the CC is for the safety of passengers as well as for the
members of the crew or the complement operating the carrier. Any
omission, lapse or neglect thereof will certainly result to the damage,
prejudice, injuries and even death to all aboard the plane, passengers, and
crew members alike.
xxx
[KLM vs CA] A provision in passage ticket that carriage by successive air
carriers is to be regarded as a single operation makes the ticket-issuing
carrier liable for tortious conduct of other carriers
xxx
Exemplary damages may be awarded where the vehicle involved
in the accident operated under the kabit system, which is a pernicious
system in violation of law and which is in fraud of the traveling public which
has a right to expect that the holder of the certificate of convenience be the
one to actually operate his transport line.
xxx
CC is liable for nominal damages for its failure to bring
passengers to their destination which is in violatin of their right as
passengers.
xxx
The CC is liable for the negligence of his driver in case of breach
of contract and cannot avail of the defense that he exercised due diligence
in the employment of his driver. The action for breach of contract imposes
on the CC a presumption of liability upon mere proof of injury to the
passenger.
xxx
An action for damages against CC for breach of contract is
primary and independent and does not depend upon the previous conviction
of the driver or EE. Indemnification in a criminal prosecution is distinct from
that awarded as damages in a civil action.
Other Principles :
The offended party has the option between an action for
enforcement of civil liability based on culpa criminal and an action for
recovery of damages based on culpa aquiliana. Responsibility for
negligence under the Civil Code is entirely separate from negligence under
the Penal Code.
An independent civil action based on quasi-delict against the ERoperator of a negligent driver cannot be suspended by the filing of a criminal
action against the driver.
Death of driver is not a hindrance to a separate quasi-delict
action against the CC-employer
PAGE 35

There is no error in awarding civil damages against a driver in a
criminal case even when a separate civil action was filed against the ER.
Culpa contractual and an act or omission punishable by law are two distinct
sources of obligation.
III. CODE OF COMMERCE PROVISIONS ON OVERLAND
TRANSPORTATION
COMMERCIAL CONTRACTS FOR TRANSPORTATION OVERLAND
A. Scope of Overland Transportation
Nature : (1) each bill is a contract in itself and the parties are bound by its
terms
(2) a bill of lading is also a receipt
(3) it is also a symbol of the goods covered by it
A bill of lading is also a document of title. A document of title is
any document used in the ordinary course of business in the sale or transfer
of goods, as proof of the possession or control of goods, or authorizing or
purporting to authorize the possessor of the document to transfer or receive,
either by indorsement or by delivery, goods represented by such document.
(b) Form, Contents
B. Nature of Contract
Art. 349. A contract of transportation by land or waterways
of any kind shall be considered commercial:
1.
When it involves merchandise or any object of
commerce.
2. When, no matter what its object may be, the carrier is a
merchant or is customarily [habitually] engaged in transportation for
the public.
Requisites for a contract of transportation by land or water to be
commercial :
(1) transportation of merchandise is always commercial
(2) transportation of person or news is commercial only when the
CC is a merchant or is habitually engaged in transportation for the public
* principal requirement : the CC is a merchant or is habitually
engaged in transportation for the public; the object carried is of little
importance
A contract of air transportation may be regarded as commercial
since it is analogous to land and water transportation. The reason for its
non-inclusion in the Code of Commerce was that at the time of its
promulgation, air transportation on a commercial basis was not yet known.
C. Effect of Civil Code
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. (New Civil Code.)
Art. 350. The shipper as well as the carrier of merchandise

and goods may mutually demand of each other the issuance of a bill of
lading in which there shall be stated:
1. The name, surname, and domicile of the shipper.
2. The name, surname, and domicile of the carrier.
3. The name, surname, and domicile of the person to
whom or to whose order the goods are addressed, or whether they are
to be delivered to the bearer of the said bill.
4. A description of the goods, stating their generic character, their weight, and the external marks or signs of the packages
containing the same.
5. The cost of the transportation.
6. The date of which the shipment is made.
7. The place of the delivery to the carrier.
8. The place and time at which the delivery is to be made
to the consignee.
9. The damages to be paid by the carrier in case of delay,
if any agreement is made on this point.
Art. 351. In transportation made by railroads or other enterprises
which are subject to schedules or the time fixed by regulations, it shall
be sufficient that the bills of lading or the declarations of shipment
furnished by the shipper refer, with respect to the rate, terms, and
special conditions of the transportation, to the schedules and
regulations, the application of which he requests; and should no
schedule be determined, the carrier must apply the rate of the
merchandise paying the lowest, with the conditions inherent therein,
always including such statement or reference to them in the bill of
lading which he delivers to the shipper.
Art. 2270. The following laws and regulations are hereby

repealed:
(2) The provisions of the Code of Commerce governing
sales, partnership, agency, loan, deposit and guaranty;
(4) All laws, Acts, parts of Acts, rules of court, executive
orders, and administrative regulations which are inconsistent with this
Code. (Ibid.)
Many of the items required in a bill of lading may be omitted with much
advantage to commerce, which aims to have the greatest number of
transactions in the last possible time especially in cases where there are
tariffs or regulations issued by the carrier company. In this case, the
circumstances relative to price, term and conditions of carriage may be
omitted and simple reference be made to the tariff and regulations under
which the transportation is to be made. (Art. 351)
There is now no distinction between a transportation contract of a

CC under the Civil Code and a transportation contract under the Code of
Commerce
The New Civil Code does not expressly repeal the provisions of
the Code of Commerce on overland transportation; it makes such provisions
suppletory to the provisions of the Civil Code on CCs.
The form of the bill of lading is not material : if it contains an

acknowledgment by the carrier of the receipt of goods for transportation, it is
in legal effect, a bill of lading
A ticket issued by a carrier to a passenger is not only a receipt
for the fare paid but is the contract between the passenger and the carrier,
of the passenger's right to ride in the CC's vehicle
D. Contract of Carriage
1. Bill of Lading
(a) Definition, Subject Matter
Art. 352. The bills of lading or tickets in cases of transportation of passengers may be diverse, one for persons and another
for baggage; but all of them shall bear the name of the carrier, the date
of shipment, the point of departure and arrival, the cost, and with
regard to the baggage, the number and weight of the packages, with
such other statements which may be necessary for their easy
identification.
A bill of lading may defined as a written acknowledgment 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 order. It comprehends all
methods of transportation.
Classes of bills of lading :

1. negotiable B/L - where it is stated that the goods will be
delivered to the bearer, or to the order of any person named in such
document
2. non-negotiable B/L - where the goods are to be delivered to a
specified person
3. clean B/L - does not indicate any defect in the goods
4. foul B/L - indicates that the goods covered by it are in bad
condition
5. spent B/L - covers goods that have already been delivered by
the CC without a surrender of a signed copy of the B/L; the subsequent
delivery of the spent B/L cannot give to the buyer of it any actual control of
the goods, or anything which can fairly be called delivery
6. through B/L - issued by the CC who is obliged to use the
facilities of other carriers as well as his own facilities for the purpose of
transporting the goods from the city of the seller to the city of the buyer,
which B/L is honored by the subsequent interested carriers who do not issue
their own ladings
PAGE 36

7. on board B/L - states that the goods have been received on
board the vessels which is to carry the goods
8. received for shipment B/L - states that the goods have been
received for shipment with or w/o specifying the vessel by which the goods
are to be shipped; issued when conditions are not normal and there is an
insufficiency of shipping space
9. custody B/L - issued by the CC to whom the goods have been
delivered for shipment but the steamer indicated in the B/L which is to carry
the goods has not yet reached the port where the goods are held for
shipment
10. port B/L - issued by the CC to whom the goods have been
delivered and the steamer indicated in the B/L by which the goods are to be
shipped is already in the port where the goods are held for shipment
Art. 356. Carriers may refuse to accept packages which

appear unfit for transportation; and if said transportation is to be made
by railway, and the shipment is insisted on, the company shall carry
them, being exempt from all liability if its objections are so stated in
the bill of lading.
CC cannot ordinarily refuse to carry a particular class of goods to the
prejudice of the traffic in those goods
exception : when the goods or packages are unfit for transportation
--> if transpo is insisted upon, railroads cannot refuse to carry them, but
they shall be exempt from all responsibility if their objections are made to
appear in the B/L
Negotiation of Bills by delivery/ by indorsement

Effect of fraud, accident on validity of negotiation : not impaired
where the person to whom the bill was negotiated paid value thereof in GF
without notice of the breach of duty or loss, theft, fraud, accident, mistake,
duress or conversion
Who may negotiate? owner; any person to whom possession or
custody of the bill has been entrusted by the owner
Rights acquired:
1. such title to the goods as the person negotiating the bill had or
had ability to convey to a buyer in good faith for value
2. direct obligation of the CC issuing the bill to hold possession of
the goods for him according to the terms of the B/L as fully as if such CC
contracted directly with him
Transfer of non-negotiable B/L
Rights acquired:
1. as against the transferor, title to the goods subject to the terms
of any agreement with the transferor
2. right to notify the CC who issued the bill and thereby acquire
the direct obligations of such CC to hold possession of the goods for him
accdg to the terms of the document; prior to notification of the CC, the title
of the transferee may be defeated by levy upon the goods or a subsequent
purchaser from the transferor of a subsequent sale of the goods by a
transferor
(c) Function
Art. 353. The legal basis of the contract between the shipper
and the carrier shall be the bills of lading, by the contents of which all
disputes which may arise with regard to their execution and fulfillment
shall be decided, no exceptions being admissible other than forgery or
material errors in the drafting thereof.
After the contract has been complied with, the bill of lading
shall be returned to the carrier who may have issued it, and by virtue
of the exchange of this title for the article transported, the respective
obligations and actions shall be considered canceled, unless the same
act the claims which the contracting parties desire to reserve are
reduced to writing, exception being made of the provisions of Article
366.
In case the consignee, upon receiving the goods, cannot
return the bill of lading subscribed by the carrier, due to its loss or for
any other cause, he shall give said carrier a receipt for the goods
delivered, this receipt producing the same effect as the return of the
bill of lading.
3. Doubtful declaration of contents

Art. 357. If by reason of well-founded suspicions of falsity in
the declaration of the contents of a package, the carrier should decide
to examine it, he shall do so before witnesses, in the presence of the
shipper or of the consignee.
Should the shipper or consignee cited not appear, the
examinations shall be made before a notary, who shall draft a certificate of the result of the examination, for such purposes as may be
proper.
If the declaration of the shipper should be correct, the
expenses caused by the examination and those of carefully repacking
the packages shall be defrayed by the carrier, and in a contrary case by
the shipper.
If the CC has a well-founded suspicion of falsity in the declaration as to the
contents of a package, he may examine it --> he must follow the procedure
under 357
4. No bill of lading
Art. 354. In the absence of a bill of lading the respective
claims of the parties shall be decided by the legal proofs that each one
may submit in support of his claims, in accordance with the general
provisions established in this Code for commercial contracts.
Art. 351. In transportation made by railroads or other
enterprises which are subject to schedules or the time fixed by
regulations, it shall be sufficient that the bills of lading or the
declarations of shipment furnished by the shipper refer, with respect to
the rate, terms, and special conditions of the transportation, to the
schedules and regulations, the application of which he requests; and
should no schedule be determined, the carrier must apply the rate of
the merchandise paying the lowest, with the conditions inherent
therein, always including such statement or reference to them in the
bill of lading which he delivers to the shipper.
Bill not essential to contract : While under 350, the shipper and the CC may
mutually demand that a B/L is made, it is not obligatory. The fact that a B/L
is not issued does not preclude the existence of a contract of transpo.
Provided there is a meeting of the minds and from such meeting arise rights
and obligations, there should be no limitations as to form.
The B/L is not essential to the contract, although it may become
obligatory by reason of the regulations of companies or as a condition
imposed in the contract by agreement of the parties themselves
Where no B/L is issued, the disputes between the parties shall be
decided accdg. to the rules laid down in Art. 354
E. Responsibility of the Carrier
B/L constitutes the legal evidence of the contract of transportation --> all
disputes between the parties regarding the execution and performance of
the contract shall be decided by the contents of the B/L issued by the CC
--> the law admits no exceptions other than falsity and material error in the
drafting of the B/L
As a contract expressing the terms and conditions upon which
the property is to be transported, it is to be regarded as merging all prior and
contemporaneous agreements of the parties, and in the absence of fraud,
concealment or mistake, its terms or legal import, when free from ambiguity
cannot be explained nor added to by parol (Parol Evidence Rule)
1. When it commences
Art. 355. The liability of the carrier shall begin from the
moment he receives the merchandise, in person or through a person
entrusted therewith in the place indicated for their reception.
The responsibility of the CC commences from the moment he receives the
merchandise --> the delivery must be made to him personally or through his
duly authorized agent, and at the place indicated for receiving the
merchandise
2. Refusal to Transport
2. Route
PAGE 37

Art. 359. If there should be an agreement between the
shipper and the carrier with regard to the road over which the
transportation is to be made, the carrier may not change the route,
unless obliged to do so by force majeure; and should he do so without
such cause, he shall be liable for any damage which may be suffered
by the goods transported for any other cause whatsoever, besides
paying the amount which may have been stipulated for such a case.
When on account of said force majeure the carrier is obliged
to take another route, causing an increase in the transportation
charges, he shall be reimbursed for said increase after formal proof
thereof.
Where there is an agreed route, the CC shall be liable for losses due not
only to the change of route but also to other causes, together with the
indemnity agreed upon --> the CC may not avail of the contract limiting his
liability in case of unjustified change of route

any of the ff. causes only:
civil;
(4) The character of the goods or defects in the packing or in
the containers;
(5) Order or act of competent public authority. (New Civil
Code.)
Art. 1735. In all cases other than those mentioned in Nos.
1,2,3,4, and 5 of the preceding article, if the goods are lost, destroyed
or deteriorated, CCs are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary
diligence as required in Art. 1733. (Ibid.)
Where there is no agreed route, the carrier must select one which
may be the shortest, least expensive and practically passable
4. Delivery
3. Care of Goods
(a) Condition of Goods
Article 361. The merchandise shall be transported at the risk

and venture of the shipper, if the contrary was not expressly stipulated.
Therefore, all damages and impairment suffered by the
goods during the transportation, by reason of accident, force majeure,
or by virtue of the nature or defect of the articles, shall be for the
account and risk of the shipper.
The proof of these accidents is incumbent on the carrier.
When goods are delivered on board a ship in good order and condition, and
the shipper-owner delivers them to the shipper in bad order and condition, it
then devolves upon the shipowner to both allege and prove that the goods
were damaged by reason of some fact which legally exempts him from
liability
The shipper will suffer losses and deteriorations arising from
fortuitous event, force majeure, or inherent nature and defects of the goods
(at the risk and venture of the shipper)
It does not mean that the CC is free from liability for losses and
deterioration arising from his negligence or fault, which is presumed
Relate this with Art. 1734 and 1735 of the Civil Code
Art. 362. The carrier, however, shall be liable for the losses
and damages arising from the causes mentioned in the foregoing
article if it is proved that they occurred on account of his negligence
or because he did not take the precautions usually adopted by careful
persons, unless the shipper committed fraud in the bill of lading,
making him believe that the goods were of a class or quality different
from what they really were.
If, notwithstanding the precaution referred to in this article,
the goods transported run the risk of being lost on account of the
nature or by reason of an unavoidable accident, there being no time
for the owners to dispose of the same, the carrier shall proceed to their
sale, placing them for this purpose at the disposal of the judicial
authority or of the officials determined by special provisions.
Burden of proof : the CC has the burden of proving that the injury was
occasioned by one of the excepted causes
The shipper then has the burden to prove that although the injury
may have been occasioned by one of the excepted causes, yet still the CC
is responsible if the injury might have been avoided by the exercise of
reasonable skill and attention on his part
Art. 362 is in consonance with Art. 1735, NCC --> except that
under 1732, proof of extra-o diligence is required and not just ordinary
diligence as implied under 362
Where goods run risk of loss due to their nature, Art. 362
provides for the remedy of sale by the CC of the goods, placing them for the
purpose at the disposal of the judicial authority or of the officials designated
by special provisions
Art. 363. With the exception of the cases prescribed in the

second paragraph of Article 361, the carrier shall be obliged to deliver
the goods transported in the same condition in which, according to the
bill of lading, they were at the time of their receipt, without any damage
or impairment, and should he not do so, he shall be obliged to pay the
value of the goods not delivered at the point where they should have
been and at the time the delivery should have taken place.
If part of the goods transported should be delivered the
consignee may refuse to receive them, when he proves that he cannot
make use thereof without the others.
Duty to deliver goods : duty to deliver the goods in the same condition in
which accdg. to the B/L they were found at the time they were received,
without damage or impairment --> otherwise, the CC is liable for damages
Partial delivery:
The consignee may refuse to receive the goods
delivered, if he can prove that he cannot make use of them independently of
those not delivered --> true solution depends upon the economic use which
the goods transported have (consignee cannot be arbitrary and must justify
his determination)
Estoppel of shipper by laches : neglect or delay of shipper to
demand immediately, or within a reasonable time, the return of the
merchandise shipped or its value in case of non-delivery constitutes
estoppel by laches
Places the CC at a disadvantageous position to show that it had
fulfilled what it had undertaken; makes it difficult for the CC to prove delivery
Art. 364. If the effect of the damage referred to in Article 361
should be only a reduction in the value of the goods, the obligation of
the carrier shall be reduced to the payment of the amount of said
reduction in value, after appraisal by experts.
Where all the goods are delivered but damage is to such an
extent that their value is diminished, the obligation of the CC shall be
reduced to the payment of the amount which, in the judgment of experts,
constitute such difference in value --> subject of course to other damages
under the NCC
Art. 365. If, on account of the damage, the goods are
rendered useless for sale or consumption for the use for which they
are properly destined the consignee shall not be bound to receive
them, and may leave them in the hands of the carrier, demanding
payment of their value at the current market price that day.
If among the goods damages there should be some in good
condition and without any defect whatsoever, the foregoing provision
shall be applicable with regard to the damaged ones, and the
consignee shall receive those which are sound, this separation being
made by distinct and separate articles, no object being divided for the
purpose, unless the consignee proves the impossibility of
conveniently making use thereof in this form.
The same provision shall be applied to merchandise in bales
or packages, with distinction of the packages which appear sound.
PAGE 38
Where damage renders the goods useless for sale and consumption for the
purposes for which they are properly destined:
1. if the damage affects all goods, the consignee may abandon
all the goods to the CC who shall pay the corresponding damages
2. if the damage affects only some of the goods, the consignee
may abandon only the damaged goods --> but if the consignee can prove
that it is impossible to conveniently use the undamaged goods in that form,
without the damaged goods, the law authorizes the consignee to abandon
all the goods
Art. 366. Within the twenty-four hours following the receipt
of the merchandise a claim may be made against the carrier on
account of damage or average found upon opening the packages,
provided that the indications of the damage or average giving rise to
the claim cannot be ascertained from the exterior of said packages, in
which case said claim shall only be admitted at the time of the receipt
of the packages.
goods transported were delivered.
A a stipulation in the B/L providing for a shorter period than the

statutory period within which to bring action for breach is valid --> does
not in any way defeat the right to recover but merely requires that said right
be asserted by action at an earlier period (filing of claims is different from
filing of suits)
Art. 367. If there should occur doubts and disputes between
the consignee and the carrier with regard to the condition of goods
transported at the time of their delivery to the former, the said goods
shall be examined by experts appointed by the parties, and in case of
disagreement, a third one appointed by the judicial authority, the result
of the examination being reduced to writing; and if the persons
interested should not agree to the report of the experts and could not
settle their disputes, said judicial authority shall order the deposit of
the merchandise in a safe warehouse, and the parties interested shall
make use of their rights in the proper manner.
If doubts and disputes should arise between the consignee and the CC with
respect to the condition of the goods transported at the time of the delivery,
Art. 367 shall govern --> expert opinion on the matter is not conclusive on
the parties
(b) To Whom Delivery Made
In case of damaged goods, the damage may either be (1) ascertainable only
by opening of the packages, or (2) ascertainable from the outside part of the
package
In Case 1, the claim against the CC for damages must be made
within 24 hours following the receipt of the merchandise
In Case 2, the claim must be made at the time of receipt
The claim must be made before the payment of transportation
charges
** otherwise, no action for damages may be maintained against
the CC
When period begins to run : period begins to run when the
consignee received possession of the goods such that he may exercise
over it the ordinary control pertinent to ownership
There must be delivery of the merchandise by the CC to the
consignee at the place of destination --> Art. 366 applies only to cases of
claims for damage to goods actually turned over by the CC and received by
the consignee
The conditions under Art. 366 are not limitation of action but are
conditions precedent to a cause of action --> if the shipper or consignee
fails to allege and prove the conditions under 366, he shall have no right of
action against the CC
The CC may require in the B/L that the goods be examined at the
time of delivery thereof --> the CC may likewise waive such right
Art. 366 is modified by a B/L prescribing a longer period for filing
of written claim with the CC or its agent
The unilateral action of a CC in stamping a condition in the notice
of arrival, requiring examination of bad order cargo by the ship's agent
before removal from port authorities as condition precedent to an action for
recovery cannot modify or add conditions to the B/L --> unreasonable and
unfair in that it allows CC to avoid responsibility for the loss of or damage to
their cargo when in packages or covered
The purpose of short period for claiming damages : to afford the
CC a reasonable opportunity and facilities to check the validity of the claims
while the acts are still fresh in the minds of the person who took part in the
transaction and the documents are still available.
The consignee may file a provisional claim : it is not necessary
that such claim should state a detailed list of the loss or damage; they only
have to contain descriptions of the shipments in question sufficient to have
allowed the CC to make reasonable verifications of such claim --> the
determination of the specific amount of damages claimed should be done
carefully and without haste and these can be done only in a formal claim
which will be filed after the provisional claim
This stipulation is in the nature of a limitation upon the owner's
right to recovery --> the burden of proof is on the CC to show that the
limitation was reasonable and in proper form or within the time stated (see
Southern Lines vs CA)
Art. 368. The carrier must deliver to the consignee without

any delay or obstruction the merchandise received by him, by the
mere fact of being designated in the bill of lading to receive it; and
should he not do so he shall be liable for the damages which may
arise therefrom.
The delivery must be made to the consignee
Where the B/L is issued to the order of the shipper, the CC is under a duty
not to deliver the merchandise except upon presentation of the B/L duly
indorsed by the shipper, and where the CC delivered the goods to another
person who did not present the B/L, such CC is liable for misdelivery -->
duty to transport the goods safely and to deliver them to the person
indicated in the B/L
Misdelivery: Delivery to a person different from that indicated in the B/L -->
different from non-delivery
In case of conflicting orders of the shipper and the consignee
(where one orders the return and the other orders the delivery of the goods),
there is no other recourse than to determine at what moment the right of the
shipper to countermand the shipment terminates --> this moment can be no
other than the time when the consignee or legitimate holder of the B/L
appears with such B/L before the CC and makes himself a party to the
contract (prior to that time, he is a stranger to the contract)
(c) Judicial Deposit
Art. 369. Should the consignee be not found at the domicile
indicated in the bill of lading, or should refuse to pay the
transportation charges and expenses, or to receive the goods, the
deposit of said goods shall be ordered by the municipal judge, where
there is no judge of first instance, to be placed at the disposal of the
shipper or sender, without prejudice to a person having a better right,
this deposit having all the effects of a delivery.
Judicial deposit as a remedy:
1. where the consignee cannot be found at the residence
indicated
2. where the consignee refused to pay the transportation charges
3. where the consignee refuses to receive the goods
Judicial deposit shall produce all the effects of delivery subject to
third persons with better rights
Duty to look for consignee : if consignee is not present, he is
entitled to reasonable notice from the CC of their arrival and a fair
opportunity to take care of and remove them
: if the consignee is unknown to the CC, the latter must use
proper and reasonable diligence to find him, and if the consignee still cannot
be found, the goods may be stored in a proper place and the CC will have
performed his whole duty and shall be discharged from liability as a CC
PAGE 39

Failure to look for consignee and to give him reasonable notice
shall make the CC liable for damages resulting from the delay in the receipt
of the goods by the consignee --> apply 1738 on the liability of the CC even
when the goods are deposited in its warehouse until after the consignee has
been given reasonable notice and opportunity to remove the goods
Art. 373. A carrier who delivers merchandise to a consignee

by virtue of agreements or combined services with other carriers shall
assume the obligations of the carriers who preceded him, reserving
his right to proceed against the latter if he should not be directly
responsible for the fault which gives rise to the claim of the shipper or
of the consignee.
Art. 1752. Even when there is an agreement limiting the

liability of the CC in the vigilance over the goods, the CC is disputably
presumed to have been negligent in case of their loss, destruction or
deterioration. (New Civil Code.)
The carrier making the delivery shall also assume all the
actions and rights of those who may have preceded him in the
transportation.
The shipper and the consignee shall have an immediate
right of action against the carrier who executed the transportation
contract, or against the other carriers who received the goods
transported without reservation.
(d) When to be made

Article 370. If a period has been fixed for the delivery of the
goods, it must be made within the same, otherwise the carrier shall
pay the indemnity agreed upon in the bill of lading, neither the shipper
nor consignee being entitled to anything else.
Should no indemnity have been agreed upon and the delay
exceeds the time fixed in the bill of lading, the carrier shall be liable for
the damages which may have been caused by the
delay.
Art. 358. Should no period within which goods are to be
delivered be previously fixed, the carrier shall be under the obligation
to forward them in the first shipment of the same or similar
merchandise which he may make to the point of delivery; and should
he not do so, the damages occasioned by the delay shall be suffered
by him.
Where period fixed for delivery : the CC must deliver the goods within the
time fixed --> for failure to do so, the CC shall pay indemnity stipulated in
the B/L, neither the shipper nor the consignee being entitled to anything else
--> however, under the CC, damages shall be paid if the carrier refuses to
pay the stipulated indemnity or is guilty of fraud in the fulfillment of his
obligation (Art. 1126,NCC)
If no indemnity has been stipulated and the delay exceeds the
time fixed in the B/L, the CC shall be liable for the damages that the delay
may have caused, e.g. the difference between the MV of the goods at the
time when they should have been delivered, and the price at the time when
they were delivered to which may be added reasonable expenses caused by
delay
A CC in GF may be held liable only for damages that were
foreseen or might have been foreseen at the time the contract of transpo
was entered into --> before a CC could be held liable for special damages,
such as loss of profits on account of the delay or failure of deliver, he must
have notice at the time of the delivery of the particular circumstances
attending the shipment and which would probably lead to such special loss
if he defaulted (Mendoza vs PAL)
If the CC incurs in delay in transporting the goods, a natural
disaster shall not free such carrier from responsibility; where the CC without
cause delays the transportation of the goods, the contract limiting the CC's
liability cannot be availed of in case of the loss, destruction or deterioration
of the goods
Where property in the hands of a CC is not delivered within a
reasonable time after it has reached its destination, the CC in the absence
of any legal exemption and after demand has been made and delivery
refused, is liable for a conversion of the property --> the consignee may
waive title to the property and sue for conversion and is entitled to the value
of the goods at the time they should have been delivered to him -->
subsequent tender of the goods by the CC is not available as a defense
If there has been demand and the CC tenders the goods, the
consignee cannot refuse to receive the goods and sue for conversion; his
sole remedy is an action for damages on account of the delay --> there can
only be conversion if there has been demand and the CC refuses delivery
The time for delivery when no period fixed : the CC shall be
bound to forward them in the first shipment of the same or similar goods
which he makes to the point where he must deliver them --> should he not
do so, the damages caused by the delay shall be for his account
Art. 358 is not violated when though the goods were not shipped
on the train agreed upon, they were shipped on another train which arrived
earlier than the one agreed upon
(e) Two or more carriers
The reservations made by the latter shall not however

exempt them from the liabilities they may have incurred by reason of
their own act.
Successive carriers shall assume the obligations of previous carriers but
have a right of action against previous carriers is the latter are directly
responsible for the fault giving rise to the claim of the shipper
(f) Obligation to keep registry
Art. 378. Transportation agents shall be obliged to keep a
special registry, with the formalities required by Article 36, in which
there shall be entered, in progressive order of number and dates, all
the goods the transportation of which is undertaken, stating the
circumstances required by Articles 350 et seq. for the respective bills
of lading.
(g) Compliance with administrative
regulations
Art. 377. The carrier shall be liable for all the consequences
arising from noncompliance on his part with the formalities prescribed
by the laws and regulations of the public administration during the
entire course of the trip and upon arrival at the point of destination,
except when his omission arises from his having been induced into
error by false statements of the shipper in the declaration of the
merchandise.
If the carrier has acted in accordance with a formal order
received from the shipper or consignee of the merchandise both shall
incur liability.
The CC is exempted from responsibility where his failure to comply arises
from having been led into error by the falsehood on the part of the shipper in
the declaration of the merchandise
The shipper or consignee may become liable for noncompliance
with govt. rules and regulations, when the CC has acted by virtue of a
formal order of the shipper or consignee --> but the CC continues to be
liable
F. Rights and Obligations of Shipper and/or Consignee
1. Right to Damages
(a) Condition imposed on right
Art. 366. Within the twenty-four hours following the receipt
of the merchandise a claim may be made against the carrier on
account of damage or average found upon opening the packages,
provided that the indications of the damage or average giving rise to
the claim cannot be ascertained from the exterior of said packages, in
which case said claim shall only be admitted at the time of the receipt
of the packages.
goods transported were delivered.
Art. 357. If by reason of well-founded suspicions of falsity in
the declaration of the contents of a package, the carrier should decide
PAGE 40

to examine it, he shall do so before witnesses, in the presence of the
shipper or of the consignee.
Should the shipper or consignee cited not appear, the
examinations shall be made before a notary, who shall draft a certificate of the result of the examination, for such purposes as may be
proper.
If the declaration of the shipper should be correct, the
expenses caused by the examination and those of carefully repacking
the packages shall be defrayed by the carrier, and in a contrary case by
the shipper.
366.
bill of lading.
Effect of return of the B/L or giving of the receipt: The respective
obligations and actions of the parties against each other shall be considered
canceled, except where in the same act of return or giving of a receipt the
claims of the parties be reduced to writing subject to the provisions of Art.
366
(b) Amount of damages for loss
Art. 372. The value of the goods which the carrier must pay
in case of their being lost or mislaid shall be fixed in accor dance with
what is stated in the bill of lading, no proofs being allowed on the part
of the shipper that there were among the goods declared therein
articles of greater value, and money.
Horses, vehicles, vessels, equipments, and all the other
principal and accessory means of transportation, shall be especially
obligated in favor of the shipper, although with respect to railroads
said obligation shall be subordinated to the provisions of the laws of
concession with regard to property and to those of this Code with
regard to the manner and form of making attachments and seizures
against the said companies.
The value of the goods stated in the B/L is conclusive between the parties
and the shipper is not allowed to prove a higher value
It is only when the CC's fault is so gross as to amount to actual
fraud, that the actual amount of the losses and damages suffered may be
proved by the shipper against the carrier
Par. 2 especially binds the horses, vehicles, vessels and eqpt. and all other
principal and accessory means of the CC in favor of the shipper --> this lien
is a security for the payment of the value of the goods which the CC must
pay in case of loss or misplacement
Art. 1744, NCC. A stipulation between the CC and the
shipper or owner limiting the liability of the former for the loss,
destruction or deterioration of the goods to a degree less than extra-o
diligence shall be valid, provided it be:
(1) in writing, signed by the shipper or owner;
(2) supported by a valuable consideration other than the
service rendered by the CC; and
(3) reasonable, just, and not contrary to public policy. (New
Civil Code.)
(c) Amount of damages for delay
Art. 371. In cases of delay on account of the fault of the
carrier, referred to in the foregoing articles, the consignee may leave
the goods transported in the hands of the carrier, informing him
thereof in writing before the arrival of the same at the point of

destination.
When this abandonment occurs, the carrier shall satisfy the
total value of the goods, as if they had been lost or mislaid.
Should the abandonment not occur the indemnity for loss
and damages on account of the delays cannot exceed the current price
of the goods transported on the day and at the place where the
delivery was to have been made. The same provision shall be
observed in all cases where this indemnity is due.
Damages for delay (par. 3) : Provided there is no express agreement as to
indemnity in the B/L and there is no fraud on the part of the CC, and the
goods have a known current price at the place and on the day they should
have been delivered, the damages shall not exceed such value --> subject
to Civil Code provisions on damages in case of delay
2. Right to abandon
Art. 371. In cases of delay on account of the fault of the
carrier, referred to in the foregoing articles, the consignee may leave
the goods transported in the hands of the carrier, informing him
thereof in writing before the arrival of the same at the point of
destination.
When this abandonment occurs, the carrier shall satisfy the
total value of the goods, as if they had been lost or mislaid.
Should the abandonment not occur the indemnity for loss
and damages on account of the delays cannot exceed the current price
of the goods transported on the day and at the place where the
delivery was to have been made. The same provision shall be
observed in all cases where this indemnity is due.
Right of abandonment: Exceptional but limited right
The right must be exercised during the intervening period
between the moment when the fault of the CC produces a delay, which is
the generative cause of the action, until the moment just before the arrival of
the goods at the place of delivery, by communicating such abandonment to
the CC in writing
Where these conditions do not concur, the refusal to accept
cannot be effective
Damages for abandonment : Art. 371 (2) --> subject to Civil Code
Art. 360. The shipper may, without changing the place where
the delivery is to be made, change the consignment of the goods
delivered to the carrier, and the latter shall comply with his orders,
provided that at the time of making the change of the consignee the
bill of lading subscribed by the carrier, if one were issued, be returned
to him, exchanging it for another containing the novation of the
contract.
The expenses arising from the change of consignment shall
be defrayed by the shipper.
Art. 365. If, on account of the damage, the goods are
rendered useless for sale or consumption for the use for which they
are properly destined the consignee shall not be bound to receive
them, and may leave them in the hands of the carrier, demanding
payment of their value at the current market price that day.
If among the goods damages there should be some in good
condition and without any defect whatsoever, the foregoing provision
shall be applicable with regard to the damaged ones, and the
consignee shall receive those which are sound, this separation being
made by distinct and separate articles, no object being divided for the
purpose, unless the consignee proves the impossibility of
conveniently making use thereof in this form.
The same provision shall be applied to merchandise in bales
or packages, with distinction of the packages which appear sound.
Art. 363. With the exception of the cases prescribed in the
second paragraph of Article 361, the carrier shall be obliged to deliver
the goods transported in the same condition in which, according to the
bill of lading, they were at the time of their receipt, without any damage
or impairment, and should he not do so, he shall be obliged to pay the
value of the goods not delivered at the point where they should have
been and at the time the delivery should have taken place.
PAGE 41

If part of the goods transported should be delivered the
consignee may refuse to receive them, when he proves that he cannot
make use thereof without the others.
Cases where consignee may abandon goods :
1. Art. 363, in case of partial non-delivery where the consignee
proves that he cannot make use of the goods capable of delivery
independently of those not delivered
2. Art. 365, where the goods are rendered useless for sale and
consumption for the purposes for which they are properly destined
3. Art. 371, where there is delay through the fault of the carrier
prescribed, his preference prescribes and his only remedy is by ordinary

action
The mere fact that the goods remain in the possession of the CC
because they have not been removed by the consignee, and the right of the
CC to demand the sale of the goods to satisfy the cost of transportation and
other expenses, do not deprive the CC of its right to demand in a proper
action the amounts owing to it by reason of the contract of transpo
The bankruptcy of the consignee shall not cut off the preference
of the CC, provided that the claim is made w/in 30 days from date of
delivery (NCC)
2. Right to change consignment

5. Obligation to return bill of lading
Art. 360. The shipper may, without changing the place where
the delivery is to be made, change the consignment of the goods
delivered to the carrier, and the latter shall comply with his orders,
provided that at the time of making the change of the consignee the
bill of lading subscribed by the carrier, if one were issued, be returned
to him, exchanging it for another containing the novation of the
contract.
The expenses arising from the change of consignment shall
be defrayed by the shipper.
3. Obligation to pay transportation charges
Art. 374. The consignees to whom the remittance may have
been made may not defer the payment of the expenses and
transportation charges on the goods that they received after twentyfour hours have elapsed from the time of the delivery; and in case of
delay in making this payment, the carrier may demand the judicial sale
of the goods he transported to a sufficient amount to cover the
transportation charges and the expenses incurred.
366.
bill of lading.
Railroad corporations have the power to detain freight, goods or

luggage, to answer for the freight, storage and other transportation charges
In case of failure of the shipper, owner or consignee to pay for
such charges, the CC has the power to sell such freight, goods, or luggage
at public auction following the procedure under the law
Under par. 2, Art. 353, after the contract of transpo has been complied with,
the B/L shall be returned to the issuing CC in exchange for the goods
transported which are delivered to the shipper or consignee
Where the consignee upon receiving the goods cannot return the
B/L to the CC by reason of its loss or any other cause, par. 3, Art. 353
provides that he must give the CC a receipt of the goods delivered
Art. 375. The goods transported shall be specifically bound

to answer for the transportation charges and for the expenses and fees
caused by the same during their transportation, and until the time of
their delivery.
Effect of return of the B/L or giving of the receipt: The respective

obligations and actions of the parties against each other shall be considered
canceled, except where in the same act of return or giving of a receipt the
claims of the parties be reduced to writing subject to the provisions of Art.
366
This special right shall be limited to eight days after the

delivery has been made, and after said prescription the carrier shall
have no further right of action than that corresponding to an ordinary
creditor.
Art. 376. The preference of the carrier to the payment of
what is due him for the transportation and expenses of the goods
delivered to the consignee shall not be affected by the bankruptcy of
the latter, provided the action is brought within the eight days
mentioned in the foregoing article.
Art. 2241. With reference to specific movable property of the
debtor, the ff. claims or liens shall be preferred :
xxx
(9) Credits for transportation, upon the goods carried, for the
price of the contract and incidental expenses, until their delivery and
for thirty days thereafter. (New Civil Code.)
Two sanctions for the enforcement by the CC of the payment of expenses
and transpo charges :
1. Art. 374 - judicial sale of the goods transported
2. Art. 375 - creating a lien in favor of the CC on the goods
transported --> 8 day period has been increased to 30 days by the NCC
The purpose of the lien and time limit: Reciprocal to that
established in favor of the shipper under
Art. 372(par. 2); time limit rests on the necessity which the consignee must
have for alienation of the goods, by which the CC is given a period relatively
urgent pertaining to the said goods transported --> after the time has
G. Applicability of Provisions
Art. 379. The provisions contained in Article 349 et seq.
shall also be understood as relating to persons who, although they do
not personally effect the transportation of commercial goods, contract
to do so through others, either as contracts for a special and fixed
transaction or as freight and transportation agents.
In either case they shall be subrogated to the place of the
carriers with regard to the obligations and liability of the latter, as well
as with regard to their right.
IV. ADMIRALTY AND MARITIME COMMERCE
A. Concept of Admiralty; Jurisdiction over Admiralty Cases
BP 129, Sec. 19.
Regional Trial Courts shall exercise
exclusive original jurisdiction:
xxx
(3) In all actions in admiralty and maritime jurisdiction
where the demand or claim exceeds one hundred thousand pesos
(P100,000) xxx.
BP 129, Sec. 33. Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts shall exercise:
(1) Exclusive original jurisdiction over civil actions and
probate proceedings, testate and intestate, including the grant of
provisional remedies in proper cases, where the value of the personal
property, estate or amount of the demand does not exceed one
PAGE 42

hundred thousand pesos (P100,000), or in Metro Manila where such
personal property, estate, or amount of the demand does not exceed
Two hundred thousand pesos (P200,000),
exclusive of interest,
damages of whatever kind, attorney's fees, litigation expenses, and
costs, the amount of which must be specifically alleged: Provided,
That interest, damages of whatever kind, attorney's fees, litigation
expenses, and costs shall be included in the determination of the filing
fees: Provided, further, That where there are several claims or causes
of action between the same or different parties, embodied in the same
complaint, the amount of the demand shall be the totality of the claims
in all the causes of action, irrespective of whether the causes of action
arose out of the same or different actions.
International Harvester vs Aragon 84 Phil 363
F:
The S/S Belle of the Sea took on board in LA, goods for
shipment to Manila and covered by B/L No. 105. The S/S Belle of the Sea
arrived in Manila and discharged her cargo at the govt. piers under the
supervision and custody of the defendant Manila Terminal Inc. Of the entire
shipment, one carton of assorted samples with a stipulated value of P200
was not delivered to plaintiff Yaras and Co. The latter filed a complaint with
the Municipal Court of Manila against International Harvester, as agent of
the S/S Belle of the Sea and Manila Terminal Inc. The complaint charged
that the merchandise was lost through the negligence of either of the
defendants. Before trial could proceed, the International Harvester Inc. (IH)
filed a motion to dismiss on the ground that the court had no jurisdiction.
The motion was denied. Prohibition proceedings were instituted before the
CFI of Manila to stop the judge from proceeding with the action. The
petition was granted and the respondents now appeal.
Held : It is clear from the complaint that IH is being held liable only on the
assumption that the goods had been lost in transit or before being
discharged at the pier. The liability of IH is predicated on the contract of
carriage by sea between IH and Yaras & Co. as evidenced by the B/L,
independently of the liability of the Manila Terminal Co. as operator of an
arrastre service.
Admiralty has jurisdiction over all maritime contracts, in whatever
form, wherever they were executed or are to be performed, but not over
non-maritime contracts. Whether or not a contract is maritime depends not
on the place where the contract is made and is to be executed, making the
locality the test, but on the subject matter of the contract, making the true
criterion a maritime service or a maritime transaction. Specifically, admiralty
has jurisdiction of a proceeding in rem or in personam for the breach of a
contract of affreightment, whether evidenced by a B/L or a charter party.
And typical of a controversy over contracts of affreightment is a suit of one
party against the other for loss or damage to the cargo. This is the very
case before us, because the respondent Yaras & Co. seeks to recover from
the petitioner IH the value of certain lost cargo.
The contention of Yaras that the admiralty jurisdiction is not
involved because the contract in question was made upon land and to be
terminated upon land, merely reflects the English rule which had long been
rejected in the US. It is now well-settled in the latter country that the
jurisdiction of admiralty in matters of contract depends upon the subject
matter, i.e., the nature and character of the contract and that the English
rule which conceded jurisdiction only to contracts made upon and to be
performed upon navigable waters, is inadmissible, the true criterion being
that the contract has reference to maritime service or maritime transaction.
Under the law, the CFI has jurisdiction over admiralty cases.
B. Vessels
P120,000 alleging that he suffered injuries due to the negligence and

inexperience having only been in its third day of apprenticeship on the day
of the accident. It was also alleged that Jison was overloaded when it
carried 14 passengers instead of its capacity for eight or nine. The
defendants assigned in it demurrer that the plaintiff did not show a right of
action since the complaint did not allege that a protest had been presented
by the plaintiff within 24 hours after the occurrence, to the competent
authority of the port where the accident occurred as provided under the
Code of Commerce. CFI dismissed the complaint, hence the appeal.
Held : Assuming that article 835 of the Code of Commerce states a
condition precedent to the maintenance of an action in a case requiring
protest, such as protest is nevertheless not necessary in the case at bar.
The article is found in the section dealing with collisions and the context
shows the collisions intended are collisions of sea-going vessels. Said
article cannot be applied to small boats engaged in river and bay traffic.
The vessels intended in the Third Book of the Code of Commerce which
deals with maritime commerce and in which Art. 865 is found was evidently
intended to define the law relative to merchant vessels and marine shipping,
and the vessels intended in that Book are such as are run by masters
having special training with the elaborate apparatus of crew and equipment
indicated in the Code. The word "vessel" used in the section was not
intended to include all ships, craft, or floating structures of every kind
without limitation, and the provision of that section should not be held to
include minor craft engaged only in river or bay traffic. Vessels of minor
nature, such as river boats and those carrying passengers from ship to
shore are governed as to their liability in passengers, by the Civil Code.
The word ship and vessel, in their grammatical sense are applied
to designate every kind of craft, large or small, merchant or war, a
signification which does not differ essentially from its juridical meaning
according to which vessels for the purpose of the Code of Commerce, are
considered not only those engaged in navigation whether coastwise or high
seas, but also floating docks, pontoons,dredges, scows, and other floating
apparatus for the service of the industry or maritime commerce.
Yet notwithstanding these principles from which it would seem
that any floating apparatus which serves directly for the transportation of
things or persons or which indirectly is related to this industry, ought to be
subjected to the principles of the Code with reference to ownership, transfer,
rights, registrations, etc. they are not applicable to small craft which are only
subject to administrative regulations in the matter of port service and in the
fishing industry.
But even if The Code Of Commerce was applicable, a protest still
need not be made since under Art. 836, want of protest cannot prejudice a
person not in a condition to make known his wishes. A person who has
suffered injuries like that of the plaintiff cannot be supposed to be in a
condition to make a protest.
2. Nature and acquisition of vessels
Art. 573. Merchant vessels constitute property which may be
acquired and transferred by any of the means recognized by law. The
acquisition of a vessel must be included in a written instrument, which
shall not produce any effect with regard to third persons if not
recorded in the registry of vessels.
The ownership of a vessel
shall also be acquired by the possession thereof in good faith for three
years, with a good title duly recorded.
In the absence of any of these requisites, uninterrupted
possession for ten years shall be necessary in order to acquire
ownership.
A captain cannot acquire by prescription the ship of which
he is in command.
1. Meaning
Lopez vs Duruelo 52 Phil 229
F:
Augusto Lopez, of Silay, Occidental Negros, wanted to embark
on the interisland steamer San Jacinto bound for Iloilo. The steamer was
anchored some half a mile from the shore or port of Silay. In order to board
the steamer, Lopes boarded the motor boat Jison at the landing which was
then engaged in conveying passengers and luggage to and from the
steamer. Whether due to negligence or incompetence of Duruelo, the
engineer of Jison aged 16, as alleged, the boat approached too near to the
stern of the steamer wherein it was struck by the still turning propeller of the
steamer. The boat sunk and Lopez was thrown into the water against the
propeller wherein he suffered a bruise in the breast, two serious fractures of
the bones of the left leg and a compound fracture of the left femur. As a
result, Lopez was hospitalized from February 28 to October 19, 1927 or
eight months. Lopez filed a complaint and sought damages amounting to
Vessels: Those engaged in navigation , whether coastwise or on the high

seas, including floating docks, pontoons, dredges, scows and any other
floating apparatus destined for the services of the industry or maritime
commerce
Vessels engaged in the business of carrying or transporting
passengers or goods for compensation, offering their services to the public
are common carriers --> governed primarily by the Civil Code provisions on
common carriers and subsidiarily by the Code of Commerce and special
laws
The Code of Commerce regulates merchant ships or those
engaged in the transportation of passengers and freight from one port to
another or from place to another
The Code of Commerce does not refer to pleasure ships, yachts,
pontoons, health service and harbor police vessels, floating storehouses,
warships or patrol vessels, coast guard vessels, fishing vessels, towboats
PAGE 43

and other craft destined to other uses, such as coast and geodetic survey,
scientific research and exploration, crafts engaged in the loading and the
discharge of vessels, or transhipments from one vessel to another
Vessels of a minor nature not engaged in maritime commerce,
such as, river boats and those carrying passengers from ship to shore, must
be governed as to their liability to passengers, by the provisions of the Civil
Code
Modes of acquisition:
(1) purchase and sale, (2) prescription, (3)
construction, (4) capture, (5) donation, (6) succession, and (7) other means,
such as barter
Possession in GF will ripen into ownership in 3 years; if the
possession is otherwise, it will ripen into ownership in 10 years
There can be no prescription in favor of the captain because the
nature of the possession of the captain is such that he is only an agent of
the owner, a depositary of the vessel
The acquisition of a vessel must appear in a written instrument
and such instrument must be registered in order that the transfer may affect
third persons
Art. 574. Builders of vessels may employ the material and
follow with regard to their construction and rigging the systems most
suitable to their interest. Ship owners and seamen shall be subject to
the provisions of the laws and regulations of the public administration
on navigation, customs, health, safety of vessels, and other similar
matters.
The business of constructing and repairing vessels or parts thereof shall not
be considered a public utility and no CPC shall be required thereof
Art. 585. For all purposes of law not modified or restricted by
the provisions of this Code, vessels shall continue to be considered as
personal property.
Vessels are considered personal or movable property; but they partake to a
certain extent, of the nature and conditions of real property, on account of
their value and importance in the world of commerce
Art. 712. Ownership is acquired by occupation and by
intellectual creation.
Ownership and other real rights over property are acquired
and transmitted by law, by donation, by testate and intestate
succession, and in consequence of certain contracts, by tradition.
They may also be acquired by means of prescription. (New
Civil Code.)
3. Registration; certificates issued; distinctions
Tariff and Customs Code, Sec. 802
(1) vessels - every sort of boat, craft or other artificial
contrivance used, or capable of being used, as a means of
transportation on water
(2) duly registered - person, natural or juridical, registered
with the proper govt. agencies, as Bureau of Commerce, SEC, NACIDA,
BOI, Export Incentives Board or Oil Commission, as now or may
hereafter be required by law.
registered with the BOI and certified to by said Board as an essential

element in the operation of the registered project.
Rule III, Marina Rules and Regulations:
Subjects of Registration:
1) All vessels used in Phil. waters, not being transients of
foreign registry, shall be registered with the MARINA. To this end, it
shall be the duty of the master, owner and agent of every such vessel
to make application to the proper MARINA district office for
registration thereof within 15 days after the vessel becomes subject to
such registration.
2) A vessel of 3 tons gross or less shall not be registered
unless the owner shall so desire, nor shall documents licenses of any
kind be required for such vessel, but the proper fee shall be charged
for measurement when measurement is necessary, except when the
same is engaged in towing or carrying of articles and passengers for
hire.
3) All undocumented vessels shall be numbered in such
form as may be prescribed by the Administrator.
Vessels exempt from Registration :

AFP vessels, vessels owned and/or operated by the AFP or
by foreign govt. for military purposes, and bancas, sail boats and other
water craft which are not motorized of less than 3 gross tons shall not
be subject to the requirements of these rules and regulations relative
to registration and navigation, except in so far as may be prescribed
by regulations of MARINA.
The Phil. Coast Guard is vested with exclusive authority over the
registration and documentation of Phil. vessels, as well as the issuance of
all certificates, licenses, or other documents necessary or incident to such
registration
The registration shall be effected at its home port or at the
nearest Coast Guard district or station when the home port does not have
such
Certificates of Philippine register: upon registration of a vessel of
domestic ownership and of more than 15 tons gross, a certificate of Phil.
register shall be issued for it
The purpose of certificates of register of vessels : to declare the
nationality of a vessel engaged in trade with foreign nations and to enable
her to assert that nationality wherever found
Privileges of certificate: It confers upon the vessel the right to
engage, consistently with law, in the Philippines coastwise trade and entitles
it to the protection of the authorities and the flag of the Philippines in all
ports and on the high seas, and at the same time secures to it the same
privileges and subjects it to the same disabilities as, under the laws of the
Philippines, pertain to foreign built vessels transferred abroad to citizens of
the Philippines
Certificates of ownership : upon registration of a vessel of more than 5 tons
gross, a certificate of ownership shall be issued for it
4. Significance of registration of transactions affecting
vessels
PD 761 as amended by PD 1064, 1521

Sec. 806. Upon registration of a vessel of domestic
ownership, and of more than 15 tons gross, a certificate of Philippine
registry shall be issued for it. If the vessel is of domestic ownership
and of 15 tons gross or less, the taking of the certificate of Philippine
registry shall be optional with the owner.
Domestic ownership means ownership vested in the citizens
of the Philippines or corporations or association organized under the
laws of the Philippines at least 60% of the C/S or capital of which is
wholly owned by citizens of the Philippines, and in the case of
corporations or associations which will engage in coastwise trade the
president and managing directors thereof shall be such citizens xxx
xxx an enterprise duly registered with the Board of
Investments WON entirely owned by foreign nationals, may register its
own vessels xxx if such vessels are to be used exclusively to transport
its own raw materials and finished products in Philippine waters as an
incident to its manufacturing, processing or business activity
Presumption of ownership from registration : the presumption is that the

person in whose name a vessel is registered has legal title thereto --> but
such is not conclusive proof against the real owners
It is essential that a record of documents affecting the title of a
vessel be entered in the Philippine Coast Guard
Arroyo vs Yu 54 Phil 511
F:
The appeal of Yu relates to the preferences to the ten lorchas as
between herself and the PNB. Among the facts found by the trial judge is
that they were owned by Lim Ponzo Navigation Co. They were mortgaged
to Po Pauco to guarantee a loan of P20,000. This was duly registered with
the register of deeds. Po Pauco later mortgaged them in favor of PNB and
registered with the register of deeds but was recorded in the Office of
Collector of Customs much later. Meanwhile, Yu secured a judgment
against Lim Ponzo Navigation Co. The notice of seizure was recorded by
PAGE 44

the collector of customs of Iloilo on which date the records of the office
disclosed the vessels as free from encumbrances.
HELD : Sec. 1171 of AC has modified the provisions of the Chattel
Mortgage Law, particularly Sec. 4 thereof. It is now not necessary for a
chattel mortgage of a vessel to be noted in the register of deeds. But it is
essential that a record of documents affecting the title of a vessel be
entered in the office of the collector of customs at a port of entry. This is
designed to protect persons who deal with a vessel on the strength of the
record title. Mortgages on vessels., although not recorded, are good as
between the parties. But as against creditors of the mortgagor, an
unrecorded mortgage is valid.
However, we find an explanation of the delay of registration with
the collector of customs-because of doubts entertained by the latter relative
to the applicability of Act No. 3324 to a mortgage executed in 1918 in favor
of a Chinese subject. This uncontradicted fact must be taken as curing the
bank's defective title. That the collector did not perform his duty was no
fault of PNB.
Judgment affirmed in part in the sense that as between Yu and
PNB, the latter has a superior right to its claim for P20,000, and set aside in
part in the sense that the record is remanded for further proceedings.
(2) for contracts entered into by the captain to repair, equip and
provision the vessel, provided that the amount claimed was invested for the
benefit of the vessel
(3) for the indemnities in favor of third persons which may arise
from the conduct of the captain in the care of the goods transported, as well
as for the safety of passengers transported
(4) for damages to third persons for tort or quasi-delict committed
by the captain, except collision with another vessel
(5) under Art. 826, for damages in case of collision due to the
fault, negligence, or want of skill of the captain, sailing mate, or any other
member of the complement
The agent is liable to the shippers and owners of the cargo
transported by it, for losses and damages occasioned to such cargo without
prejudice to his rights against the owner of the ship, to the extent of the
value of the vessel, its equipment and the freight
Under 588, the shipowner and the shipagent are not liable for the obligations
contracted by the captain if he exceeds his authority, unless the amounts
claimed were invested for the benefit of the vessel --> however under Art.
1759, NCC, the ship owner is liable for the death of or injuries to the
passengers which are caused by the negligence or wilful acts of his EEs
although such EEs may have acted beyond the scope of their authority or in
violation of the orders of the shipowner
Rubiso vs Rivera 37 Phil 72

F:
Defendant Rivera acquired by purchase the pilot boat Valentina
on a date prior to that of the purchase and adjudication at public auction by
plaintiff Rubiso. But the sale at public auction to Rubiso was recorded in the
office of the collector of customs on Jan. 27, 1915 and in the commercial
registry on March 4, 1915, while the sale to Rivera was entered in the
customs registry only on March 17, 1915. Lower court decided for plaintiff.
Defendant appealed.
HELD : The requisite of registration in the registry of the purchase of a
vessel is necessary and indispensable in order that the purchaser's rights
may be maintained against a claim filed by a third person. Such registration
is required both Art. 573 of the Code of Commerce in connection with Sec 2
of Act No. 1900 which Act amended said article. The amendments solely
consisted in charging the Insular Collector of Customs, as at present, with
the fulfillment of the duties of the commercial register concerning the
registering of vessels, so that the registration of a bill of sale of a vessel
shall be made in the Insular Collector of Customs, who, since May 18, 1909,
has been performing the duties of the commercial registry in place of this
latter official. In view of said legal provisions, it is undeniable that
defendant's rights cannot prevail over those acquired by plaintiff in the
ownership of said boat, in as much as defendant's registration came after
plaintiff's registration.
C. Persons Participating in Maritime Commerce
Art. 589. If two or more persons should be part owners of a

merchant vessel, an association shall be presumed as established by
the part owners.
This association shall be governed by the resolutions of a
majority of the members.
A majority shall be the relative majority of the voting
members.
If there should be only two part owners, in case of
disagreement the vote of the member having the largest interest shall
be decisive. If the interests are equal, it shall be decided by lot.
The representation of the smallest part in the ownership
shall have one vote; and proportionately the other part owners as
many votes as they have parts equal to the smallest one.
A vessel cannot be detained, attached or levied upon execution in her entirety for the private debts of a part owner, but the
proceedings shall be limited to the interest the debtor may have in the
vessel, without interfering with her navigation.
Art. 590. The co-owners of a vessel shall be civilly liable, in
the proportion of their contribution to the common fund, for the results
of the acts of the captain, referred to in Article 587.
Each part owner may exempt himself from this liability by
the abandonment before a notary of the part of the vessel belonging to
him.
1. Shipowners and shipagents

Art. 586. The owner of a vessel and ship agent shall be
civilly liable for the acts of the captain and for the obligations
contracted by the latter to repair, equip, and provision the vessel,
provided the creditors proves that the amount claimed was invested
therein.
By agent is understood the person entrusted with the
provisioning of a vessel, or who represents her in the port in which
she happens to be.
Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which arise from the conduct of
the captain in the care of the goods which the vessel carried; but he
may exempt himself therefrom by abandoning the vessel with all her
equipments and the freightage he may have earned during the voyage.
Art. 588. Neither the owner of the vessel nor the agent shall
be liable for the obligations contracted by the captain if the latter
exceeds his powers and privileges inherent in his position or those
which may have been conferred upon him by the former.
However, if the amounts claimed were made use of for the
benefit of the vessel, the owner or agent shall be liable.
Liability of shipowner and shipagent :
(1) under Art. 857, for the acts of the captain
Art. 591. All the part owners shall be liable, in proportion to

their respective ownership, for the expenses which are incurred by
virtue of a resolution of the majority.
They shall likewise be liable in the same proportion for the
expenses of maintenance, equipment, and provisioning of the vessel,
necessary for navigation.
Art. 592. The resolutions of the majority with regard to the
repair, equipment, and provisioning of the vessel in the port of
departure shall bind the minority, unless they renounce their
participation therein, which must be acquired by the other part owners
after a judicial appraisement of the value of the portion or portions
assigned.
The resolutions of the majority relating to the dissolution of
the association and sale of the vessel shall also be binding on the
minority.
The sale of the vessel shall be made at a public auction,
subject to the provisions of the law of civil procedure unless the part
owners unanimously agree otherwise, subject always to the right of
pre-emption and redemption mentioned in Article 575.
Art. 593. The owners of a vessel shall have preference in her
charter over other persons, offering equal conditions and price. If two
or more of the former should claim said right the one having greater
PAGE 45

interest shall be preferred, and should they have an equal interest it
shall be decided by lot.
indemnity whatsoever, unless there is an expressed and specific

agreement in respect thereto.
Art. 594. The part owners shall elect the manager who is to
represent them in the capacity of agent.
The appointment of director or agent shall be revocable at
the will of the partners.
Art. 604. If the captain or any other member of the crew should
be discharged during the voyage, they shall receive their salary until their
return to the place where the contract was made, unless there are good
reasons for the discharge, all in accordance with Art. 636 et seq. of this
Code.
Art. 595. The agent, be he at the same time an owner of a

vessel or a manager for an owner or for an association of co- owners,
must be qualified to trade and must be recorded in the merchant's
registry of the province.
The agent shall represent the ownership of the vessel, and
may in his own name and in such capacity take judicial and extrajudicial steps in all that relates to commerce.
Art. 605. If the contracts of the captain and members of the

crew with the agent should be for a definite period or voyage, they
cannot be discharged until the fulfillment of their contracts, except for
reasons of insubordination in serious matters, robbery, theft, habitual
drunkenness, and damage caused to the vessel or to its cargo by
malice or manifest or proven negligence.
Art. 596. The agent may discharge the duties of captain of

the vessel, subject, in every case, to the provisions contained in Article
609.
If two or more co-owners request the position of captain, the
disagreement shall be decided by a vote of the members; and if the
vote should result in a tie, the position shall be given to the part owner
having the larger interest in the vessel.
If the interest of the petitioners should be the same, and
there should be a tie, the matter shall be decided by lot.
Art. 597. The agent shall select and enter into an agreement
with the captain, and shall contract in the name of the owners, who
shall be bound in all that refers to repairs, details of equipment,
armament, provisions, fuel, and freight of the vessel, and, in general,
in all that relates to the requirements of navigation.
Art. 598. The agent cannot order a new voyage, nor make
contracts for a new charter, nor insure the vessel, without the authority
of her owner or by virtue of a resolution of the majority of the coowners, unless these powers were granted him in the certificate of his
appointment.
If he should insure the vessel without authority therefor he
shall be subsidiarily liable for the solvency of the underwriter.
Art. 599. The managing agent of an association, shall give
his co-owners an account of the results of each voyage of the vessel,
without prejudice to always having the books and correspondence
relating to the vessel and to its voyages at their disposal.
Art. 600. After the account of the managing agent has been
approved by a relative majority, the co-owners shall satisfy the
expenses in proportion to their interest, without prejudice to the civil
or criminal actions which the minority may deem fit to institute
afterwards.
In order to enforce the payment, the managing agents shall
be entitled to an executory action, which shall be instituted by virtue of
a resolution of the majority, and without further proceedings than the
acknowledgment of the signatures of the persons who voted for the
resolution.
* Note : an executory action is no longer recognized in this jurisdiction
Art. 601. Should there be any profits, the co-owners may
demand of the managing agent the amount due them, by means of an
executory action without further requisite than the acknowledgment of
the signatures in the instrument approving the account.
Art. 602. The agent shall indemnify the captain for all the
expenses he may have made from his own funds or from those of
other persons, for the benefit of the vessel.
Art. 603. Before a vessel goes out to sea the agent may at
his discretion, discharge the captain and members of the crew whose
contract did not state a definite period nor a definite voyage, paying
them the salaries earned according to their contracts, and without any
Art. 606. If the captain should be a part owner in the vessel,

he may not be discharged unless the agent returns to him the amount
of his interest therein, which, in the absence of an agreement between
the parties, shall be appraised by experts appointed in the manner
established in the law of civil procedure.
Art. 607. If the captain who is a part owners should have
obtained the command of the vessel by virtue of a special agreement
contained in the articles of copartnership, he cannot be deprived
thereof except for the reasons mentioned in Article 605.
Art. 608. In case of the voluntary sale of the vessel, all
contracts between the agent and captain shall terminate, reserving to
the latter his right to the indemnity which may be proper, according to
the agreements made with the agent.
The vessel sold shall remain subject to the security of the
payment of said indemnity if, after the action against the vendor has
been instituted, the latter should be insolvent.
Art. 618. The captain shall be civilly liable to the ship agent
and the latter to the third persons who may have made contracts with
the former 1. For all the damages suffered by the vessel and its cargo
by reason of want of skill or negligence on his part. If a misdemeanor
or crime has been committed he shall be liable in accordance with the
Penal Code.
2. For all the thefts and robberies committed by the crew,
reserving his right of action against the guilty parties.
3. For the losses, fines, and confiscations imposed on
account of violation of the laws and regulations of customs, police,
health, and navigation.
4. For the losses and damages caused by mutinies on board
the vessel, or by reason of faults committed by the crew in the service
and defense of the same, if he does not prove that he made full use of
his authority to prevent or avoid them.
5. For those arising by reason of a misuse of powers and
nonfulfillment of the duties which pertain to him in accordance with
Articles 610 and 612.
6. For those arising by reason of his going out of his course
or taking a course which, in the opinion of the officers of the vessel, at
a meeting attended by the shippers or supercargoes who may be on
board, he should not have taken without sufficient cause.
No exception whatsoever shall exempt him from his obligation.
7. For those arising by reason of his voluntarily entering a
port other than his destination, with the exception of the cases or
without the formalities referred to in Article 612. 8. For those arising
by reason of the nonobservance of the provisions contained in the
regulations for lights and maneuvers for the purpose of preventing
collisions.
Art. 618 provides for the direct responsibility of the shipowner and shipagent
to third persons; the captain shall be civilly liable to the ship agent and the
latter is the one liable to third persons
This article applies to breaches
of contract and tortious negligence of the captain
But where the vessel is totally chartered for use of a single party,
the shipowner and that party may validly stipulate that the latter shall be
exempt from liability for the negligence of the captain and crew
PAGE 46

(a) Responsibilities and liabilities
Reason for imposition of liability on owner for damages suffered by
third persons occasioned by the acts of the captain: To place the
primary liability upon the person who has actual control over the conduct of
the voyage and who has the most capital embarked in the venture, namely,
the owner of the ship, leaving him to obtain recourse, from other individuals
who have been drawn into the venture as shippers
The shippers and passengers in making contracts with the
captain do so through the confidence they have in the shipowner who
appointed him --> they presume that the owner made a most careful
investigation before appointing him
Distinction between liability for lawful and unlawful acts :
The lawful acts and obligations of the captain beneficial to the
vessel may be enforced as against the agent/owner for the reason that such
obligations arise from the contract of agency ( provided that the captain
does not exceed his authority)
As to any liability incurred by the captain through his unlawful
acts, the ship agent is simply subsidiarily liable
Liabilities of captain: the responsibility of the captain extends to every
fraudulent or negligent act of any person in the complement, in the
execution of his employment --> he does not respond for personal injuries of
the crew arising from personal quarrels but he is liable for damages to
persons or property occasioned by a maneuvering of the vessel, for failure
to follow international rules and regulations, for failure to take the
precautions to prevent every damage possible to the vessel which has
suffered an average
Standard Oil vs Castelo 42 Phil 256
F:
Castelo, owner of the interisland steamer Batangueno,
contracted with Chumbuque stipulating that for a term of one year, the latter
shall use it in conveying cargo; that the crew should be supplied by the
owner; and that the charterer should have no control over the captain and
crew than to specify the voyages. Plaintiff delivered petroleum which was
placed on deck. While the steamer was on her way, a typhoon came,
compelling the captain to jettison the petroleum. When the storm abated,
the ship made port and 13 cases of petroleum were recovered, but the
remainder was wholly lost. Plaintiff brought action to recover the petroleum
value against the shipowner. CFI rendered judgment for plaintiff.
Held : Ordinarily, the loss of cargo carried on deck shall not be considered
as general average loss, as expressed in the York- Antwerp Rules. This
rule, first made during the days of sailing vessels has changed and it is now
generally held that jettisoned goods carried on deck, according to the
customs of trade, by steam vessels navigating coastwise and inland waters,
are entitled to contribution as general average loss. The reason for this, in
coastwise trade, is that boats are small and voyages are short, with the
result that the coasting vessel can use more circumspection about the
condition of the weather at departure time. It is evident therefore, that the
loss of the petroleum is a general average with the result that plaintiff is
entitled to recover an amount bearing such proportion to its total loss as the
value of both ship and cargo bears to the value of ship and entire cargo
before jettison was effected.
It is universally recognized that the captain is the representative
of the owner and both under Art. 586 of the Code of Commerce, are civilly
liable for the acts of the master. When jettison of cargo occurs, it is the duty
of the captain to effect the adjustment, liquidating and distribution of the
general average; his failure gave rise to liability for which the owner of the
ship must answer.
The owner of the ship ordinarily has vastly more capital
embarked upon a voyage than has any shipper of cargo. Moreover, the
shipowner, in captain's person, has complete and exclusive control of the
crew and ship navigation. It is therefore proper that any person whose
property may have been cast should have a right of action directly against
the shipowner for breach of duty which the law imposed on the captain with
respect to such cargo. The evident intention of the Com. Code is to place
primary liability upon the person who has actual control over the conduct of
the voyage and who has most capital in the venture, namely, the shipowner,
leaving him to obtain recourse, as it is very easy to do, from other
individuals who have been drawn into the venture as shippers. Defendant is
therefore liable.
Araullo, and Avancena, dissenting :
Action for recovery, if any, should be brought not against the
defendant owner but against the captain thereof.
Yu Con vs Ipil 41 Phil 770

F:
Yu delivered to Ipil and Solamo P 450 for delivery from Catmon
to Cebu aboard a banca named Maria of which Lauron was the owner and
Ipil and Solamo, the master and supercargo, respectively. The money
together with various merchandise belonging to plaintiff was to be carried
from the port of Cebu to Catmon in Cebu. The money was placed by Yu in
his trunk and was transferred to that of Ipil. That night, the window of the
stateroom in which the trunk containing the money was kept was broken
through by persons not identified and through which the said trunk was
stolen. It was found at the trial that Ipil and Solamo were negligent in
guarding the money because they were sound asleep at the time of the theft
and they assigned no one to stand guard during the night. Their defense
was that Yu chartered and had control and responsibility of the banca and
that the theft was due to Yu's negligence. The CFI held Ipil and Solamo
negligent and held Lauron liable as ER and shipowner under Articles 586,
587 and 618 of the Code of Commerce.
Held : Ipil and Solamo, as carriers and depositories of the money were liable
under the Civil Code, the theft not being a fortuitous event or of force
majeure and they being manifestly negligent and at fault.
As to the liability of Lauron, the SC proceeded by first defining
the banca "Maria" as within the meaning of the term "vessel." Thus,
according to the foregoing definitions (by the Mercantile Code, by Reus in
Commentaries on the Code of Commerce, and by Blanco) we hold that the
banca "Maria" chartered by Yu Con from Lauron, was a "vessel" under
Mercantile Law and the Code of Commerce. Ipil, the master of the banca,
was also held to be the captain (masters are to small vessels as captains
are to big ones). Under Arts. 587 and 618, the shipowner shall be civilly
liable to third persons when the captain of the vessel causes the damage or
loss to goods entrusted to him by said third persons under a contract to
carry said goods. Thus, it is well and god that the shipowner be not held
criminally liable for such crimes or quasi crimes but he cannot be excused
from liability for the damage and harm which in consequence of those acts
may be suffered by the third parties who contracted with the captain in his
double capacity of agent and subordinate of the shipowner himself. In
maritime commerce, the shippers and passengers in making contracts with
the captain do so through the confidence they have in the shipowner who
appointed him.
The owner of a minor craft who has equipped and victualed it for
the purpose of using it in the transportation of merchandise from one port to
another is under the law a shipowner and the master of the craft is to be
considered as its captain in the legal acceptation of this word, and the
former must be held civilly liable for indemnities in favor of third parties to
which the conduct of the master/captain may give rise in the custody of the
effects laden on the craft, and for all losses which, through his fault or
negligence, may occur to the merchandise or effects delivered to him for
their transportation as well as for the damages suffered by those who
contracted with him, in consequence of misdemeanors and crimes
committed by him or by the members of the crew of the craft.
Manila Steamship vs Abdulhaman 100 Phil 32
F:
At around 7 p.m., M/L Consuelo V, owned by Lim Hong To, laden
with cargoes and passengers left Zamboanga City bound for Siokon under
the command of Faustino Macrohon. Among her passengers were plaintiff
Insa Abdulhaman, his wife, and their 5 kids. On the same night, the M/S
Bowline Knot owned by the Manila Steamship Co. were navigating from
Maribojoc towards Zamboanga City. The weather then was considered fair.
At around 10 PM, without any warning to the resting passengers,
both vessels collided. M/L Consuelo V capsized, resulting in the death of
Abdulhaman's five children. The above facts found by the Board of Marine
Inquiry, was used by the CFI to hold the owners of both vessels solidarily
liable to Abdulhaman for P 20,784 as damages. The CA, however,
exempted Lim from liability by reason of the sinking and total loss of his
vessel. Hence, this petition by the Manila Steamship Co. questioning the
exemption of Lim while also alleging its exemption having had exercised
due diligence in the selection of its EEs.
Held : (1) While it is true that plaintiff's action against petitioner is based on
a tort or quasi-delict, the tort in question is not a civil tort under the Civil
Code but is a maritime tort resulting in a collision at sea, governed by Arts.
826-939 of the Code of Commerce, while the owners of both colliding
vessels are solidarily liable for damages caused. This direct responsibility is
recognized in Art. 618 of the Code of Commerce, under which the captain
PAGE 47

shall be civilly liable to the ship agent, and the latter is the one liable to third
persons.
In fact it is a general principle well established in the maritime law
and custom, that shipowners and shipagents are civilly liable for the acts of
the captain (Art. 586) and for the indemnities due to the third persons (Art.
587). This direct liability moderated and limited by the owner's right of
abandonment of the vessel and earned freight (Art. 587) has been declared
to exist not only in the case of breached contracts but also in cases of
tortious negligence.
It is easy to see that to admit the defense of the diligence of a
bonus pater familias in the selection and vigilance of the officers and crew
as exempting the shipowner from any liability for their faults, would render
nugatory the solidary liability in Art. 827 for the greater protection of injured
parties.
(2) It is to be noted that Macrohon was not duly licensed as a
shipmaster and Lim knew of this fact when it hired the former, thus
deliberately increasing the risk to which the unknowing passengers would be
subjected. The liability of Lim, cannot, therefore be identical to that of a
shipowner who bears in mind the safety of the passengers by employing
duly licensed officers. To hold, as the CA had done, that Lim may limit his
liability to the value of his vessels, is to erase all differences between
compliance with law and the deliberate disregard thereof.
The international rule is to the effect that the right of
abandonment of vessels, as a legal limitation of a shipowner's liability, does
not apply to cases where the injury of the average is due to shipowner's own
fault.
cost of production which must be included in the budget of any wellmanaged industry
(3) Total destruction of the vessel does not affect the liability of the owner for
repairs on the vessel completed before its loss --> owners of a vessel are
liable for necessary repairs; its liability for repairs remains unaffected by the
loss of the thing
Reason for limited liability: This doctrine had its origin when maritime
trade and sea voyage was 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, eqpt.
and freight or insurance, if any
Limited liability is evidence of the real and hypothecary nature of
maritime law:
(1) limitation of liability to the actual value of the vessel and freight; (2) right
to retain the cargo and the embargo and detention of the vessel in cases
where the ordinary civil law would not allow more than a personal action
against the debtor or personal liable --> the maritime creditor may attach the
vessel itself to secure his claim without waiting for a settlement of his rights
by a final judgment, even to the prejudice of a third person
Manila Steamship vs Abdulhaman 100 Phil 32
Issue : How is the doctrine of limited liability applied in this case with M/V
Consuelo?
(b) The doctrine of limited liability

* Doctrine of limited liability is provided for in Arts. 587, 590 and 837
Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which arise from the conduct of
the captain in the care of the goods which the vessel carried; but he
may exempt himself therefrom by abandoning the vessel with all her
equipments and the freightage he may have earned during the voyage.
A shipagent is liable notwithstanding the insolvency of the principal/owner
BUT the ship agent may exempt himself from liability by abandoning the
vessel with all her equipment and the freight it may have earned during the
voyage --> the effect of abandonment is to extinguish the liability of the
shipagent
The ship agent's liability is confined to that which he is entitled as
a matter of right to abandon : the vessel with all her eqpt. and the freight it
may have earned during the voyage and to the insurance thereof
Limited liability is not applicable when no abandonment of vessel
is made
Effect of abandonment: An abandonment amounts to an offer of the value
of the vessel, of her equipment, and freight money earned --> results in the
cessation of the responsibility of the owner/agent
Abandonment cannot be refused by creditors
This applies to all cases where the owner/agent may be held
liable for the negligent or illicit acts of the captain
Effect of loss or destruction of vessel: The shipagent's liability is merely
co-extensive with his interest in the vessel such that the total loss thereof
results in its extinction --> the total destruction of the vessel extinguishes a
maritime lien as there is no longer any res to which it can attach.
Thre (3) cases where the loss of the vessel extinguishes the
liability of the shipowner:
(1) under 587, liability arising from the conduct of the captain in
the vigilance of the goods and for the safety of the passengers and for any
liability arising from the negligent or illicit acts of the captain for which the
shipowner or ship agent may be held liable
(2) under 643, liability for the wages of the captain and the crew
and for advances made by the shipagent if the vessel is lost by shipwreck
or capture
(3) under 837, liability for collision
Exceptions:
(1) Doctrine does not apply where shipowner is at fault : the doctrine is
premised on the condition that the death or injury to the passenger occurred
by reason of the fault or negligence of the captain only
(2) Doctrine does not apply in cases of Workmen's Compensation --> such
compensation has nothing to do with maritime commerce; it is an item in the
Held : The direct liability may be moderated or limited by the shipowner's

right to abandon the vessel and earned freight. However, this right of
abandonment of vessels, as a legal limitation of a shipowner's liability does
not apply to cases where the injury or the average is due to shipowner's
fault. Thus, the owner of Consuelo is solidarily liable with Manila Steamship,
the former having caused the vessel to sail without licensed officers, for
injuries caused by the collision over and beyond the value of the said
vessel.
In the application for permission to operate, despite lack of
trained crew, Lim Hong To even declared expressly, "that in case of any
accident, damage, or loss, I shall assume full risks and responsibility for all
consequences, thereof." Hence, Lim cannot escape liability because of the
sinking of the vessel. Operating with an unlicensed shipmaster constitutes
such negligence as would prevent the shipowner from claiming the benefit
of limited liability under Art. 587.
Yangco vs Laserna 73 Phil 330
F:
Petitioner Yangco's vessel SS Negros left Romblon for Manila.
The captain was duly advised and his attention was called by the
passengers that typhoon Signal No. 2 was up. But the boat proceeded to
sail after some loading. The boat was overloaded with cargo and
passengers (180 instead of only 123). After two weeks of sailing, the sea
became too dangerous. The captain ordered that they return to Romblon
and while turning, a big wave caught them on the side causing it to capsize.
Among the passengers who perished were the relatives of respondents
Laserna.
In the separate civil action for damages for the death of the
passengers, the CFI held Yangco liable for a total of P3,180. After the
rendition of the judgment, Yangco sought to abandon the vessel to
plaintiffs/respondents with all its equipments. Abandonment was denied.
The CA affirmed the judgment.
Held : Art. 587 accords a shipowner or agent the right of abandonment; and
by necessary implication, his liability is confined to that which he is entitled
as of right to abandon -- the vessel with all her equipments and the freight it
may have earned during the voyage. In other words, such liability is limited
to the value of the vessel and other things appertaining thereto such that a
total loss thereof results in its extinction. Although the article appears to
deal only with the limited liability of shipowners or agents for damages
arising from the misconduct of the captain in the care of the goods which
the vessel carries, this is a mere deficiency of language and in no way
indicates the true extent of such liability, to wit, the benefit of limited liability
applies in all cases (as regards both goods and passengers of the vessel)
wherein the shipowner or agent may properly be held for the negligent or
illicit acts of the captain.
The reason for the limited liability is the real and hypothecary
nature of maritime law as distinguished from civil law and mercantile law in
general. As evidence of this real nature, we have (1) the limitation of the
liability of the agents to the actual value of the vessel and the freight money
PAGE 48

and (2) the right of the maritime creditor to retain the cargo, and the
embargo and detention of the vessel in cases where the ordinary civil law
would not allow more than a personal action against the debtor or person
liable. Thus, even assuming that Yangco is liable for breach of contract
because his relationship to the passengers rests on a contract of carriage,
the exclusively real and hypothecary nature of maritime law still operates to
limit his liability to the value of the vessel or to the insurance thereon, if any.
In this case, the vessel was not insured. Whether the abandonment of the
vessel sought by the petitioner in instant case was in accordance with law
or not, is immaterial. The vessel having totally perished, any act of
abandonment would be an idle ceremony. Petitioner is absolved from all
complaints.
Abueg vs San Diego 77 Phil 730
F:
Bartolome San Diego was the owner of 2 motorships, San Diego
II and Bartolome S. Dionisia Abueg is the widow of Amado Nunez, who was
a machinist on board the M/S San Diego II. Marciana de Salvacion is the
widow of Victoriano Salvacion, who was a machinist on board the M/S
Bartolome S. Rosario Oching is the widow of Francisco Oching, who was
the captain of the M/S Bartolome S. The 2 ships, while engaged in fishing
operations around Mindoro Island on October 1941, were caught by a
typhoon as a consequence of which they were sunk and totally lost. Nunez,
Salvacion and Oching while acting in their capacities perished in the
shipwreck. The vessels were not covered by any insurance. The widows
were awarded compensation under the Workmen's Compensation Act by the
CFI.
Held : The real and hypothecary nature of the liability of the shipowner or
agent embodied in the provisions of the Maritime Law, had its origin in the
prevailing conditions of the maritime trade and sea voyages during the
medieval ages, attended by innumerable hazards and perils. To offset
against these adverse conditions and to encourage shipbuilding and
maritime commerce, it was deemed necessary to confine the liability of the
owner or agent arising from the operation of a ship to the vessel, equipment,
and freight, or insurance, if any, so that if the shipowner or agent abandoned
the ship, equipment, and freight, his liability was extinguished.
The provisions of the Code of Commerce regarding maritime
commerce have no room in the application of the Workmen's Compensation
Act which seeks to improve, and aims at the amelioration of, the condition
of laborers and EEs. Said Act creates a liability to compensate EEs and
laborers in cases of injury received by or inflicted upon them, while engaged
in the performance of their work or employment, or the heirs and
dependents of such laborers and EEs in the event of death caused by their
employment.
The officers of motor ships engaged in fishing are industrial EEs
and are entitled to the benefits of the Workmen's Compensation Act. If an
accident is compensable under the WCA, it must be compensated even
when the workman's right is not recognized by or is in conflict with other
provisions of the Civil Code or Code of Commerce. The reason is that the
WCA was enacted in abrogation of existing laws.
of the application of Art. 587 of the Code of Commerce. Under this

provision, a shipowner or agent has the right of abandonment; and by
necessary implication, his liability is confined to that which he is entitled as
of right to abandon -- the vessel with all her equipments and the freight it
may have earned during the voyage. This rule is found necessary to offset
against the innumerable hazards and perils of a sea voyage and to
encourage shipbuilding and marine commerce. The limited liability doctrine
applies not only to the goods but also in all cases like death or injury to
passengers wherein the shipowner of agent may properly be held liable for
the negligent or illicit acts of the captain. Art. 587 speaks only of situations
where the fault or negligence is committed solely by the captain. In cases
where the shipowner is likewise to be blamed, Art. 587 does not apply.
Such a situation will be covered by the Civil Code provisions on CCs.
Owing to the nature of their business and for reasons of public policy, they
are required to observe EO diligence.
Maritima's claim that it had no information of typhoon Welming
until after the boat was at sea is untenable in light of modern technology
which enables it to detect any incoming atmospheric disturbances. In fact,
the Weather Bureau issued a total of 17 warnings or advisories of typhoon
Welming. In allowing the ship to depart late from Manila despite the
typhoon advisories, Maritima displayed lack of foresight and minimum
concern for the safety of its passengers taking into account the surrounding
circumstances of the case.
While the captain was negligent for overloading the ship,
Maritima shares equally in his negligence. M/V Mindoro was cleared for
departure at 2 PM by the Bureau of Customs and the Coast Guard but its
departure was delayed for 4 hours. Maritima could not account for the delay
because it neither checked from the captain the reasons behind the delay.
It was due to this interim that there is great probability that unmanifested
cargo and passengers were loaded.
Maritima presented evidence of the seaworthy condition of the
ship prior to its departure, including the installation of life saving equipment
and other navigational instruments. But it could not present evidence that it
specifically installed a radar which could have allowed the vessel to
navigate safely for shelter during the storm. An important device such as
the radar could have enabled the ship to pass through the river and to
safety.
Maritima's lack of EO diligence coupled with the negligence of
the captain were the proximate causes of the sinking of M/V Mindoro.
Maritima is liable for the deaths and injury of the victims. It was ordered to
pay death indemnities to the heirs of the victims, moral damages, actual
damages and attorney's fees.
(c) Specific rights and prerogatives

Art. 575. Part owners of vessels shall enjoy the right of preemption and redemption in the sales made to strangers; but they can
only exercise it within the nine days following the record of the sale in
the registry and by delivering the price at once.
Heirs of Amparo de los Santos vs CA 186 SCRA 649

F:
M/V Mindoro owned by Compania Maritima sailed from Manila
bound for New Washington, Aklan. Said vessel met typhoon Welming on
the Sibuyan Sea, causing the death of many of its passengers, although
about 136 survived. Mauricio de los Santos declared that he, his wife and 4
children were aboard the boat together with their household utensils valued
at P 1,000, with the intention of living in Aklan permanently. His wife and his
children were among the casualties. The Board of Marine Inquiry found that
the captain and some officers of the crew were negligent in operating the
vessel and imposed upon them a suspension and/or revocation of their
license certificates. This decision could not be executed against the captain
who perished with the vessel. The shipowner alleged that no negligence was
ever established and in fact they took all the necessary precautions in
operating the vessel. Furthermore, the loss of lives as a result of the
drowning of some passengers, including the relatives of the plaintiffs, was
due to force majeure because of the strong typhoon Welming. It also
presented the findings of the Board of Marine Inquiry recommending that the
captain be exonerated and that the ship was in seaworthy condition. The
CFI dismissed the complaint in view of lack of sufficient evidence. The CA
ruled that while concurring negligence on the part of the captain is imputable
to Maritima, Maritima could not be held liable in damages based on the
principle of limited liability of the shipowner or shipagent under Art. 587 of
the Code of Commerce.
Art. 593. The owners of a vessel shall have preference in her

charter over other persons, offering equal conditions and price. If two
or more of the former should claim said right the one having greater
interest shall be preferred, and should they have an equal interest it shall be
decided by lot.
Held : There is no dispute as to the finding of the captain's negligence. The

present controversy centers on the questions of Maritima's negligence and
If the interest of the petitioners should be the same, and

there should be a tie, the matter shall be decided by lot.
Art. 594. The part owners shall elect the manager who is to
represent them in the capacity of agent.
The appointment of director or agent shall be revocable at
the will of the partners.
Art. 596. The agent may discharge the duties of captain of
the vessel, subject, in every case, to the provisions contained in Article
609.
If two or more co-owners request the position of captain, the
disagreement shall be decided by a vote of the members; and if the
vote should result in a tie, the position shall be given to the part owner
having the larger interest in the vessel.
PAGE 49

investigation on the crimes committed on board the vessel on the high
seas, which he shall turn over to the authorities, who are to take
cognizance thereof, at the first port touched.
4. To make contracts for the charter of the vessel in the
absence of the ship agent or of the consignee, acting in accordance with
the instructions received and protecting the interests of the owner with
utmost care.
5. To adopt all the measures which may be necessary to keep
the vessel well supplied and equipped, purchasing all that may be
necessary for the purpose, provided there is no time to request
instructions of the agent.
6. To provide in similar urgent cases and on a voyage, for the
repairs to the hull and engines of the vessel and to her rigging and
equipment which are absolutely necessary in order for her to be able to
continue and conclude her voyage; but if she should arrive at a point
where there is a consignee of the vessel, he shall act in concurrence
with the latter.
Art. 609. Captains, masters or patrons

of vessels must be Filipinos, have legal capacity
to contract in accordance with this Code, and
prove the skill, capacity, and qualifications
necessary to command and direct the vessel, as
established by marine or navigation laws,
ordinances, or regulations, and must not be
disqualfied according to the same for the
discharge of the duties of the position.
If the owner of a vessel desires to be the
captain thereof, without having the legal
qualifications therefor, he shall limit himself to the
financial administration of the vessel, and shall
intrust the navigation to a person possessing the
qualifications required by said ordinances nd
regulations.
Art. 601. Should there be any profits, the co- owners may
demand of the managing agent the amount due them, by means of an
executory action without further requisite than the acknowledgment of
the signatures in the instrument approving the account.
2. Captains and Masters
(a) Qualifications and licensing
RA 5173
Sec. 3. The Philippine Coast Guard shall perform the following
functions : (e) to issue licenses and certificates to officers, pilots, major
and minor patrons and seamen, as well as suspend and revoke such
licenses and certificates.
Art. 609. Captains and masters of vessels must be Filipinos
having legal capacity to bind themselves in accordance with this Code,
and must prove that they have the skill, capacity, and qualifications
required to command and direct the vessel, as established by marine
laws, ordinances, or regulations, or by those of navigation, and that they
are not disqualified according to the same for the discharge of the duties
of that position.
If the owner of a vessel desires to be the captain thereof and
does not have the legal qualifications therefore, he shall limit himself to
the financial administration of the vessel, and shall entrust her
navigation to the person possessing the qualifications required by said
ordinances and regulations.
notes: The first three powers cannot be renounced as they relate to public
order and are vested in the captain as a delegation of public authority
Art. 611. In order to comply with the obligations mentioned in
the foregoing article, and when he has no funds and does not expect to
receive any from the agent, the captain shall procure the same in the
successive order stated below:
1. By requesting said funds of the consignees of the vessel or
the correspondents of the ship agent.
2. By applying to the consignees of the cargo or to the
persons interested therein.
3. By drawing on the ship agent.
4. By borrowing the amount required by means of a bottomry
loan.
5. By selling a sufficient amount of the cargo to cover the
amount absolutely necessary to repair the vessel and to equip her to
pursue the voyage.
In the two last cases he must apply to the judicial authori ty of
the port, if in the Philippines and to the Filipino consul, if in a foreign
country; and where there should be none, to the local authority,
proceeding in accordance with the prescriptions of Article 583, and with
the provisions of the law of civil procedure.
Art. 583. If while on a voyage the
captain should find it necessary to contract one or
more of the obligations mentioned in subdivisions
8 and 9 of articl 580, he shall apply to the judge or
court if he is in the Philippine territory, and
otherwise to the consul of the Republic of the
Philippines, should there be one, and in his
absence, to the judge or court or proper local
authority, presenting the certificate of the
registration sheet treated of in Article 612 and the
instruments proving the obligation contracted.
The judge or court, the consul, or the
local authority, as the case may be, in view of the
result of the proceedings institutied, shall make a
temporary memorandum of their result in the
certificate, in order that it may be recorded in the
registry when the vessel returns to the port of its
registry, or so that it can be admitted as a legal
and preferred obligation in case of sale before its
return, by reason of the sale of the vessel on
account of a declaration of unseaworthiness.
The omission of this formality shall
make the captain personally liable for the credits
prejudiced on his account.
notes:
- Captain - one who governs vessels that navigate the high seas or ships of
large dimensions and importance, although they may be engaged in coastwise
trade
- Master - one who commands smaller ships engaged exclusively in coastwise
trade
- captain and master have the same meaning for maritime commerce
- patron - bancas
- Roles of the captain :
(1) general agent of the shipowner
(2) technical director of the vessels
(3) represents the government of the country under whose flag he navigates
(b) Inherent Powers
Art. 610. The following powers are inherent in the position of
captain or master of a vessel:
1. To appoint or make contracts with the crew in the absence
of the ship agent and propose said crew, should said agent be present;
but the agent may not employ any member against the captain's express
refusal.
2. To command the crew and direct the vessel to the port to its
destination, in accordance with the instructions he may have received
from the ship agent.
3. To impose, in accordance with the contracts and the laws
and regulations of the merchants marine, on board the vessel,
correctional punishment upon those who do not comply with his orders
or who conduct themselves against discipline, holding a preliminary
(the ff. is not required by the outline)

Art. 612. The following duties are inherent in the office of
captain:
1. To have on board before starting on a voyage a detailed
inventory of the hull, engines, rigging, tackle, stores, and other
equipments of the vessel; the navigation certificate; the roll of the
persons who make up the crew of the vessel, and the contracts entered
into with the crew; the list of passengers; the health certificate; the
certificate of the registry proving the ownership of the vessel; and all the
obligations which encumber the same up to that date; the charters or
authenticated copies thereof; the invoices or manifest of the cargo, and
the instrument of the expert visit or inspection, should it have been
made at the port of departure.
2. To have a copy of this Code on board.
PAGE 50

3. To have three folioed and stamped books, placing at the
beginning of each one a note of the number of folios it contains, signed
by the marine official, and in his absence by the competent authority.
In the first book, which shall be called "log book," he shall
enter every day the condition of the atmosphere, the prevailing winds,
the course sailed, the rigging carried, the horsepower of the engines, the
distance covered, the maneuvers executed, and other incidents of
navigation. He shall also enter the damage suffered by the vessel in her
hull engines, rigging, and tackle, no matter what is its cause, as well as
the imperfections and averages of the cargo, and the effects and
consequence of the jettison, should there be any; and in cases of grave
resolutions which require the advice or a meeting of the officers of the
vessel, or even of the passengers and crew, he shall record the decision
adopted. For the informations indicated he shall make use of the
binnacle book, and of the steam or engine book kept by the engineer.
In the second book, called the "accounting book", he shall
enter all the amounts collected and paid for the account of the vessel,
entering specifically article by article, the sources of the collection, and
the amounts invested in provisions, repairs, acquisition of rigging or
goods, fuel, outfits, wages, and all other expenses. He shall furthermore
enter therein a list of all the members of the crew, stating their domiciles,
their wages and salaries, and the amounts they may have received on
accounts, either directly or by delivery to their families.
In the third book, called "freight book," he shall record the
entry and exit of all the goods, stating their marks and packages, names
of the shippers and of the consignees, ports of loading and unloading,
and the freight earned. In the same book he shall record the names and
places of sailing of the passengers and the number of packages of which
their baggage consists, and the price of the passage.
4. To make, before receiving the freight, with the officers of
the crew, and the two experts, if required by the shippers and
passengers, an examination of the vessel, in order to ascertain whether
she is watertight, and whether the rigging and engines are in good
condition; and if she has the equipment required for good navigation,
preserving a certificate of the memorandum of this inspection, signed by
all the persons who may have taken part therein, under their liability.
The experts shall be appointed one by the captain of the
vessel and the other one by the persons who request the examination,
and in case of disagreement a third shall be appointed by the marine
authority of the port.
5. To remain constantly on board the vessel with the crew
during the time the freight is taken on board and carefully watch the
stowage thereof; not to consent to any merchandise or goods of a
dangerous character to be taken on, such as inflammable or explosive
substances, without the precautions which are recommended for their
packing, management and isolation; not to permit that any freight be
carried on deck which by reason of its disposition, volume, or weight
makes the work of the sailors difficult, and which might endanger the
safety of the vessel; and if, on account of the nature of the merchandise,
the special character of the shipment, and principally the favorable
season it takes place, he allows merchandise to be carried on deck, he
must hear the opinion of the officers of the vessel, and have the consent
of the shippers and of the agent.
6. To demand a pilot at the expense of the vessel whenever
required by navigation, and principally when a port, canal, or river, or a
roadstead or anchoring place is to be entered with which neither he, the
officers nor the crew are acquainted.
7. To be on deck at the time of sighting land and to take
command on entering and leaving ports, canals, roadsteads, and rivers,
unless there is a pilot on board discharging his duties. He shall not
spend the night away from the vessel except for serious causes or by
reason of official business.
8. To present himself, when making a port in distress, to the
maritime authority if in the Philippines and to the Filipino consul if in a
foreign country, before twenty-four hours have elapsed, and make a
statement of the name, registry, and port of departure of the vessel, of its
cargo, and reason of arrival, which declaration shall be vised by the
authority of by the consul if after examining the same it is found to be
acceptable, giving the captain the proper certificate in order to show his
arrival under stress and the reasons therefore. In the absence of marine
officials or of the consul, the declaration must be made before the local
authority.
9. To take the steps necessary before the competent authority
in order to enter in the certificate of the vessel in the registry of the
vessels, the obligations which he may contract in accordance with
Article 583.
10. To put in a safe place and keep all the papers and
belongings of any members of the crew who might die on the vessel,
drawing up a detailed inventory, in the presence of passengers as

witnesses, and, in their absence, of members of the crew.
11. To conduct himself according to the rules and precepts
contained in the instructions of the agent, being liable for all that he may
do in violation thereof.
12. To give an account to the agent from the port where the
vessel arrives, of the reason therefore, taking advantage of the
semaphore, telegraph, mail, etc., according to the cases; notify him the
freight he may have received, stating the name and domicile of the
shippers, freight earned, and amounts borrowed on bottomry bond,
advise him of his departure, and give him any information and date
which may be of interest.
13. To observe the rules on the situation of lights and
evolutions to prevent collisions.
14. To remain on board in case of danger to the vessel, until
all hope to save her is lost, and before abandoning her to hear the
officers of the crew, abiding by the decision of the majority; and if he
should have to take a boat he shall take with him, before anything else,
the books and papers, and then the articles of most value, being obliged
to prove in case of the loss of the books and papers that he did all he
could to save them.
15. In case of wreck he shall make the proper protest in due
form at the first port reached, before the competent authority or Filipino
consul, within twenty-four hours, stating therein all the incidents of the
wreck, in accordance with case 8 of this article.
16. To comply with the obligations imposed by the laws and
rules of navigation, customs, health, and others.
Notes: Although the duties in Art. 612 are inherent in the captain, the civil
liability arising from the non-fulfillment thereof is not limited to the captain,
since while the captain is liable to the shipagent, the shipagent is liable to third
persons (Art. 618).
(not included in the outline)
Art. 622. If when on a voyage the captain should receive news
of the appearance of privateers or men of war against his flag, he shall
be obliged to make the nearest neutral port, inform his agents or
shippers, and await an occasion to sail under convoy or until the danger
is over or to receive final orders from the ship agent or shippers.

Art. 624. A captain whose vessel has gone through a
hurricane or who believes that the cargo has suffered damages or
averages, shall make a protest thereon before the competent authority at
the first port he touches within the twenty-four hours following his
arrival, and shall ratify it within the same period when he arrives at the
place of his destination, immediately proceeding with the proof of the
facts, it not being permitted to open the hatches until after this has been
done.
The captain shall proceed in the same manner if, the vessel
having been wrecked, he is saved alone or with part of his crew, in which
case he shall appear before the nearest authority, and make a sworn
statement of the facts.
The authority or the consul abroad shall verify the said facts,
receiving sworn statements of the members of the crew and passengers
who may have been saved, and taking such other steps as may help in
arriving at the facts, he shall make a statement of the result of the
proceedings in the log book and in that of the sailing mate, and shall
deliver the original records of the proceedings to the captain, stamped
and folioed, with a memorandum of the folios, which he must rubricate,
for their presentation to the judge or court of the port of destination.
The statement of the captain shall be believed if it is in
accordance with those of the crew and passengers; if they disagreed, the
latter shall be accepted, unless there is proof to the contrary.
Art. 625. Upon arrival at the port of destination, the captain
shall, under his personal liability, turn over the cargo, without any
defalcation, to the consignees, and, in a proper case, the vessel, rigging,
and freights to the agent, after having obtained the necessary
permission from the health and customs officers and fulfilled the other
formalities required by the regulations of the administration.
PAGE 51

[If, by reason of the absence of the consignee or on account of
the nonappearance of a legal holder of the invoices, the captain does not
know to whom he is to make the legal delivery of the cargo, he shall
place it at the disposal of the proper judge or court or authority, in order
that he may decide with regard to its deposit, preservation, and custody.]
port of Manila - with the result that the shipowner was relieved from liability for
the deviation from the stipulated route and from liability for the damage to the
cargo.
(c) Prohibited acts and transactions
Notes: Under 619, the delivery of the cargo at the port of discharge
terminates the captain's responsibility as to the cargo
Art. 613. A captain who navigates for freight in common or on

shares may not make any separate transaction for his own account, and
should he do so the profits shall belong to the other persons interested,
and the losses shall be borne by him alone.
INTER-ORIENT MARINE ENTERPRISES V. NLRC [235 S 634 (1994)]

F:
1. Captain Rizalino Tayong was employed by petitioner shipwoners
as master of a vessel for one year. His instructions were to replenish bunker
and diesel fuel and to sail to South Africa , and there to load 120,000 metric
tons of coal.
2. While in HK, a storm hit, and precautionary measures were taken since the
vessel was 14 years old and the turbo-charger was leaking. The Captain
requisitioned for supplies of oxygen and acetylene necessary for the repairs.
The vessel sailed from HK to Singapore.
3. While in Singapore, the supplies were not available, hence after
consultation with the Chied Engineer, the Captain decided to delay departure
and wait for the supplies.
4. After the supplies were delivered, the vessel sailed for South Africa, where
upon arrival, the Captain was instructed to turn over his post to a new captain.
He was then repatriated to the Philippines.
5. Captain Tayong filed with the POEA a complaint for illegal dismissal, which
was dismissed.
6. On appeal, the NLRC reversed and ordered the shipowner to pay his salary
for the unexpired contract plus one month leave benefit, and attorney's fees.
Hence, this appeal.
ISSUE: W/N CAPTAIN TAYONG WAS ILLEGALLY DISMISSED?
HELD: Yes.
1. It is well settled that confidential and managerial employees cannot be
arbitrarily dismissed at any time, and without case as reasonably established
in an appropriate investigation.
2. The captain of a vessel is a confidential and managerial employee within
the meaning of the above doctrine. A master or captain, for purposes of
maritime commerce, is one who has command of a vessel. A captain
commonly performs three (3) distinct roles: (1) he is a general agent of the
shipowner; (2) he is also commander and technical director of the vessel; and
(3) he is a representative of the country under whose flag he navigates. Of
these roles, by far the most important is the role performed by the captain as
commander of the vessel, for such role (which to our mind, is analogous to
that of "Chief Executive Officer" [CEO] of a present-day corporate enterprise)
has to do with the operation and protection of the vessel during its voyag and
the protection of the passengers (if any) and crew and cargo. In his role as
general agent of the shipowner, the captain has authority to sign bills of lading,
carry goods aboard and and deal with the freight earned, agree upon rates and
decide whether to take cargo. The ship captain, as agent of the shipowner,
has legal authority to enter into contracts with respect to the vessel and the
trading of the vessel, subkect to applicable limitations established by statute,
contract or instructions and regulations of the shipowner. To the captain is
committed the governance, care and management of the vessel. Clearly, the
captain is veste with both management and fiduciary functions.
3. More importantly, a ship's captain must be accorded a reasonable measure
of discretionary authority to decide what the safety of the ship and its crew
and cargo specifically requires on a stipulated ocean voyage. The captain is
held responsible, and properly so, for such safety.
4. Compagnie de Commerce v. Hamburg is instructive in this connection. In
that case, the captain of a German vessel at the port of Saigon decided to
head for the port of Manila instead of the ports of Dunkirk and Hamburg
because of WWI has been declared and in his judgment, the vessel could not
reach its destination. The charterer sued for damages arising from the breach
of the charter party, and unauthorized sale of the Cargo. The SC held that the
master of the vessel had reasonable grounds to apprehend that the vessel
was in danger of seizure of captur by the French authorities in Saigon and was
justified by necessity to elect the court which he took - to flee Saigon for the
Art. 615. Without the consent of the ship agent, the captain
may not have himself substituted by another person; and should he do
so, besides being liable for all the acts of the substitute and bound to
pay the indemnities mentioned in the foregoing article, the substitute as
well as the captain may be discharged by the ship agent.
Notes: The duties of a captain are essentially personal due to the confidence
given to him arising from the fact that he possesses the required technical
ability and that he is a man worthy of trust of the shipowner
Art. 617. The captain may not contract loans on respondentia
secured by the cargo, and should he do so the contract shall be void.
Neither may he borrow money on bottomry for his own
transactions, except on the portion of the vessel he owns, provided no
money has been previously borrowed on the whole vessel, and provided
there does not exist any other kind of lien or obligation chargeable
against the vessel. When he is permitted to do so, he must necessarily
state what interest he has in the vessel.
In case of violation of this article the principal, interest, and
costs shall be charged to the private account of the captain, and the ship
agent may furthermore discharge him.
Art. 621. A captain who borrows money on the hull, engine,
rigging, or tackle of the vessel, or who pledges or sells merchandise or
provisions outside of the cases and without the formalities prescribed in
this Code, shall be liable for the principal, interest, and costs, and shall
indemnify for the damages he may cause.
He who commits fraud in his accounts shall reimburse the
amount defrauded, and shall be subject to the provisions of the Penal
Code.
Art. 583. If the ship being on a voyage the captain should find
it necessary to contract one or more of the obligations mentioned in
Nos. 8 and 9 of Article 580, he shall apply to the judge or court if he is in
Philippine territory, and otherwise to the Filipino consul, should there be
one, and in his absence to the judge or court or to the proper local
authority, presenting the certificate of the registry of the vessel treated of
in Article 612, and the instruments proving the obligation contracted.
The judge or court, the consul or the local authority as the
case may be in view of the result of the proceedings instituted, shall
make a temporary memorandum in the certificate of their result, in order
that it may be recorded in the registry when the vessel returns to the port
of her registry, or so that it can be admitted as a legal and preferred
obligation in case of sale before the return, by reason of the sale of the
vessel by virtue of a declaration of unseaworthiness.
The lack of this formality shall make the captain personally
liable to the creditors who may be prejudiced through his fault.
Notes: Obligations covered by this article : (1) price which has not been paid
to the last vendor; (2) for materials and labor in the construction of the vessel;
(3) for the repair, equipment and provisioning with the victuals and fuel; (4)
loan on bottomry before departure of the vessel; (5) insurance premiums
under Art. 580 pars. 8 and 9.
3. Other Officers and Crew
notes:
Art. 626 - 631 : sailing mate or second in command
Art. 632 - 633 : second mate or third in command
Complement of a vessel or crew - all the persons on board, from the captain to
the cabin boy, necessary for the management, maneuvers, and service;
includes the sailing mates, engineers, stokers, and other employees.
PAGE 52

5. Any occurrence which incapacitates the sailor to perform
the work entrusted to him, with the exception of that provided in Article
644.
(a) Contracts and formalities

Art. 634. The captain may make up his crew with the number
he may consider advisable, and in the absence of Filipino sailors he may
ship foreigners residing in the country, the number thereof not to exceed
one-fifth of the total crew. If in foreign ports the captain should not find
a sufficient number of Filipino sailors, he may make up the crew with
foreigners, with the consent of the consul or marine authorities.
The agreements which the captain may make with the
members of the crew and others who go to make up the complement of
the vessels, to which reference is made in Article 612 (obligations
inherent in the office of captain) must be reduced to writing in the
account book without the intervention of a notary public or clerk of
court, signed by the parties thereto, and vised by the marine authority if
they are executed in Filipino territory, or by the consuls or consular
agents of the Philippines if executed abroad, stating therein all the
obligations which each one contracts and all the rights they acquire,
said authorities taking care that these obligations and rights are
recorded in a concise and clear manner, which will not give rise to
doubts or claims.
The captain shall take care to read to them the articles of this
Code which concern them, stating in the said document that they were
read.
If the book includes the requisites prescribed in Article 612,
and there should not appear any signs of alterations in its entries, it
shall be admitted as evidence in questions which may arise between the
captain and the crew with regard to the agreements contained therein
and the amounts paid on account of the same.
Every member of the crew may demand of the captain a copy,
signed by the latter, of the agreement and of the liquidation of his wages,
as they appear in the book.
Notes: The contract with a seaman has the nature of a lease of serv ice, in
virtue of which one person binds himself to perform or to do the services or
works for which he has signed himself in the vessel in consideration of the
compensation stipulated
(b) Duties and liabilities
Art. 635. A sailor who has been contracted to serve on a
vessel cannot rescind his contract nor fail to comply therewith except by
reason of a legitimate impediment which may have occurred.
Neither can he pass from the service of one vessel to another
without obtaining the written consent of the vessel on which he may be.
If, without obtaining said permission, the sailor who has
signed for one vessel should sign for another one, the second contract
shall be void, and the captain may choose between forcing him to fulfill
the service to which he first bound himself or look for a person to
substitute him at his expense.
Said sailor shall furthermore lose the wages earned on his first
contract to the benefit of the vessel for which he may have signed.
A captain who, knowing that a sailor is in the service of
another vessel, should have made a new agreement with him, without
having requested the permission referred to in the foregoing paragraphs,
shall be personally liable to the captain of the vessel to which the sailor
first belonged for that part of the indemnity, referred to in the third
paragraph of this article, which the sailor may not be able to pay.
(c) Rights
Art. 636. Should there be no fixed period for which a sailor
has been contracted, he cannot be discharged until the end of the return
voyage to the port where he enlisted.
Art. 637. Neither may the captain discharge a sailor during the
time of his contract except for just cause, the following being considered
as such:
1. The perpetration of a crime which disturbs order on the
vessel.
2. Repeated insubordination, want of discipline, or nonfulfillment of the service.
3. Incapacity and repeated negligence in the fulfillment of the
service which he should render.
4. Habitual drunkenness.
Art. 644. A seaman who falls sick shall

not lose his right to wages during the voyage,
unless the sickness is the result of his own fault.
At any rate, the costs of the attendance and cure
shall be defrayed from the common funds, in the
form of a loan.
If the sickness should comee from an
injury received in the service or defense of the
vessel, the seaman shall be attended and cured at
the expense of the common funds deducting,
before anything else, from the proceeds of the
freightage the cost of the attendance and cure.
6. Desertion.
The captain may, however, before setting out on a voyage and
without giving any reason whatsoever, refuse to permit a sailor whom he may
have engaged to go on board, and may leave him on land, in which case his
wages have to be paid as if he had rendered services.
The indemnity shall be paid from the funds of the vessel if the
captain should have acted for reasons of prudence and in the interest of the
safety and good service of the vessel. Should this not be the case, it shall be
paid by the captain personally.
After the voyage has begun, and during the same and until the
conclusion thereof, the captain may not abandon any member of his crew on
land or on the sea, unless, as the accused of a crime, his imprisonment and
delivery to the competent authority in the first port touched should be proper,
which shall be obligatory to the captain.
Art. 638. If, after the crew has been engaged, the voyage is
revoked by the will of the ship agent or of the charterers, before or after
the vessel has put to sea, or if the vessel is for the same reason given a
different destination from that fixed in the agreement with the crew, the
latter shall be indemnified on account of the rescission of the contract,
according to the following cases:
1. If the revocation of the voyage should be decided before
departure of the vessel from the port, each sailor engaged shall be given
one month's salary, besides what may be due him, in accordance with
his contract, for the services rendered to the vessel up to the date of the
revocation.
2. If the agreement should have been for a fixed amount for
the whole voyage, what may be due for said month and days shall be
determined in proportion to the approximate duration of the voyage, in
the judgment of the experts, in the manner established by the law of civil
procedure; and if the proposed voyage should be of such short duration
that it is calculated at approximately one month, the indemnity shall be
fixed at fifteen days, discounting in all cases the sums advanced.
3. If the revocation should take place after the vessel has put
to sea, the sailors engaged for a fixed amount for the voyage shall
receive the entire salary which may have been offered them if the voyage
had terminated; and those engaged by the month shall receive the
amount corresponding to the time they might have been on board and to
the time they may require to arrive at the port of destination, the captain
being obliged, furthermore, to pay said sailors in both cases the passage
to the said port or to the port of sailing of the vessel, as may be
convenient for them.
4. If the ship agent or the charterers of the vessel should give
it a destination different from that fixed in the agreement, and the
members of the crew should not agree thereto, they shall be given by
way of indemnity half the amount fixed in the first case, in addition to
what may be due them for the part of the monthly wages corresponding
to the days which may have elapsed from the date of their agreements.
If they accept the change, and the voyage, on account of
greater distance or of other reasons, should give rise to an increase of
wages, the latter shall be adjusted privately, or through friendly adjusters
in case of disagreement. Even if the voyage should be shortened to a
nearer point, this shall not give rise to a reduction in the wages agreed
upon.
Should the revocation or change of the voyage originate from
the shippers or charterers, the ship agent shall have a right to demand of
them the indemnity which may be justly due.
PAGE 53
Art. 639. Should the revocation of the voyage arise from a just
cause independent of the will of the ship agent and the charterers, and
the vessel should not have left the port, the members of the crew shall
no other right than to collect the wages earned up to the day the
revocation was made.
Art. 640. The following shall be just causes for the revocation
of the voyage:
1. A declaration of war or interdiction of commerce with the
power to whose territory the vessel was bound.
2. The blockade of the port of its destination or the breaking
out of an epidemic after the agreement.
3. The prohibition to receive in said port the goods which
make up the cargo of the vessel.
4. The detention or embargo of the same by order of the
government, or for any other reason independent of the will of the agent.
5. The inability of the vessel to navigate.
Art. 641. If, after a voyage has been begun, and any of the first
three causes mentioned in the foregoing article should occur, the sailors
shall be paid at the port which the captain may deem advisable to make
for the benefit of the vessel and cargo, according to the time they may
have served thereon; but if the vessel is to continue its voyage, the
captain and the crew may mutually demand the enforcement of the
contract.
In case of the occurrence of the fourth cause, the crew shall
continue to be paid half wages, if the agreement is by month; but if the
detention should exceed three months, the contract shall be rescinded
and the crew shall be paid what they should have earned according to
the contact, as if the voyage had been made. And if the agreement
should be for a fixed sum for the voyage, the contract must be complied
with in the terms agreed upon.
In the fifth case, the crew shall have no other right than to
collect the wages earned; but if the disability of the vessel should have
been caused by the negligence or lack of skill of the captain, engineer, or
sailing mate, they shall indemnify the crew for the damages suffered,
always without prejudice to the criminal liability which may be proper.
Art. 642. If the crew has been engaged on shares it shall not
be entitled, by reason of the revocation, delay, or greater extension of the
voyage, to anything but the proportionate part of the indemnity which
may be paid to the common funds by the persons responsible for said
occurrences.
Art. 643. If the vessel and her cargo should be totally lost by
reason of capture or shipwreck, all rights shall be extinguished, both as
regards the right of the crew to demand any wages and as regards the
right of the ship agent to recover the advances made.
If a portion of the vessel or of the cargo, or of both, should be
saved, the crew engaged on wages, including the captain, shall retain
their rights on the salvage, as far as possible, on the remainder of the
vessel as well as on the value of the freightage or the cargo saved; but
sailors who are engaged on shares shall have no right on the salvage of
the hull, but only on the portion of the freightage saved. (If they should
have worked to recover the remainder of the shipwrecked vessel, they
shall be given from the amount of the salvage an award in propor tion to
the efforts made and to the risks encountered in order to accomplish the
salvage.)
And if the contract was on shares and the death occurred after
the voyage was begun, the heirs shall be paid the entire portion due the
sailor; but if the latter died before the departure of the vessel from the
port, the heirs shall not be entitled to claim anything.
If death occurred in the defense of the vessel, the sailor shall
be considered as living, and his heirs shall be paid, at the end of the
voyage, the full amount of wages or the entire part of the profits which
may be due him as others of his class.
The sailor shall likewise be considered as present if he was
captured while defending the vessel, in order to enjoy the benefits as
the rest; but should he have been captured on account of carelessness
or other accident not related to the service, he shall only receive the
wages due up to the day of his capture.
Art. 646. The vessel with her engines, rigging, equipment, and
freightage shall be liable for the wages earned by the crew engaged per
month or for the trip, the liquidation and payment to take place between
one voyage and the other. // After a new voyage has been undertaken,
credits of such kind pertaining to the preceding voyage shall lose the
preference.
Art. 647. The officers and the crew of the vessel shall be
exempted from all obligations contracted, if they deem if proper, in the
following cases;
1. If, before the beginning of the voyage, the captain attempts
to change it, or there occurs a naval war with the power to which the
vessel was destined.
2. If a disease should break out and be officially declared
epidemic in the port of destination.
3. If the vessel should change owner or captain.
4. Supercargoes
Art. 649. Supercargoes shall discharge on board the vessel
the administrative duties which the agent or shippers may have assigned
them; they shall keep an account and record of their transactions in a
book which shall have the same conditions and requisites as required
for the accounting book of the captain, and shall respect the latter in his
duties as chief of the vessel.
The powers and liabilities of the captain shall cease, when
there is a supercargo, with regard to that part of the administration
legitimately conferred upon the latter, but shall continue in force for all
acts which are inseparable from his authority and office.
Supercargo: An agent of the owner of the goods shipped as cargo on a
vessel, who has charge of the cargo on board, sells the same to the best
advantage in the foreign markets, buys cargo to be brought back on the return
voyage of the ship, and comes home with it
Art. 650. All the provisions contained in the second section of
Title III, Book II, with regard to qualifications, manner of making
contracts, and liabilities of factors shall be applicable to supercargoes.
Now governed by the provisions on agency
Art. 651. Supercargoes cannot, without special authorization
or agreement, make any transaction for their own account during the
voyage, with the exception of the ventures which, in accordance with the
custom of the port of destination, they are permitted to do.
Neither shall they be permitted to invest in the return trip more
than the profits from the ventures, unless there is a special authorization
therefor from the principals.
Art. 644. A sailor who falls sick shall not lose his right to
wages during the voyage, unless his sickness is the result of his own
fault. At any rate, the costs of medical attendance and treatment shall be
defrayed from the common funds, in the form of a loan.
If the sickness should be caused by an injury received in the
service or defense of the vessel, the sailor shall be attended and treated
at the expense of the common funds, deducting, before anything else,
from the proceeds of the freightage, the cost of the attendance and
treatment.
Art. 645. If a sailor should die during the voyage, his heirs
shall be given the wages earned and not received, according to his
contract and the cause of his death, namely --If he died a natural death and was engaged on wages, that
which may have been earned up to the date of his death shall be paid.
If the contract was for a fixed sum for the whole voyage, half
the amount earned shall be paid if the sailor died on the voyage out, and
the whole amount if he died on the return voyage.
D. Accidents and Damages in Maritime Commerce

RISKS, DAMAGES, AND ACCIDENTS OF MARITIME COMMERCE
1. Averages
(a) Nature and Kinds
Art. 806. For the purposes of this Code the following shall
be considered averages:
1. All extraordinary or accidental expenses which may be
incurred during the voyage for the preservation of the vessel or cargo,
or both.
2. All damages or deterioration which the vessel may suffer
from the time it puts to sea at the port of departure until it casts anchor
at the port of destination, and those suffered by the merchandise from
PAGE 54

the time they are loaded in the port of shipment until they are unloaded
in the port of their consignment.
Art. 807. The petty and ordinary expenses incident to
navigation, such as those of pilotage of coasts and ports, lighterage
and towage, anchorage, inspection, health, quarantine lazaretto, and
other so-called port expenses, costs of barges, and unloading, until
the merchandise is placed on the wharf, and other usual expenses of
navigation shall be considered ordinary expenses to be defrayed by
the shipowner, unless there is an express agreement to the contrary.
Art. 808. Averages shall be:
1. Simple or particular.
2. General or gross.
Averages consist of 2 items :
1. Expenses : to constitute an average, an expense must be:
a. extraordinary or accidental
b. incurred during the voyage
c. incurred in order to preserve the vessel, cargo or
both
2. Damages or deterioration : to constitute an average, it must
be:
a. have been suffered from the time the vessel puts
to sea from
the port of departure until it casts anchor in the
port of
destination
b. have been suffered by the merchandise from the
time they are
loaded in the port of shipment until they are unloaded
in the port
of consignment
(1) Simple or Particular
(a) Defined
Art. 809. As a general rule, simple or particular averages
include all the expenses and damages caused to the vessel or to her
cargo which have not inured to the common benefit and profit of all
the persons interested in the vessel and her cargo, especially the
following:
1. The losses suffered by the cargo from the time of its
embarkation until it is unloaded, either on account of the inherent
defect of the goods or by reason of a marine accident or force majeure,
and the expenses incurred to avoid and repair the same.
2. The losses and expenses suffered by the vessel in its
hull, rigging, arms, and equipments, for the same causes and reasons,
from the time it puts to sea from the port of departure until it anchors
in the port of destination.
3. The losses suffered by the merchandise loaded on deck,
except in coastwise navigation, if the marine ordinances allow it.
4. The wages and victuals of the crew when the vessel is
detained or embargoed by a legitimate order or force majeure, if the
charter has been contracted for a fixed sum for the voyage.
5. The necessary expenses on arrival at port, in order to
make repairs or secure provisions.
6. The lowest value of the goods sold by the captain in
arrivals under stress for the payment of provisions and to save the
crew, to meet any other need of the vessel against which the proper
amount shall be charged.
7. The victuals and wages of the crew while the vessel is in
quarantine.
8. The loss inflicted upon the vessel or cargo by reason of
an impact or collision with another, if it is accidental and unavoidable.
If the accident should occur through the fault or negligence of the
captain, the latter shall be liable for all the damage caused.
9. Any loss suffered by the cargo through the faults,
negligence, or barratry of the captain or of the crew, without prejudice
to the right of the owner to recover the corresponding indemnity from
the captain, the vessel, and the freight.
Distinguishing feature : an expense incurred or damage suffered which has
not inured to the common benefit and profit of all persons interested in the
vessel and its cargo
(b) Effects
Art. 810. The owner of the goods which gave rise to the
expense or suffered the damage shall bear the simple or particular
averages.
(2) Gross or General
(a) Defined
Art. 811. As a general rule, general or gross averages shall
include all the damages and expenses which are deliberately caused in
order to save the vessel, its cargo, or both at the same time, from a
real and known risk, and particularly the following:
1. The goods or cash invested in the redemption of the
vessel or of the cargo captured by enemies, privateers, or pirates, and
the provisions, wages, and expenses of the vessel detained during the
time the settlement or redemption is being made.
2. The goods jettisoned to lighten the vessel, whether they
belong to the cargo, to the vessel, or to the crew, and the damage
suffered through said act by the goods which are kept on board.
3. The cables and masts which are cut or rendered useless,
the anchors and the chains which are abandoned, in order to save the
cargo, the vessel, or both.
4. The expenses of removing or transferring a portion of the
cargo in order to lighten the vessel and place it in condition to enter a
port or roadstead, and the damage resulting therefrom to the goods
removed or transferred.
5. The damage suffered by the goods of the cargo by the
opening made in the vessel in order to drain it and prevent its sinking.
6. The expenses caused in order to float a vessel intentionally stranded for the purpose of saving it.
7. The damage caused to the vessel which had to be
opened, scuttled or broken in order to save the cargo.
8. The expenses for the treatment and subsistence of the
members of the crew who may have been wounded or crippled in
defending or saving the vessel.
9. The wages of any member of the crew held as hostage by
enemies, privateers, or pirates, and the necessary expenses which he
may incur in his imprisonment, until he is returned to the vessel or to
his domicile, should he prefer it.
10. The wages and victuals of the crew of a vessel chartered
by the month, during the time that it is embargoed or detained by force
majeure or by order of the Government, or in order to repair the
damage caused for the common benefit.
11. The depreciation resulting in the value of the goods sold
at arrivals under stress in order to repair the vessel by reason of gross
average.
12. The expenses of the liquidation of the average.
Art. 817. If in the lightening a vessel on account of a storm,
in order to facilitate its entry into a port or roadstead, part of her cargo
should be transferred to lighters or barges and be lost, the owner of
said part shall be entitled to indemnity, as if the loss had originated
from a gross average, the amount thereof being distributed between
the vessel and cargo from which it came.
If, on the contrary, the merchandise transferred should be
saved and the vessel should be lost, no liability may be demanded of
the salvage.
Art. 818. If, as a necessary measure to extinguish a fire in
port, roadstead, creek, or bay, it should be decided to sink any vessel,
this loss shall be considered gross average, to which the vessels
saved shall contribute.
Distinguishing feature: Expense or damage suffered deliberately in order to
save the vessel, its cargo or both from a real and known risk --> it is the
deliverance from an immediate peril, by a common sacrifice, that constitutes
the essence of general average
Requisites for general average:
1. there must be a common danger --> the ship and cargo are
subject to the same danger and that the danger arises from accidents of the
sea, dispositions of the authorities or faults of men, provided that the
circumstances producing the peril should be ascertained and imminent
PAGE 55

2. for the common safety, part of the vessel or the cargo or both
is sacrificed deliberately
3. from the expenses or damages caused follows the successful
saving of the vessel and cargo
4. the expenses or damages should have been incurred or
inflicted after taking legal steps and authority
(b) Essential
Requisites
Art. 813. In order to incur the expenses and cause the
damages corresponding to gross average, there must be a resolution
of the captain, adopted after deliberation with the sailing mate and
other officers of the vessel, and after hearing the persons interested in
the cargo who may be present.
If the latter should object, and the captain and officers or a
majority of them, or the captain, if opposed to the majority, should
consider certain measures necessary, they may be executed under his
responsibility, without prejudice to the right of the shippers to proceed
against the captain before the competent judge or court, if they can
prove that he acted with malice, lack of skill, or negligence.
If the persons interested in the cargo, being on board the
vessel, have not been heard, they shall not contribute to the gross
average, their share being chargeable against the captain, unless the
urgency of the case should be such that the time necessary for
previous deliberation was wanting.
Art. 814. The resolution adopted to cause the damages
which constitute general average must necessarily be entered in the
log book, stating the motives and reasons on which it is based, the
votes against it and the reason for the dissent, should there be any,
and the irresistible and urgent causes which impelled the captain if he
acted of his own accord.
In the first case the minutes shall be signed by all the
persons present who could do so before taking action, if possible; and
if not, at the first opportunity. In the second case, it shall be signed by
the captain and by the officers of the vessel.
In the minutes, and after the resolution, shall be stated in
detail all the goods jettisoned, and mention shall be made of the
injuries caused to those kept on board. The captain shall be obliged
to deliver one copy of these minutes to the maritime judicial authority
of the first port he may make, within twenty- four hours after his
arrival, and to ratify it immediately under oath.
Formalities for incurring gross average :
1. there must be an assembly of the sailing mate and other officers with the
captain including those with interests in the cargo
2. there must be a resolution of the captain
3. the resolution shall be entered in the log book, with the reasons and
motives and the votes for and against the resolution
4. the minutes shall be signed by the parties
5. within 24 hours upon arrival at the first port the captain makes, he shall
deliver one copy of these minutes to the maritime judicial authority thereat
Art. 860. If, notwithstanding the jettison of the merchandise,
breakage of masts, ropes, and equipment, the vessel should be lost
running same risk, no contribution whatsoever by reason of gross
average shall be proper.
The owners of the goods saved shall not be liable for the
indemnification of those jettisoned, lost or damaged.
The goods that were not sacrificed shall not be liable for the indemnification
of those sacrificed - One of the requisites of general average is lacking,
that is, success in saving the vessel and remaining cargo
Magsaysay Inc. vs Agan 96 Phil. 504
F:
Plaintiff's vessel SS Antonio left for Manila for Basco, Batanes
with general cargo owned by the different shippers including that of the
defendant. Upon reaching Aparri, it accidentally ran aground. Plaintiff had it
refloated by Luzteveco for compensation. After refueling, the vessel
proceeded to Basco where the cargoes were delivered. On the theory that
the expenses incurred in floating the vessel constituted a general average to
which both the ship and cargo should contribute, plaintiff asked from the
shippers a deposit or bond to answer for contribution to the average. All
shippers acceded except the defendant. In action to recover said
contribution, the Manila CFI decided for the plaintiff. Defendant appealed
contending that the floating of a vessel, unintentionally stranded inside a
port and at the mouth of a river during a fine weather, does not constitute
general average expenses.
Held: In classifying averages into simple or particular and general or gross
and defining each class, the Code of Commerce at the same time
enumerate certain specific cases as coming specially under one or the other
class. While the expenses incurred in putting the vessel afloat may well
come under No. 2 of Art. 809 - referring to expenses suffered by the vessel
due to an accident of the sea or force majeure- said expenses do not fit into
any of the specific cases of general average enumerated in ART. 811. No. 6
of Art. 811 mentions expenses caused to afloat a vessel, but it specifically
refers to a vessel intentionally stranded for the purpose of saving it, and
would have no application where the stranding was unintentional.
The following are the requisites for a general average: 1) there
must be common danger, 2) for the common safety part of the vessel or
cargo or both is sacrificed deliberately, 3) from the expenses or damages
caused follows the successful saving of the vessel and cargo, and 4) the
expenses or damages should have been incurred or inflicted after taking the
proper legal steps and authority.
It is the deliverance from an immediate peril, by reason of a
common sacrifice, that constitutes the essence of a general average.
Where there is no proof that the stranded vessel had to be put afloat to save
it from imminent danger, and what does appear is that the vessel had to be
salvaged in order to enable it to proceed to its port of destination, the
expenses incurred in floating the vessel do not constitute general average.
It is the safety of the property, and not of the voyage which constitutes the
true foundation of general average.
The expenses incurred for the common safety of the vessel and
cargo in this case did not arise from the imminent peril of both. The cargo
could have been unloaded by the owners had they been required to do so.
The refloating was a success, but as the sacrifice was for the vessel's
benefit -- to enable it to proceed to its destination -- and not for the purpose
of saving the cargo, the cargo owners are not in law bound to contribute to
expenses. The final requisite has not been proved for it does not appear
that the expenses in question were incurred after following the procedure
laid down in Art. 913.
Decision reversed.
International Harvester vs Hamburg American Line 42 Phil 845

F:
In the spring of 1917, defendant undertook to carry agricultural
machineries, belonging to the plaintiff, from Hamburg to Vladivostok,
Russia. Freight charges were prepaid to ultimate destination and defendant
reserved the right to forward the machineries at its own expense by some
other means in case of its inability to effect discharge at the port of
destination. When the voyage was almost completed at the China Sea, war
broke out between Germany and Russia, and the ship put in to the port of
Manila, where it was interned. Captain of the vessel refused to surrender
the machineries to the owner's agent unless the latter would agree to
subject said cargo to liability upon general average to satisfy the cost and
expenses of the vessel incident to its stay in Manila. Plaintiff did not assent
and brought an action for recovery of the machineries plus damages. The
plaintiff later obtained said cargo by a writ of replevin and forwarded it to
Vladivostok by another streamer. Defendant denied liability asserting its lien
on the cargo for general average. Trial court awarded the plaintiff damages.
Defendant appealed.
Held: It is clear that the cargo in question is not liable to a general average.
It is not claimed that said cargo was contraband of war and being neutral
goods, they were not liable to forfeiture in the event of capture by the
enemies of the ship's flag. It follows that when the master of the vessel
decided to take refuge in Manila, he acted exclusively with a view to the
vessel's protection. There was no common danger to the ship and cargo;
and, therefore, it was not a case for a general average.
The outbreak of the war between Germany and Russia absolved
the defendant from conveying the cargo to Russia, and no damage could be
recovered by the plaintiff from the defendant for the latter's failure to convey
the cargo to the port of destination on that ship. But by the terms of the
contract of affreightment, the defendant was bound to forward the cargo to
Vladivostok at its expense, not necessarily by a streamer of defendant. It
does not by any means follow that it is not liable for the expenses incurred
by the plaintiff in completing the unfinished portion of the voyage in another
ship. Defendant is, therefore, liable for the cost of forwarding the cargo by
another line, the full freight having been received by the ship at the
commencement of the voyage.
Judgment affirmed.
PAGE 56

prepared before the departure, in accordance with the first paragraph
of Article 612.
Compagnie de Commerce vs Hamburg 36 Phil 590
F:
In July 1914, defendant's vessel undertook to carry a cargo of
rice meal in the French port of Saigon for delivery to Dunkirk under a
contract of affreightment with a French shipper. While the loading of the
cargo was made, rumors of the outbreak of war between French and
Germany spread. The master of the German vessel, after completion of the
loading of the cargo and after being refused by the French Governor at
Saigon for a pass of safe-conduct, fled with his vessel and her cargo and
took refuge in Manila. Considering the nature of the cargo and its
impossibility of being delivered to its destination within reasonable time, the
master of the vessel consulted the shipper's instruction as to the disposition
of the cargo, but the shipper's agent refused to assume responsibility.
Defendant's agent in Manila, upon the court's authority secured by the
master of the vessel, sold said rice meal and deposited the proceeds
thereof with the court minus the expenses incident to the sale. Plaintiff filed
an action for recovery of the proceeds of the sale and the resulting
damages. Defendant also claimed, in a cross-complaint, contribution from
plaintiff for general average for the expenses incurred by the vessel's stay in
Manila. Trial court decided for the plaintiff including damages for the
defendant's breach of the charter party. Both parties appealed.
Held: The danger from which the master of the vessel fled was a real and
not merely an imaginary one. Seizure at the hands of the enemy, though
not inevitable, was a possible outcome of a failure to leave the port of
Saigon; and it cannot be said that under the conditions existing at the time
when the master elected to flee from that port, there were no grounds for a
reasonable apprehension of danger from seizure by French authorities, and
therefore no necessity for flight. The deviation of the vessel therefore, from
the route prescribed in her charter party, and the subsequent abandonment
by the master of the voyage contemplated in the contract of affreightment,
must be held to have been justified by the necessity under which the master
was placed to elect that course which would remove and preserve the
vessel from danger of seizure by the public enemy of the flag which the
vessel sailed; and that neither the vessel nor her owners are liable for the
resultant damages suffered by the owner of the cargo.
The claim for general average by the shipowner, however, cannot
be sustained under the provisions of the York-Antwerp Rules. An
examination of the entire body of these rules discloses that general average
is never allowed thereunder unless the loss or damage sought to be made
good as general average has been incurred for the `common safety'. It is
very clear that in fleeing from the port of Saigon and taking refuge in Manila,
the master of the vessel was not acting for the common safety of the vessel
and her cargo. The French cargo was absolutely secure from danger of
seizure or confiscation so long as it remained in the port of Saigon, and
there can be no question that the flight of the vessel was a measure of
precaution adopted solely and exclusively for the preservation of the vessel
from danger of seizure or capture. Delivery of the net proceeds of the sale
to plaintiff should be affirmed, but recovery of damages by plaintiff should be
reversed. Defendant cannot claim for general average.
Judgment modified.
(c) Effects
Art. 812. In order to satisfy the amount of the gross or
general averages, all the persons having an interest in the vessel and
cargo therein at the time of the occurrence of the average shall
contribute.
(e) Jason Clause

Jason Clause, Rule D, York-Antwerp Rules
Rights to contribution in general average shall not be affected,
though the event which gave rise to the sacrifice or expenditure may have
been due to the fault of one of the parties to the adventure; but this shall not
prejudice any remedies which may be open against that party for such fault.
(b) Proof and Liquidation of Averages
(1) Modes
Art. 846. Those interested in the proof and liquidation of
averages may mutually agree and bind themselves at any time with
regard to the liability, liquidation and payment thereof.
In the absence of agreements, the following rules shall be
observed:
1. The proof of the average shall take place in the port
where the repairs are made, should any be necessary, or in the port of
unloading.
2. The liquidation shall be made in the port of unloading, if
it is a Philippine port.
3. If the average occurred outside of the jurisdictional
waters of the Philippines, or the cargo has been sold in a foreign port
by reason of an arrival under stress, the liquidation shall be made in
the port of arrival.
4. If the average has occurred near the port of destination,
so that said port can be made, the proceedings mentioned in rules 1
and 2 shall be held there.
Art. 847. In the case where the liquidation of the averages is
made privately by virtue of agreement, as well as when a judicial
authority intervenes at the request of any of the parties interested who
do not agree thereto, all of them shall be cited and heard, should they
not have renounced this right.
Should they not be present or should they have no legal
representative, the liquidation shall be made by the consul in a foreign
port, and where there is none, by the competent judge or court,
according to the laws of the country and for the account of the proper
party.
When the representative is a person well known in the place
where the liquidation is made, his intervention shall be admitted and
shall produce legal effects, even though he be authorized only by a
letter of the ship agent, the shipper, or the insurer.
Art. 848. Claims for averages shall not be admitted if they
do not exceed 5 per cent of the interest which the claimant may have in
the vessel or in the cargo if it be gross average, and 1 per cent of the
goods damaged if particular average, deducting in both cases the
expenses of appraisal, unless there is an agreement to the contrary.
(d) Jettison
(2) Appraisal of general average
Art. 815. The captain shall direct the jettison, and shall order
the goods cast overboard in the following order:
1. Those which are on deck, beginning with those which
embarrass the maneuver or damage the vessel, preferring, if possible,
the heaviest ones with the least utility and value.
2. Those which are below the upper deck, always beginning
with those of the greatest weight and smallest value, to the amount
and number absolutely indispensable.
Art. 816. In order that the goods jettisoned may be included
in the gross average and the owners thereof be entitled to indemnity, it
shall be necessary in so far as the cargo is concerned that their
existence on board be proven by means of the bill of lading; and with
regard to those belonging to the vessel, by means of the inventory
Art. 850. If by reason of one or more accidents of the sea,

particular and gross averages of the vessel, of the cargo, or of both,
should take place on the same voyage, the expenses and damages
corresponding to each average shall be determined separately in the
port where the repairs are made, or where the merchandise is
discharged, sold, or utilized.
For this purpose the captains shall be obliged to demand of
the expert appraisers and of the contractors making the repairs, as
well as of those appraising and taking part in the unloading, repair,
sale, or utilization of the merchandise, that in their appraisements or
estimates and accounts they set down separately and accurately the
expenses and damages pertaining to each average, and in those of
each average those corresponding to the vessel and to the cargo, also
stating separately whether or not there are damages proceeding from
inherent defect of the thing and not from accident of the sea; and in
case there should be expenses common to the different averages and
PAGE 57

to the vessel and its cargo, the amount corresponding to each must be
estimated and stated distinctly.
Art. 851. At the instance of the captain, the adjustment,
liquidation, and distribution of gross averages shall be held privately,
with the consent of all the parties in interest.
For this purpose, within forty-eight hours, following the
arrival of the vessel at the port, the captain shall convene all the
persons interested in order that they may decide as to whether the
adjustment or liquidation of the gross average is to be made by
experts and liquidators appointed by themselves, in which case did
shall be so done if the interested parties agree.
If an agreement is not possible, the captain shall apply to the
competent judge or court, who shall be the one in the port where
these proceedings are to be held in accordance with the provisions of
this Code, or to the consul of the Philippines should there be one, and
should there be none, to the local authority when they are to be held in
a foreign port.
Art. 852. If the captain does not comply with the provisions
of the preceding article, the ship agent or the shippers shall demand
the liquidation, without prejudice to the action they may bring to
demand indemnity from him.
Under Art. 851, the captain is required to initiate the proceedings for the
adjustment, liquidation and distribution of any gross average; it is his duty to
take the proper steps to protect any shipper whose goods may have been
jettisoned for the general safety ==> if the captain does not comply with his
duty under 851, the shipowner or shipper has the right to maintain an action
against the captain for indemnification for the loss --> this does not involve
the suppression of the right of action of the shipper against the shipowner
Art. 853. After the experts have been appointed by the
persons interested, or by the court, and after the acceptance, they
shall proceed to the examination of the vessel and of the repairs
required and to the appraisal of their cost, separating these losses and
damages from those arising from the inherent defect of the things.
The experts shall also declare whether the repairs may be
made immediately, or whether it is necessary to unload the vessel in
order to examine and repair it.
With regard to the merchandise, if the average should be
visible at a mere glance, the examination thereof must be made before
they are delivered. Should it not be visible at the time of unloading,
said examination may be made after the delivery, provided that it is
done within forty-eight hours from the unloading, and without
prejudice to the other proofs which the experts may deem proper.
Art. 854. The valuation of the objects which are to contribute
to the gross average, and that of those which constitute the average,
shall be subject to the following rules:
1. The merchandise saved which is to contribute to the
payment of the gross average shall be valued at the current price at the
port of unloading, deducting the freightage, customs duties, and
expenses of unloading, as may appear from a material inspection of
the same, without taking the bills of lading into consideration, unless
there is an agreement to the contrary.
2. If the liquidation is to be made in the port of departure,
the value of the merchandise loaded shall be determined by the
purchase price, including the expenses until they are placed on board,
the insurance premium excluded.
3. If the merchandise should be damaged, it shall be
appraised at its true value.
4. If the voyage having been interrupted, the merchandise
should have been sold in a foreign port, and the average cannot be
estimated, the value of the merchandise in the port of arrival, or the net
proceeds obtained at the sale thereof, shall be taken as the
contributing capital.
5. Merchandise lost, which constitutes the gross average,
shall be appraised at the value which merchandise of its kind may
have in the port of unloading, provided that its kind and quality appear
in the bill of lading; and should they not appear, the value shall be that
stated in the invoices of the purchase issued in the port of shipment,
adding thereto the expenses and freightage subsequently arising.
6. The masts cut down, the sails, cables, and other
equipment of the vessel rendered useless for the purpose of saving it,
shall be appraised at the current value, deducting one-third by reason

of the difference between new and old.
This deduction shall not be made with respect to anchors
and chains.
7. The vessel shall be appraised at its true value in the
condition in which it is found.
8. The freightage shall represent 50 per cent by way of
contributing capital.
Art. 855. The merchandise loaded on the upper deck of the
vessel shall contribute to the gross average should it be saved; but
there shall be no right to indemnify if it should be lost by reason of
having been jettisoned for common safety, except when the marine
ordinances allow its shipment in this manner in coastwise navigation.
The same shall take place with that which is on board and is
not included in the bills of lading or inventories, according to the
cases.
In any case the shipowner and the captain shall be liable to
the shippers for the damages from the jettison, if the storage on the
upper deck was made without the consent of the latter.
The goods may be stowed on deck (1) with the consent of the shipper or (2)
without his consent --> if stowed on deck with his consent, he takes the risk
upon himself of the perils arising from the dangers of the sea and any
damage will be borne by the owner [particular average]
--> if stowed on deck without his consent, the captain does so at
his own risk; the captain cannot protect himself by showing that they are
damaged or lost by dangers of the sea
The carriage of gasoline on deck by coastwise or interisland
vessels is allowed by marine regulations --> the loss of petroleum for
common safety and benefit will constitute a general average.
Art. 857. After the appraisement of the goods saved and of
those lost which constitute the gross average, has been concluded by
the experts, the repairs, if any, made on the vessel, and, in this case,
the accounts of the same approved by the persons interested or by the
judge or court, the entire record shall be turned over to the liquidator
appointed, in order that he may proceed with the distribution of the
average.
(3) Liquidation of general
average
Art. 858. In order to effect the liquidation, the liquidator
shall examine the protest of the captain, comparing it, if necessary,
with the log book, and all the contracts which may have been made
among the persons interested in the average, the appraisements,
expert examinations, and accounts of repairs made. If, as a result of
this examination, he should find any defect in the procedure which
might injure the rights of the persons interested or affect the liability of
the captain, he shall call attention thereto in order that it may be
corrected, if possible, and otherwise he shall include it in the exordial
of the liquidation.
Immediately thereafter he shall proceed with the distribution
of the amount of the average, for which purpose he shall fix:
1. The contributing capital, which he shall determine by the
value of the cargo, in accordance with the rules established in Article
854.
2. That of the vessel in its actual condition, according to a
statement of experts.
3. The 50 per cent of the amount of the freightage,
deducting the remaining 50 per cent for wages and maintenance of the
crew.
After the amount of the gross average has been determined
in accordance with the provisions of this Code, it shall be distributed
pro rata among the goods which are to cover the same.
Art. 865. The distribution of the gross average shall not be
final until it has been agreed to, or in the absence thereof, until it has
been approved by the judge or court, after an examination of the
liquidation and a hearing of the persons interested who may be
present or of their representatives.
Art. 866. After the liquidation has been approved, it shall be
the duty of the captain to collect the amount of the contribution, and
PAGE 58

he shall be liable to the owners of the goods averaged for the damages
they may suffer through his delay or negligence.
Art. 867. If the persons contributing should not pay the
amount of the contribution at the end of the third day after having been
required to do so, the goods saved shall be proceeded against, at the
request of the captain, until payment has been made from their
proceeds.
Art. 868. If the person interested in receiving the goods
saved should not give security sufficient to answer for the amount
corresponding to the gross average, the captain may defer the
delivery thereof until payment has been made.
Art. 869. The experts whom the court or the persons
interested may appoint, as the case may be, shall proceed with the
examination and appraisement of the averages in the manner
prescribed in Articles 853 and 854, Rules 2 to 7, in so far as they are
applicable.
Art. 819. If during the voyage the captain should believe that
the vessel cannot continue the trip to the port of destination on
account of the lack of provisions, well-founded fear of seizure,
privateers, or pirates, or by reason of any accident of the sea disabling
it to navigate, he shall assemble the officers and shall summon the
persons interested in the cargo who may be present, and who may
attend the meeting without the right to vote; and if, after examining the
circumstances of the case, the reason should be considered wellfounded, the arrival at the nearest and most convenient port shall be
agreed upon, drafting and entering the proper minutes, which shall be
signed by all, in the log book.
The captain shall have the deciding vote, and the persons
interested in the cargo may make the objections and protests they may
deem proper, which shall be entered in the minutes in order that they
may make use thereof in the manner they may consider advisable.
Formalities : 1. assembly of the officers including all interested parties
2. drafting and entering in the log book the proper minutes, which shall be
signed by all
3. entry in the log book of the objections and protests of the persons
interested in the cargo
(4) Liquidation of particular

average
Art. 869. The experts whom the court or the persons
interested may appoint, as the case may be, shall proceed with the
examination and appraisement of the averages in the manner
prescribed in Articles 853 and 854, Rules 2 to 7, in so far as they are
applicable.
2. Arrivals Under Stress
(a) Causes
Art. 819. If during the voyage the captain should believe that
the vessel cannot continue the trip to the port of destination on
account of the lack of provisions, well-founded fear of seizure,
privateers, or pirates, or by reason of any accident of the sea disabling
it to navigate, he shall assemble the officers and shall summon the
persons interested in the cargo who may be present, and who may
attend the meeting without the right to vote; and if, after examining the
circumstances of the case, the reason should be considered wellfounded, the arrival at the nearest and most convenient port shall be
agreed upon, drafting and entering the proper minutes, which shall be
signed by all, in the log book.
The captain shall have the deciding vote, and the persons
interested in the cargo may make the objections and protests they may
deem proper, which shall be entered in the minutes in order that they
may make use thereof in the manner they may consider advisable.
Art. 820. An arrival shall not be considered lawful in the

following cases:
1. If the lack of provisions should arise from the failure to
take the necessary provisions for the voyage according to usage and
custom, or if they should have been rendered useless or lost through
bad stowage or negligence in their care.
2. If the risk of enemies, privateers, or pirates should not
have been well known, manifest, and based on positive and provable
facts.
3. If the defector the vessel should have arisen from the fact
that it was not repaired, rigged, equipped, and prepared in a manner
suitable for the voyage, or from some erroneous order of the captain.
4. Whenever malice, negligence, want of foresight, or lack of
skill on the part of the captain exists in the act causing the damage.
Arrival under stress:
Arrival of a vessel at the nearest and most
convenient port, if during the voyage the vessel cannot continue the trip to
the port of destination due to : (1) lack of provisions, (2) well-founded fear of
seizure, privateers, or pirates, (3) by reason of any accident of the sea
disabling it to navigate
(b) Formalities
Art. 822. If in order to make repairs to the vessel or because

there is danger that the cargo may suffer damage, it should be
necessary to unload, the captain must request authorization from the
competent judge or court for the removal, and carry it out with the
knowledge of the person interested in the cargo, or his representative,
should there be any.
In a foreign port, it shall be the duty of the Filipino consul,
where there is one, to give the authorization.
In the first case, the expenses shall be for the account of the
ship agent or owner, and in the second, they shall be chargeable
against the owners of the merchandise for whose benefit the act was
performed.
If the unloading should take place for both reasons, the
expenses shall be divided proportionately between the value of the
vessel and that of the cargo.
(c) Expenses
Art. 821. The expenses of an arrival under stress shall
always be for the account of the shipowner or agent, but they shall not
be liable for the damages which may be caused the shippers by reason
of the arrival, provided the latter is legitimate.
Otherwise, the ship agent and the captain shall be jointly
liable.
Art. 822. If in order to make repairs to the vessel or because
there is danger that the cargo may suffer damage, it should be
necessary to unload, the captain must request authorization from the
competent judge or court for the removal, and carry it out with the
knowledge of the person interested in the cargo, or his representative,
should there be any.
In a foreign port, it shall be the duty of the Filipino consul,
where there is one, to give the authorization.
In the first case, the expenses shall be for the account of the
ship agent or owner, and in the second, they shall be chargeable
against the owners of the merchandise for whose benefit the act was
performed.
If the unloading should take place for both reasons, the
expenses shall be divided proportionately between the value of the
vessel and that of the cargo.
Requisites for the captain to unload the cargo arriving under stress:
1. the unloading must be necessary to make repairs or there must be
danger that the cargo may suffer damage
2. the captain must be authorized by either a competent court or the Phil.
consul, depending on the port of arrival
(d) Responsibility of Captain
Art. 823. The custody and preservation of the cargo which
has been unloaded shall be entrusted to the captain, who shall be
responsible for the same, except in cases of force majeure.
PAGE 59

7. The vessel which is not properly moored or does not observe
the proper distances, has the presumption against itself.
Art. 824. If the entire cargo or part thereof should appear to
be damaged, or there should be imminent danger of its being
damaged, the captain may request of the competent judge or court, or
of the consul in a proper case, the sale of all or of part of the former,
and the person taking cognizance of the matter shall authorize it, after
an examination and declaration of experts, advertisements, and other
formalities required by the case, and an entry in the book, in
accordance with the provisions of Article 624.
The captain shall, in a proper case, justify the legality of his
conduct, under the penalty of answering to the shipper for the price
the merchandise would have brought if it had arrived in good
condition at the port of destination.
Art. 825. The captain shall be responsible for the damages
caused by his delay, if after the cause of the arrival under stress has
ceased, he should not continue the voyage.
If the cause of the arrival should have been the fear of
enemies, privateers, or pirates, a deliberation and resolution in a
meeting of the officers of the vessel and persons interested in the
cargo who may be present, in accordance with the provisions
contained in Article 819, shall precede the departure.
8. The vessel which is moored at a place not used for the

purpose, or which is improperly moored or does not have sufficient cables,
or which has been left without watch, has also against itself the
presumption.
9. The same rule applies to those vessels which do not have
buoys to indicate the location of its anchors to prevent damage to these
vessels which may approach it.
Zones in time of collisions (3 time zones):
1. all the time up to the moment when the risk of collision may
have said to have begun
--> within this zone, no rule is applicable because none is
necessary. Each vessel is free to direct its course as it deems best with
reference to the movements of the other vessel.
2. the time between the moment when the risk of collission
begins and the moment when it has become a practical necessity.
3. the time between the moment when collission has become a
practical certainty and the moment of actual contact
The captain has the duty to continue the voyage without delay after the
cause of the arrival under stress has ceased--> otherwise, he shall be liable
for damages caused by the delay
3. Collisions
Collision: impact of two vessels both of which are moving
Allision: striking of a moving vessel against one that is stationary
Cases of collision :
1. due to the fault, negligence or lack of skill of the captain, sailing mate or
the complement of the vessel --> under 826, the shipowner shall be liable
for the losses and damages
2. due to the fault of both vessels --> under 827, each vessel shall suffer its
own losses, but as regards the owners of the cargoes, both vessels shall be
jointly and severally liable
3. where it cannot be determined which of the 2 vessels is at fault --> under
828, each vessel shall suffer its own losses, and both shall also be solidarily
responsible for the losses and damages caused to their cargoes
4. collision due to fortuitous event or force majeure --> under 830, each
vessel shall bear its own damages
5. where two vessels collide with each other without their fault but by reason
of the fault of a third vessel --> under 831, the owner of the third vessel
causing the collision shall be liable for the losses and damages 6. a vessel
which is properly anchored and moored may collide with those nearby by
reason of a storm or other cause of force majeure --> under 832, the vessel
run into shall suffer its own damages and expenses
Nautical Rules to determine negligence :
1. When 2 vessels are about to enter a port, the farther one must
allow the nearer to enter first; if they collide, the fault is presumed to be
imputable to the one who arrived later, unless it can be proved that there
was no fault on its part.
Effect of fault of privileged vessel during third zone :

If a vessel having a right of way suddenly changes its course
during the third zone, in an effort to avoid an imminent collision due to the
fault of another vessel, such act may be said to be done in extremis, and
even if wrong, cannot create responsibility on the part of said vessel with
the right of way. Thus, it has been held that fault on the part of the sailing
vessel at the moment preceding a collission, that is, during the third division
of time, does not absolve the steamship which has suffered herself and a
sailing vessel to get into such dangerous proximity as to cause inevitable
harm and confusion, and a collision results as a consequence. The steamer
having a far greater fault in allowing such proximity to be brought about is
chargeable with all the damages resulting from the collission; and the act of
the sailing vessel having been done in extremis and even wrong, is not
responsible for the result.
(a) Classes and Effects
(1) Fortuitous
Art. 830. If a vessel should collide with another through
fortuitous event or force majeure, each vessel and its cargo shall bear
its own damages.
Art. 832. If, by reasons of a storm or other cause of force
majeure, a vessel which is properly anchored and moored should
collide with those nearby, causing them damages, the injury
occasioned shall be considered as particular average of the vessel run
into.
Each to his own damage --> particular damage
2. When 2 vessels meet, the smaller should give the right of way
to the larger one.
(2) Culpable
3. A vessel leaving port should leave the way clear for another
which may be entering the same port.
4. The vessel which leaves later is presumed to have collided
against one who has left earlier.
5. There is also a presumption against the vessel which sets sail
Art. 826. If a vessel should collide with another, through the

fault, negligence, or lack of skill of the captain, sailing mate, or any
other member of the complement, the owner of the vessel at fault shall
indemnify the losses and damages suffered, after an expert appraisal.
Where the obligation arises from tortious act and not from contract, both the
owner and the shipagent should be declared liable
at night.
6. The presumption also works against the vessel with spread
sails which collides with another which is at anchor, and cannot move, even
when the crew of the latter has received word to lift anchor, when there was
not sufficient time to do so or there was fear of a greater damage or other
legitimate reason.
Art. 827. If the collision is imputable to both vessels, each

one shall suffer its own damages, and both shall be solidarily
responsible for the losses and damages occasioned to their cargoes.
PAGE 60

Defense of due diligence of a good father of a family in the selection and
vigilance of the officers and crew cannot be used to render nugatory the
solidary liability under 827
Under the express provisions of 827, the shipowners cannot successfully
maintain an action against the other for the loss or injury to his vessel
Art.831. If a vessel should be forced by a third vessel to
collide with another, the owner of the third vessel shall indemnify the
losses and damages caused, the captain thereof being civilly liable to
said owner.
(3) Inscrutable Fault
Art. 828. The provisions of the preceding article are
applicable to the case in which it cannot be determined which of the
two vessels has caused the collision.
Relation of Art. 827 to Art. 828
Art. 828 must be considered an extension of Art. 827
The rule of liability under Art. 827 is applicable not only to the
case where both vessels may be shown to be actually blameworthy but also
to the case where it is obvious that only one was at fault but the proof does
not show which
Under Arts. 827 and 828, in case of collision between two
vessels at sea, both are solidarily liable for the loss of cargo carried by
either to the full extent of the value thereof, not only in the cse where both
vessels may be shown to be actually blameworthy but also in the case
where it is shown that only one ws at fault but the proof does not show it -->
it makes no difference that the negligence imputable to the two vessels may
have differed somewhat in character and degree and that the negligence of
the sunken ship was somewhat more marked than that of the ther
The doctrine of last clear chance cannot be raised --> under the
express provisions of Art. 827, under which the evidence disclosing that
both vessels are blameworthy, the owners of neither can successfully
maintain an action against the other for the loss or injury to his vessel
(b) Presumption of loss by collision
Art.833. A vessel which, upon being run into, sinks
immediately, as well as that which, having been obliged to make a port
to repair the damages caused by the collision, is lost during the
voyage or is obliged to be stranded in order to be saved, shall be
presumed as lost by reason of collision.
Art. 834. If the vessels colliding with each other should have
pilots on board discharging their duties at the time of the collision,
their presence shall not exempt the captains from the liabilities they
incur, but the latter shall have the right to be indemnified by the pilots,
without prejudice to the criminal liability which the latter may incur.
(3) conditions; protests
Art. 835. The action for the recovery of losses and damages
arising from collisions cannot be admitted if a protest or declaration is
not presented within twenty-four hours before the competent authority
of the point where the collision took place, or that of the first port of
arrival of the vessel, if in Philippine territory and to the consul of the
Philippines, if it occurred in a foreign country.
Art. 836. With respect to damages caused to persons or to
the cargo, the absence of a protest may not prejudice the persons
interested who were not on board or were not in a condition to make
known their wishes.
Art. 835 establishes a condition precedent before any action for the
recovery of damages arising from collisions may be admitted -->
presentation of a protest or declaration within 24 hours before the proper
authorities [competent authority at the point where the collision took place or
of the first port of arrival of the vessel or to the consul of the Philippines if it
occurred in a foreign country]
The requirement of protest is not necessary with respect to small boats
engaged in river and bay traffic and boats manned by a group of fishermen
Reason for requiring protest: Neccesity of preventing fictitious collisions
and improper indemnities
Summary of cases where protest is required:
1. under 612, when the vessel makes an arrival under stress
2. under 612, 624 and 843, where the vessel is shipwrecked
3. under 624, where the vessel has gone through a hurricane or when the
captain believes that the cargo has suffered damages or averages
4. under 835, in case of maritime collisions
Art. 839. If the collision should take place between
Philippine vessels in foreign waters, of if having taken place in the
open seas, and the vessels should make a foreign port, the Filipino
consul in said port shall hold a summary investigation of the accident,
forwarding the proceedings to the Secretary of the Department of
Foreign Affairs for continuation and conclusion.
(c) Liabilities
4. Shipwrecks
(1) Shipowner or agent
Art. 837. The civil liability incurred by the shipowners in the
cases prescribed in this section, shall be understood as limited to the
value of the vessel with all its appurtenances and freightage earned
during the voyage.
Art. 838.
When the value of the vessel and her
appurtenances should not be sufficient to cover all the liabilities, the
indemnity due by reason of the death or injury of persons shall have
preference.
Limited liability : limited to the value of the vessel and the freight earned
during the voyage [provided for in Arts. 587, 590 and 837]
Damages may be recovered to the extent of what may be
salvaged or of the freightage received or of the value of the insurance
recoverable
(2) Captain, pilot, others

Art. 829. In the cases above mentioned the civil action of
the owner against the person causing the injury as well as the
criminal liabilities, which may be proper, are reserved.
Art. 840. The losses and deteriorations suffered by a vessel

and her cargo by reason of shipwreck or stranding shall be
individually for the account of the owners, the part which may be
saved belonging to them in the same proportion.
Art. 841. If the wreck or standing should be caused by the
malice,e negligence, or lack of skill of the captain, or because the
vessel put to sea insufficiently repaired and equipped, the ship agent
or the shippers may demand indemnity of the captain for the damages
caused to the vessel or to the cargo by the accident, in accordance
with the provisions contained in Articles 610, 612, 614, and 621.
Shipwreck: Loss of a vessel at sea, either by being swallowed up by the
waves, by running against another vessel or thing at sea, or on coast -->
renders the ship incapable of navigation
Under 841, in case the wreck or stranding is due to the (1)
malice, negligence, or lack of skill of the captain, or (2) because the vessel
put to sea was insufficiently repaired and equipped, the captain shall be
liable
Art. 842. The goods saved from the wreck shall be specially
bound for the payment of the expenses of the respective salvage, and
the amount thereof must be paid by the owners of the former before
PAGE 61

they are delivered to them, and with preference over any other
obligation if the merchandise should be sold.
Where a ship and its cargo are saved together, the salvage allowance
should be charged against the ship and cargo in proportion of their
respective values, the same as in general averages and neither is liable for
the salvage due from the other
Where a personal action is brought by the salvor against the
owner of the ship, the liability of the latter is limited to such part of the
salvage compensation due for the entire service as is proportionate to the
value of the ship
Art. 843. If several vessels sail under convoy, and any of
them should be wrecked, the cargos saved shall be distributed among
the rest in proportion to the amount which each one is able to take.
If any captain should refuse, without sufficient cause, to
receive what may correspond to him, the captain of the wrecked
vessels shall enter a protest against him, before two sea officials, of
the losses and damages resulting therefrom, ratifying the protest
within twenty-four hours after arrival at the first port, and including it
in the proceedings he must institute in accordance with the provisions
contained in Article 612.
If it is not possible to transfer to the other vessels the entire
cargo of the vessel wrecked, the goods of the highest value and
smallest volume shall be saved first, the designation thereof to be
made by the captain with the concurrence of the officers of his vessel.
1. a marine peril
2. service voluntarily rendered when not required as an existing
duty or from special contract
3. success, in whole or in part, or that the services rendered
contributed to such success
Distinction between salvage and towage is of importance to the
crew of the salvaging ship : if the contract for towage is in fact towage, then
the crew does not have any interest or rights with the renumeration pursuant
to the contract; BUT if the owners of the respective vessels are of a salvage
nature, the crew of the salvaging ship is entitled to salvage, and can look to
the salvaged vessel for its share
Captain towing vessel cannot invoke equity in quasi-contract of
towage --> there is an express provision of law (Art. 2142, NCC) applicable
to the relationship of quasi-contract of towage, where the crew is not entitled
to compensation separate from that of the vessel
Section 2. If the captain of the vessel, or the person acting in
his stead, is present, no one shall take from the sea, or from the
shores, or coast merchandise or effects proceeding from a shipwreck
or proceed to the salvage of the vessel, without the consent of such
captain or person acting in his stead.
Section 3. He who shall save or pick up a vessel or
merchandise at sea, in the absence of the captain of the vessel, owner
or a representative of either of them, they being unknown, shall convey
and deliver such vessel or merchandise, as soon as possible, to the
Collector of Customs, if the port has a collector, and otherwise to the
provincial treasurer or municipal mayor.
Salvage Law (Act No. 2616)

Section 1. When in case of shipwreck, the vessel or its cargo
shall be beyond the control of the crew, or shall have been abandoned
by them, and picked up and conveyed to a safe place by other
persons, the latter shall be entitled to a reward for the salvage.
Those who, not being included in the above paragraph,
assist in saving a vessel or its cargo from shipwreck, shall be entitled
to a like reward.
Salvage.-- The compensation allowed to persons by whose voluntary
assistance a ship at sea or her cargo or both have been saved in whole or in
part from impending sea peril, or such property recovered from actual peril
or loss, as in cases of shipwrecks, derelict or recapture
-a
service which one person, renders to the owner of a ship or goods by his
own labor, preserving the goods or ship which the owner or those entrusted
with the care of them either abandoned in distress at sea or are unable to
protect and secure ---> a permit is required to engage in salvage business
Shipwreck-- means a ship which has received injuries rendering her
incapable by navigation; loss of a vessel at sea, either by being swallowed
up by the waves, running against a thing at sea, or on the coast
Derelict.-- A ship or her cargo which is abandoned and deserted at sea by
those who are in charge of it, without any hope of recovering it, or without
any intention of returning it --> if those in charge of the property left it with
the intention of finally leaving it, it is a derelict and the change of their
intention and an attempt to return to it will not change its nature
ex. a schooner which has capsized in the high seas, deserted by
her captain with no intention to return, is a derelict
a vessel, though not abandoned, may be the subject of salvage,
if at the time the services were rendered, there was a probable, threatening
danger to the vessel or its cargo --> if the vessel towed is aided in escaping
present or prospective danger, the service is one of salvage an the towage
is merely incidental
Rights of finder of derelict: The finder who takes possession
with the intention of saving her, gains a right of possession which he can
maintain against the true owners. The owner does not renounce his right of
property. This is not presumed to be intentional, nor does the finder acquire
any such right. But the owner thus abandons temporarily, his right of
possession, which is transferred to the finder who becomes bound to
preserve the property with GF and bring it to a place of safety for the
owner's use; in return, he acquires a right to be paid for his service a
reasonable and proper compensation out of the property itself. He is not
bound to part with the possession until he is paid or the property is taken
into the possession of the law preparatory to the amount of salvage being
legally asserted
Elements of a valid salvage:
Section 4. After the salvage is accomplished, the owner or

his representative shall have the right to the delivery of the vessel or
the things saved, provided that he pays or gives a bond to secure the
expenses and the proper reward.
Salvor has an interest in the property; this is called a lien, but it is not a debt
due by the owner to the salvor for services rendered but upon the principle
that the service creates a property in the thing saved --> he is, to all intents
and purposes, a joint owner and if, the property is lost he must bear his
share like other joint owners.
Payment of compensation where vessel and cargo salvage : where a ship
and its cargo are saved together, the salvage allowance should be charged
against the ship and cargo in the proportion of their respective values, as in
the case of general average
Section 5. The Collector of Customs, provincial treasurer, or
municipal mayor, to whom a salvage is reported, shall order:
a. That the things saved be safeguarded and inventoried.
b. The sale at public auction of the things saved which may
be in danger of immediate loss or those whose conservation is
evidently prejudicial to the interests of the owner, when no objection is
made to such sale.
c. The advertisement within the 30 days subsequent to the
salvage, in one of the local newspapers or in the nearest newspaper
published, of all the details of the disaster, with a statement of the
mark and number of the effects requesting all interested persons to
make their claims.
Section 6. If, while the vessel or thing saved are at the
disposition of the authorities, the owner or his representative shall
claim them, such authorities shall order their delivery to such owner or
his representative, provided that there is no controversy over their
value, and a bond is given by the owner or his representative to secure
the payment of the expenses and the proper reward. Otherwise, the
delivery shall not be made until the matter is decided by the CFI (RTC)
of the province.
Section 7. No claim being presented in the three months
subsequent to the publication of the advertisements prescribed in
subsection (c) of Section 5, the things saved shall be sold at public
auction, and their proceeds, after deducting the expenses and the
proper reward shall be deposited in the insular treasury. If three years
shall pass without anyone claiming it, one-half of the deposit shall be
adjudged to him who saved the things, and the other half to the insular
government.
Section 8. The following shall have no right to a reward for
salvage or assistance:
PAGE 62

a. The crew of the vessel shipwrecked or which was in
danger of shipwreck;
b. He who shall have commenced the salvage in spite of
opposition of the captain or his representative; and
c. He who shall have failed to comply with the provisions of
Section 3.
Section 9. If, during the danger, an agreement is entered into
concerning the amount of the reward for salvage or assistance, its
validity may be impugned because it is excessive, and it may be
required to be reduced to an amount proportionate to the
circumstances.
Kinds of salvage service:
(1) voluntary - wherein the compensation is dependent upon
success
(2) rendered under a contract for a pier diem or per horam
wage, payable at all events
Where the compensation is dependent upon success, it may be very much
larger than mere quantum meruit --> as a reward for perilous services
Such contracts for salvage will not be set aside unless corruptly
entered into, or made under fraudulent representations, a clear mistake or
suppression of important facts, under compulsion or contrary to equity and
good conscience
Taking passengers from a sinking ship, without rendering any service in

rescuing the vessel, is not a salvage service, being a duty of humanity and not
for reward --> the Salvage Act, giving salvors of human life a fair share or
remuneration offered to salvors of the vessel, refers to a situation where both
lives and property were simultaneously imperiled and both are rescued at the
same time
Section 13. If a vessel or its cargo shall have been assisted or
saved, entirely or partially, by another vessel, the reward for salvage or
for assistance shall be divided between the owner, the captain, and the
remainder of the crew of the latter vessel, so as to give the owner a half,
the captain a fourth, and all the remainder of the crew the other fourth of
the reward, in proportion to their respective salaries, in the absence of
an agreement to the contrary. The expenses of salvage, as well as the
reward for salvage or assistance, shall be a charge on the thing salvaged
or their value.
The owner of the salving vessel has always been considered as entitled to
salvage reward for the use of his vessel in rendering salvage services, though
he was not present when the salvage service was rendered --> remuneration
is awarded on account of the danger to which the service exposes their
property and the risk which they run of loss in suffering their vessels engaged
in such perilous undertaking.
Section 14. This Act shall take effect on its passage. Enacted
2/4/16.
Section 10. In a case coming under the last preceding

section, as well as in the absence of an agreement, the reward for
salvage or assistance shall be fixed by the RTC of the province where
the things salvaged are found, taking into account principally the
expenditures made to recover, or save the vessel or the cargo or both,
the zeal demonstrated, the time employed, the services rendered, the
excessive expenses occasioned, the number of persons who aided,
the danger to which they and their vessels were exposed as well as
that which menaced the things recovered or salvaged, and the value of
such things after deducting the expenses.
Reasons for allowing salvage compensation to salving vessel:
(1) to reward promptness, energy, efficiency, and heroic endeavor in saving
life and property in peril;
(2) to compensate the use and service of the vessel as an indispensable
instrument for the salvage;
(3) recognizes the danger and risk to which the crew and the vessel were
exposed to in saving the ship and property and life.
The amount should be liberal enough to cover the expenses and to give an
extra sum as a reward for the services rendered; should be liberal enough to
offer an inducement to others to render like services in similar emergencies
in the future; BUT should not be so high as to cause vessels in need of
assistance to hesitate because of ruinous cost
"Public policy encourages the hardy and adventurous
mariner to engage in these laborious and sometimes
dangerous enterprises, and with a view to withdraw
from him every temptation to embezzlement and
dishonesty, the law allows him, in case he is
successful, a liberal compensation."
Section 11. From the proceeds of the sale of the things saved
shall be deducted, first, the expenses of their custody, conversation,
advertisement, and auction, as well as whatever taxes or duties they
should pay for their entrance; then there shall be deducted the expenses
of salvage; and from the net amount remaining shall be taken the reward
for the salvage or assistance which shall not exceed 50% of such
amount remaining.
Section 12. If in the salvage or in the rendering of assistance
different persons shall have intervened the reward shall be divided
between them in proportion to the services which each one may have
rendered, and in case of doubt, in equal parts.
Those who, in order to save persons, shall have been exposed
to the same dangers shall also have a right to participation in the reward.
No other person has the right to interfere with the salvage of a vessel or cargo
if the salvor is able to effect the salvage with fidelity and vigor --> if their
means are inadequate, they are bound to accept additional assistance if
offered
MRR vs Macondray 37 Phil 850

F:
On April 6, 1915 the steamer Seward owned by Macondray & Co.
left Saigon for the Philippine Islands, encountering a moderately high sea.
Laden with a cargo of rice, the weight of which, taken with the condition of the
sea, caused the vessel to spring a leak, and her master felt compelled to
return to Saigon. At this juncture, the steamship Hondagua owned by plaintiff,
was sighted, whereupon the Seward flew the international distress signal
asking for assistance. The Hondagua changed her course and approached
the Seward. Seward had indicated that it had sprung a leak and wished to be
taken in tow. In response to signals from the Hondagua, the Seward sent her
boat to the Hondagua for a heaving line, by means of which a hawser was
passed from the Hondagua to the Seward and the former, with the latter in
tow, then proceeded at half speed towards Saigon. Shortly afterwards, the
Seward signaled that the leak was gaining rapidly. The Hondagua went full
speed ahead, until their arrival at Cape St. James, at the mouth of the Saigon
River. The towing occupied some 4 or 5 hours and covered a distance of 20 to
30 miles.
The court found that the value of the Seward upon her arrival at
Cape St. James did not exceed P 20,000 and that the value of the cargo was
approximately P 54,000. The defendant company had no interest in the cargo,
other than that of the carrier, and the cargo was owned by shippers whose
names do not appear of record.
Plaintiff filed an action in the CFI of Manila, seeking to recover from
defendant P 75,000, the alleged value of the salvage service. The CFI
ordered the defendant to pay P 4,000 to the plaintiff. Both appealed.
Issues : Is the plaintiff entitled to recover renumeration for saving the cargo as
well as for saving the ship? What is the reasonable compensation which
should be allowed?
Held : There is no question as to the liability of defendant for the service
rendered by plaintiff. Nor is there any dispute over the fact that the service
rendered was a salvage service and renumerable as such. Where a ship and
its cargo are saved together, as a result of services carried on with a view to
saving both, the salvage allowance should be apportioned between the ship
and cargo in the proportion of their respective values, the same as in a case of
general average; and neither is liable for the salvage due from the other. If one
who have salved both ship and cargo brings before the court in his salvage
action only the ship, or only the cargo, he will get judgment only for such
amount of reward as the court finds to be due in respect of the value of that
property which is before the court. Not only is the salvage charge a separate
and divisible burden as between ship and cargo, but also as between portions
of the cargo belonging to different owners. There is no common liability for the
amounts due from the ship or other portions of the cargo when the ship and
cargo, or either, are brought into the custody of the court as a result of a
proceeding in rem. The rule of liability must be the same where a personal
action is instituted against the owners of the one or the other. The personal
liability of each must be limited to the portion of the salvage charge which
should be borne by his own property.
If it had been alleged and proved that the ship was unseaworthy
when she put to sea or that the necessity for the salvage service was due to
the negligence of the master, or of the ship's owner, the latter might have been
PAGE 63

liable, at least between himself and the shipper, for the entire cost of the
service. But when the claim is put upon the basis of salvage, the fixing of the
compensation goes beyond the limits of a quantum meruit for the work and
labor done and involves the assessment of a bounty. The amount to be
allowed is in part determined upon considerations of equity and public policy;
and it is not proper to make the ship or the ship's owner liable for the whole
amount. But where the owner of the cargo has not been made a party to the
action, no recovery can be had in this action in regard to the service rendered
to the cargo.
In fixing the compensation, the ff. circumstances are taken into
consideration: (1) the labor expended by the salvors in rendering the salvage
service; (2) the promptitude, skill and energy displayed in rendering the
service and saving the property; (3) the value of the property employed by the
salvors, and the danger to which such property was exposed; (4) the risk
incurred by the salvors in rescuing the property from the impending peril; (5)
the value of the property salved; and (6) the degree of danger from which the
property was rescued.
In applying these criteria to this case, the ff. circumstances are
pertinent : the Hondagua was delayed in her voyage about nine hours. This
delay caused her to enter Iloilo, the port of destination, in the early hours of
the morning instead of the late afternoon of the previous day; but the
unloading of her cargo was not thereby retarded. Under the charter party
contract under which she was operating, the Hondagua was earning about P
300/day, which was considered reasonable compensation for her use,
including the services of officers and crew. The service rendered did not
involve any further expenditure of labor on the part of the salvors, no unusual
display of skill and energy and the condition of the sea was not such as to
involve any special risk either to Hondagua or her crew. Finally, the danger
from which the Seward was rescued was real since the ship was confronted
by a serious peril.
In determining the amount of the award, the aim should
be to hold out to seafaring men a fair inducement to the performance of
salvage service without fixing a scale of compensation so high as to cause
vessels in need of such services to hesitate and decline to receive them
because of the ruinous cost. That the salvor is entitled, as of bounty, to
something more than mere renumeration for his own work and the risk
incurred by him is conceded; but the interests of commerce should also be
considered. Towage is not considered a salvage service of high order of merit
and where the risk is inconsiderable and other conditions favorable, the
compensation to be allowed should be modest in its amount.
In this case, the sum of P 1,000 is adequate for the service
rendered.
Barrios vs Go Thong 7 SCRA 535
F:
Plaintiff Barrios was the captain of MV Henry I, a vessel of William
Lines, Inc. At about 8:00 p.m. of May 1, 1958, plaintiff as captain received an
SOS or distress signal by blinkers from the MV Alfredo, owned by the
defendant Carlos Go Thong & Co. Answering the SOS call, the plaintiff as
captain of MV Henry, which was then sailing from Dumaguete City, altered the
course of said vessel, and headed towards the MV Don Alfredo, which plaintiff
found to be in trouble, due to engine failure and the loss of her propeller, for
which reason, it was drifting slowly southward from Negros Island towards
Borneo in the open China Sea, at the mercy of a moderate easterly wind. At
about 8:25 p.m. on the same day, May 1, 1958, the MV Henry, under the
command of the plaintiff, succeeded in getting near the MV Don Alfredo -- in
fact as near as about 7 meters from the latter ship -- and with the consent and
knowledge of the captain and/or master of the MV Don Alfredo, the plaintiff
caused the latter vessel to be tied to, or well-secured and connected with two
lines from the MV Henry; and the latter had the MV Don Alfredo in tow and
proceeded towards the direction of Dumaguete City, as evidenced by a written
certificate to this effect executed by the Master, the Chief Engineer, the Chief
Officers, and the Second Engineer of the MV Don Alfredo, who were then on
board the latter ship at the time of the occurrence. When both vessels were
approaching the vicinity of Negros Oriental, the MV Lux, a sister ship of MV
Don Alfredo, was sighted heading towards the two vessels. At the request and
instance of the captain of MV Don Alfredo, the plaintiff caused the tow lines to
be released, thereby also releasing the MV Don Alfredo.
Issue: WON the service rendered by plaintiff constituted salvage or towage,
and if so, WON plaintiff may recover from defendant compensation for such
service.
Held :(1) According to Sec. 1 of the Salvage Law, those who assist in saving a
vessel or its cargo from shipwreck, shall be entitled to a reward (salvage).
"Salvage" has been defined as the compensation allowed to persons by
whose assistance a ship or her cargo has been saved, in whole or in part,
form impending peril on the sea, or in recovering such property from actual
loss, as in case of shipwreck, derelict or recapture. There was no marine peril
in this case. Although defendant's vessel was in a helpless condition due to
engine failure, it did not drift too far from the place where it was. As found by
the LC, the weather was fair, clear and good. The waves were small and too
slight, so much so, that there were only ripples on the sea, which was quite
smooth. During the towing of the vessel on the same night, there was
moonlight. Although said vessel was drifting towards the open sea, there was
no danger of its foundering or being stranded, as it was far from any island or
rocks. In case of danger of stranding, its anchor could be released, to prevent
such occurrence. There was no danger that defendant's vessel would sink, in
view of the smoothness of the sea and the fairness of the weather. That there
was absence of danger is shown by the fact that said vessel or its crew did
not even find it necessary to lower its launch and two motor boats, in order to
evacuate its passengers no were the cargo in danger of perishing. All that the
vessel's crew members could no do was to move the vessel on its own power.
That did not make the vessel a quasi-derelict, considering that even before the
plaintiff-appellant extended the help to the distressed ship, a sister vessel was
known to be on its way to succor it.
(2) But plaintiff's service can be considered as a quasi- contract of
towage. In consenting to plaintiff's offer to tow the vessel, the defendant
through its captain, thereby impliedly entered into a juridical relation of towage
with the owner of the MV Henry. If the contract thus created is one for
towage, then only the owner of the towing vessel , to the exclusion of the crew
of the said vessel, may be entitled to renumeration. And as the vessel-owner,
William Lines, had expressly waived its claim for compensation for the towage
service rendered to defendant, it is clear that plaintiff, whose right if at all
depends upon and not separate from the interest, is not entitled to payment for
such towage services. Neither may the plaintiff captain invoke equity in
support of his claim for compensation against defendant. There being an
express provision of law (Art. 2142, NCC) applicable to the relationship
created in this case, that is, that of a quasi-contract of towage where the crew
is not entitled to compensation separate from that of the vessel, there is no
occasion to resort to equitable considerations.
E. SPECIAL CONTRACTS OF MARITIME COMMERCE

1. Charter Parties
a. Definition; as common carrier
A charter party is a contract by virtue of which the owner or agent
of a vessel binds himself to transport merchandise or persons for a fixed
price. It is a contract by which the owner or agent of the vessel leases for a
certain price the whole or a portion of the vessel for the transportation of
goods or persons from one port to another.
Towage is not a charter party; instead it is a contract for the hire
of services by virtue of which a vessel is engaged to tow another vessel
from one port to another for a consideration
Planters Products vs CA G.R. 101503 (Sept. 15, 1993)
F:
Planters purchased urea fertilizer from Mitsubishi,New York. The
fertilizer was shipped on MV Sun Plum, which is owned by KKKK, from
Alaska to San Fernando, La Union. A time charter party was entered into
between Mitsubishi as shipper/charterer and KKKK as shipowner. Upon
arrival in the port, PPI unloaded the cargo. It took PPI 11 days to unload the
cargo. PPI hired a marine and cargo surveyor to determine if there was any
shortage. A shortage and contamination of the fertilizer was discovered.
PPI sent a claim letter to SSA, the resident agent of KKKK for the amount of
the loss. An action for damages was filed. SSA contended that the
provisions on CC do not apply to them because they have become private
carriers by reason of the charter-party. The TC awarded damages. The CA
reversed.
Issue : Does a charter party between a shipowner and a charterer transform
a CC into a private one as to negate the civil law presumption of negligence
in case of loss or damage to its cargo? NO.
Held : 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. There are 2 kinds : (1) contract of affreightment which involves
the use of shipping space or vessels leased by the owner in part or as a
whole, to carry goods for others; and (2) charter by demise or bareboat
charter where 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.
It is not disputed that the carrier operates as a CC in the ordinary
course of business. When PPI chartered the vessel, the ship captain, its
officers and crew were under the employ of the shipowner and therefore
PAGE 64

continued to be under its direct supervision and control. Thus it continued
to be a public carrier.
It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel, provided the
charter is limited to the ship only, as in the case of a time-charter or a
voyage-charter. It is only when the charter includes both the vessel and the
crew, as in a bareboat or demise that a CC becomes private, insofar as
such particular voyage is concerned.
Issue : WON the carrier is liable for damages. NO.
Held : The presumption of negligence on the part of respondent carrier has
been overcome by the showing of extraordinary zeal and assiduity
exercised by the carrier in the care of the cargo. 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.
b. Kinds
Classes of charter party:
(1) as to extent of vessel hired
(a) total
(b) partial - the charterer does not as a rule acquire
the right to fix the date when the vessel should depart, unless such right is
expressly granted in the contract
(2) as to time
(a) until a fixed day or for a determined number of
days or month
(b) for a voyage
(3) as to freightage
(a) for a fixed amount for the whole cargo
(b) for a fixed rate per ton
(c) for so much per month
Maritime Agencies vs CA 187 SCRA 346
F:
Transcontinental Fertilizer Co. of London chartered from
Hongkong Island Shipping Co. the motor vessel Hongkong Island for the
shipment of bagged urea from Odessa, USSR to the Philippines. The
parties signed a Uniform General Charter dated August 1979. The
consignee was Atlas Fertilizer Co. while the insurer was the Union
Insurance Society of Canton. Maritime Agencies was appointed as the
charterer's agent and Macondray as the owner's agent. The vessel arrived
in Manila to unload part of its cargo and then proceeded to Cebu to
discharge the rest of the cargo. The consignee filed a formal claim for
shortlanded bags. The consignee also filed a claim against Viva Customs
Brokerage for the unrecovered spillage. These claims having been rejected,
the consignee went to Union, which paid the total indemnity of P 113,123.86
pursuant to the insurance contract. As subrogee of the consignee, Union
filed a claim for reimbursement against Hongkong Island Co., Maritime
Agencies and/or Viva Customs Brokerage. Viva was dropped from the
complaint while Macondray Co. was impleaded.
The RTC found Hongkong Island liable for the shortlanded bags
while Maritime Agencies was held liable for the spillage during discharge.
The RTC ordered Hongkong Island and its local agent Macondray to pay P
87,000+ and Maritime Agencies to pay P 36,000+ to Union Insurance. CA
exempted Hongkong Island and Macondray exempt from liability. Thus this
petition. Maritime pleads non-liability on the ground that it was only the
charterer's agent and should not answer for whatever responsibility might
have attached to the principal. Union asked that Maritime should be made
solidarily liable since its principal had not been impleaded.
Held : There are 3 general categories of charters:
1. Demise or bareboat charter - involves the transfer of full
possession and control of the vessel for the period covered by the contract,
the charterer obtaining the right to use the vessel and carry whatever cargo
it chooses, while manning and supplying the ship as well
2. Time Charter - contract to use a vessel for a particular period
of time, the charterer obtaining the right to direct the movements of the
vessel during the chartering period, although the owner retains possession
and control
3. Voyage Charter - contract for the hire of a vessel for one or a
series of voyages usually for the purpose of transporting goods for the
charterer; the voyage charter is a contract of affreightment and is
considered a private carriage
- being a private carriage, the parties may freely contract
respecting liability for damages to the goods and other matters;
responsibility for the cargo loss falls on the one who agreed to perform the
duty involved in accordance with the terms of the voyage charter
This case involves a voyage charter.In the present case, the
charterer was responsible for loading, stowage and discharging at the ports
visited, while the owner was responsible for the care of the cargo. Par. 2 of
the Uniform General Charter provided that the owner shall be responsible for
loss or damage or delay in the delivery of goods caused by improper or
negligent stowage of the goods or by personal want of due diligence in
making the vessel seaworthy and properly manned. However, the owner
shall not be liable for any other cause, even from the neglect of the captain
or the crew or any other person employed by the owner on board, or for any
unseaworthiness of the vessel on loading or commencement of the voyage.
In cases at bar, the TC found that there were shortlanded bags,
which could only mean that they were damaged or lost on board the vessel
before unloading of the shipment. The entire cargo was covered by a clean
B/L. As the bags were in good order when received by the vessel, the
presumption is that they were damaged or lost during the voyage as a result
of their negligent improper storage. The shipowner should be held liable.
The filing of the claim must be within one year, in accordance
with the COGSA. Otherwise, the carrier and the ship shall be discharged
from liability. The one year period should commence from Oct. 20, 1979, the
date when the last item was delivered to the consignee. Union filed the
complaint against Hongkong within the one year period but tardily against
Macondray. The action has prescribed with respect Macondray but not
against the principal, Hongkong Island.
As regards the goods damaged or lost during unloading, the
charterer is liable thereof, having assumed this activity under the charter
party free of expense to the vessel. The difficulty is that Transcontinental
has not been impleaded and so is beyond the court's jurisdiction. The
liability imposed on it cannot be borne by Maritime which is a mere agent
and is not answerable for the injury caused by its principal (unless the
principal is undisclosed).
In this case, the charterer did not represent itself as a carrier and
indeed assumed responsibility only for the unloading of the cargo. Maritime
acted in representation of the charterer and not of the vessel. As a mere
charterer's agent, it cannot be held solidarily liable with Transcontinental for
the losses/damages to the cargo outside the custody of the vessel.
Transcontinental was disclosed as the charterer's principal and Maritime
only acted within the scope of its authority.
The TC's findings were upheld except for some modifications.
The liability of Macondray can no longer be enforced because of
prescription. Maritima cannot be held liable for the principal's acts.
c. Forms and Effects
Art. 652. A charter party must be drawn in duplicate and
signed by the contracting parties, and when either does not know how
or is not able to do so, by two witnesses at his request.
The charter party shall include, besides the condition
stipulated, the following circumstances:
1. The kind, name, and tonnage of the vessel.
2. Her flag and port or registry.
3. The name, surname, and domicile of the captain.
4. The name, surname, and domicile of the agent, if the
latter should make the charter party.
5. The name, surname, and domicile of the charterer, and if
he states that he is acting by commission, that of the person for whose
account he makes the contract.
6. The port of loading and unloading.
7. The capacity, number of tons or weight, or measure
which they respectively bind themselves to load and transport, or
whether it is the total cargo.
8. The freightage to be paid, stating whether it is to be a
fixed amount for the voyage or so much per month, or for the space to
be occupied, or for the weight or measure of the goods of which the
cargo consists, or in any other manner whatsoever agreed upon.
9. The amount of primage to be paid the captain.
10. The days agreed upon for loading and unloading.
11. The lay days and extra lay days to be allowed and
the rate of demurrage.
Art. 653. If the freight should be received without the charter
party having been signed, the contract shall be understood as
executed in accordance with what appears in the bill of lading, which
shall be the only instrument with regard to the freight to determine the
rights and obligations of the ship agent, of the captain, and of the
charterer.
PAGE 65

If the cargo is received without a charter party, the B/L shall be considered
the contract of the parties
Q: If there is no charter party and B/L, would there be a valid contract?
A: Taking Art. 653 literally, the answer is no. However, if we take into
account the fact that delivery of the cargo does not constitute the making of
a contract but rather the partial performance thereof, the mere fact of
delivery and receipt of such cargo, the GF and mutual consent with which
they have been made, should be a better substitute for the charter party
than is the B/L which is nothing more than the proof of such delivery.
Primage.-- Formerly, a small allowance or compensation payable to the
master and marines of a ship; to the former for the use of his cables and
ropes to discharge the goods of the merchant; to the latter for lading and
unlading in any port of haven
Primage, at present, it is no longer a gratuity to the master,
unless especially stipulated; but it belongs to owners or freighters and is
nothing but an increase of the freight rate.
Demurrage.-- Sum which is fixed by the contract of carriage, or which is
allowed, as remuneration to the owner of a ship for the detention of his
vessel beyond the number of days allowed by the charter party for loading
and unloading or for sailing; it is an extended freight or reward to the vessel
in compensation for the earnings she is improperly caused to lose
Articles 659 to 664 : Some of the goods being transported may : (1) be sold
by the captain to pay for necessary repairs; (2) be jettisoned for the
common safety; (3) be lost by reason of shipwreck or stranding; (4) be
seized by pirates or enemies; (5) suffer deteriorations or dimunitions; or (6)
increase by natural cause in weight or size
** Goods that shall not pay freightage:
(1) Art. 660 - goods jettisoned for the common safety but the amount of
freightage that should have been paid shall be considered as a general
average and shall be computed in proportion to the distance covered when
they were jettisoned
(2) Art. 661 - merchandise lost by reason of shipwreck or stranding; if freight
had been paid in advance, it shall be returned
(3) Art. 661 - goods seized by pirates or enemies; freight paid in advance
shall be returned
** Goods required to pay freightage:
(1) Art. 659 - goods sold by the captain to pay for the necessary repairs to
the hull, machinery or equipment or for unavoidable and urgent needs -->
but the freight may not be required to be paid in full
(2) Art. 663 - goods which suffer deterioration or dimunition on account of (a)
inherent defects or bad quality of packing, or of (b) fortuitous event
(3) Art. 644 - goods that increase in size or weight by natural cause
Lay days.-- Days allowed to charter parties for loading and unloading the
cargo
Art. 654. The charter parties executed with the intervention
of a broker, who certifies to the authenticity of the signatures of the
contracting parties made in his presence, shall be full evidence in
court; and, if they should be conflicting, that which agrees with the
one which the broker must keep in his registry, if kept in accordance
with law, shall govern.
The contracts shall also be admitted as evidence, even
though a broker has not taken part therein, if the contracting parties
acknowledge the signatures of the same as their own.
Should no broker have taken part in the charter party and
the signatures be not acknowledged, doubts shall be decided by what
is provided for in the bill of lading, and, in the absence thereof, by the
proofs submitted by the parties.
Art. 655. Charter parties executed by the captain in the
absence of the ship agent shall be valid and effective, even though in
executing them he should have acted in violation of the orders and
instructions of the agent or shipowner; but the latter shall have a right
of action against the captain to recover damages.
Art. 656. If in the charter party the time in which the loading
and unloading are to take place is not stated, the usages of the port
where these acts take place shall be observed. After the stipulated or
customary period has passed, and should there not be in the freight
contract an express provision fixing the indemnification for the delay,
the captain shall be entitled to demand demurrage for the lay days and
extra lay days which may have elapsed in loading and unloading.
Art. 657. If during the voyage the vessel should be rendered
unseaworthy the captain shall be obliged to charter at his expense
another one in good condition, to carry the cargo to its destination, for
which purpose he shall be obliged to look for a vessel not only at the
port of arrival but also in the neighboring ports within a distance of
150 kilometers.
If the captain, through indolence or malice, should not
furnish a vessel to take the cargo to its destination, the ship pers, after
requesting the captain to charter a vessel within an unextendible
period, may charter one and apply to the judicial authority for the
summary approval of the charter party which they may have made.
The same authority shall judicially compel the captain to
carry out for his account and under his responsibility the charter made
by the shippers.
If the captain, notwithstanding his diligence, should not find
a vessel to charter, he shall deposit the cargo at the disposal of the
shippers, to whom he shall communicate the facts on the first
opportunity, the freight being adjusted in such cases by the distance
covered by the vessel, with no right to any indemnification whatsoever.
d. Rights and Obligations of Shipowners

Art. 669. The shipowner of the captain shall observe in
charter parties the capacity of the vessel or that expressly designated
in its registry, a difference greater than 2 per cent between that
registered and her true capacity not being permissible.
If the shipowner or the captain should contract to carry a
greater amount of cargo than the vessel can carry, in view of her
tonnage, they shall indemnify the shippers whose contracts they do
not fulfill for the losses they may have caused them by reason of their
default, according to the cases, viz:
If the vessel has been chartered by one shipper only, and
there should appear to be an error or fraud in her capacity, and the
charterer should not wish to rescind the contract, when he has a right
to do so, the freightage shall be reduced in proportion to the cargo the
vessel cannot receive, the person from whom the vessel is chartered
being furthermore obliged to indemnify the charterer for the losses he
may have caused him.
If, on the contrary, there should be several charter parties,
and by reason of the want of space all the cargo contracted for cannot
be received, and none of the charterers desires to rescind the contract,
preference shall be given to the person who has already loaded and
arranged the cargo in the vessel, and the rest shall take the place
corresponding to them in the order of the dates of their contracts.
Should there be no priority, the charterers may load, if they
wish, in proportion to the weight or space they may have engaged, and
the person from whom the vessel was chartered shall be obliged to
indemnify them for losses and damages.
Art. 670. If the person from whom the vessel is chartered,
after receiving a part of the cargo, should not find sufficient to make
up at least three fifths of the amount the vessel can hold, at the price
he may have fixed, he may substitute for that transportation another
vessel inspected and declared suitable for the same voyage, the
expenses of transfer, and the increase in the price of the charter,
should there be any, being for his account. Should he not be able to
make this change, the voyage shall be undertaken at the time agreed
upon; and should no time have been fixed, within fifteen days from the
time the loading began, should nothing to the contrary have been
stipulated.
If the owner of the part of the cargo already loaded should
procure some more at the same price and under similar or proportionate conditions to those accepted for the freight received, the
person from whom the vessel is chartered or the captain may not
refuse to accept the rest of the cargo; and should he do so, the
charterer shall have a right to demand that the vessel put to sea with
the cargo she may have on board.
Art. 671. After three-fifths of the vessel is loaded, the person
from whom she is chartered may not, without the consent of the
charterers or shippers, substitute the vessel designated in the charter
party with another one, under the penalty of making himself thereby
PAGE 66

liable for all the losses and damages occurring during the voyage to
the cargo of those who did not consent to the change.
Art. 672. If the vessel has been chartered in whole, the
captain may not, without the consent of the person chartering her,
accept cargo from any other person; and should he do so, said
charterer may oblige him to unload it and to indemnify him for the
losses suffered thereby.
Art. 673. The person from whom the vessel is chartered
shall be liable for all the losses caused the charterer by reason of the
voluntary delay of the captain in putting to sea, according to the rules
prescribed, provided he has been requested to put to sea at the proper
time through a notary or judicially.
Art. 674. If the charterer should carry to the vessel more
cargo than that contracted for, the excess may be admitted in
accordance with the price stipulated in the contract if it can be well
stowed without incurring the other shippers, but if in order to stow
said cargo it should be necessary to stow it in such manner as to
throw the vessel out of trim the captain must refuse it or unload it at
the expense of its owner.
The captain may likewise, before leaving the port, unload the
merchandise clandestinely placed on board, or transport it, it he can
do so and keep the vessel in trim, demanding by way of freightage the
highest price which may have been stipulated for said voyage.
Art. 675. If the vessel has been chartered to receive the
cargo in another port, the captain shall appear before the consignee
designated in the charter party, and should the latter not deliver the
cargo to him, he shall inform the charterer and await his instructions,
the lay days agreed upon, or those allowed by custom in the port,
beginning to run in the meantime, unless there is an express
agreement to the contrary.
Should the captain not receive an answer within the time
necessary therefore, he shall make efforts to find cargo; and should he
not find any after the lay days and extra lay days have elapsed, he
shall make a protest and return to the port where the charter was
made.
The charterer shall pay the freightage in full, discounting
that which may have been earned on the merchandise which may have
been carried on the voyage out or on the return trip, if carried for the
account of third persons.
The same shall be done if a vessel, having been chartered
for the round trip, should not be given any cargo for her return.
Art. 676. The captain shall lose the freightage and shall
indemnify the charterers if the latter should prove, even against the
certificate of inspection, if one has been made at the port of departure,
that the vessel was not in a condition to navigate at the time of
receiving the cargo.
Art. 677. The charter party shall subsist if the captain should
not have any instructions from the charterer, and a declaration of war
or a blockade should take place during the voyage.
In such case the captain must proceed to the nearest safe
and neutral port, requesting and awaiting orders from the shipper; and
the expenses and salaries accruing during the detention shall be paid
as general average.
If, by orders of the shipper, the cargo should be discharged
at the port of arrival, the freightage for the voyage out shall be paid in
full.
Art. 678. If the time necessary, in the opinion of the judge or
court, to receive orders from the shippers should have elapsed without
the captain having received any instructions, the cargo shall be
deposited, and it shall be liable for the payment of the freightage and
expenses incurred by reason of the delay, which shall be paid from the
proceeds of the part first sold.
Obligations of shipowner:
1. Art. 669 - to observe in the charter parties, the capacity of the vessel, and
to indemnify the shippers whose contracts are not fulfilled for the losses
they may have suffered by the failure of the shipowner to observe the
capacity of the vessel
2. Art. 670 - to undertake a voyage at the time agreed upon or within 15
days from loading if no time is stipulated, even if the shipowner should not
find cargo sufficient to make up at least 3/5 of the amount which the vessel
may hold, where he fails to exercise his right to change vessel
3. Art. 670 - where the shipowner should not find cargo sufficient to make up
at least 3/5 of the amount which the vessel may hold, to accept other cargo
procured by the owner of the freight already loaded under the same price
and conditions
4. Art. 671- not to change the vessel after 3/5 of the vessel has been
loaded, without the consent of the charterers or shippers
5. Art. 672 - if the vessel has been chartered in whole, not to accept cargo
from any other person without the consent of the charterer
6. Art. 673 - to answer for losses arising from delay in putting to sea
7. Art. 676 - to have the vessel in a condition to navigate at the time of
receiving the cargo
8. Art. 677 - in case of declaration of war or blockade during the voyage,
where the captain has not received any instructions from the charterer, for
the captain to proceed to the nearest safe and neutral port, requesting and
awaiting orders from the shippers
Rights of Shipowner:
1. Art. 670 - where the cargo is not sufficient to make up at least 3/5 of the
amount which the vessel may hold, he may substitute anohter vessel
inspected and declared suitable for the voyage --> expenses of transfer and
increase in price of the charter shall be paid by him
2. Art. 674 - to collect the freight in accordance with the price stipulated for
cargo in excess of that agreed upon is such excess can be properly stowed
3. Art. 674 - to refuse and unload at the expense of the owner excess cargo
that cannot be properly stowed
4. Art. 674 - to unload merchandise clandestinely placed on board, or to
transport them if he can do so, demanding the highest freightage
5. Art. 675- to find freight to take place of freight not received, if the vessel
has been chartered to receive cargo in another port, after he receives no
cargo from the consignee and after he receives no answer from the
charterer
6. Art. 675 - to receive freight in full, discounting that which may have been
earned on the merchandise carried as substitute
7. Art. 677 - to have the charter party subsist notwithstanding the declaration
of war or a blockade during the voyage, and to receive in such cases, the
freightage in full where the shipper orders that the cargo should be
discharged at the port of arrival
e. Obligations of charterers
Art. 679. The charterer of an entire vessel may subcharter
the whole or part thereof for the amounts he may consider most
convenient, the captain not being allowed to refuse to receive on board
the cargo delivered by the second charterers, provided the conditions
of the first charter are not changed, and that the price agreed upon is
paid in full, even though the full cargo is not loaded, with the limitation
established in the next article.
Art. 680. A charterer who does not complete the full cargo
he bound himself to ship shall pay the freightage of the amount he
fails to load, if the captain does not take other freight to complete the
load of the vessel, in which case he shall pay the first charterer the
difference should there be any.
Art. 681. If the charterer should ship goods different from
those indicated at the time of executing the charter party, without the
knowledge of the person from whom the vessel was chartered or of the
captain, and should thereby give rise to losses, by reason of
confiscation, embargo, detention, or other causes, to the person from
whom the vessel was chartered or to the shippers, the person giving
rise thereto shall be liable with the value of his shipment and
furthermore with his property, for the full indemnity to all those injured
through his fault.
Art. 682. If the merchandise should have been shipped for
the purpose of illicit commerce, and was taken on board with the
knowledge of the person from whom the vessel was chartered or of the
captain, the latter, jointly with the owner of the merchandise, shall be
PAGE 67

liable for all the losses which may be caused to other shippers, and
even though it may have been agreed, they cannot demand any
indemnity whatsoever from the charterer for the damage caused the
vessel.
Art. 683. In case of making a port to repair the hull,
machinery, or equipment of the vessel, the shippers must wait until the
vessel is repaired, being permitted to unload her at their own expense
should they deem it advisable.
If, for the benefit of cargo
which runs the risk of deterioration, the shippers or the court, or the
consul, or the competent authority in a foreign land should order the
merchandise to be unloaded, the expenses of unloading and reloading
shall be for the account of the former.
Art. 684. If the charterer, without the occurrence of any
of the cases of force majeure mentioned in the foregoing article,
should wish to unload his merchandise before arriving at the port of
destination, he shall pay the full freightage, the expenses of the arrival
made at his request, and the losses and damages caused the other
shippers, should there be any.
Art. 685. In charters for transportation of general freight any
of the shippers may unload the merchandise before the beginning of
the voyage, paying one half the freightage, the expense of stowing and
restoring the cargo, and any other damage which may be caused the
other shippers.
Art. 686. After the vessel has been unloaded and the cargo
placed at the disposal of the consignee, the latter must immediately
pay the captain the freightage due and the other expenses for which
the cargo may be liable.
The primage must be paid in the same proportion and at the
same time as the freightage, all the changes and modifications to
which the latter should be subject also governing the former.
Art. 687. The charterers and shippers may not abandon
merchandise damaged on account of its own inherent defect or of
fortuitous event for the payment of the freightage and other expenses.
The abandonment shall be proper, however, if the cargo
should consist of liquids which may have leaked out, there remaining
in the containers not more than one-fourth of their contents.
Obligations of the charterer:
1. Art. 680 - to pay the freight in full even if the charterer does not complete
the full cargo he bound himself to ship
2. Art. 681- to answer with the value of his shipment and other property for
the losses suffered by the shipowner, captain or other shippers arising from
confiscation, embargo, detention, or other causes, where the charterer loads
goods different from those stated at the time of the execution of the charter
party
3. Art. 682 - to be jointly liable with the captain for losses which may be
caused to the other shippers where the charterer ships goods for illicit
commerce with the knowledge of the shipowner or captain
4. Art. 682 - in case of making a port to repair the hull, machinery or
equipment of the vessel, to wait until the vessel is repaired or to pay for the
expenses of unloading should the charterer choose to unload
5. Art. 684 - where the charterer unloads goods before arriving at port of
destination without any force majeure occurring, to pay (1) expenses of
arrival, (2) full freight and (3) for the damages and losses caused to other
shippers, if any
6. Art. 685 - where the charterer unloads before the beginning of the voyage,
(1) to pay 1/2 of the freight, (2) to pay for the expenses of stowing and
restowing the cargo, (3) to pay any other damage which he may have
caused other shippers
7. Art. 686 - to pay for freight, other expenses and the primage after the
vessel has been unloaded and the cargo placed at the disposal of the
consignee
8. Art. 687 - not to abandon merchandise damaged on account of
inherent defect or fortuitous event, for the payment of the freight and other
expenses
f. Rescission
Art. 688. A charter party may be annulled at the request of

the charterer:
1. If before loading the vessel he should abandon the
charter, paying half the freightage agreed upon.
2. If the capacity of the vessel should not agree with that
stated in the certificate of tonnage, or if there be an error in the
statement of the flag under which she sails.
3. If the vessel should not be placed at the disposal of the
charterer within the period and in the manner agreed upon.
4. If, after the vessel has put to sea, she should return to the
port of departure, on account of risk from pirates, enemies, or bad
weather, and the shippers should agree to unload her.
In the second and third cases the person from whom the
vessel was chartered shall indemnify the charterer for the losses he
may suffer.
In the fourth case the person from whom the vessel was
chartered shall have a right to the freightage in full for the voyage out.
If the charter should have been made by the month, the
charterers shall pay the full freightage for one month, if the voyage is
for a port in the same waters; and two months, if for a port in different
waters.
(From one port to another of the Peninsula (Philippines) and
adjacent islands, the freightage for one month only shall be paid.)
5. If a vessel should make a port during the voyage in order
to make urgent repairs and the charterers should prefer to dispose of
the merchandise.
When the delay does not exceed thirty days, the shippers
shall pay the full freightage for the voyage out.
Should the delay exceed thirty days, they shall pay the
freight in proportion to the distance covered by the vessel.
Art. 689. At the request of the person from whom the vessel
is chartered the charter party may be rescinded:
1. If the charterer at the termination of the extra lay days
does not place the cargo alongside the vessel.
In such case the charterer must pay half of the freightage
stipulated besides the demurrage due for the lay days and extra lay
days.
2. If the person from whom the vessel was chartered should
sell it before the charterer has begun to load it and the purchaser
should load it for his own account.
In such case the vendor shall indemnify the charterer for the
losses he may suffer.
If the new owner of the vessel should not load it for his own
account the charter party shall be respected, and the vendor shall
indemnify the purchaser if the former did not inform him of the charter
pending at the time of making the sale.
Art. 690. The charter party shall be rescinded and all action
arising therefrom shall be extinguished if, before the vessel puts to sea
from the port of departure, any of the following cases should occur:
1. A declaration of war or interdiction of commerce with the
power to whose ports the vessel was to make its voyage.
2. A condition of blockage of the port of destination of said
vessel, or the breaking out of an epidemic after the contract was
executed.
3. The prohibition to receive at the said port the merchandise constituting the cargo of the vessel.
4. An indefinite detention, by reason of an embargo of the
vessel by order of the government, or for any other reason independent of the will of the ship agent.
5. The inability of the vessel to navigate, without fault of the
captain or ship agent.
The unloading shall be made for the account of the charterer.
Art. 691. If the vessel cannot put to sea on account of the
closing of the port of departure, or any other temporary cause, the
charter shall remain in force without right of either of the contracting
parties to claim damages.
The subsistence and wages of the crew shall be considered
as general average.
During the interruption the charterer may, at the proper timer
and for his own account, unload and load the merchandise, paying
demurrage if the reloading should continue after the cause for the
detention has ceased.
PAGE 68

Art. 692. A charter party shall be partially rescinded, unless
there is an agreement to the contrary, and the captain shall only be
entitled to the freightage for the voyage out, if, by reason of a
declaration of war, closing of ports, or interdiction of commercial
relations during the voyage, the vessel should make the port
designated for such a case in the instructions of the charterer.
2. Loans on Bottomry and Respondentia
a. Loan on Bottomry, defined
A contract in the nature of a mortgage, by which the owner of the
ship borrows money for the use, equipment and repair of the vessel and for
a definite term, and pledges the ship (or the keel or bottom of the ship) as a
security for its repayment, with maritime or extraordinary interest on account
of the maritime risks to be borne by the lender, it being stipulated that if the
ship be lost in the course of the specific voyage or during the limited time,
by any of the perils enumerated in the contract, the lender shall also lose his
money.
b. Loan on Respondentia, defined
One made on the goods laden on board the ship, and which are
to be sold or exchanged in the course of the voyage, the borrower's
personal responsibility being deemed the principal security for the
performance of the contract, which is therefore called respondentia. The
lender must be paid his principal and interest, thought the ship perishes,
provided that the goods are saved.
1. indemnity is paid after the

advance by way of loan
loss has occurred
indemnity is paid in
2. when marine peril occurs,

causes the loss of the
the obligation of the insurer
obligation of the
becomes absolute
extinguished
when
3. consensual contract
--perfected from the
* governed by Insurance Act
the thing loaned
real
marine peril
vessel or cargo, the

borrower to pay is
contract
moment of delivery of
When loss does not extinguish loan: (Art. 731)

1. where the loss is caused by inherent defect of the thing
2. where the loss is caused by fault or malice of borrower
3. where loss is caused by barratry on the part of the captain
4. where loss is caused by damage to the vessel as a consequence of
its
engaging in contraband
5. where loss arose from having loaded the merchandise on a vessel
different from that designated in the contract, except if change is due to
force majeure
d. Forms and Requisites
Art. 720. Loans on bottomry or respondentia may be execut-
c. Character of Loan
ed:
Art. 719. A loan in which, under any condition whatever, the

repayment of the sum loaned and of the premium stipulated depends
upon the safe arrival in port of the goods on which it is made, or of the
price they may receive in case of accident, shall be considered a loan
on bottomry or respondentia.
Real, unilateral, aleatory contract:
1. delivery of the amount loaned is necessary for the perfection
of the contract
2. although there are reciprocal benefits, the contract produces
obligations only for one party, the borrower who must return the amount
borrowed plus premium
3. lender really runs known risks
Distinguished from ordinary loans:
Ordinary loan
and respondentia
1. first lender has preference
preference over
over subsequent lenders
loan on bottomry
2. must be paid absolutely

paid only upon
at all events, WON thing
thing given as
given as security is lost or
destination
destroyed
loan is required to be
3. subject to Usury Law

interest in
no limit as to rate of
last
lender
has
previous ones
1. By means of a public instrument.

2. By means of a policy signed by the contracting parties
and the broker taking part therein.
3. By means of a private instrument.
Under whichever of these forms the contract is executed, it
shall be entered in the certificate of the registry of the vessel and shall
be recorded in the registry of vessels, without which requisites the
credits of this kind shall not have, with regard to other credits, the
preference which, according to their nature, they should have,
although the obligation shall be valid between the contracting parties.
The contracts made during a voyage shall be governed by
the provisions of Articles 583 and 611, and shall be effective with
regard to third persons from the date of their execution, if they should
be recorded in the registry of vessels of the port of registry of the
vessel before the lapse of eight days following its arrival. If said eight
days should elapse without the record having been made in the
registry of vessels, the contracts made during the voyage of a vessel
shall produce no effect with regard to third persons, except from the
day and date of their inscription.
In order that the policy of the contracts executed in accordance with No.2 may have binding force, they must conform to the
registry of the broker who took part therein. With respect to those
executed in accordance with No. 3 the acknowledgment of the
signature shall be required.
Contracts which are not reduced in writing shall not give
rise to judicial action.
safe arrival of the

security at port of
Effect of registration:
view
of
1. the loan shall have, with regard to other credits, the preference which,
according to its nature, it should have (Art. 580 - 8th in the order of
preference)
2. effective against third persons from the time of execution/registration
diff. classes and various

risks in a
maritime voyage
Marine insurance vs Bottomry and Respondentia Loans:
The borrower is in effect indemnified for his loss, at least, to the extent of
the loan --> in case of loss of the thing given as security, the borrower is
under no obligation to pay the loan
Marine insurance
bottomry/respondentia loans
Art. 721. In a contract on bottomry or respondentia the

following must be stated:
1. The kind, name, and registry of the vessel.
2. The name, surname, and domicile of the captain.
3. The names, surnames, and domiciles of the person
giving and the person receiving the loan.
4. The amount of the loan and the premium stipulated.
5. The time for repayment.
6. The goods pledged to secure repayment.
7. The voyage during which the risk is run.
PAGE 69

Art. 722. The contracts may be made to order, in which case
they shall be transferable by indorsement, and the indorsee shall
acquire all the rights and shall incur all the risks corresponding to the
indorser.
e. On What Constituted
Art. 724. The loans may be constituted jointly or separately:
1. On the hull of the vessel.
2. On the rigging.
3. On the equipment, provisions, and fuel.
4. On the engine, if the vessel is a steamer.
5. On the merchandise loaded.
If the loan is constituted on the hull of the vessel, the
rigging, equipment and other goods, provisions, fuel, steam engines,
and the freightage earned during the voyage on which the loan is
made, shall also be considered as included in the liability for the loan.
If the loan is made on the cargo, all that which constitutes
the same shall be subject to the repayment; and if on a particular
object of the vessel or of the cargo, only the object concretely and
specifically mentioned shall be liable.
Art. 725. No loans on bottomry may be made on the salaries
of the crew or on the profits expected.
f. Amount
Art. 723. Loans may be made in goods and in merchandise,
fixing their value in order to determine the principal of the loan.
Art. 726. If the lender should prove that he loaned an
amount larger than the value of the object liable for the bottomry loan,
on account of fraudulent measures employed by the borrower, the loan
shall be valid only for the amount at which said object is appraised by
experts.
The surplus principal shall be returned with legal interest for
the entire time required for repayment.
Art. 611. In order to comply with the obligations mentioned

in the foregoing article, and when he has no funds and does not
expect to receive any from the agent, the captain shall procure the
same in the successive order stated below:
1. By requesting said funds of the consignees of the vessel
or the correspondents of the ship agent.
2. By applying to the consignees of the cargo or to the
persons interested therein. 3. By drawing on the ship agent.
4. By borrowing the amount required by means of a
bottomry loan.
5. By selling a sufficient amount of the cargo to cover the
amount absolutely necessary to repair the vessel and to equip her to
pursue the voyage.
In the two last cases he must apply to the judicial authority
of the port, if in the Philippines and to the Filipino consul, if in a
foreign country; and where there should be none, to the local
authority, proceeding in accordance with the prescriptions of Article
583, and with the provisions of the law of civil procedure.
Art. 583. If the ship being on a voyage the captain should
find it necessary to contract one or more of the obligations mentioned
in Nos. 8 and 9 of Article 580, he shall apply to the judge or court if he
is in Philippine territory, and otherwise to the Filipino consul, should
there be one, and in his absence to the judge or court or to the proper
local authority, presenting the certificate of the registry of the vessel
treated of in Article 612, and the instruments proving the obligation
contracted.
The judge or court, the consul or the local authority as the
case may be in view of the result of the proceedings instituted, shall
make a temporary memorandum in the certificate of their result, in
order that it may be recorded in the registry when the vessel returns to
the port of her registry, or so that it can be admitted as a legal and
preferred obligation in case of sale before the return, by reason of the
sale of the vessel by virtue of a declaration of unseaworthiness.
The lack of this formality shall make the captain personally
liable to the creditors who may be prejudiced through his fault.
h. Effects of Contract
Art. 727. If the full amount of the loan contracted in order to

load the vessel should not be used for the cargo, the balance shall be
returned before clearing.
The same procedure shall be observed with regard to the
goods taken as loan, if they were not loaded.
Art. 719. A loan in which, under any condition whatever, the

repayment of the sum loaned and of the premium stipulated depends
upon the safe arrival in port of the goods on which it is made, or of the
price they may receive in case of accident, shall be considered a loan
on bottomry or respondentia.
The excess shall be valid only as an ordinary loan

Art. 729. Should the goods on which money is taken not be
subjected to risk, the contract shall be considered a simple loan, with
the obligation on the part of the borrower to return the principal and
interest at the legal rate, if that agreed upon should not be lower.
g. By whom
Art. 728. The loan which the captain takes at the point of
residence of the owners of the vessel shall only affect that part thereof
which belongs to the captain, if the other owners or their agents
should not have given their express authorization therefor or should
not have taken part in the transaction.
If one or more of the owners should be requested to furnish
the amount necessary to repair or provision the vessel, and they
should not do so within twenty-four hours, the interest which the
parties in default may have in the vessel shall be liable for the loan in
the proper proportion.
Outside of the residence of the owners, the captain may
contract loans in accordance with the provisions of Articles 583 and
611.
Art. 617. The captain may not contract loans on respondentia secured by the cargo, and should he do so the contract shall be
void.
Neither may he borrow money on bottomry for his own
transactions, except on the portion of the vessel he owns, provided no
money has been previously borrowed on the whole vessel, and
provided there does not exist any other kind of lien or obligation
chargeable against the vessel. When he is permitted to do so, he must
necessarily state what interest he has in the vessel.
In case of violation of this article the principal, interest, and
costs shall be charged to the private account of the captain, and the
ship agent may furthermore discharge him.
Art. 726. If the lender should prove that he loaned an

amount larger than the value of the object liable for the bottomry loan,
on account of fraudulent measures employed by the borrower, the loan
shall be valid only for the amount at which said object is appraised by
experts.
The surplus principal shall be returned with legal interest for
the entire time required for repayment.
Art. 727. If the full amount of the loan contracted in order to
load the vessel should not be used for the cargo, the balance shall be
returned before clearing.
The same procedure shall be observed with regard to the
goods taken as loan, if they were not loaded.
Art. 730. Loans made during the voyage shall have preference over those made before the clearing of the vessel, and they shall
be graduated in the inverse order of their dates.
The loans for the last voyage shall have preference over
prior ones.
Should several loans have been made at the same port of
arrival under stress and for the same purpose, all of them shall be paid
pro rata.
PAGE 70

understood that the new captain accepts the cargo as it appears from
the bills of lading.
F. BILL OF LADING
B/L 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 stipulated
2. Probative Value
A stipulation that a CC's liability is limited to the value of the

goods appearing in the B/L, unless the owner declares a greater value, is
valid and binding
Art. 709. A bill of lading drawn up in accordance with the

provisions of this title shall be proof as between those interested in the
cargo and between the latter and the insurers, evidence to the contrary
being reserved by the latter.
Bill of Lading vs Charter party

1. Charter party - entire or complete contract
B/L - private receipt which the captain gives to accredit that such goods
belong to such persons
2. Charter party - consensual party, which can be dissolved by means of
indemnity for losses and damages
B/L - real contract; exists only after delivery of the goods to be transported
is made
Art. 710. If the bills of lading do not agree, and no change or

erasure appears in any of them, those in the possession of the shipper
or consignee signed by the captain shall be proof against the latter or
ship agent in favor of the consignee or the shipper; and those
possessed by the captain or ship agent signed by the shipper shall be
proof against the shipper or consignee in favor of the captain or ship
agent.
1. Contents
Art. 706. The captain and the shipper shall have the
obligation of drawing up the bill of lading, in which shall be stated:
1. The name, registry, and tonnage of the vessel.
2. The name of the captain and his domicile.
3. The port of loading and that of unloading.
4. The name of the shipper.
5. The name of the consignee, if the bill of lading is issued
in the name of a specified person.
6. The quantity, quality, number of packages, and marks of
the merchandise.
7. The freightage and the primage stipulated.
The bill of lading may be issued to bearer, to order, or in the
name of a specified person, and must be signed within twenty- four
hours after the cargo has been received on board, the shipper being
entitled to demand the unloading at the expense of the captain should
the latter not sign it, and, in any case, the losses and damages
suffered thereby.
Art.707. Four true copies of the original bill of lading shall
be made, and all of them shall be signed by the captain and by the
shipper. Of these copies the shipper shall keep one and send another
to the consignee; the captain shall take two, one for himself and the
other for the ship agent.
There may also be drawn as many copies of the bill of lading
as may be considered necessary by the parties; but, when they are
issued to order or to bearer, there shall be stated in all the copies, be
they the first four or the subsequent ones, the destination of each one,
stating whether it is for the ship agent, for the captain, for the shipper,
or for the consignee. If the copy sent to the latter should have a
duplicate, this circumstance and the fact that it is not valid except in
default of the first one must be stated therein.
Art. 713. If before the delivery of the cargo a new bill of
lading should be demanded of the captain, on the allegation that the
failure to present the previous ones is on account of their loss or for
any other just cause, he shall be obliged to issue it, provided that
security for the value of the cargo is given to his satisfaction; but
without changing the consignment and stating therein the
circumstances prescribed in the last paragraph of Article 707, when
dealing with the bills of lading referred to therein, under penalty,
should he not do so, of being liable for said cargo if improperly
delivered through his fault.
Art. 714. If before the vessel puts to sea the captain should
die or should cease to hold his position through any cause, the
shipper shall have the right to demand of the new captain the
ratification of the first bills of lading, and the latter must do so,
provided that all the copies previously issued be presented or returned
to him, and it should appear from an examination of the cargo that
they are correct.
The expenses arising from the examination of the cargo
shall be for the account of the ship agent, without prejudice to his right
of action against the first captain, if he ceased to be such through his
own fault. Should said examination not be made, it shall be
B/L - proof of the agreement between the parties

Issuance of B/L is merely prima facie evidence of the receipt of
the merchandise by the carrier or his agent; not conclusive evidence
Defective and irregular B/L may be cured by other
complementary documents
G. PASSENGERS ON SEA VOYAGE
1. Nature of Contract
Art. 695. The right to passage, if issued to a specified
person, may not be transferred without the consent of the captain or of
the consignee.
2. Obligations of Passengers
Art. 693. If the passage price has not been agreed upon, the
judge or court shall summarily fix it, after a statement of experts.
Art. 699. If the contract is rescinded, before or after the
commencement of the voyage, the captain shall have a right to claim
payment for what he may have furnished the passengers.
Art. 704. In order to collect the fare and expenses of
sustenance, the captain may retain the goods belonging to the
passenger, and in case of their sale, he shall be given preference over
other creditors, acting in the same way as in the collection of
freightage.
Art. 694. Should the passenger not arrive on board at the
time fixed, or should he leave the vessel without permission from the
captain, when the latter is ready to leave the port, the captain may
continue the voyage and demand the full passage price.
Art. 700. In all that pertains to the preservation of order and
discipline on board the vessel, the passengers shall be subject to the
orders of the captain, without any distinction whatsoever.
3. Rights of Passengers
Art. 697. If before beginning the voyage it should be
suspended through the sole fault of the captain or ship agent, the
passengers shall be entitled to have their passage refunded and to
recover for losses and damages; but if the suspension was due to an
accidental cause, or to force majeure, or to any other cause beyond
the control of the captain or ship agent, the passengers shall only be
entitled to the return of the passage money.
Art. 698. In case a voyage already begun should be
interrupted, the passengers shall be obliged to pay only the fare in
proportion to the distance covered, and without right to recover for
losses and damages if the interruption is due to a fortuitous event or
to force majeure, but with a right to indemnify if the interruption
PAGE 71

should have been caused by the captain exclusively. If the interruption
should be by reason of the disability of the vessel, and the 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 delay
shall be for his own account.
In case of delay in the departure of the vessel, the
passengers have a right to remain on board and to be furnished food
for the account of the vessel, unless the delay is due to an accidental
cause or to force majeure. If the delay should exceed 99ten days, the
passengers requesting the same shall be entitled to the return of the
fare; and if it is due exclusively to the captain or ship agent they may
furthermore demand indemnity for losses and damages.
A vessel exclusively destined to the transportation of passengers must take them directly to the port or ports of destination, no
matter what the number of passengers may be, making all the stops
indicated in its itinerary.
Furthermore, the conditions relied upon by petitioner cannot

prevail over Arts. 614 and 698 of the Code of Commerce.
The voyage to Catbalogan was interrupted by the captain upon
instruction of management. The interruption was not due to fortuitous event
or force majeure nor to disability of the vessel. Having been caused by the
captain upon instructions of management, the passengers' right to indemnity
is evident. The owner of a vessel and the ship agent shall be civilly liable
for the acts of the captain under Art. 586 of the Code of Commerce.
The passengers are also entitled to moral damages on account
of the BF on the part of the carrier. They did not give notice of the change
of schedule. Knowing fully well that it would take 15 hours to repair the
vessel, they informed the passengers that it would take only a few hours.
They did not offer to refund the tickets of the passengers nor provide them
transportation from Bacolod City to Catbalogan.
4. Responsibilities of Captain
In the Philippines, there is no law which requires shipowners to publish a

schedule of the arrivals and departures of their vessels in the different ports
of call, and which holds them liable in damages to passengers for any
deviation from said schedule
Art. 701. The convenience or the interest of the passengers

shall not obligate nor empower the captain to stand in-shore or enter
places which may take the vessel out of her course, nor to remain in
the ports he must or is under the necessity of touching for a period
longer than that required by the needs of navigation.
Sweet Lines vs CA 121 SCRA 769

F:
Private respondents purchased first-class tickets from petitioner
in Cebu City. They were to board petitioner's vessel M/V Sweet Grace,
bound for Catbalogan, Western Samar. Instead of departing at the
scheduled hour of about midnight, the vessel sailed at around 3 A.M. only to
be towed back to Cebu due to engine trouble, arriving back at Cebu at about
4 PM. After repairs, the vessel was only able to leave around 8 A.M. of the
next day.
Instead of docking at Catbalogan, which was the first port of call,
the vessel proceeded directly to Tacloban. Private respondents had no
recourse but to disembark and board a ferryboat to Catbalogan. Hence this
suit for damages for breach of contract of carriage. The TC and CA decided
in favor of plaintiffs.
Issue: WON defendant is liable.
Held: The governing provisions are found in the Code of Commerce. Art.
614 provides that a captain who agreed to make a voyage and who fails to
fulfill his undertaking, without being prevented by fortuitous event or force
majeure, shall indemnify all the losses which his failure may cause, without
prejudice to criminal penalties which may prosper. Art. 698 also provides for
the captain's liability.
The crucial factor then is the existence of a fortuitous event or
force majeure. Without it, the right to damages and indemnity exists against
a captain who fails to fulfill his undertaking or where the interruption has
been caused by the captain exclusively.
As found by both courts below, there was no fortuitous event or
force majeure which prevented the vessel from fulfilling its undertaking of
taking private respondents to Catbalogan. Mechanical defects in the CC are
not considered caso fortuito that exempts the CC from responsibility. Even
granting that the engine failure was a fortuitous event, it accounted only for
the delay in the departure. When the vessel left Cebu, there was no longer
any force majeure that justified the by-passing a port of call. The vessel
was completely repaired when it left Cebu for Samar and Leyte. In fact,
after docking at Tacloban City, the vessel left for Manila to complete its
voyage.
Petitioner cannot rely on the conditions in small bold print at the
back of the ticket reading: "The passenger's acceptance of this ticket shall
be considered as an acceptance of the ff. conditions:
3. In case the vessel cannot continue or complete the trip for any
cause whatsoever, the carrier reserves the right to bring the passenger to
his/her destination at the expense of the carrier or to cancel the tickets and
refund the passenger the value of his/her ticket.
11. The sailing schedule of the vessel xxx is subject to change
without previous notice."
Even assuming that those conditions are applicable to case at
bar, petitioner did not comply with the same. It did not cancel the ticket nor
did it refund the value of the tickets to private respondents. Besides, it was
not the vessels' sailing schedule that was involved. The complaint is
directed not at the delayed departure the next day but at the by-passing of
Catbalogan, their destination. Had petitioner notified them previously and
offered to bring them to their destination at its expense or refunded the
value of the tickets purchased, perhaps this controversy would not have
arisen.
Art. 702. In the absence of an agreement to the contrary, the

subsistence of the passengers during the voyage shall be deemed
included in the price of the passage; but should it be for their account,
the captain shall be under the obligation, in case of necessity, to
supply the food necessary for their sustenance at a reasonable price.
Art. 705. In case of the death of a passenger during the
voyage the captain shall be authorized, with respect to the body, to
take the steps required by the circumstances, and shall carefully take
care of the papers and goods of said passenger which may be on
board, complying with the provisions of case No. 10 of Article 612 with
regard to members of the crew.
Art. 612. The following duties are inherent in the office of
captain:
1. To have on board before starting on a voyage a detailed
inventory of the hull, engines, rigging, tackle, stores, and other
equipments of the vessel; the navigation certificate; the roll of the
persons who make up the crew of the vessel, and the contracts
entered into with the crew; the list of passengers; the health certificate;
the certificate of the registry proving the ownership of the vessel; and
all the obligations which encumber the same up to that date; the
charters or authenticated copies thereof; the invoices or manifest of
the cargo, and the instrument of the expert visit or inspection, should
it have been made at the port of departure.
2. To have a copy of this Code on board.
3. To have three folioed and stamped books, placing at the
beginning of each one a note of the number of folios it contains,
signed by the marine official, and in his absence by the competent
authority.
In the first book, which shall be called "log book," he shall
enter every day the condition of the atmosphere, the prevailing winds,
the course sailed, the rigging carried, the horsepower of the engines,
the distance covered, the maneuvers executed, and other incidents of
navigation. He shall also enter the damage suffered by the vessel in
her hull engines, rigging, and tackle, no matter what is its cause, as
well as the imperfections and averages of the cargo, and the effects
and consequence of the jettison, should there be any; and in cases of
grave resolutions which require the advice or a meeting of the officers
of the vessel, or even of the passengers and crew, he shall record the
decision adopted. For the informations indicated he shall make use of
the binnacle book, and of the steam or engine book kept by the
engineer.
In the second book, called the "accounting book", he shall
enter all the amounts collected and paid for the account of the vessel,
entering specifically article by article, the sources of the collection,
and the amounts invested in provisions, repairs, acquisition of rigging
or goods, fuel, outfits, wages, and all other expenses. He shall
furthermore enter therein a list of all the members of the crew, stating
their domiciles, their wages and salaries, and the amounts they may
have received on accounts, either directly or by delivery to their
families.
PAGE 72

In the third book, called "freight book," he shall record the
entry and exit of all the goods, stating their marks and packages,
names of the shippers and of the consignees, ports of loading and
unloading, and the freight earned. In the same book he shall record
the names and places of sailing of the passengers and the number of
packages of which their baggage consists, and the price of the
passage.
4. To make, before receiving the freight, with the officers of
the crew, and the two experts, if required by the shippers and
passengers, an examination of the vessel, in order to ascertain
whether she is watertight, and whether the rigging and engines are in
good condition; and if she has the equipment required for good
navigation, preserving a certificate of the memorandum of this
inspection, signed by all the persons who may have taken part therein,
under their liability.
The experts shall be appointed one by the captain of the
vessel and the other one by the persons who request the examination,
and in case of disagreement a third shall be appointed by the marine
authority of the port.
5. To remain constantly on board the vessel with the crew
during the time the freight is taken on board and carefully watch the
stowage thereof; not to consent to any merchandise or goods of a
dangerous character to be taken on, such as inflammable or explosive
substances, without the precautions which are recommended for their
packing, management and isolation; not to permit that any freight be
carried on deck which by reason of its disposition, volume, or weight
makes the work of the sailors difficult, and which might endanger the
safety of the vessel; and if, on account of the nature of the
merchandise, the special character of the shipment, and principally the
favorable season it takes place, he allows merchandise to be carried
on deck, he must hear the opinion of the officers of the vessel, and
have the consent of the shippers and of the agent.
6. To demand a pilot at the expense of the vessel whenever
required by navigation, and principally when a port, canal, or river, or a
roadstead or anchoring place is to be entered with which neither he,
the officers nor the crew are acquainted.
7. To be on deck at the time of sighting land and to take
command on entering and leaving ports, canals, roadsteads, and
rivers, unless there is a pilot on board discharging his duties. He shall
not spend the night away from the vessel except for serious causes or
by reason of official business.
8. To present himself, when
making a port in distress, to the maritime authority if in the Philippines
and to the Filipino consul if in a foreign country, before twenty-four
hours have elapsed, and make a statement of the name, registry, and
port of departure of the vessel, of its cargo, and reason of arrival,
which declaration shall be vised by the authority of by the consul if
after examining the same it is found to be acceptable, giving the
captain the proper certificate in order to show his arrival under stress
and the reasons therefor. In the absence of marine officials or of the
consul, the declaration must be made before the local authority.
9. To take the steps necessary before the competent
authority in order to enter in the certificate of the vessel in the registry
of the vessels, the obligations which he may contract in accordance
with Article 583.
10. To put in a safe place and keep all the papers and
belongings of any members of the crew who might die on the vessel,
drawing up a detailed inventory, in the presence of passengers as
witnesses, and, in their absence, of members of the crew.
11. To conduct himself according to the rules and precepts
contained in the instructions of the agent, being liable for all that he
may do in violation thereof.
12. To give an account to the agent from the port where the
vessel arrives, of the reason therefor, taking advantage of the
semaphore, telegraph, mail, etc., according to the cases; notify him the
freight he may have received, stating the name and domicile of the
shippers, freight earned, and amounts borrowed on bottomry bond,
advise him of his departure, and give him any information and date
which may be of interest.
13. To observe the rules on the situation of lights and
evolutions to prevent collisions.
14. To remain on board in case of danger to the vessel, until
all hope to save her is lost, and before abandoning her to hear the
officers of the crew, abiding by the decision of the majority; and if he
should have to take a boat he shall take with him, before anything else,
the books and papers, and then the articles of most value, being
obliged to prove in case of the loss of the books and papers that he
did all he could to save them.
15. In case of wreck he shall make the proper protest in due
form at the first port reached, before the competent authority or
Filipino consul, within twenty-four hours, stating therein all the

incidents of the wreck, in accordance with case 8 of this article.
16. To comply with the obligations imposed by the laws and
rules of navigation, customs, health, and others.
Art. 703. A passenger shall be considered a shipper of the
goods he carries on board, and the captain shall not be responsible for
what the former may keep under his immediate and special custody,
unless the damage arises from an act of the captain or of the crew.
Art. 1754. The provisions of Arts. 1733 to 1753 shall apply to
the passenger's baggage which is not in his personal custody or in
that of his employee. As to the other baggage, the rules in Articles
1998 and 2000 to 2003 concerning the responsibility of hotel-keepers
shall be applicable. (New Civil Code.)
J. Carriage of Goods by Sea Act (Commonwealth Act. No. 65, Public Act
No. 521, 74the US Congress)
Sec. 1. That the provisions of Public Act No. 521 of the 74th Congress
of the United States, approved on April 16, 1936, be accepted, as it is
hereby accepted to be made applicable to all contracts for the carriage
of goods by sea to and from Philippine ports in foreign trade:
Provided, that nothing in this Act shall be construed as repealing any
existing provision of the Code of Commerce which is not in force, or
as limiting its application.
Notes: In relation to Civil Code :
Art. 1753 - governed by law of place of destination, if shipped to a foreign
country, governed by law of foreign country
Art. 1766 - goods from foreign country shipped to the Philippines, governed
by the Civil Code
COGSA - applicable to all transportation of goods by sea in foreign trade to
and from Philippine ports
- does not apply to purely domestic transport
- Laws applicable to a contract for the carriage of goods by sea:
1. Distinguish - common carrier (Civil Code)
- private carrier
2. Where is the vessel going?
a. Common carrier coming to the Phils. = what law applies?
1st: Civil Code
2nd: COGSA (it's more specific than Code of Commerce)
- in foreign trade
3rd: Code of Commerce
b. Private carrier coming to the Phils. in foreign trade
1st: COGSA (because it's more specific)
2nd: Code of Commerce
3rd: Civil Code (provisions not on common carriers e.g. torts, contracts)
c. From the Phils. to a foreign country: apply laws of such foreign country
(Art. 1753)
- with respect to vessels destined for foreign ports, the COGSA doesn't
apply unless parties make it applicable.
Q: In what situations does COGSA primarily apply?
A: Where the parties expressly stipulate that COGSA shall govern their
respective rights and obligations.
Q: Can the COGSA apply in domestic shipping?
A: Generally, NO.
EXCEPTION: when parties agree to make it apply.
Q: What application does COGSA have in carriage of passengers?
A: None. Applies only to carriage of goods.
Sec. 2. This Act shall take effect upon its approval.
(Approved October 22, 1936).
TITLE I
Sec. 1. When used in this Act(a) The term "carrier" includes the owner or the charterer
PAGE 73

who enters into a contract of carriage with a shipper.
(b) The term "contract of carriage" applies only to
contracts of carriage covered by a bill of lading or any similar
document of title, insofar as such document relates to the carriage of
goods by sea, including any bill of lading or any simi lar document as
aforesaid issued under or pursuant to a charter party from the moment
at which such bill of lading or similar document of title regulates the
relations between a carrier and a holder of the same.
(c) The term "goods" includes goods, wares, merchandise,
and articles of ever kind whatsoever, except live animals and cargo
which by the contract of carriage is stated as being carried on deck
and is so carried.
(d) The term "ship" means any vessel used for the carriage
of goods by sea.
(e) The term "carriage of goods" covers the period from the
time when the goods are loaded to the time when they are discharged
from the ship
RISKS
Sec. 2. Subject to the provisions of Section 6, under every
contract of carriage of goods by sea, the carrier in relation to the
loading, handling, stowage, carriage, custody, care, and discharge of
such goods shall be subject to the responsibilities and liabilities and
entitled to the rights and immunities hereinafter set forth.
RESPONSIBILITIES AND LIABILITIES
(6) Unless notice of loss or damage and the general nature of

such loss or damage be given in writing to the carrier or his agent at the
port of discharge or at the time of the removal of the goods into the
custody of the person entitled to delivery thereof under the contract of
carriage, such removal shall be prima facie evidence of the delivery by
the carrier of the goods as described in the bill of lading. If the loss or
damage is not apparent, the notice must be given within three days of
the delivery.
Said notice of loss or damage may be endorsed upon the
receipt for the goods given by the person taking delivery thereof.
The notice in writing need not be given if the state of the
goods has at the time of their receipt been the subject of joint survey or
inspection.
In any event the carrier and the ship shall be discharged from
all liability in respect of loss or damage unless suit is brought within one
year after delivery of the goods or the date when the goods should have
been delivered: Provided, that, if a notice of loss or damage, either
apparent or concealed, is not given as provided for in this section, that
fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the deliver of the goods or the date when the goods
should have been delivered.
In the case of any actual or apprehended loss or damage, the
carrier and the receiver shall give all reasonable facilities to each other
for inspecting and tallying the goods
(7) After the goods are loaded the bill of lading to be issued by
the carrier, master, or agent of the carrier to the shipper shall if the
shipper so demands, be a "shipped" bill of lading: Provided, that if the
shipper shall have previously taken up any document of title to such
goods, he shall surrender the same as against the issue of the "shipped"
bill of lading, but at the option of the carrier such document of title may
be noted at the port of shipment by the carrier, master, or agent with the
name or names of the ship or ships upon which the goods have been
shipped and the date or dates of shipment, and when so noted the same
shall for the purpose of this section be deemed to constitute a "shipped"
bill of lading.
Sec. 3. (1) The carrier shall be bound before and at the

beginning of the voyage to exercise due diligence to(a) Make the ship seaworthy;
(b) Properly man, equip, and supply
the ship;
(c) Make the holds, refrigerating and
cooling chambers, and all other parts of the ship
in which goods are carried, fit and safe for their
reception, carriage, and preservation
(2) The carrier shall properly and carefully load, handle,
stow, carry, keep, care for, and discharge the goods carried.
(3) After receiving the goods into his charge the carrier, or
the master or agent of the carrier, shall, on demand of the shipper,
issue to the shipper a bill of lading showing among other things(a) The loading marks necessary for identification
of the goods as the same are furnished in writing
by the shipper before the loading of such goods
starts, provided such marks are stamped or
otherwise shown clearly upon the goods if
uncovered, in such a manner as should ordinarily
remain legible until the end of the voyage.
(b) Either the number of packages or pieces, or
the quantity or weight, as the case may be, as
furnished in writing by the shipper.
(c) The apparent order and conditions of the goods: Provided, that no carrier, master, or agent of the carrier, shall be
bound to state or show in the bill of lading any marks, num ber,
quantity, or weight which he has reasonable ground for
suspecting not accurately to represent the goods actually
received or which he has had no reasonable means of
checking.
(4) Such a bill of lading shall be prima facie evidence of the
receipt by the carrier of the goods as therein described in accordance
with paragraphs (3) (a), and (c), of this section: (The rest of the provision
is not applicable to the Philippines).
(5) The shipper shall be deemed to have guaranteed to the
carrier the accuracy at the time of shipment of the marks, number,
quantity, and weight, as furnished by him; and the shipper shall
indemnify the carrier against all loss, damages, and expenses arising or
resulting from inaccuracies in such particulars. The right of the carrier
to such indemnity shall in no way limit his responsibility and liability
under the contract of carriage to any person other than the shipper.
(8) Any clause, covenant, or agreement in a contract of

carriage relieving the carrier of the ship from liability for loss or damage
to or in connection with the goods, arising from negligence, fault, or
failure in the duties and obligations provided in this section, or
lessening such liability otherwise than as provided in this Act, shall be
null and void and of no effect. A benefit of insurance in favor of the
carrier, or similar clause, shall be deemed to be a clause relieving the
carrier from liability.
Notes: Prescriptive period under Section 3(6). - the carrier and the agent
shall be discharged form liability in respect of loss or damage unless suit is
brought within 1 year from:
(1) in case of damaged goods: from the time delivery of the goods
was made
(2) in case of non-delivery (i.e., lost goods): from the date the
goods should have been delivered
Cases of misdelivery or conversion not covered.
1 year-prescriptive period in Sec. 3 (6) applies only where there is loss or
damage.
Loss contemplates only where no delivery at all was made by the carrier of the
goods because the same had perished, gone out of commerce, or
disappeared in such a way that their existence is unknown or they cannot be
recovered
Hence, in case of misdelivery (delivery to wrong person) or conversion of the
goods, the rules on prescription found in the Civil Code shall apply (10 years
for contracts; 4 years for tortious obligations)
Shipper, consignee or legal holder of B/L may invoke the prescriptive period
and have the right to file suit within one year after delivery of the goods or
failure to deliver.
Mere proposal for arbitration or fact that there have been initial negotiations
does not suspend the running of the period for prescription
PAGE 74

NOTE: Prof. Quimbo does not agree with this SC ruling. If there is a
misdelivery or conversion, there is a case of loss from the point of view of the
consignee or shipper.
(f) Act of public enemies;

(g)
Arrest or restraint of princes, rulers, or
people, or seizure under legal process;
(h) Quarantine restrictions;
(i) Act or omission of the shipper or owner of the
goods, his agent or representative;;
(j) Strikes or lockouts or stoppage or restraint of
labor from whatever cause, whether partial or
general: Provided, that nothing herein contained
shall be construed to relive a carrier from
responsibility for the carrier's own acts:
(k) Riots and civil commotions;
(l) Saving or attempting to save life or property at
sea;
(m) Wastage in bulk or weight or any other loss
or damage arising from inherent defect, quality, or
vice of the goods;
(n) Insufficiency of packing;
(o) Insufficiency or inadequacy of marks;
(p) Latent defects not discoverable by due
diligence; and
(q) Any other cause arising without the actual
fault and privity of the carrier and without the fault
or neglect of the agents or servants of the carrier,
but the burden of proof shall be on the person
claiming the benefit of this exception to show that
neither the actual fault or privity of the carrier not
the fault or neglect of the agents or servants of the
carrier contributed to the loss or damage.
Q: Is the prescriptive period under the COGSA interrupted from the time of
the making of extra-judicial demand or filing of judicial action as provided in
Art. 1155, NCC?
A: No. 1 year period is a special prescriptive period, uniform worldwide
Rationale behind the 3-day notice and relatively short prescriptive period:
- to provide carrier an opportunity to look for the lost goods
- to discover who was at fault
- in case of transshipment, to determine, when and where damage
occurred
Shipper, consignee or legal holder of bill may invoke prescriptive period
although the proviso in Sec. 3 (6) gives the impression that it is the shipper
alone who can invoke the same.
But prescriptive period does not apply to the action by an insurer as subrogee
of the consignee.
Stipulation in bill limiting carrier's liability contrary to sec. 3(8) is void; e.g.
provision in the bill excepting th owner form liability for loss or damage of
cargo unless written notice is thereof was given to the carrier within 30 days;
such a provision is contrary to a provision of the COGSA since Sec. 3
provides that even if a notice of loss or damage is not given as required, that
fact shall not prejudice the right of the shipper to bring suit within 1 year after
delivery of the goods.
Notice requirements:
COGSA: Sec. 3(6)
If loss or damage is apparent - protest as soon as receipt of goods
If not apparent -> within 3 days of delivery
(3) The shipper shall not be responsible for loss or damage

sustained by the carrier or the ship arising or resulting from any cause
without the act, or neglect of the shipper, his agents, or his
(4) An deviation in saving or attempting to save life or
property at sea, or any reasonable deviation shall not be deemed to be
an infringement or breach of this Act or of the contract of carriage, and
carrier shall not be liable for any loss or damage resulting therefrom:
Provided, however, that if the deviation is for the purpose of loading or
unloading cargo or passengers it shall, prima facie, be regarded as
unreasonable.
Code of Commerce: Art. 366

apparent - protest at time of receipt
non-apparent - within 24 hours after receipt
WARSAW: Art. 26
in case of damage:
of baggage - within 3 days from receipt
of goods - within 7 days
in case of delay: within 14 days from receipt
failure to comply with the 3-days notice requirement under COGSA does not
affect the right of the shipper to bring action provided he brings the same
within 1 year
To be distinguished from the notice requirement in the WARSAW
convention and Code of Commerce, where the notice requirement is a
condition precedent for the right of action against the shipowner to accrue.
RIGHTS AND IMMUNITIES
Sec. 4. (1) Neither the carrier not the ship shall be liable for
loss or damage arising or resulting from unseaworthiness unless caused
by want of due diligence on the part of the carrier to make the ship
seaworthy and to secure that the ship is properly manned, equipped,
and supplied, and to make the holds, refrigerating and cooling
chambers, and all other parts of the ship in which goods are carried fit
and safe for their reception, carriage, and preservation, in accordance
with the provisions of paragraph (1) of Section (3). Whenever loss or
damage has resulted from unseaworthiness, the burden of proving the
exercise of due diligence shall be on the carrier or other person claiming
exemption under this section.
(2) Neither the carrier not the ship shall be responsible for
loss or damage arising or resulting from(a) Act, neglect, or default of the master, mariner,
pilot, or the servants of the carrier in the
navigation or in the management of the ship;
(b) Fire, unless caused by the actual fault or
privity of the carrier;
(c) Perils, dangers, and accidents of the sea or
other navigable water;
(d) Act of God;
(e) Act of war;
(5) Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $500 per package of
lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of that sum in
other currency, unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in the bill of
lading. This declaration, if embodied in the bill of lading, shall be prima
facie evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master or agent of the
carrier, and the shipper another maximum amount than that mentioned
in this paragraph may be fixed: Provided, that such maximum shall not
be less than the figure above named. In no event shall the carrier be
liable for more than the amount of damage actually sustained.
Neither the carrier nor the ship shall be responsible in any
event for loss or damage to or in connection with the transportation of
the goods if the nature or value thereof has been knowingly and
fraudulently mis-stated by the shipper in the bill of lading.
(6) Goods of an inflammable, explosive, or dangerous nature
to the shipment whereof, the carrier, master or agent of the carrier, has
not consented with knowledge of their nature and character, may at any
time before discharge be landed at any place or destroyed or rendered
innocuous by the carrier without compensation, and the shipper of such
goods shall be liable for all damages and expenses directly or indirectly
arising out of or resulting from such shipment. If any such goods
shipped with such knowledge and consent shall become a danger to the
ship or cargo, they may in like manner be landed at any place, or destroyed or rendered innocuous by the carrier without liability on the part
of the carrier except to general average if any.
Notes: Amount recoverable in case of loss: $500/package, even if not
stipulated
PAGE 75

The plaintiff cannot dispute said limitation on the ground that it was not freely
and fairly agreed upon or that it is against public policy, since the LAW ITSELF
PROVIDES FOR SAID LIMITATION; THE SAME IS DEEMED READ INTO
THEIR CONTRACT
carrier's responsibilities and liabilities pursuant to Section 5, Title I, of

this Act;
(c) in any other way prohibited by the Shipping Act, 1916, as
amended.
Package - means individual packaging of the goods

- does not cover 1 container van
Sec. 10. (Not applicable to the Philippines.)
Parties may agree to amount of liability less than $500 under Sec. 4(5). By
providing that $500 is the maximum liability, the law does not disallow an
agreement for liability at a lesser amount. Moreover, Art. 1749 of the NCC
expressly allows th limitation of the carrier's liability. (Eastern v. Great American)
SURRENDER OF RIGHTS AND IMMUNITIES AND INCREASE OF
RESPONSIBILITIES AND LIABILITIES
Sec. 11. When under the custom of any trade the weight of
any bulk cargo inserted in the bill of lading is a weight ascertained or
accepted by a third party other than the carrier or the shipper and the
fact that the weight as ascertained or accepted is stated in the bill of
lading, then notwithstanding anything in this Act, the bill of lading shall
not be deemed to be prima facie evidence against the carrier of the
receipt of goods of the weight so inserted in the bill of lading, and the
accuracy thereof at the time of shipment shall not be deemed to have
been guaranteed by the shipper.
Sec. 5. A carrier shall be at liberty to surrender in whole or in

part all or any of his rights and immunities or to increase any of his
responsibilities and liabilities under this Act, provided such surrender or
increase shall be embodied in the bill of lading issued to the shipper.
The provisions of this Act shall not be applicable to charter
parties; but if bills of lading are issued in the case of a ship under a
charter party, they shall comply with the terms of this Act. Nothing in
this Act shall be held to prevent the insertion in a bill of lading of any
lawful provisions regarding general average.
SPECIAL CONDITIONS
Sec. 6. Notwithstanding the provisions of the preceding
section, a carrier, master or agent of the carrier, and a shipper shall, in
regard to any particular goods be at liberty to enter into any agreement
in any terms as to the responsibility and liability of the carrier for such
goods, and as to the rights and immunities of the carrier in respect to
such goods, or his obligation as to seaworthiness, (so far as the
stipulation regarding seaworthiness is not contrary to public policy), or
the care or diligence of his servants or agents in regard to the loading,
handling, stowage, carriage, custody, care and discharge of the goods
carried by sea; provided, that in this case no bill of lading has been or
shall be issued and that the terms agreed shall be embodied in a receipt
which shall be a non-negotiable document and shall be marked as such.
Any agreement so entered into shall have full legal effect:
Provided, that this section shall not apply to ordinary commercial
shipments made in the ordinary course of trade but only to other
shipments where the character or condition of the property to be carried
or the circumstances, terms and conditions under which the carriage is
to be performed are such as reasonable to justify a special agreement.
Sec. 7. Nothing contained in this Act shall prevent a carrier or
a shipper from entering into any agreement, stipulation, condition,
reservation, or exemption as to the responsibility and liability of the
carrier or the ship for the loss or damage to or in connection with the
custody and care and handling of goods prior to the loading on and
subsequent to the discharge from the ship on which the goods are
carried by sea.
Sec. 8. The provisions of this Act shall not affect the rights
and obligations of the carrier under the provisions of the Shipping Act,
1916, or under the provisions of Section 4281 to 4292, inclusive, of the
Revised Statutes of the United States, or of any amendments thereto, or
under the provisions of any other enactment for the time being in force
relating to the limitation of the liability of the owners of seagoing
vessels.
TITLE II
Sec. 9. Nothing contained in this Act shall be construed as
permitting a common carrier by water to discriminate between
competing shippers similarly placed in time and circumstances, either
(a) with respect to their right to demand and receive bills of
lading subject to the provisions of this Act; or
(b) when issuing such bills of lading either in the surrender of
any of the carrier's rights and immunities or in the increase of any of the
Sec. 12. (Not applicable to the Philippines.)

Sec. 13. This act shall apply to all contracts for carriage of
goods by sea to or from ports of the United States in foreign trade. As
used in this Act the term "United States" includes its districts, territories,
and possessions: Provided, however, that the Philippine Legislature
may by law exclude its application to transportation to or from ports of
the Philippine Islands.
The term "foreign trade"
means the
transportation of goods between the ports of the United States and ports
of foreign countries. Nothing in this Act shall be held to apply to contracts for carriage of goods by sea between any port of the United States
or its possession: Provided, however, that any bill of lading or similar
document of the title which is evidence of a contract for the carriage of
goods by sea between such ports, containing an express statement that
it shall be subject to the provisions of this Act, shall be subjected hereto
as fully as if subject hereto by the express provisions of this Act:
Provided, further, that every bill of lading or similar document of title
which is evidence of a contract for the carriage of goods by sea from
ports of the United States in foreign trade, shall contain a statement that
it shall have effect subject to the provisions of this Act.
Notes: American Insurance vs Cia Maritima : contract of carriage from NY
with final destination in Cebu. COGSA is applicable despite the fact that from
Manila to Cebu, the goods were transshipped on an interisland vessel.
Transshipment was not a separate transaction from that originally entered into
by the parties but was part of the carrier's contractual obligation.
Sec. 14. Upon the certification of the Secretary of Commerce
that the foreign commerce of the United States in its competition with
that of foreign nations is prejudiced by the provisions, or any of them, of
the Title I of this Act, or by the laws of any foreign country or countries
relating to the carriage of goods by sea, the President of the United
States may, from time to time by proclamation, suspend any or all
provisions of Title I of this Act for such periods of time or indefinitely as
may be designated in the proclamation., The President may at any time
rescind such suspension of Title I hereof, and any time rescind such
suspension of Title I hereof, and any provisions thereof which may have
been thereafter made for carriage of goods by sea. Any proclamation of
suspension or rescission of any such suspension shall take effect on the
date named therein, which date shall be not less than ten days from the
issue of the proclamation.
Any contract for the carriage of goods by sea, subject to the
provisions of this Act, effective during any period when Title I hereof, or
any part thereof, is suspended, shall be subject to all provisions of law
now or hereafter applicable to that part of Title I which may have thus
been suspended.
Sec. 15, COGSA. This Act shall take effect ninety days after the date of
its approval; but nothing in this Act shall apply during a period not to
exceed one year following its approval to any contract for the carriage of
goods by sea, made before the date on which this Act is approved nor to
any bill of lading or similar document of title issued, whether before or
after such date of approval in pursuance of any such contract as
aforesaid.
PAGE 76

Sec. 16, COGSA. This Act may be cited as the "Carriage of Goods by
Sea Act."
E.g. transportation by PAL from Manila to San Francisco

Federal Express - transporation of goods
Approved, April 16, 1936.

B. Constitutionality
SANTOS V. NORTHWEST AIRLINES [210 S 256 (1992)]
F:
1. A Filipino minor was informed by Northwest that he had no
reservations for his flights, and had to be waitlisted, despite a previous
confirmation. He sued for damages. Northwest moved to dismiss on the
ground of lack of jurisdiction based on Art.28 (1) of the Warsaw Convention,
where the complaint could be instituted in the territory of one of the contracting
parties before the court of the
(1) domicile of the carrier;
(2) principal place of business;
(3) where it has a place of business through which the contract had been
made; and
(4) place of destination.
V. International Air Transport

A. The Warsaw Convention, 51 O.G. 5084 (October 1955);
Presidential Proclamation No. 201, 51 O.G. 4933 (October 1955)
FIRST ISSUE: W/NOT THE WARSAW CONVENTION IS

UNCONSTITUTIONAL?
MAKING PUBLIC THE ADHERENCE OF THE R.P. TO THE CONVENTION

FOR THE UNIFICATION OF CERTAIN RULES RELATING TO INTL.
TRANSPORTATION BY AIR AND THE ADDITIONAL PROTOCOL THERETO,
1929
WHEREAS, a Convention for the Unification of Certain Rules
Relating to International Transportation by Air & an Additional Protocol
thereto relating to Article 2 of the Convention were signed at Warsaw by
the plenipotentiaries of 32 countries;
WHEREAS, Article 38 of the aforesaid Convention provides
that a Government on behalf of which this Convention has not been
signed, shall be allowed to adhere thereto at any time after the
Convention has come into force, by means of a notification addressed to
the Government of the Republic of Poland;
WHEREAS, the Senate of the Congress of the Philippines, by
its Resolution No. 19 adopted on May 16, 1950, concurred in the
adherence by the Republic of the Philippines Government to the said
Convention & the said Protocol in accordance with the Philippine
Constitution, subject to the reservation, as provided in the Additional
Protocol, that the 1st paragraph of Art. 2 of the Convention shall not
apply to international transportation that may be performed by the
Republic of the Philippines;
WHEREAS, the Republic of the Philippines Government has
formally adhered to the said Convention its Additional Protocol, & the
Government of the Republic of Poland was notified of said adherence on
November 9, 1950, when the instrument of adherence was registered in
accordance with Article 38 (2) of said Convention; and,
WHEREAS, the adherence of the Republic of the Philippines
Government, pursuant to Art. 38(3) of said Convention, took effect as
from the 90th day after November 9, 1950.
NOW, THEREFORE, be it known that I, Ramon Magsaysay,
Republic of the Philippines President, in pursuance of the aforesaid
concurrence of the Senate of the Congress of the Philippines, and
subject to the reservation as provided in the Additional Protocol that the
First paragraph of Art.2 of the Convention shall not apply to international
transportation that may be performed by the Republic of the Philippines,
do hereby proclaim and make public the said Convention and said
Protocol, a copy of which is hereto attached, to the end that the same
and every article and clause thereof may be observed & fulfilled with
good faith by the Republic of the Philippines and the citizens thereof.
Notes: If common carrier, Civil Code first applies, then Warsaw Convention.
HELD: No. Art. 28 (1) of Warsaw Con. is constitutional. Although the case can
be decided on other grounds without resolving the constitutional question, the
Warsaw Convention is a treaty commitment voluntarily assumed by the
Philippine Government and as such, has the force and effect of law. The
presumption is that this joint legislative-executive act was first carefully
studied and determined to be constitutional before it was adopted. Petitioner's
allegation have not overcome this presumption. Moreover, the treaty since
1950 has not been rejected by the Philippine Government.
SECOND ISSUE: W/NOT THE WC SHOULD BE RENDERED IRRELEVANT
BY THE DOCTRINE OF REBUS SIC STANTIBUS?
HELD: No. The circumstance that the airline industry was still in infancy when
the Convention was made, alone, is not sufficient justification for the rejection
of the treaty at this time. The changes recited by petitioner were not entirely
unforeseen although they were expected in a general sense only. (Check
Art.41).
THIRD ISSUE: W/NOT THE REQUISITS OF THE WC IS MERELY A MATTER
OF VENUE OR JURISDICTION?
HELD: Jurisdiction
(1) The wording of Art. 32, which indicates the places where the action for
damages "must" be brought, underscores the mandatory nature of Art. 28 (1).
(2) This characterization is consistent with one of the objectives of the
convention, which is to regulate in a uniform manner the conditions of
international transportation by air.
FOURT ISSUE: W/NOT PHILIPPIN COURTS HAVE JURISDICTION OVER
THIS CASE?
HELD: No. Art. 28 (1) provides that an action for damage must be brought at
the option of the plaintiff: (a) before the court of the domicile of the carrier;
(b) the court of its principal place of business;
(c) the court where it has a place of business thru w/c the contract had been
made;
(d) the court of the place of destination.
In this case, the ff. were not followed, and hence the Philippines,
not being one of the courts mentioned in Art.28 (1), does not have jurisdiction
over the case.
(1) court of domicile is Minnesota, U.S.A;
(2) principal place of business of carrier is also U.S.A;
(3) place of business where contract was made was in San Francisco;
(4) place of destination is also San Francisco, Santos having purchased a
round trip-ticket from SFO-TYO-MNL, then back to TYO- SFO. The "ultimate
destination" being San Francisco.
Situations where Warsaw is applicable is in private carriers.

The only criterion for the Warsaw Convention to be applicable is: it is
applicable to ALL international transportation of persons, baggage, or goods
performed by aircraft for hire.
International transport: where there's transport by AIR & there is a point of
contact in 2 high contracting parties (countries which have acceded to the
Convention).
The court called upon to determine the applicability of the limitation

provision must first be vested with the appropriate jurisdiction. If the carrier is
indeed is indeed not guilty of WILLFUL MISCONDUCT, it can avail itself of the
limitations set forth in this article. But it can be done only if the action has first
been commenced properly under the rules set forth in Art.28 (1).
Notes: The enumeration of the causes of action in the WC is not an exclusive
list. You can have a cause of action even if it is not:
(a) death or wounding of passenger;
PAGE 77

(b) damage or loss or destruction of checked baggage;
(c) delay in transportation of passengers, luggage and goods.
Note however, that the limitations of liability in the Convention favors the
carrier.
F:
Nicolas Cuenca, an official delegate of Philippines to a conference
in Tokyo, was transferred from first class to tourist class despite his first class
ticket. The Northwest agent also treated him rudely in front of other
passengers. Northwest argues that according to the Warsaw Convention, Arts.
17, 18, 19, an air carrier is liable only in the event of (a) death of a
passenger or injury suffered by him; (b) of destruction or loss of, or damage to
any checked baggage/goods; & (c) delay in the transportation by air of
passengers, baggage or goods.
C. When Applicable
ISSUE: W/NOT CUENCA HAS A CAUSE OF ACTION THOUGH NOT AMONG

THOSE MENTIONED IN THE WC?
The case of Northwest is actually overbooking. Delay still a cause of action

under WC.
Art. 1. (1) This convention shall apply to all international

transportation of persons, baggage, or goods performed by aircraft for
hire. It shall apply equally to gratuitous transportation by aircraft
performed by an air transportation enterprise.
(2) For the purpose of this convention the expression
"international transportation" shall mean any transportation in which,
according to the contract made by the parties, the place of departure and
the place of destination, whether or not there be a break in the
transportation or a transshipment, are situated either within the
territories of two High Contracting Parties, or within the territory of a
single High Contracting Party, if there is an agreed stopping place within
a territory subject to the sovereignty, suzerainty, mandate, or authority of
another power, even though that power is not a party to this convention.
Transportation without such an agreed stopping place between territories subject to the sovereignty, suzerainty, mandate, or authority of the
same High Contracting Party shall not be deemed to be international for
the purposes of this Convention.
(3) Transportation to be performed by several successive air
carriers shall be deemed, for the purposes of this Convention, to be one
undivided transportation, if it has been rendered by the parties as a
single operation, whether it has been agreed upon under the form of a
single contract or of a series of contracts is to be performed entirely w/in
a territory subject to the sovereignty, suzerainty, mandate, or authority of
the same High Contracting Party.
Art. 2. (1) This convention shall apply to transportation
performed by the state or by legal entities constituted under public law
provided it falls within the conditions laid down in Art .1.
(2) This convention shall not apply to transportation performed
under the terms of any international postal convention.
D. Liabilities Under the Convention
Art. 17. The carrier shall be liable for damage sustained in the
event of the death or wounding of a passenger or any other bodily injury
suffered by a passenger, if the accident which caused the damage so
sustained took place on board the aircraft or in the course of any of the
operations of embarking or disembarking.
HELD: Yes. The said articles merely declare the carrier liable for damages in
the enumerated cases, if the conditions therein specified are present. Neither
the provisions of said articles nor others regulate or exclude liability for other
breaches of contract by the carrier. Under petitioner's theory, an air carrier
would be exempt from any liability for damages in the event of its absolute
refusal, in bad faith, to comply with a contract of carriage, which is absurd.
ALITALIA V. IAC [192 SCRA 10 (1990)]
F:
Dr. Felipa Pablo, an Associate UP Professor and research grantee
of the Philippine Atomic Energy Agency was scheduled to speak in a UN
meeting in Ispra, Italy. She arrived in Milan a day before the meeting, but her
luggage (where her speech was) was delayed, and arrived a day after the
meeting. She returned to Manila before the meeting.
ISSUE: W/NOT THE WC SHOULD APPLY TO LIMIT ALITATLIA'S LIABILITY?
HELD: No. The WC does not operate as an absolute limit of the extent of an
airline's liability. It does not regulate or exclude liability for other breaches of
contract by the carrier.
Under the WC, an air carrier is made liable for damages for delay in the
transportation by air of passengers, luggage or goods. The WC also limits
the liability of the carrier to 250 francs per kilo of the total weight of the
package. The WC denies to the carrier availment of the provisions which
exclude or limit his liability, if the damage is caused by his willful misconduct
or by such default on his part as, in accordance with the law of the court
seized of the case, is considered as willful misconduct, or if the damage is
caused by any agent of the carrier acting w/in the scope of his employment.
2. The WC does not regulate or exclude liability for other breaches of contract
by the carrier or misconduct of its officers and employees or for some
particular or exceptional damage. The WC has been held inapplicable where
there was proof of malice or bad faith attributable to its officers and
employees. Here, however, there was no bad faith on the part of the
employees.
Nominal damages however, was awarded because of the presence of some
special species of injury caused to Dr. Pablo.
E. Limitations on Liability
Art. 18. (1) The carrier shall be liable for damage sustained in
the event of the destruction or loss of, or of damage to, any checked
baggage, or any goods, if the occurrence which caused the damage so
sustained took place during the transportation by air.
(2) The transportation by air within the meaning of the
proceeding paragraph shall comprise the period during which the
baggage or the goods are in charge of the carrier, whether in an airport
or on board an aircraft, or in the case of a landing outside an airport, in
any place whatsoever.
(3) The period of the transportation by air shall not extend to
any transportation by land, by sea, or by river performed outside of an
airport. If however, such transportation takes place in the performance of
a contract for transportation by air, for the purpose of loading, delivery,
or transshipment,any damage is presumed, subject to proof to the
contrary, to have been the result of an event which took place during the
transportation by air.
Art. 19. The carrier shall be liable for damage occasioned by
delay in the transportation by air of passengers,baggage, or goods.
NORTHRWEST V. CUENCA [14 S 1063 (1965)]
RE: PASSENGERS
Art.22. (1) In the transportation of passengers the liability of
the carrier for each passenger shall be limited to the sum of 125,000
francs. (Now $100,000) Where, in accordance w/ the law of the court to
w/c the case is submitted, damages may be awarded in the form of
periodical payments, the equivalent capital value of the said payments
shall not be exceed 125,000 francs. Nevertheless, by special contract, the
carrier and the passenger may agree to a higher limit of liability.
RE: BAGGAGE/GOODS
(2) In the transportation of checked baggage and of goods, the
liability of the carrier shall be limited to a sum of 250 francs per kilogram
(Now $20 per kilo), unless the consignor has made, at the time when the
package was handed over to the carrier, a special declaration of the
value of the 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 sun, unless he proves that the sum is grater that
the actual value to the consignor at delivery.
(3) As regards objects of w/c the passenger takes charge
himself, the liability of the carrier shall be limited to 5,000 francs per
passenger.
PAGE 78

(4) The sums mentioned above shall be deemed to refer to the
French franc consisting of 65 1/2 milligrams of gold at the standard of
fineness of nine hundred thousandths. These sums may be converted
into any national currency in round figures.
Art. 23. Any provision tending to relieve the carrier of liability
or to fix a lower limit that which is laid down in this convention shall be
null and void, but the nullity of any such provision shall not involve the
nullity of the whole contract, which shall remain subject to the
provisions of this convention.
Art. 24. (1) In the cases covered by Arts.18 & 19 any action for
damages, HOWEVER FOUNDED, can only be brought subject to the
conditions and limit set out in this convention.
(2) In the case covered by Art.17, the provisions of the preceding paragraph shall also apply,w/o prejudice to the question as to who
are the persons who have the right to bring suit and what are their
respective rights.
NOTES: Even if you base your claim on quasi-delict, you can still sue under
Warsaw, invoking Art.24 (1).
(2) The absence, irregularity, or loss of the passenger ticket

shall not affect the existence or the validity of the contract of
transportation, w/c shall none the less be subject to the rules of this
convention. Nevertheless, if the carrier accepts a passenger w/o a
passenger ticket having been delivered he shall not be entitled to avail
himself of those provisions of this Convention w/c exclude or limit his
liability.
Art.25. (1) The carrier shall not be entitled to avail himself of
the provisions of this convention w/c exclude or limit his liability, if the
damage is caused by his wilful misconduct or by such default on his
part as, in accordance w/ the law of the court to w/c the case is
submitted, is considered to be equivalent to wilful misconduct.
(2) Similarly the carrier shall not be entitled to avail himself of
the said provisions, is the damage is caused under the same
circumstances by any agent of the carrier acting w/in the scope of his
employment.
NOTES: Q: In what cases can carrier NOT invoke limitations?
A: 1. wilfull misconduct (Art.25)
2. default amounting to wilful misconduct accdg. to court where action is
brought;
3. accepting passengers w/o passenger ticket (Art.3-2);
4. accepting goods w/o air waybill/baggage w/o baggage check.
PAN AM v. IAC (164 SCRA)

Q: Can carrier rely on WC if it was guilty of wilfull misconduct?
F:
Pangan's luggages didn't arrive w/ his flight. As a consequence the
film exhibitions he set up & promoted for, was cancelled. CFI ordered PanAm
to pay for P83,000 for actual damages. PanAm contended that such award
was beyond the limitation of liability set forth in the Warsaw Con., the
provisions of such being found at the back of the ticket.
ISSUE: WON Pangan is bound by such Warsaw provisions & hence is entitled
only to $600 ($20 standard X 30 kilos) ---- YES.
Such provisions have been held to be a part of the contract of
carriage, & is valid & binding upon the passenger regardless of the latter's lack
of knowledge or assent to the regulation.
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. Inasmuch as Pangan failed to declare any higher value for his
luggage & to pay add'l charges, PanAm's liability is limited to $600, as
stipulated at the back of the ticket.
FELICIANO v. PAN AM (CA CASE)
F:
Feliciano, & her Co. asked P182,000 for the value of the contents
of her lost luggage (including loss of possible opportunities). PanAm contends
its liability if limited by the Warsaw Con. to not more than $20 per kilo. TC
held that there was no issue of fact except as to amount& awarded $600 ($20
X 30 kgs).
A: YES. It just can't avail of the limitation on liability. Thus it can

still invoke the provisions on NOTICE or PRESCRIPTION/LACK OF CAUSE
OF ACTION.
e.g. If damage wasn't one of the enumerations in the WC, & case was filed
beyond the 2 year requirement. The carrier can invoke prescription. But if suit
is brought w/in 2 years, carrier may be liable for a higher amount than the
limitation.
The only time when WC isn't applicable is when it's not intl. air
transport. There is nothing in Art.25 w/c says that the WC doesn't apply
entirely.
ALITALIA v.IAC (supra)
The Convention does not regulate or exclude liability for other
breaches of contract by the carrier or misconduct of its officers and
employees or for some particular or exceptional damage. The Con. has been
held inapplicable where there was proof of malice or bad faith attributable to its
officers & employees. HERE, HOWEVER, no bad faith of EES. Nominal
damages however, was awarded because of the presence of some special
species of injury caused to Dr. Pablo.
TWA v. CA (165 SCRA)
Was TC correct? --- YES.

Indeed, SC has granted damages on the ground of fraud or bad
faith due to the personal misconduct of airline employees. This case, however,
the contract of carriage of PET's baggage is based on the conditions in the
airline. Such contract is governed by Art.22(2). Since there is no evidence that
PET had declared a higher value for her lost luggage for w/c the
corresponding value, the Warsaw Con. should apply.
F. When limitations unavailable
Art. 3. (1) For the transpo. of passengers the carrier must
deliver a passenger ticket w/c shall contain the ff. particulars:
(a) The place & date of issue;
(b) The place of departure & of destination;
(c) The agreed stopping places, provided that the
carrier may reserve the right to alter the stopping
places in case of necessity, and that if he
exercises that right, the alteration shall not have
the effect of depriving the transportation of its intl.
character;
(d) The name & address of the carrier/s;
(e) A statement that the transpo. is subject to the
rules relating to liability established by this
convention.
F:
Vinluan, ACCRA lawyer, was downgraded from 1st class to
economy & was issued refund
application, in his MNL-Europe-NYK- SFO-MNL flight. (His NYK-SFO flight
particularly) He also noticed that white Caucasian passengers who checked in
later than him were given preference in 1st class seats, w/c became available
due to "no show" passengers. He sued in CFI for breach of contract & bad
faith.
ISSUE: WON Warsaw Con. limit on liability can be availed of --- NO.
There was obvious discrimination & humiliation to w/c Vinluan was
subjected. Such inattention & lack of care for interest of its passengers
amount to bad faith w/c entitles passenger to moral damages.
NOTES: His entire trip, even though he availed of the services of other
airlines, is equal to one transport.
E.g. MNL-SFO via PAL } one continuing
SFO-NYK via United }
ticket
Hence, if injury appears in SFO-NYK, Warsaw can be applied.
F. Conditions of Liability
Art.26. (1) Receipt by the person entitled to the delivery of
baggage of goods w/o complaint shall be prima facie evidence that the
same have been delivered in good condition & in accordance w/ the
document of transpo.
PAGE 79

(2)In case of damage, the person entitled to delivery must
complain to the carrier forthwith after the discovery of the damage, and
at the latest, within 3 days from the date of receipt in the case of
BAGGAGE and 7 days from the date of receipt in the case of GOODS. In
case of DELAY the complaint must be made at the latest w/in 14 days
from the date on w/c the baggage or goods have been placed at his
disposal.
(3) Every complaint must be made in writing upon the document of transportation or by separate notice in writing dispatched w/in
the times aforesaid.
(4) Failing complaint w/in the times aforesaid, no action shall
lie against the carrier, save in the case of fraud on his part.
NOTE: No notice requirement in case or a person's death or injury.
Art. 27. In the case of death of the person liable, an action for
damages lies in accordance w/ th terms of this convention against those
legally representing his estate.
Art. 28. (1) An action for damage must be brought at the option
of the plaintiff, in the territory of one of the High Contracting Parties,
either before the court of the domicile of the carrier or of his principal
place of business , or where he has a place of business through w/c the
contract has been made, or before the court at the place of destination.
(2) Questions of procedure shall be governed by the law of the court
to w/c the case is submitted.
SANTOS v. NORTHWEST (supra)
Art. 28(1) provides that an action for damage must be brought
at the option of the plaintiff:
(a) before the court of the domicile of the carrier;
(b) the court of its principal place of business;
(c) the court where it has a place of business thru
w/c the contract had been made;
(d) the court of the place of destination.
xxx
In this case, the ff. were not followed, and hence the Phils., not
being one of the courts mentioned in Art.28 (1), does not have jurisdiction over
the case.
(1) court of domicile is U.S., Minnesota;
(2) principal place of business of carrier is also US;
(3) place of business where contract was made was in San Francisco;
(4) place of destination is also San Francisco, Santos having purchased a
round trip-ticket from SFO-TYO-MNL, then back to TYO- SFO. The "ultimate
destination" being San Francisco.
Art. 32. Any clause contained in the contract an all special
agreements entered into before the damage occurred by which the
parties purport to infringe the rules laid down by this convention,
whether by deciding the law to be applied or by altering the rules as to
jurisdiction, shall be null and void. Nevertheless, for the transportation
of goods, arbitration clauses shall be allowed, subject to this
convention, if the arbitration is to take place within one of the
jurisdictions referred to in the first paragraph of Article 28.
PAGE 80

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TRANSPORTATION AND MARITIME LAW

Based on the outline of Prof. Rodrigo Quimbo

bidding documents necessary for the public bidding of the development,

Secretary Reyes created a 7-man MICT Bidding Committee to

TRANSPORTATION AND MARITIME LAW

Philippines, and whatever other person or entities that may own or

Section 16. Proceedings of the Commission, upon notice

(b) To approve, subject to constitutional limitations any

(e) To ascertain and fix adequate and serviceable standards

TRANSPORTATION AND MARITIME LAW

(o) To fix, determine, and regulate, as the convenience of the

(f) To establish reasonable rules, regulations, instructions,

Section 17. Proceedings of commission without previous

(h) To require any public service to establish, construct,

(b) To require payment of actual expenses incurred in any

(j) To authorize, in its discretion, any railroad, street railway

(e) To permit any street railway or traction company to

(l) To fix and determine the proper and adequate rates of

(g) To require any public service to keep its books, records,

(m) To amend, modify or revoke at any time any certificate

(k) To investigate accidents directly or indirectly arising from

TRANSPORTATION AND MARITIME LAW

consolidation to be approved, and that the same are not detrimental to

Section 19. Unlawful acts - It shall be unlawful for any

(h) To sell or register in its books the transfer or sale of

(b) To make or give, directly or indirectly, by itself or through

(i) To sell, alienate or in any manner transfer shares of its

(c) To refuse or neglect, when requested by the director of

Difference between CPC and CPCN : A CPCN is issued by the PSC to a

Determination of WON an issuance of a certificate is for public convenience

(b) To establish, construct, maintain or operate new units or

(e) Hereafter to issue any stock or stock certificates

Raymundo vs Luneta Motor 58 Phil 889

TRANSPORTATION AND MARITIME LAW

Carmelo vs Monserrat 55 Phil 644

Batangas Transportation Co. vs Orlanes 52 Phil 455

San Pablo vs Pantranco South Express, Inc. 153 SCRA 199

Issue : WON a CPC should be issued to a second operator in a field where,

Issue : WON the sea can be considered as a continuation of the highway.

TRANSPORTATION AND MARITIME LAW

(b) guide govt. and private investments in the devt. of the

In the case of Javellana vs PSC, the Court differentiated between

EO 125-A, Sec. 5. To accomplish its mandate, the Dept. shall

(a) absent a transportation contract

TRANSPORTATION AND MARITIME LAW

in domestic air commerce and/or air transportation shall be issued

Sec. 13. xxx

Section 11. xxx The present Regional Offices of the Land

Sec. 25, RA 776. The Civil Aeronautics Administration shall

Administrative Code of 1987, Title XV

Section 10 (A) Except as otherwise provided herein, the

Franchising and Regulatory Board

Section 10 (C) Powers and Duties of the CAB

Sec.1. There is hereby created in the DOTC, the Land

Section 11. A CPCN is a permit issued by the Board

TRANSPORTATION AND MARITIME LAW

12. coordinate and cooperate with other govt. agencies and

Sec. 21. Regional Franchising and Regulatory Offices - hear

Sec. 22. decisions of the Regional Franchising and

Sec.7. There shall be a Regional Franchising and Regulatory

Administrative Code, Title XV

II. Common Carriers

3. determine, prescribe, approve and periodically review and

TRANSPORTATION AND MARITIME LAW