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TRANSPORTATION AND PUBLIC SERVICE

DOCTRINES DIGEST

ATTY. VIVENCIO F. ABAO


3B
SY 2010-2011

SBC VALERO POWER STUDY GROUP!

I. INTRODUCTION
1. CONCEPT OF TRANSPORTATION
2. GOVERNING LAWS (ART. 1766, NCC)

II. COMMON CARRIERS


1. CONCEPT/ELEMENTS OF COMMON CARRIER (ART. 1732, NCC)
CALVO VS. UCPB INSURANCE (379 SCRA 510)
- Principal activity vs. ancillary activity; general public vs. narrow segment of population
o 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.
o Neither does the said article distinguish between a carrier offering its services to the general
public (i.e. the general community or population), and one who offers services or solicits
business only from a narrow segment of the general population.
- Common Carrier Public Service under the Public Service Act
o The concept of Common Carrier under Art. 1732 may be seen to coincide neatly with the
notion of public service under the PSA, and under which is defined as including
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, either for freight or passenger or both, with or without fixed route
and whatever may be its classification, engaged in the transportation of passengers
or freight or both
GUZMAN VS. CA (168 SCRA 612)
- No distinctions (3 aspects)
o Article 1732 makes no distinction between
Business One whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary activity (in
local idiom, as a sideline)
Schedule One between a person/enterprise offering transportation on a regular
or scheduled basis or one offering such service on an occasional, episodic or
unscheduled basis
Public One between a carrier offering its services to the general public (i.e. the
general community or population), and one who offers services or solicits business
only from a narrow segment of the general population.
- Coincides with PSA Definition of public service
o 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
- Requisite to incur liability
o A certificate of public convenience is NOT a requisite for the incurring of liability under
the NCC. Such liability arises the moment a person or firm acts as a common carrier,
without regard as to whether or not such carrier has also complied with the requirements of
applicable regulatory statute implementing regulations and has been granted a certificate
of public convenience or other franchise.
Rationale: this would be offensive to sound public policy; it would be to reward a common
carrier for failing to comply with applicable statutory requirements
The law imposes duties and liabilities upon common carriers for the safety
and protection of those who utilize their services, and the law cannot allow

a common carrier to render such duties and liabilities merely facultative


by simply failing to obtain the necessary permits and authorizations.
FABRE VS. CA (259 SCRA 426)
- On need to be engaged in public transportation to be liable
o The Fabres DID NOT have to be engaged in the business of public transportation for the
provisions of the Civil Code on Common Carriers to apply to them.
In the case: owner liable under culpa contractual; negligent driver under tort
FGU INSURANCE VS. SARMIENTO (386 SCRA 312)
- Who are common carriers
o Common carriers are
persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both
by land, water, or air
for hire or compensation
offering their services to the public
whether to the public in general or to a limited clientele in particular, but
NEVER on an exclusive basis
o True Test of a Common Carrier the carriage of passengers or goods, providing space for tehose
who opt to avail themselves of its transportation service for a fee.
BASCOS VS. CA (221 SCRA 318)
- Test to determine if a common carrier
o Whether the given undertaking is a part of the business engaged in by the carrier which he
has held out to the general public as his occupation rather than the quantity or extent of the
business transacted/
FIRST PHIL. INDUSTRIAL VS. CA (300 SCRA 661)
- Test if a common carrier (BKMH)
o Must be engaged in business of carrying goods for others as a public employment, and
holds himself out as ready to engage in transportation of goods for persons generally as a
business, and NOT as a casual occupation
o Must undertake to carry goods of the kind to which his business is confined
o Must undertake to carry by the method by which his business is conducted and over his
established roads
o Transportation must be for hire
- No distinction as to the means of transporting
o The definition of common carriers in the NCC makes no distinction as to the means of
transporting, as long as it is by land, water or air.
o It DOES NOT provide that the transporting of the passengers or goods should be by motor
vehicle (example: oil pipeline operators) .
SCHMITZ VS. TRANSPORT VENTURE (456 SCRA 557)
- When considered a common carrier; ownership of vehicle
o As long as a person/corporation holds itself to the public for the purpose of transporting
goods as a business, it is already considered a common carrier regardless if it owns the
vehicle to be used or has to hire one.
SANCHEZ BROKERAGE VS. CA (447 SCRA 427)
- Re: principal vs. ancillary business activity
o It suffices that the carrier undertakes to deliver the goods for pecuniary consideration.
CRISOSTOMO VS. CA (409 SCRA 528)
- Definition of contract of carriage

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.
Such person or association of persons are regarded as carriers, and are classified as
private or special carriers and common or public carriers.
Object of a contract of carriage the transportation of passengers or goods
o

2. LIABILITY OF COMMON CARRIER


OCCIDENTAL TRANSPORT VS. CA (220 SCRA 167)
- Liability of real owner of vehicle
o The real owner of the vehicle at fault is liable for damages arising from accident it is
involved in.
In the case: The fact that the Fiera was owned by Almedilla though registered with
Sevilla Line, will not alter the conclusion arrived at by the lower court. The party
who stands to benefit or suffer from the decision is admittedly Almedilla and not Sevilla
Lines. William Sevilla admitted that the real owner of the vehicle was Almedilla, in
the case for damages.
BENEDICTO VS. IAC (187 SCRA 554)
- Liability of registered owner
o The prevailing doctrine on common carriers makes the registered owner liable for
consequences flowing from the operations of the carriers, even though the specific
vehicle involved may already have been transferred to another person.
Rationale: in dealing with vehicles registered under the Public Service Law, the
public has the right to assume that the registered owner is the actual or lawful owner
thereof.
It would be very difficult and often impossible as a practical matter, for
members of the general public to enforce the rights of action that they may
have for injuries inflicted by the vehicles being negligently operated if they
should be required to prove who the actual owner is. The registered owner
is NOT ALLOWED to deny liability by proving the identity of the alleged
transferee.
EQUITABLE VS. SUYON (388 SCRA 445)
- Liability of registered owner
o Regardless of sales made of a motor vehicle, the registered owner is the lawful operator
insofar as the public and third persons are concerned; it is directly and primarily responsible
for the consequences of its operation.
o The owner/operator of record is the employer of the driver, the actual operator and
employer being considered merely its agent
o Purpose of motor vehicle registration: The main aim of motor vehicle registration is to
identify the owner should that if any accident happens, or that any damage or injury is
caused by the vehicle on the public highways, responsibility therefore may be fixed on a
definite individual.

III. TRANSPORTATION OF GOODS


1. EXTRAORDINARY DILIGENCE (ART. 1733, NCC)
EASTERN SHIPPING VS. CA (196 SCRA 570)
-

Degree of Care

Common carriers are bound to observe extraordinary diligence over goodsaccording to


all circumstances of each case. A common carrier is required to exercise the highest degree
of care in the discharge of its business.
Art. 1735
o In all cases other than those mentioned in Nos. 1-5 of Article 1735, if the goods are lost or
damaged, the common carriers are presumed to have been at fault or negligent.
Defenses: (1) Article 1734[5]; (2) Article 1733 [extraordinary diligence]
If carrier fails to establish any caso fortuito presumption of negligence
o If the carrier fails to establish any caso fortuito, the presumption by law of fault or
negligence on the part of the carrier applies; and the carrier must present evidence that it
has observed the extraordinary diligence required by Art. 1733 in order to escape liability.
o

DELSAN TRANSPORT VS. CA (369 SCRA 24)


- Duty of common carriers
o Common carriers are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of passengers transported by them, according to all the
circumstances of each case. (1733)
o In case of loss, destruction, or deterioration of the insured goods, common carriers shall be
responsible UNLESS the same is brought about by some natural disaster or calamity.
(1735)
o In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, UNLESS they proved they
observed extraordinary diligence. (1735, 1733)
PHILMAGEN VS. PKS SHIPPING (401 SCRA 222)
- Extraordinary diligence
o Art. 1733 requires common carriers to observe extraordinary diligence over the goods they
carry.
o In case of loss, destruction or deterioration of goods, common carriers are presumed to
have been at fault or to have acted negligently, and the burden of proving otherwise rests
on them.
o The provisions of Art. 1733 notwithstanding, common carriers are exempt from liability for
loss, destruction or deterioration for any of the causes enumerated in Art. 1734
SALUDO VS. CA (207 SCRA 479)
- Bill of lading, defined
o 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 in his order.
Synonyms shipping receipt; forwarders receipt; receipt for transportation
Examples freight tickets for bus companies; receipts for cargo transported by all
forms of transportation; airway bills of lading
Two-fold character
A receipt as to the quantity and description of the goods shipped
A contract to transport the goods to the consignee or other person therein
designated, on the terms specified in such instrument.
o It is prima facie evidence (not conclusive evidence) of delivery to the carrier.
It is a general rule as to the parties to a contract of carriage of goods in connection with
which a bill of lading is issued reciting that goods have been received for
transportation, that the recital being in essence a receipt alone, is NOT
CONCLUSIVE, but may be explained by parol or other evidence.
o Acceptance of bill of lading without dissent
The acceptance of a bill of lading without dissent raises the presumption that all
terms therein were brought to the knowledge of the shipper and agreed to by him, and in

the absence of fraud or mistake, he is estopped from thereafter denying that he assented
to such terms.
In order that any presumption of assent to a stipulation in a bill of lading
limiting liability of a carrier may arise, it must appear that the clause
containing the exemption from liability plainly formed part of the
contract contained in the bill of lading. (i.e. printed on the back, or on
papers attached)
When observance of ED commences
o The extraordinary responsibility of the common carrier BEGINS from the time the goods
are delivered to the carrier,
o and REMAINS IN FULL FORCE AND EFFECT even when they are temporarily unloaded
or stored in transit, UNLESS shipper/owner exercises the right of stoppage in transitu,
o and TERMINATES only after a reasonable time of the acceptance of the goos by the
consignee or such other person entitled to receive them. (1737)
When is there delivery
o There is delivery to the carrier when the goods are ready for and have been placed in the
exclusive possession, custody and control of the carrier for the purpose of their
immediate transportation and the carrier has accepted them.
Rights of the carrier
o To require good faith on the part of those persons who deliver goods to be carried, or enter
into contracts with it
o To inquire as to its value (inasmuch as the freight may depend on the value of the article to
be carried)
Duty of carrier
o To make inquiry as to the general nature of the articles shipped and of their value before it
consents to carry them
Failure to do so: CANNOT DEFEAT the shipperss right to recovery of the full
amount of the package if lost, in the absence of showing of fraud or deceit on the
part of the shipper.
Expounded: the carrier has the right to accept the shippers marks as to the contents
of the package offered for transportation, and is not bound to inquire particularly
about them in order to take advantage of a false classification and where a shipper
expressly represents the contents of a package to be of a designated character, it is
not the duty of the carrier to ask for a repetition of the statement nor disbelieve it
and open the box and see for himself.
Exception where a carrier has reasonable ground to suspect that the offered
goods are of a dangerous or illegal character, he has the right to know the
character of such goods and to insist on an inspection, if reasonable and
practical under the circumstances, as a condition of receiving and
transporting the goods.
Carriers liability for delay
o In the absence of a special contract, a carrier is not an insurer against delay in
transportation of goods.
When a common carrier 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.
If there is an explicit contract to transport and delivery property within a specified
time, it is bound to fulfill its contract, and is liable for delay, no matter from what
cause it may have arisen.

LORENZO SHIPPING VS. BJ MATHEL (443 SCRA 163)


- Test to determine whether time was of the essence

The ultimate criterion is the actual or apparent intention of the parties, and before time
may be so regarded by a court, there must be sufficient manifestation, either in the contract itself
or the surrounding circumstances, of that intention.
Presumption that time is NOT of the essence
o When the time of delivery is not fixed or is stated in general and indefinite terms = time is
NOT of the essence of the contract
In such cases (i.e. when no time is fixed), the delivery must be made within a
reasonable time.
o Regarding breach
Even where time is of the essence, a breach of the contract in that respect by one of
the parties may be waived by the other partys subsequently treating the contract as
still in force.
o

2. DURATION OF RESPONSIBILITY (ARTS. 1736-38, NCC)


MITSUI LINES VS. CA (287 SCRA 366)
- Loss
o Loss refers to the deterioration or disappearance of goods. (It was held that there was no
loss because the goods had simply been delivered)
o Whatever damage or injury is suffered by the goods while in transit would result in loss or
damage to either the shipper or the consignee. As long as it is claimed that the losses or
damages suffered by the shipper or consignee were due to the arrival of the goods in
damaged or deteriorated condition, the action is still basically one for damages for
goods.
SULPICIO VS. FIRST LEPANTO (462 SCRA 125)
- Standard of Care
o A common carrier is bound to transport its cargo and its passengers safely as far as human
care can provide, using the utmost diligence of a very cautions person, with due regard for
all the circumstances.
The standard of extraordinary diligence imposed upon common carriers is
considerably more demanding than the standard of ordinary diligence.
Such extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding the damage to, or destruction of, the goods entrusted to it
for safe carriage and delivery.
It requires common carriers to render service with the greatest skill and
foresight and to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires.

3. PRESUMPTION OF NEGLIGENCE (ART. 1735)


WILDVALLEY SHIPPING VS. CA (342 SCRA 213)
- Proving foreign law
o Foreign laws do not prove themselves in our jurisdiction. Like any other fact, they must be
alleged and proved.
o When the foreign law sought to be proved is unwritten, the oral testimony of expert
witnesses is admissible, as are printed and published books of reports of decisions of the
courts of the country concerned if proved to be commonly admitted in such courts.

For a copy of a foreign public document to be admissible, the following requisites


are mandatory:
(1) It must be attested by the officer having legal custody of the records or
by his deputy;
and (2) It must be accompanied by a certificate by a secretary of the
embassy or legation, consul general, consul, vice consular or consular
agent or foreign service officer, and with the seal of his office.
o This requirement is not a mere technicality but is intended to
justify the giving of full faith and credit to the genuineness of a
document in a foreign country.

MAERSK LINES VS. CA (222 SCRA 108) [INFRA]


FGU INSURANCE VS. CA (454 SCRA 337)
- Art. 1739
o Art. 1739. In order that the common carrier may be exempted from responsibility, the
natural disaster must have been the proximate and only cause of the loss. However, the
common carrier must exercise due diligence to prevent or minimize loss before, during and
after the occurrence of flood, storm, or other natural disaster in order that the common
carrier may be exempted from liability for the loss, destruction, or deterioration of the
goods . . .
- Caso fortuito; necessary qualification
o It is not enough that the event should not have been foreseen or anticipated, as is
commonly believed but it must be one impossible to foresee or to avoid.
o To be exempt from liability because of an act of God, the tug must be free from any
previous negligence or misconduct by which that loss or damage may have been
occasioned. For, although the immediate or proximate cause of the loss in any given
instance may have been what is termed an act of God, yet, if the tug unnecessarily
exposed the two to such accident by any culpable act or omission of its own, it is not
excused.
DSR-SENATOR VS. FEDERAL (413 SCRA 14)
- Art. 1734
o Fire is not one of those enumerated under the above provision which exempts a carrier
from liability for loss or destruction of the cargo.
Since the peril of fire is not comprehended within the exceptions in Article 1734,
then the common carrier shall be presumed to have been at fault or to have acted
negligently, unless it proves that it has observed the extraordinary diligence
required by law.
Even if fire were to be considered a natural disaster within the purview of Article
1734, it is required under Article 1739[10] 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.
- Duration of Responsibility; presumption of negligence
o A common carriers duty to observe the requisite diligence in the shipment of goods lasts
from the time the articles are surrendered to or unconditionally placed in the possession
of, and received by, the carrier for transportation until delivered to or until the lapse of a
reasonable time for their acceptance by the person entitled to receive them.
- Presumption of Negligence; exceptions to negligence
o When the goods shipped either are lost or arrive in damaged condition, a presumption
arises against the carrier of its failure to observe that diligence, and there need not be an
express finding of negligence to hold it liable.

o
o

They are presumed to have been at fault or to have acted negligently if the goods are lost,
destroyed or deteriorated.
There are very few instances when the presumption of negligence does not attach and
these instances are enumerated in Article 1734. In those cases where the presumption is applied,
the common carrier must prove that it exercised extraordinary diligence in order to overcome the
presumption.

4. DEFENSES AND CONDITIONS (ARTS. 1734, 1739-43)


CENTRAL SHIPPING VS. INS. (438 SCRA 511)
- Storm
o According to PAGASA, a storm has a wind force of 48 to 55 knots,[24] equivalent to 55 to
63 miles per hour or 10 to 11 in the Beaufort Scale.

The second mate of the vessel stated that the wind was blowing around force 7 to
8 on the Beaufort Scale. Consequently, the strong winds accompanying the
southwestern monsoon could not be classified as a storm. Such winds are the
ordinary vicissitudes of a sea voyage.
To our mind it would not be sufficient to categorize the weather condition at the
time as a storm within the absolutory causes enumerated in the law. Significantly,
no typhoon was observed within the Philippine area of responsibility during that
period.
- Art. 1739; force majeure must be without any human interference
o Even if the weather encountered by the ship is to be deemed a natural disaster under
Article 1739 of the Civil Code, petitioner failed to show that such natural disaster or
calamity was the proximate and only cause of the loss.
Human agency must be entirely excluded from the cause of injury or loss. In
other words, the damaging effects blamed on the event or phenomenon must
not have been caused, contributed to, or worsened by the presence of human
participation. The defense of fortuitous event or natural disaster cannot be
successfully made when the injury could have been avoided by human
precaution.
Hence, if a common carrier fails to exercise due diligence -- or that ordinary care
that the circumstances of the particular case demand -- to prevent or minimize the
loss before, during and after the occurrence of the natural disaster, the carrier shall
be deemed to have been negligent. The loss or injury is not, in a legal sense, due to
a natural disaster under Article 1734(1).
CITADEL LINES VS. CA (184 SCRA 544)
- Failure to prove
o Failure to prove that the loss of goods was occasioned by an excepted cause carrier is
liable
- Stipulation limiting liability of carrier, binding
o A stipulation limiting the liability of the carrier to the value of the goods appearing in the bill of
lading, unless the shipper or owner declares a greater value, is binding.
o Further, 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.
EVERETT STEAMSHIP VS. CA (297 SCRA 496)
- Stipulation limiting liability
o A stipulation in the bill of lading limiting the common carriers liability for loss or
destruction of a cargo to a certain sum, unless the shipper or owner declares a greater

value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which
provide:
ART. 1749. A stipulation that the common carriers liability is limited to the
value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been freely and fairly
agreed upon.
Must be reasonable It is required that the stipulation limiting the common carriers
liability for loss must be reasonable and just under the circumstances, and has been
freely and fairly agreed upon.
Contracts of adhesion contracts of adhesion wherein one party imposes a readymade form of contract on the other are contracts not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres he gives his
consent.

5. LIMITED LIABILITY (ARTS. 1744-52)


PAL VS. CA (207 SCRA 100)
- Governing law
o The liability of the common carrier for the loss, destruction or deterioration of goods
transported from a foreign country to the Philippines is governed primarily by the New
Civil Code. In all matters not regulated by said Code, the rights and obligations of common
carriers shall be governed by the Code of Commerce and by Special Laws.
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.
In this case: Since the passenger's destination in this case was the Philippines,
Philippine law governs the liability of the carrier for the loss of the passenger's
luggage.
PANAM VS. IAC (186 SCRA 687)
- Discourteous employees
o When airline passengers luggage was left at airlines fault in Manila and passenger was
not adequately or properly given assistance in Hawaii to locate his luggage an award of
moral damages is proper.
o In this case: Even accepting PAN AM's version of the occurrence at face value, it is clear that
none of the PAN AM employees exerted the least effort to assist Ongsiako in his
predicament, despite his appeal for help; that not one of them even deigned to look at
Ongsiako's baggage tag, or listen to his problem, or give assurances that something would
be done about his difficulties, or otherwise show any sign of sympathy or commiseration;
that instead, they looked at their watches-an impolite and dismaying gesture of
impatience, to be sure, considering the circumstances-and told him he could not be helped
because there were other people waiting for their turn-to be served, of course, like
Ongsiako, as they had a right to expect as paying passengers-and that it was best if he just
went to his plane so as not to miss his flight.
CATHAY PACIFIC VS. CA (219 SCRA 520)
- Breach of contract of carriage
o Failure of common carrier to deliver luggage of passenger at designated place and time
constitutes a breach of contract of carriage.

10

Discourteous and arbitrary conduct of common carriers personnel amounts to bad faith
entitling passengers recovery for moral damages.
o In the absence of fraud or bad faith in breach contract of carriage, liability of common
carrier limited to natural and probable consequences of said breach, otherwise, moral and
exemplary damages are recoverable.
Warsaw Convention
o Recognition of the Warsaw Convention does not preclude the operation of the Civil Code
and other pertinent laws in the determination of extent of liability of common carriers in
cases of breach of contract of carriage, particularly for willful misconduct of their
employees.
o

6. BAGGAGE/LUGGAGE (ART. 1754)

IV. TRANSPORTATION OF PASSENGERS


1. EXTRAORDINARY DILIGENCE (ART. 1755)
PAL VS. CA (275 SCRA 621)
- Attended with public duty
o The contract of air carriage generates a relation attended with a public duty. Neglect or
malfeasance of the carriers employees could give ground for an action for damages.
- In this case: basis for action for damages
o Not whether or not the hotel room was an amenity, but whether it was discriminatory in
that the amenities were not given to all. It had also been sufficiently established that it was
company policy to extend cash assistance or accommodations at hotels with which the
airline had existing tie-ups. Therefore, the refund of hotel expenses was surreptitiously and
discriminatorily made by PAL since the same was not made known to everyone, except
through word of mouth to a handful of passengers.
CALALAS VS. CA
- Source of liability; how to prove breach
o Quasi-delict negligence of the tortfeasor
The negligence or fault should be clearly established because it is the basis of the
action
o Breach of contract negligence in the performance of a contractual obligation
The action can be prosecuted merely by proving the existence of the contract and
the fact that the obligor, in this case a common carrier, failed to transport his
passenger safely to his destination.
- Art. 1756
o In case of death/injuries to passengers, Art. 1756 provides that common carriers are
PRESUMED to have been negligent or at fault unless they prove that they observed the
ED as defined in Arts. 1733 and 1755. This provision necessarily SHIFTS THE BURDEN
OF PROOF to the carrier.
In the case: Because of the accident, the carrier is presumed negligent, and should
have proved ED. This he failed to prove. He had parked askew and the jeepney was
apparently overloaded.
JAL VS. CA
- Liability of common carriers; fortuitous event
o Failure on the part of the common carrier to live up to the exacting standards of care
renders it liable for any damages that may be sustained by its passengers.

11

HOWEVER it is incorrect to say that common carriers are absolutely responsible for all
injuries or damages, even if the same were caused by a fortuitous event.
When a party is unable to fulfill his obligation because of force majeure, the
general rule is that he cannot be held liable for damages for non-performance.
Force Majeure
o In the case: Whatever losses in the form of hotel and meal expenses the stranded passengers
incurred cannot be charged to JAL. Their predicament was not due to the fault or
negligence of JAL, but the closure of NAIA to international flights (Mt. Pinatubo)
o Airline passengers must take such risks incident to the mode of travel,
In this regard, adverse weather conditions or extreme climate changes are some of
the perils involved in air travel, the consequences of which the passenger must
assume or expect. After all, common carriers are not the insurer of all risks.
o HOWEVER if the FE was accompanied by neglect and malfeasance of the carriers
employees = an action for damages against the carrier is permissible.
In the case: JALs duty was to transit new passengers, making the necessary
arrangements themselves for the next flight to Manila. This JAL failed to do. Liable
for nominal damages.
o

2. DURATION OF RESPONSIBILITY
DANGWA VS. CA (202 SCRA 574)
- Duty to stop for a reasonable length of time to allow boarding
o It is the duty of common carriers of passengers to stop their conveyances a reasonable
length of time in order to afford passengers an opportunity to board and enter, and they
are LIABLE for injuries suffered by boarding passengers resulting from the sudden
starting up or jerking of their conveyances while they are doing so.
- When deemed a passenger
o The victim herein, by stepping and standing on the platform of the bus, is already considered a
passenger and is entitled to all the rights and protection pertaining to such a contractual
relation.
o Presumption in stopping When the bus is not in motion, there is no necessity for a person
who wants to ride the same to signal his intention to board. A public utility bus, once it
stops, is in effect making a continuous offer to bus riders. Therefore, it becomes the duty
of the driver and the conductor, everytime the bus stops, to do no act that would have the
effect of increasing the peril to a passenger while he was attempting to board the same.
ABOITIZ SHIPPING VS. CA (179 SCRA 95)
- Extent of passenger relationship to carrier
o The relation of carrier and passenger continues until the passenger has been landed at the
port of destination and has left the vessel owner's dock or premises.
o Once created, the relationship will not ordinarily TERMINATE until the passenger has,
after reaching his destination, safely alighted from the carrier's conveyance or had a
reasonable opportunity to leave the carrier's premises.
All persons who remain on the premises a reasonable time after leaving the conveyance = to
be deemed passengers.
What is a reasonable time or a reasonable delay within this rule = determined from
all the circumstances
Includes a reasonable time to see after his baggage and prepare for his
departure.
o The carrier-passenger relationship is not terminated merely by the
fact that the person transported has been carried to his destination
if, for example, such person remains in the carrier's premises to
claim his baggage.
o A carrier is duty bound not only to bring its passengers safely to

12

their destination but also to afford them a reasonable time to


claim their baggage.
Reasonable presence with the carriers premises That reasonableness of time
should be made to depend on the attending circumstances of the case, such as
Kind of common carrier
Nature of its business
The customs of the place, etc.
Primary factor of extent of passenger-carrier relationship the existence of a reasonable
cause as will justify the presence of the victim on or near the petitioners vessel.

DIAZ VS. CA
- Presumption of negligence
o In a contract of carriage, it is presumed that the common carrier is at fault or is negligent
when a passenger dies or is injured.
In fact, there is even no need for the court to make an express finding of fault or
negligence on the part of the common carrier. This statutory presumption may
only be overcome by evidence that the carrier exercised extraordinary diligence.
In the case at bar: petitioner, as common carrier, failed to establish sufficient
evidence to rebut the presumption of negligence. The accident which led to the
death of Sherly Moneo was caused by the reckless speed and gross negligence of
petitioner's driver who demonstrated no regard for the safety of his passengers.

3. PRESUMPTION OF NEGLIGENCE (ART. 1756)


DAVILA VS. PAL (49 SCRA 223)
- Burden of Proof
o Burden of Proof that extraordinary diligence in transporting passengers was observed is on
the common carrier (1756).
- Stipulation to avoid liability
o Responsibility of common carriers for safety of passengers cannot be dispensed with by
notice and stipulations.
JUNTILLA VS. FONTANAR (136 SCRA 625)
- Liability for defect in appliance
o A passenger is entitled to recover damages from a carrier for an INJURY resulting from a
defect in an appliance purchased from a manufacturer, whenever it appears that the
defect would have been discovered by the carrier had it exercised the degree of care which
under the circumstances was incumbent upon it, with regard to inspection and application
of the necessary tests.
o Rationale - the passenger has neither choice nor control over the carrier in the selection and
use of the equipment and appliances in use by the carrier. Having no privity whatever
with the manufacturer or vendor of the defective equipment, the passenger has no remedy
against him, while the carrier usually has.

4. NON-EXEMPTION FROM LIABILITY (ARTS. 1759-1760)


ONG YIU VS. CA
- Provision limiting liability
o In this case: Petitioner didnt declare a higher value; nor question the stipulations validity;
it was easily readable; and the petitioner should've been fully aware of conditions
o Such provisions have been held to be a part of a contract of carriage, and VALID AND
BINDING upon the passenger regardless of the latters lack of knowledge or assent to the
regulation a contract of adhesion

13

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

ESTRADA VS. CONSOLACION (71 SCRA 523)


- Legal presumption
o Once a passenger in the course of travel is injured or does not reach his destination safely,
the carrier and the driver are presumed at fault.
o In the case: private respondents were able to prove that the accident which resulted in the
death of petitioners wife was due to the fault or negligence of the drivers of the two pickup trucks over whom the carrier has no supervision or control. Having therefore shown prima
facie that the accident was due to caso fortuito and that the driver of the respondent was free from
concurrent fault or negligence, it was incumbent upon petitioner to rebut such proof.
This petitioner failed to do.

5. LIMITED LIABILITY AND DEFENSES (ARTS. 1757-58)


YOBIDO VS. CA
- Assumption of risks incidental to mode of travel
o When a passenger boards a common carrier, he takes all the risks incidental to the mode of
travel he has taken. After all, a carrier is not an insurer of the safety of its passengers and is
not bound absolutely and at all events to carry them safely and without injury.
HOWEVER, when a passenger is injured or dies while travelling, the law presumes tha the
common carrier was negligent.
- Defenses under culpa contractual
o In culpa contractual, once a passenger dies or is injured, the carrier is presumed to have
been at fault or to have acted negligently.
o How overcome:
Evidence that the carrier had observed extraordinary diligence (1733, 1755, 1756)
Evidence that the death or injury was due to a fortuitous event.
o The court need not make an express finding of fault or negligence on the part of the carrier
to hold it responsible for damages sought by the passenger.
- Force majeure
o Requisites of caso fortuito:
Must be independent of human will
There must be a total exclusion of human agency from the cause of injury
Must be impossible to foresee, or if it can be foreseen, impossible to avoid
The occurrence must be such as to render it impossible for the debtor to fulfill his obligation
in a normal manner
The obligor must be free from any participation in the aggravation of the injury resulting
to the creditor.
o In this case: human factors were involved!
That the tire was new did not imply that it was entirely free from manufacturing
defects or that it was properly mounted
That it was a of a brand noted for quality doesnt follow that it couldnt have
exploded within 5 days of use.
o An accident caused by either defects in the automobile or through the negligence of its
driver = NOT CASO FORTUITO
o Absolution
A common carrier may not be absolved from liability in case of force majeure alone.
The common carrier must still prove that it was not negligent in causing the
death or injury of the passenger.
In the case: The carrier said that it was running within speed limit. But there was
contrary evidence which said the driver had ignored warnings from passengers.

14

These contradictory testimony give rise to the presumption that the carrier was
negligent (1755)
AIR FRANCE VS. CA (171 SCRA 399)
- Restricted air fare
o International Air Transportation Association (IATA) Resolution No. 275 e, 2., special note
reads: "Where a fare is restricted and such restrictions are not clearly evident from the required
entries on the ticket, such restrictions may be
written, stamped or reprinted in plain language in the Endorsement/Restrictions
box of the applicable flight coupon(s);
or attached thereto by use of an appropriate notice.
o Changes to the ticket requested by the passenger will be subject to carriers regulations
- Claim for damages; requisite
o It is also essential before an award of damages that the claimant must satisfactorily prove
during the trial the existence of the factual basis of the damages and its causal connection to
defendant's acts.
BAYASEN VS. CA (103 SCRA 197)
- In the case: no evidence of negligence
o The witness for the prosecution herself said that they were driving at moderate speed,
didnt know the cause of the accident, no bump/jolt, no distracting conversation, didnt
notice anything wrong with the condition of the jeep, road was wet but fair enough to
drive on; fair weather; wasnt drinking NO EVIDENCE OF NEGLIGENCE
The testimony of a credible witness that he saw or heard at a particular time and place is
more reliable than that of an equally credible witness who with the same opportunities,
testified that he did not see or hear the same thing at the same time and place.
FORTUNE EXPRESS VS. CA
- Lack of diligence in protecting passengers; liability for hijacking
o Had petitioner and its employees been vigilant they would not have failed to see that the
malefactors had a large quantity of gasoline with them. Under the circumstances, simple
precautionary measures to protect the safety of passengers, such as frisking passengers and
inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors,
before allowing them on board could have been employed without violating the
passengers constitutional rights.
A common carrier can be held liable for failing to prevent a hijacking by
frisking passengers and inspecting their baggage.
- In this case, not a fortuitous event
o Under the requisites enumerated in Yobido lacking #2 (they were forewarned by the
police)

6. ACTS OF PASSENGER AND OTHERS (ARTS. 1761-1763)


MANILA RAILROAD VS. BALLESTEROS (16 SCRA 641)
- Acts of passenger
o (NCC) Art. 1763. A common carrier is responsible for injuries suffered by a passenger on
account of the wilfull 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.
o (Motor Vehicle Law) Sec. 48(b). No professional chauffeur shall permit any unlicensed
person to drive the motor vehicle under his control, or permit a person, sitting beside him
or in any other part of the car, to interfere with him in the operation of the motor vehicle,
by allowing said person to take hold of the steering wheel, or in any other manner take
part in the manipulation or control of the car.

15

BACHELOR EXPRESS VS. CA (188 SCRA 216)


- Must prove it was not negligent
o In order that a common carrier may be absolved from liability in case of force majeure, it is
not enough that the accident was caused by force majeure. The common carrier must still
prove that it was not negligent in causing the injuries resulting from such accident.

V. DAMAGES SEE OUTLINE


VI. TRANSPORTATION OVERLAND
1. TIME TO DELIVER, DELAY IN DELIVERY
Maersk Line vs. CA (222 SCRA 108)
- Bills of Lading as Contracts of Adhesion
o Bills of lading are contracts not entirely prohibited. One who adheres to the contract is in
reality free to reject it in its entirety; if he adheres, he gives his consent.
- Nature of Bills of Lading
o A bill of lading operates both as a receipt and as a contract.
Receipt for the goods shipped
Contract to transport and deliver the same as therein specified
o Names the parties
o Fixes the route, destination and freight rates or charges
o Stipulates the rights and obligations assumed by the parties
It is the law between the parties who are bound by its terms and
conditions.
Becomes effective upon its delivery to and acceptance by the shipper.
It is presumed that the stipulations of the bill were known to the shipper,
and he is generally bound by his acceptance whether he reads the bill or not
- Delivery; when made
o While it is true that common carriers are not obligated by law to carry and deliver
merchandise not obligated by law to carry and deliver merchandise, and that persons are
not vested with the right to prompt delivery, unless such common carriers previously
assume the obligation to deliver at a given date/time, delivery of shipment/cargo shout at
least be made within a REASONABLE TIME
In the absence of a special contract, a carrier is not an insurer against delay in
transportation of goods. When a common carrier undertakes to convey goods, the
law implies a contract that they shall be delivered at a destination within a
reasonable time, in the absence of any AGREEMENT AS TO THE TIME OF
DELIVERY.
But where a carrier has made an express contract to transport and deliver property within
a specified time, it is bound to fulfill its contract and is liable for any delay, no
matter from what cause it may have arisen.
PHILMAGEN VS. CA (222 SCRA 155)
- Delay in unloading cargo; no negligence from common carrier
o Where delay in unloading of cargo not due to negligence of carrier, it cannot be held liable
for damages.
o In the case: While it is true that there was indeed delay in discharging the cargo from the
vessel, neither of the parties herein could be faulted for such delay, for the same was not
due to negligence, but to several factors.

16

Also, the diligence shown by the shipmaster to protect cargo from the typhoon and
pilferages exempts the carrier from damages (had sought police and coast guard assistance
before abandoning ship).

TRANSASIA SHIPPING VS. CA (254 SCRA 260)


- Seaworthiness; unseaworthiness as breach of contract of carriage
o For a vessel to be seaworthy, it must be adequately equipped for voyage and manned
with a sufficient number of competent officers and crew.
Failure of a common carrier to maintain in seaworthy condition its vessel = breach
of Art. 1755 of CC
o In contracts (and quasi-contracts): the obligor is liable for all the damages which may be
reasonably attributed to the non-performance of the obligation if he is guilty of fraud, bad faith,
malice or wanton attitude.
- Art. 698 (Code of Commerce); rights and duties of parties arising out of delay
o Article 698 (Code of Commerce)
In case a voyage already begun should be INTERRUPTED the passengers shall
be obliged to pay the fare in proportion to the distance covered
WITHOUT RIGHT to recover if the interruption is due to a fortuitous
event
WITH RIGHT TO INDEMNITY if the interruption was caused bythe
captain exclusively
o Cause of delay was from failure to observe ED Art. 698 in re: NCC 2199, 2200, 2201, 2208
and 21
Ergo, the common carrier is LIABLE for any pecuniary loss or loss of profits
which may have been suffered by reason of such lack of ED
o However, in this case The loss [for the passenger in this case]would be the loss of
income if unable to report to his office on the day he was supposed to arrive were it not for
the delay. This however ASSUMES that he stayed on the vessel and was with it when it
thereunder resumed the voyage; but he did not.
Therefore, any further delay was his own fault!

2. ROUTE AND DEVIATION


CAMPAGNIE VS. HAMBURG-AMERIKA (36 PHIL. 590) (INFRA)

3. PARTIAL AND DEFECTIVE DELIVERY


KUI PAI & CO. VS. DOLLAR STEAMSHIP LINE (52 PHIL. 863)
- Duty of carrier
o It is the duty of the carrier to deliver the transported articles in as good order and condition
as when received, and for failure to do so, the carrier is liable for corresponding damage.
- Burden of Proof
o As to whether the goods which were delivered were those which were received = a
question of fact
In an action by the shipper to recover damages for failure to make such deliver, it
devolves upon the plaintiff to both allege and prove that the articles tendered
werent the same as those which he delivered to the carrier
SOUTHERN LINES, INC. VS. CA (4 SCRA 259)
- Liability for damages to goods; Articles 361 and 362 of Code of Commerce
o Art. 361 the carrier, in order to free itself from liability, was only obliged to PROVE that the
damages suffered by the goods were by virtue of the nature or defect of the articles.

17

Art. 362 in order to hold the carrier liable, the consignee was obliged to PROVE that the
damages to the goods by virtue of their nature, occurred on account of the common
carriers negligence or because the common carrier did not take the precaution required.
Carrier not relieved from liability if improper packing of goods was APPARENT
o If the fact of improper packing is known to the carrier or his servants, or apparent upon
ordinary observation, but accepts the goods notwithstanding such condition, it is NOT relieved
of liability for loss or injury resulting therefrom.
o

PHILCHARTER VS. CHEMOIL (462 SCRA 77) [INFRA]


ESSO STANDARD VS. MANILA RAILROAD (93 SCRA 305)
- - On provisional claims
o A claim, though dubbed provisional, for loss of goods handled by an arrastre operator is
sufficient compliance with the 15-day requirement for filing claims against the arrastre
operator
o Test for sufficiency of claim Whether a claim, be it called a provisional claim, or a
claim for value, has served the purpose of giving the arrastre operator(s) reasonable
opportunity to check the validity of the claim while the facts are still fresh in the minds of the
persons who took part in the transaction and while the pertinent documents are still available.
- A claim for losses of cargo NEED NOT state in detail the lisst of shipments lost or damaged
o It is not necessary that the provisional claims state a detailed list of the loss/damage
suffered by the said shipments; they only have to meet the test above mentioned
Rationale: the determination and preparation of the specific amount of damages
claimed should be done carefully and without haste, and these can be done
practically only in a formal claim which can be filed even long after a provisional
claim has been filed.
o The circumstance that the provisional claim DID NOT SPECIFY the value of the loss still
substantially fulfills the requirement of the contract and is not a defense against the claim of the
consignee for recovery after it shall have ascertained later its actual loss or damage
- A claim that a suit has prescribed must be proved
- Constructive denial of claim
o Where a claim for cargo damage or short delivery is filed, and the arrastre operator DOES
NOT ACT on the claim within one year from discharge of the last package the claims
shall be deemed constructively denied upon expiration of one year therefrom
FILPRO VS. MANILA RAILROAD (97 SCRA 629)
- To hold arrestre operator liable for goods lost or damaged (two steps)
o Claimant must file with the operator a claim for the value of said goods within 15 days
from the date of discharge of the last package from the carrying vessel
o Suit should be brought in the court of proper jurisdiction within 1 year
from the date of discharge of the goods, or
from the date when the claim for the value of such goods has been rejected or denied
- Constructive rejection of claim
o In case of INACTION on the part of the arrestre operator, he shall be deemed to have
rejected or denied the importers claim upon the expiration of one year from the date when the
last package was discharged, and that the period within which to file suit shall then begin to
run
- Sufficiency of a provisional claim
o A provisional claim may be sufficient, even if the value of the goods involved were not
stated therein, provided it describes said goods sufficiently to permit its identification by
the operator and the determination by the latter of the facts relevant thereto.
o Failure to specify value of loss The circumstance that the provisional claim DID NOT specify
the value of the loss does not detract from the fact that said claim still substantially fulfills

18

the requirements of the contract, and is not a defense against the claim of the consignee for
recovery after it shall have ascertained later its actual loss or damage.
SHELL CHEMICAL VS. MANILA PORT (72 SCRA 35)
- Effect of stipulation in management contract for liability of arrastre operator to consignee as a
stipulation pour atrui
- Loss of goods; failure to file claim
o The consignees failure to file a claim with the arrastre service operator within 15 days
from the date of discharge of the last package from the vessel is deemed a constructive
denial, and relieves the arrastre service operator of liability for non-delivery
The filing of the claim is a condition precedent to the institution of the suit for
damages
PURPOSE: to apprise the arrastre operator of the existence of a claim and
to enable it to check on the validity of the claimants demand while the
facts are still fresh in the recollection of the persons who took part in the
undertaking and the pertinent papers are still available.
- Premature filing
o The filing of a provisional claim on the day of the vessels arrival, but one day prior to the
discharge of the cargo is premature and speculative

4. CLAIM AND SUIT


PHILCHARTER VS. CHEMOIL (462 SCRA 77)
- Filing of claim as condition precedent for action; payment of transportation charges
o The filing of a claim with the carrier within the time limitation constitutes a condition
precedent to the accrual of a right of action against a carrier for loss of or damage to the
goods.
o The shipper/consignee must allege and prove the fulfillment of the condition.
If he fails to do so no right of action against the carrier can accrue in favor of the
former
o Moreover, it is not only when the period to make a claim has elapsed that no claim shall be
admitted, as no claim may similarly be admitted after the transportation charges have
been paid.

5. MISDELIVERY AND NON-DELIVERY


TAN PHO VS. HASSAMAL (67 PHIL. 555)
- Misdelivery/Non-delivery
o Considering that the bill of lading covering the goods in question has been made to order,
which means that said goods cannot be delivered without previous payment of the value thereof, it
is evident that, the said goods having been delivered to A without paying the price of the
same, these facts constitute misdelivery and not non-delivery, because there was in fact
delivery of the merchandise.
- Ratification of Misdelivery
o When the owner of the goods transported attempts to secure the value thereof from the person
to whom they have been delivered by mistake, he cannot be deemed to have ratified the
misdelivery or waived his right against the carrier.
MAERSK LINES VS. CA (222 SCRA 108) [SUPRA]
NEW ZEALAND VS. JOY (97 PHIL. 646)

19

Art. 366, Code of Commerce; requisites, to take effect


o In order that the condition provided may be demanded, there should be
A consignment of goods, through a common carrier, by a consignor in one place
to a consignee in another place
The claim of damages must be made within 24-hours following the receipt of the
merchandise
i.e. there must be delivery of the merchandise by the carrier to the
consignee at the place of destination.
On Art. 366
o Art. 366 is limited to cases of claims for damages to goods actually turned over by the
carrier and received by the consignee, whether those damages
be apparent from an examination of the packages in which the goods are
delivered,
or of such character that the nature and extent of the damage is not apparent
until the packages are opened and the contents are examined.
o Clearly, it has no application in cases wherein the goods entrusted to the carrier ARE NOT
delivered by the carrier to the consignee.
In such cases, there can be no question of a claim for damages suffered by the
goods while in transport, since the claim for damages arises exclusively out of the
failure to make delivery.

6. MULTI-CARRIERS
KLM VS. DUTCH AIRLINES VS. CA (65 SCRA 237)
- Art. 30 of the Warsaw Convention on International Air Transportation
o Art. 30 DOES NOT APPLY to a case where an airline refuses to transport a passenger with
confirmed reservation
The article presupposes the occurrence of either an accident or a delay
- Tickets
o The effect of a provision in passage ticket that carriage by successive air carriers is to be
regarded as a single operation is to make the ticket-issuing carrier LIABLE for tortious
conduct of other carriers.
LUFTHANSA VS. CA (238 SCRA 290)
- Bound by mistakes by of fellow member of IATA
o An airline company is considered bound by the mistakes committed by another member of
IATA which, in behalf of the former, had confirmed a passengers reservation for
accommodation.
- Meaning of Delay
o In the case: Lufthansa prays this court to take heed of jurisprudence in the United States
where the term "delay" was interpreted to include "bumping-off" or failure to carry a
passenger with a confirmed reservation.
These decisions in the United States are not controlling in this jurisdiction.
In its ordinary sense, "delay" means to prolong the time of or before; to stop,
detain or hinder for a time, or cause someone or something to be behind in
schedule or usual rate of movement in progress.
"Bumping-off," which is the refusal to transport passengers with
confirmed reservation to their planned and contracted destinations, totally
forecloses said passengers' right to be transported, whereas delay merely
postpones for a time being the enforcement of such right.
CHINA AIRLINES VS. CA (185 SCRA 449)

20

Airline cannot be held liable for negligence of employee of its ticketing agent (another airline)
o In the case: CAL is not the employer of PAL or Espiritu. There is a need to first establish
the existence of an employer-employee relationship before an employer can be held
vicariously liable under Art. 2180, NCC.
As employer, it is PAL who is liable for the negligence of its employees, even if
PAL was acting as ticketing agent of CAL.
PALs main defense is that is only an agent. As a general proposition, an agent
who duly acts as such is NOT PERSONALLY LIABLE to third persons.
HOWEVER, there are admitted exceptions, as in this case where the agent
is being suef for damages arising from a tort committed by its employee.

VII. VESSELS AND PERSONS IN MARITIME COMMERCE


1. VESSELS
SANTIAGO LIGHTERAGE VS. CA (432 SCRA 492)
- Seaworthiness
o To be seaworthy, a vessel must have the degree of fitness which an ordinary, careful and
prudent owner would require his vessel to have at the commencement of her voyage,
having regard to all the probable circumstances of it.
Therefore, the degree of seaworthiness varies in relation to the contemplated voyage.
o Obligation to be seaworthy
It is essential to consider that once the necessary degree of seaworthiness has been
ascertained, this obligation is an ABSOLUTE ONE, i.e. the undertaking is that the
vessel is actually seaworthy
o Duties of seaworthiness: be EFFICIENT
as an instrument of transport (seaworthiness)
If its hull, tackle and machinery are in a state of good repair
If she is sufficiently provided with fuel and ballast
If she is manned by an efficient crew
and as a storehouse for her cargo (cargoworthiness)
if it is sufficiently strong and equipped to carry the particular kind of cargo
which she has contracted to carry
her cargo must be so loaded that it is safe for her to proceed on her voyage
o On inspections before loading
A mere right given to the charterer to inspect the vessel before loading and to
satisfy himself that she was fit for the contracted cargo DOES NOT FREE THE
SHIPOWNER from his obligation to provide a cargoworthy ship.
ABOITIZ VS. NEW INDIA (488 SCRA 563)
- Limited liability; exception
o An exception to the limited liability doctrine: when the damage done is due to the fault of the
shipowner or to the concurrent negligence of the ship-owner and captain. In which case, the
shipowner shall be liable to the full extent of the damage.
- Presumption of negligence from unseaworthiness
o Where the vessel is found to be unseaworthy, the ship-owner is also presumed to be
negligent since it is tasked with the maintenance of its vessel.
Though this duty can be delegated, still, the shipowner must exercise close
supervision over his men.
- Findings of the Board of Marine Inquiry (BMI)
o The findings of the BMI are not deemed always binding on the courts. Besides, exoneration
of the vessels officers and crew by the BMI merely concerns his respective administrative

21

liabilities. It DOES NOT in any way operate to absolve the common carrier from his civil
liabilities arising from its failure to exercise extraordinary diligence, the determination of
which properly belongs to the courts.
WESTERN SHIPPING VS. NLRC (253 SCRA 405)
- Coast Guard clearance to sail; proof of seaworthiness
o Clearance issued by the Coast Guard is entitled to much weight as it was issued by an
agency of the government charged with the seaworthiness of vessels.
In this case It establishes two points: (1) The Coast Guard and the Collector of
Customs approved the application for the boarding of the additional passengers;
(2) the safety of the vessel was not endangered by the presence of the additional
passengers.
CALTEX VS. SULPICIO LINES (315 SCRA 709)
- Charter party; Contract of affreightment
o Charter Party 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
o Contract of affreightment contract whereby the owner of a ship or other vessel lets the
whole or part of the ship to a merchant or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of freight.
Types
Time Charter the leased vessel is leased to the charterer for a fixed period
of time
Voyage Charter ship is leased for a single vessel
o For BOTH CASES, the charter-party provides for the hire of the
vessel only, either for a determinate period or for a single or
consecutive voyage, the ship owner
To supply the ships store
Pay for the wages of the master of the crew, and
Defray the expenses of the maintenance of the ship
Demise/Bareboat Charter the charterer mans the vessel with his own
people and becomes, in effect, the owner for the voyage or service
stipulated, subject to liability for damages caused by negligence
If the charter is a contact of affreightment, which leaves the general owner in possession
of the ship AS OWNER for the voyage the rights and the responsibilities of
ownership rest on the owner.
The charterer is FREE FROM LIABILITY to third persons in respect of the
ship.
- Does a charter party agreement turn the common carrier into a private one?
o It is imperative that a public carrier shall remain as such, notwithstanding the charter of
the whole or portion of a vessel by one or more persons, provided the charter is limited to
the ship only
o BUT, when the charter includes both the vessel and its crew, a common carrier becomes
private, at least insofar as the particular voyage covering the charter-party is concerned.
Although a charter-party may transform a common carrier into a private one, the
same however is NOT TRUE in a contract of affreightment
- Warranty of seaworthiness; seaworthy
o The carriers are deemed to warrant impliedly the seaworthiness of the ship.
The charterer of a vessel has no obligation before transporting its cargo to ensure that
the vessel it chartered complied with all its requirements.
Such duty falls on the common carrier for being engaged in public service.
o Duty of Shippers - Because of the implied warranty of seaworthiness, shippers of goods,
when transacting with common carriers, are NOT EXPECTED to inquire into the vessels
seaworthiness, genuineness of its licenses and compliance with all maritime laws.

22

To demand more from shippers and hold them liable in case of failure exihibits
nothing but the futility of our maritime laws insofar as the protection of the public
in general is concerned.
Duty of Passengers We can also neither expect passengers to inquire every time they
board a common carrier whether the carrier possesses the necessary papers or that all the
carriers employees are qualified.

2. SHIPOWNERS AND SHIP AGENTS


MACANDRAY VS. PROVIDENT (445 SCRA 644)
- Ship agents
o Definition - A ship agent is the person entrusted with provisioning or representing the
vessel in the port in which it may be found.
Ergo, a person will be considered a ship agent whether acting as agent of the owner
of the vessel or as agent of the charterer.
o Civil liability of ship agents
The ship-owner/ship agent shall be civilly liable
o for the acts of the captain,
o or for the obligations contracted by the latter to repair, equip, and
provision the vessel
PROVIDED the creditor proves that the amount claimed was invested
for the benefit of the same.
The ship agent shall be civilly liable
For the indemnities in favor of third persons which may arise from the
conduct of the captain in the care of the goods which he loaded on the
vessel
BUT he may exempt himself therefrom by abandoning the vessel with
all her equipments and the freight it may have earned during the voyage.
NDC VS. CA (164 SCRA 593)
- Liability of owner and agent of vessel
o Both the owner and agent of the offending vessel are LIABLE for the damage done where
both are impleaded
that in case of collision, both the owner and the agent are civilly responsible for the
acts of the captain.
That while it is true that the liability of the naviero in the sense of charterer or
agent, is not expressly provided in Art. 826 (Code of Commerce), it is clearly
deductible from the general doctrine of jurisprudence under the Civil Code, but
more specially as regards contractual obligations in Art. 586 (Code of Commerce)
Moreover, the Court has held that both the owner and agent should be declared
jointly and severally liable, since the obligation which is the subject of the action
had its origin in a tortious act, and did not arise from contract.
Consequently, the agent, even though he may not be the owner of the vessel, is LIABLE
to shippers and owners of the cargo transported by it, for losses and damages
occasioned to such cargo, without prejudice, however, to his rights against the owner
of the ship, to the extent of the value of the vessel, its equipment, and the freight.
- Common carriers cannot limit their liability for injuries to loss of goods where such injury/loss
was caused by their own negligence
- Transhipment of Cargo
o In the case: The bills of lading issued allow transshipment of the cargo, which simply means
that the date of arrival of the ship was merely tentative, to give allowances for such
contingence that said vessel might not arrive on schedule at Manila and therefore, would
necessitate the transhipment of cargo, resulting in consequent delay of their arrival.

23

CENTRAL VS. INSURANCE CO.


- Doctrine of limited liability
o The doctrine does not apply to situations in which the loss or injury is due to the
concurrent negligence of the ship-owner and the captain.
In the case: It has already been established that the sinking of the ship was due to
the fault or negligence of the ship captain and crew, as shown by the improper
stowage of the cargo of logs. Closer supervision on the part of the ship-owner couldve
presented this fatal miscalculation. It cannot escape liability by virtue of the limited
liability rule.
NEGROS NAVIGATION VS. CA (281 SCRA 534)
- Liability of ship-owner
o A ship-owner may be liable for injuries to passengers notwithstanding the exclusively real
and hypothecary nature of maritime law if fault can be attributed to the ship-owner.
CHUA YEK HONG VS. IAC (166 SCRA 183)
- Ship agent
o The term is broad enough to include the ship-owner. Therefore, both the ship-owner and
ship agent are civilly and directly liable for the indemnities in favor of third persons,
which may arise from the conduct of the captain in the care of the goods transported, as
well as of the passengers on board.
o Liability moderated/limited by right of abandonment
HOWEVER, under the same article, this direct liability is moderated and limited
by the ship agents or ship-owners right of abandonment of the vessel and earned
freight. This expresses the universal principle of limited liability under maritime
law.
Fundamental effect of abandonment the cessation of the responsibility of the
ship agent/ship-owner
By necessary implication, the ship agents or ship-owners liability is confined
to that which he is entitled as of right to abandon
o the vessel, with all her equipment and the freight it may have
earned during the voyage, and
o the insurance thereof, if any.
In other words the ship-owners/ship agents liability is merely coextensive with his interest in the vessel, such that a total loss thereof
results in its extinction.
o No vessel, no liability expresses in a nutshell the limited liability
rule.
o Total destruction of the vessel extinguishes maritime liens as there
is no longer any res to which it can attach.
Rationale Without the principle of limited liability, a ship-owner and
investor in maritime commerce would run the risk of being ruined by the
bad faith or negligence of his captain, and the apprehension of this would
be fatal to the interest of navigation.
Exceptions to the limited liability rule
o Where the injury or death to a passenger is due either to the fault
of the ship-owner, or to the concurring negligence of the shipowner and captain.
o Where the vessel is insured
o In workmans compensation claims
ABOITIZ VS. GENERAL ACCIDENT (217 SCRA 359)
- Real and hypothetecary nature of maritime law

24

Means: liability of the carrier is confined to the vessel, which is hypothecated for such
obligations or which stands as a guaranty for their settlement.
o Reasons: conditions; risks attendant to maritime trade
Limited liability rule
o The only time the limited liability rule does not apply is when there is an actual finding of
negligence on the part of the vessel owner or agent.
o The rights of a vessel owner/agent under the LLR are akin to those of the rights of
shareholders to limited liability under our Corporation Law.
Both are privileges governed by statute, and while not absolute, must be swept
aside only in the established existence of the most compelling reasons. In the
absence of such reasons, the court chooses to exercise prudence and shall not
sweep such rights aside on mere whim or surmise, for even in the existence of a
cause to do so, such incursion is definitely punitive in nature.
In both insolvency of a corporation and the sinking of a vessel, the claimants or
creditors are limited in their recovery to the remaining value of accessible assets.
Corporation residual assets of the corporation left over from its operations
Lost vessel the insurance proceeds and pending freightage for the
particular voyage.
o

YANGCO VS. LACERNA (73 PHIL. 313)


- Civil liability of ship-owner for injury to or death of passengers arising from captains
negligence
o If the ship-owner or agent may in any way be held civilly liable at all for injury to or death
of passengers arising from the negligence of the captain in cases of collisions or
shipwrecks, his liability is merely co-extensive with his interest in the vessel, such that a
total loss thereof results in its extinction.
Such liability is limited to the value of the vessel, or to the insurance thereon, if
any.
OHTA VS. STEAMSHIP POMPEY (49 PHIL. 117)
- What determines liability of captain over cargo
o It is the DELIVERY of the cargo at the point of discharge that determines the cessation of
the liability of the captain for the cargo.
- When no abandonment of vessel
o Limiting the liability of the agent to the value of the ship, its appurtenances and freight, is
not applicable when no abandonment of the vessel is made.
HEIRS OF DELOS SANTOS VS. CA (186 SCRA 649)
- Limited liability doctrine
o 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"
- Article 587, Code of Commerce
o Notwithstanding the passage of the New Civil Code, Article 587 of the Code of Commerce
is still good law. The reason lies in the peculiar nature of maritime law which is exclusively
real and hypothecary that operates to limit such liability to the value of the vessel, or to the
insurance thereon, if any.
This rule is found necessary to offset against the innumerable hazards and perils of
a sea voyage and to encourage shipbuilding and marine commerce.
o Application of doctrine
The limited liability doctrine applies not only to the goods but also in all cases like
death or injury to passengers wherein the shipowner or agent may properly be
held liable for the negligent or illicit acts of the captain.

25

It must be stressed at this point that Article 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 NCC

3. CAPTAIN/MASTER
INTER-ORIENT VS. NLRC (235 SCRA 268)
- Definition; role
o The captain of a vessel is a confidential and managerial employee within the meaning of
the above doctrine.
o A master or captain, for purposes of maritime commerce, is one who has command of a
vessel.
o Three distinct roles:
(1) he is a general agent of the shipowner;
In this role, the captain has authority
o to sign bills of lading,
o carry goods aboard and deal with the freight earned,
o agree upon rates
o decide whether to take cargo
o to enter into contracts with respect to the vessel and the trading of
the vessel, subject to applicable limitations established by statute,
contract or instructions and regulations of the shipowner.
(2) he is also commander and technical director of the vessel; and
The most important is the role, 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 preservation of the
vessel during its voyage and the protection of the passengers (if any) and
crew and cargo.
(3) he is a representative of the country under whose flag he navigates.
To the captain is committed the governance, care and management of the vessel. Clearly,
the captain is vested with both management and fiduciary functions.
- Control, discretion of captain
o A ships 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.
A captain is held responsible, and properly so, for such safety. He is right there on
the vessel, in command of it and knowledgeable as to the specific requirements of
seaworthiness and the particular risks and perils of the voyage he is to embark upon.
o The captain has control of all departments of service in the vessel, and reasonable
discretion as to its navigation.
It is the right and duty of the captain, in the exercise of sound discretion and good
faith, to do all things with respect to the vessel and its equipment and conduct of
the voyage which are reasonably necessary for the protection and preservation of
the interests under his charge, whether those be of the ship-owners, charterers,
cargo owners or of the underwriters.
It is the right and duty of the captain to be left free to exercise his own best
judgment, and such judgment and discretion must not be straitjacketed, even in
the age of electronic communications.
If the ship captain is convinced that the ship=owners or ship agents instructions
(insisted upon from miles away) will result in imposing unacceptable risks of loss

26

or serious danger to ship or crew, he cannot usually seek absolution from his
responsibility, if a marine casualty occurs, in such instructions.
SWEET LINES VS. CA (121 SCRA 769)
- Owner of a vessel is liable in damages arising from the act of its captain in by-passing a prescheduled port if call
o In the case: The voyage was interrupted by the captain upon instruction. The
interruption was not due to fortuitous event nor to disability of the vessel. Having been
caused by the captain upon instruction 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 a
captain.

4. OFFICERS AND CREW


REMIGIO VS. NLRC

5. SUPERCARGOES
6. PASSENGERS

VIII. DAMAGES AND ACCIDENTS IN MARITIME COMMERCE


1. AVERAGES
COMPAGNIE VS. HAMBURG AMERIKA (36 PHIL. 590)
- Questions of General Average
o Under the York Antwerp Rules of 1890, by reference to which it was expressly stipulated
in the charter party of the Sambia all questions of general average should be settled, general
average should be settled, general average is not allowed unless the loss or damage sought
to be made good as general average has been incurred for the common safety of ship and
cargo.
The following general rule of maritime law prescribing the conditions under which
a claim for general average contribution on account of ships expenses, cited and
adhered to: Expenses voluntarily and successfully incurred or the necessary
consequences of resolutions voluntarily and successfully taken, by a person in
charge of sea adventure, for the safety of life, ship and cargo, under the pressure
of a danger or total loss or destruction imminent and common to them, give, the
ship being saved, a claim to general average contribution.
AMERICAN HOME ASSURANCE VS. CA (208 SCRA 343)
- Particular average
o A loss happening to the ship, freight, or cargo which is not be shared by contributing
among all those interested, but must be borne by the owner of the subject to which it
occurs.
- General average
o A contribution by the several interests engaged in the maritime venture to make good
the loss of one of them for the voluntary sacrifice of a part of the ship or cargo to save
the residue of the property and the lives of those on board, or for extraordinary expenses
necessarily incurred for the common benefit and safety of all.
PHILIPPINE HOME ASSURANCE VS. CA (257 SCRA 468)
- General average

27

As a rule, general or gross averages include all damages and expenses which are
deliberately caused in order to save the vessel, its cargo, or both at the same time, from a
real and known risk.
In the case: While the instant case may technically fall within the purview of the
said provision, the formalities prescribed under Article 813 and 814 of the Code of
Commerce in order to incur the expenses and cause the damage corresponding to
gross average were not complied with.
813
ARTICLE 813. In order to incur the expenses and cause the damages
corresponding to gross average, there must be a resolution of the captain,
adopted after deliberation with the sailing mate and other officers of the
vessel, and after hearing the persons interested in the cargo who may be
present.
If the latter shall 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 deliberations was
wanting.
814
ARTICLE 814. The resolution adopted to cause the damages which
constitute general average must be necessarily be entered in the log book
stating the motives and reasons 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.

2. ARRIVAL UNDER STRESS


3. COLLISION AND ALLISION
URRUTIA & CO. VS. BACO RIVER (26 PHIL. 632)
- Collision; zones of time
o In all collisions between vessels at sea, there exist 3 division or zones of time:
First division covers all the time up to the moment when the risk of collision may
be said to have begun
Second division covers the time between the moment when the risk of collision
begins and the moment when it has become practically certain

28

Third division covers the time between the moment when the collision has
become a practical certainty and the moment of actual contact

Nautical rules
o Nautical rules require that, where a steamship and sailing vessel are approaching each other from
opposite directions, or on intersecting lines, the steamship, from the moment the sailing
vessel is seen, shall watch with the highest diligence her course and movements so as to
be able to adopt such timely means of precaution as will necessarily prevent the two
boats from coming into contact.
o Nautical rules also require that, where a steamship and a sailing vessel are approaching each
other from opposite directions, or on intersecting lines, the sailing vessel is required to keep
her course unless the circumstances are such as to render a departure from the rule
necessary in order to avoid immediate danger.
Where a steamship and a sailing vessel are approaching each other bow on, or on
intersecting lines, the steamship must give way. In case of collision between such
vessels, the steamship is prima facie at fault.
Damages
o Fault on the part of the sailing vessel 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 alarm and confusion, and a collision results as a
consequence.
The steamer having incurred a far greater fault in allowing such proximity to be
brought about is chargeable with all the damage resulting from such collision; and
the act of the sailing vessel having been done in extremis, even if done, is
responsible for the result.
The responsibility of the owner of a steamship for the damage caused by a collision
between the steamer and a sailing vessel brought about by the negligence of the
steamship is EXTINGUIHED where the steamship is sunk and totally lost be reason of
said collision.
Where, however, such steamship is INSURED and the insurance is
collected by the owner, the insurance substitutes the vessel and the owner
becomes responsible for the injuries caused the sailing vessel to the extent of the
insurance collected.
In an action brought by a steamship owner against the owner of a sailing vessel for
damages caused to the steamship by a collision, a passenger who suffered a loss of
baggage and freight by reason of such collision CANNOT INTERVENE in the
action for the adjudication of his rights, as he has no legal interest in the matter in
litigation, or in the success of either of the parties, or an interest against both.

SULPICIO LINES VS. CA (305 SCRA 478)


- Philippine Merchant Rules and Regulations
o Rule 19 When two power driven vessels are crossing, so as to involve a risk of collision,
the vessel which has the other on her starboard side shall keep out of the way of the
other.
o Rule 21 Where, by any of these rules, one of two vessels is to keep out of the way, the other
shall keep her course and speed.
o Rule 22 Every vessel which is directed by these Rules to keep out of the way of another
vessel shall, so far as possible, take positive early action to comply with this obligation, and
shall, if the circumstances of the case admit, avoid crossing ahead of the other.
o Rule 23 Every power driven vessel which is directed by these Rules to keep out of the
way of another vessel shall, on approaching her, if necessary, slacken her speed or stop or
reverse.
NEGROS NAVIGATION VS. CA (281 SCRA 534)
- International Rules of the Road

29

Rule 18 Requires 2 power-driven vessels meeting end on or nearly end on each to alter
her course to starboard so that each vessel may pass on the portside of the other.
BUT route observance of the Rules will not relieve a vessel from
responsibility if the collision could have been AVOIDED by proper care and skill
on her part or even by a departure of the rules.

U.S. VS. SMITH BELL (5 PHIL. 68)


- Action for damages as a result of collision
o An action for the recovery of loss and damage arising from the collision of boats engaged
in traffic upon Philippine waters CANNOT BE ADMITTED if a sworn statement or
declaration is not presented within 24 hours to competent authority
of the point where the collision took place
or of the first port of arrival of the vessel.
o This statutory rules applies even though the injury was done to a boat operated by the
government.
LUZON STEVEDORING VS. CA (156 SCRA 169)
- Need for abandonment of vessel; exception
o In the case of collision, abandonment of the vessel is necessary in order to limit the
liability of the ship-owner or agent to the value of the vessel, its appurtenances and
freightage earned in the voyage in accordance with Art. 587 of the Code of Commerce.
o The only instance where such abandonment is dispensed with when the vessel was entirely
lost, in which case, the obligation is thereby extinguished.
- Art. 837 as superfluous
o The principle of limited liability of a ship-owner or agent is provided for in but three
articles of the Code of Commerce Art. 587, 590 and 837
Art. 590 merely reiterates the principle embodied in 587, where the vessel is
owned by several persons
Art. 837 applies the same principle in cases of collision, and it has been observed
that said article is but a necessary consequence of the right to abandon the vessel
given to the ship-owner in Art. 587, and it is one of the many superfluities
contained in the code.
o IN EFFECT Only Arts. 587 and 590 are the provisions contained in our Code of
Commerce on the matter, and the framers of said code had intended those provisions to
embody the universal principle of limited liability in all cases.

4. SHIPWRECKS
ERLANGER VS. SWEDISH EAST (34 SCRA 178)
- Salvage; right to compensation; theory of remuneration
o Salvage 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 have either abandoned in distress at sea or are unable to protect and secure.
It is found on the equity of remunerating private and individual services
performed in saving, in whole or in part, a ship or its cargo from impending peril,
or of recovering them after actual loss.
It is a compensation for actual services rendered to the property charged with it,
and is allowed for meritorious conduct of the salvor and in consideration of a
benefit conferred upon the person whose property he has saved.
Three elements necessary for a valid salvage claim
A marine peril
Service voluntarily rendered when not required as an existing duty or
from special contract

30

Success, in whole or in part, or that the services rendered contributed to


such success.
Computation of amount
Compensation as salvage is not viewed by the admiralty courts merely as pay on
the principle of quantum meruit or as a remuneration pro opere et labore, but as a
reward given for perilous services, voluntarily rendered, and as an inducement
to mariners to embark in such dangerous enterprises to save life and property.
Amount
The amount should be liberal enough to cover the expenses and to give an
extra sum as a reward for the services rendered. There is NO FIXED RULE
for salvage allowance. The allowance rests on the sound discretion of the
court who hears the case. An allowance for salvage should be made as a
reward for meritorious voluntary services, rendered at a time when
danger of loss is imminent and for the purpose of encouraging others in
like services.
Lien of salvor
A salvor, in the view of the maritime law, has an interest in the property (LIEN)
It never goes, in the absence of a contract expressly made, upon the idea of
a debt due by the owner to the salvor for the 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 the other joint owners.
Derelict; defined
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 to it.
If those in charge of the property quitted it or left it with the intention of
finally leaving it, it is derelict, and the change of their intention and an
attempt to return will not change its nature.
Right of possession of derelict
When a vessel is found at sea, deserted, and has been abandoned by the master
and crew without the intention of returning and resuming the possession, she is, in
the sense of the law, derelict, and the finder who takes the possession with the
intention of saving her, gains a RIGHT OF POSSESSION, which he can maintain
against the true owner.
The owner does not, indeed, renounce his right of property. This is not
presumed to be his intention, nor does the finder acquire any such right.
But the owner does abandon temporarily his right of possession, which
is transferred to the FINDER,
o who becomes bound to preserve the property with good faith,
and bring it to a place of safety for the owner's use;
o and he acquired a right to be paid for his services a reasonable and
proper compensation, out of the property itself.
o He is not bound to part with the possession until this is paid, or it is
taken into the custody of the law, preparatory to the amount of salvage
being legally ascertained.

31

IX.

SPECIAL LAWS IN TRANSPORTATION (A)


1. CARRIAGE OF GOODS BY SEA ACT

PHILIPPINE CHARTER VS. NEPTUNE ORIENT (554 SCRA 335)


- Applicable law
o The rights and obligations of the common carrier are governed by the provisions of
The Civil Code
And the COGSA, which is a special law applies suppletorily
- Stipulation limiting liability for loss of cargo
o Allowed
under NCC 1749
and Sec. 4(5) of the COGSA
o A stipulation in the bill of lading limiting the common carriers liability for loss or
destruction of a cargo to a certain sum, unless the shipper/owner declares a greater value
sanctioned by law (NCC 1749 and 1750)
EASTERN SHIPPING VS. MARGARINE (93 SCRA 257)
- Stipulation as to amount of damages
o A consignees claim for the full value of damages to its cargo while on board a ship
VALID
Even though under Art. 848 of the Code of Commerce, where the damage amount
does not exceed 5% of the claimants interest, a claim for damages may not be
admitted
o Where the bill of lading stipulates that in case of average, the same shall be adjusted
according to York-Antwerp Rules of 1950 which allows such full recovery without any
limit as to claimants interest
The insertion of such a provision is expressly authorized by the COGSA
o Under the York-Antwerp Rules: Damage done to a ship and cargo, or either of them, by water or
otherwise, including damage by breaching or scuttling a burning ship, in extinguishing a fire on
board the ship, shall be made good as general average
- A contract of adhesion is construed strictly against the one who drew its terms
o In the case: There is a clear and irreconcilable inconsistency between the York-Antwerp
Rules expressly adopted by the parties as their contract under the bill of lading which
sustains respondents claim and the codal article cited by petitioner. The ambiguity must
be construed against the party who drew up the bill.
BELGIAN OVERSEAS VS. PHIL. FIRST. (383 SCRA 23)
- Notice of loss
o The COGSA provides that the notice of claim need not be given if the state of the goods,
at the time of their receipt, has been the subject of a joint inspection or survey.
In the case: Prior to unloading the cargo, an Inspection Report46 as to the condition
of the goods was prepared and signed by representatives of both parties.47
o A failure to file a notice of claim within three days will not bar recovery if it is
nonetheless filed within one year. This one-year prescriptive period also applies to the
shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading.
A claim is not barred by prescription as long as the one-year period has not lapsed
"Inasmuch as the neither the Civil Code nor the Code of Commerce states
a specific prescriptive period on the matter, the Carriage of Goods by Sea
Act (COGSA)--which provides for a one-year period of limitation on
claims for loss of, or damage to, cargoes sustained during transit--may be
applied suppletorily to the case at bar."

32

Package limitation
o Dual function of bill of lading
First, it is a receipt for the goods shipped.
Second, it is a contract by which three parties -- namely, the shipper, the carrier,
and the consignee -- undertake specific responsibilities and assume stipulated
obligations.
In a nutshell, the acceptance of the bill of lading by the shipper and the consignee, with full
knowledge of its contents, gives rise to the presumption that it constituted a perfected and
binding contract.
o Limitation of liability
A stipulation in the bill of lading limiting to a certain sum the common carrier's
liability for loss or destruction of a cargo -- unless the shipper or owner declares a
greater value58 -- is sanctioned by law.
Two conditions to be satisfied:
(1) the contract is reasonable and just under the circumstances, and
(2) it has been fairly and freely agreed upon by the parties.
Rationale for this rule to bind the shippers by their agreement to the value
(maximum valuation) of their goods.
o Civil Code and COGSA provisions on limitation of liability
It is to be noted, however, that the Civil Code does not limit the liability of the common
carrier to a fixed amount per package. In all matters not regulated by the Civil Code,
the right and the obligations of common carriers shall be governed by the Code
of Commerce and special laws.
Thus, the COGSA, which is suppletory to the provisions of the Civil Code, supplements
the latter by establishing a statutory provision limiting the carrier's liability in the absence
of a shipper's declaration of a higher value in the bill of lading.
The provisions on limited liability are as much a part of the bill of lading as though
physically in it and as though placed there by agreement of the parties.
o Separability of bill of lading from other Letter of Credit arrangement
The contract of carriage, as stipulated in the bill of lading in the present case, must
be treated independently of the contract of sale between the seller and the buyer,
and the contract of issuance of a letter of credit between the amount of goods
described in the commercial invoice in the contract of sale and the amount allowed
in the letter of credit will not affect the validity and enforceability of the contract of
carriage as embodied in the bill of lading.
o Package
When what would ordinarily be considered packages are shipped in a container
supplied by the carrier and the number of such units is disclosed in the shipping
documents, each of those units and not the container constitutes the 'package'
referred to in the liability limitation provision of Carriage of Goods by Sea Act.

MALAYAN VS. MANILA PORT (85 SCRA 320)


- Purpose of provisional claim
o To afford the arrastre operator a reasonable opportunity to check the validity of the claim
while the facts are still fresh the absence of a statement therein as to the precise amount of
the loss does not render the claim invalid as a substantial compliance with the terms of
Section 15 of the arrastre management contract, so long as the claim is filed after the
discharge of the cargo and within 15 days thereafter.
- Sufficient Compliance with Provisions of Management Contract
o The filing of a provisional claim within 15 days from the discharge of the goods from the
carrying vessel is a sufficient compliance of the requirement of Sec. 15 of the Management
Contract
- When provisional claim may be filed even before discharge of the last cargo from the vessel

33

Although under Sec. 15 of the Management contract, the claim should be made after the
discharge of the last cargo from the carrying vessel, it has been held that if the consignee
or broker was informed of a shortage or damage to the goods before the unloading of the
last package, or even during the unloading, a provisional claim may properly be
presented.
Responsibility of Arrastre Operator
o not only for the invoice value of the goods damaged or lost,
o but also for all damages that may be suffered by the consignee on account of their loss,
destruction or injury.
o

MAYER STEEL VS. CA (274 SCRA 432)


- Only the carriers liability is extinguished
o Under Sec. 3(6) of the COGSA, only the carriers liability is extinguished if no suit is
brought within one year.
Sec. 3(6) of the COGSA the carrier and the shipper shall be discharged from all
liability for loss/damage to goods if no suit is filed within 1 year after delivery of the
goods or the date when they should have been delivered.
o Insurers liability is not extinguished
The insurers liability, being based not on the contract of carriage but on the
contract of insurance, is NOT extinguished.
o Relationship governed by COGSA
The COGSA governs the relationship between the CARRIER and the SHIPPER,
CONSIGNEE AND/OR THE INSURER
It defines the obligations of the carrier under the contract of carriage
It does not affect the relationship between the shipper and the insurer, this
relationship being governed by the Insurance Code.
- Right of action under Sec. 3(6) of the COGSA in re: the insurer
o Filipino Merchants Case: The INSURER, like the shipper, may no longer file a claim against
the carrier beyond the one-year period provided in the law.
This does not mean that the SHIPPER may no longer file a claim against the insurer
Because the basis of the insurers liability is the insurance contract.
WALLEM PHILS. VS. S.R. FARMS (XX SCRAXX)
- Governing provision re: prescriptive period for claims arising from damage to cargoes
o For the prescriptive period involving claims arising from damage to cargoes sustained
during transit, the law that governs is the COGSA.
o Under Section 3(6):
Notice of loss or damages must be filed within 3 DAYS OF DELIVERY.
- Failure to file notice of claim and right to suit
o The failure to file a notice of claim within three days WILL NOT BAR RECOVERY if a suit is
nonetheless filed within one year
from delivery of the goods
or from the date when the goods should have been delivered.
o In other words: A claim is not barred by prescription as long as the one-year period has
not lapsed.
Reason: Inasmuch as neither the Civil Code nor the Code of Commerce states a
specific prescriptive period on the matter, the COGSA -- which provides for a oneyear period of limitation on claims for loss of, or damage to, cargoes sustained
during transit -- may be applied suppletorily.

34

MITSUI LINES VS. CA (287 SCRA 366)


- Meaning of Loss
o Loss contemplates a situation where no delivery at all was made by the shipper 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.
o Deterioration due to delay constitutes loss/damage
Whatever damage/injury is suffered by the goods while in transit would result in
loss or damage to either the shipper or the consignee.
Minimum requirement to constitute loss/damage as long as it is claimed that the
losses/damages suffered by the shipper or consignee were due tot eh arrival of the
goods in damaged or deteriorated condition, the action is still basically one for
damage to the goods
Thus, must be filed within one year from delivery or receipt
TAN VS. AMERICAN PRESIDENT (98 PHIL. 203)
- Damage to goods while in transit amounts to breach of contract of carriage
o Any injury or damages suffered by the goods, while in transit and in the custody of the
carrier, amounts to a breach of the contract of carriage.
- No distinction between damages to goods and damages to shipper; action must be brought
within prescriptive period of one year
o Whatever damage/injury is suffered by the goods while in transit would result in
loss/damage to either the shipper or consignee
o As long as it is claimed that the losses/damages suffered by the shipper/consignee were
due to the arrival of the goods in damaged or deteriorated condition the action is still
basically one for damage to goods
And thus must be filed within one year from
Delivery of the goods, or
The date when the goods should have been delivered.
- Carrier liable for unjustified delay in transporting goods
o The obligation of the carrier to carry goods includes the duty not to delay their
transportation
If the goods are lost/damaged by reason of an unjustified delay = carrier is liable
- Pendency of claim does not suspend period of limitation
o The pendency of an extrajudicial claim for damages filed with the carrier does not suspend
the running of the prescriptive period of one year, unless there is express agreement to the
contrary.
PECO VS. MANILA PORT (42 SCRA 31)
- Extent of arrastre operators liability for goods lost/damaged in its possession under par. 15 of
the Management Contract
o Said liability shall be LIMITED to "to invoice value of each package but which in no case
shall be more than P500.00 for each package
UNLESS
the value is otherwise specified or manifested,
and the corresponding arrastre charges had been paid,
o including all damages that may be suffered on account of loss,
destruction or damage of any merchandise while in the custody or
under the control of the contractor.
- Damages contemplated by management contract

35

o
o

Not only the actual amount of costs, insurance and freight,


But even marginal fees which had been paid in connection with the shipment.

EASTERN SHIPPING VS. IAC (150 SCRA 474)


- Governing law
o 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.
In this case: As the cargoes in question were transported from Japan to the
Philippines, the liability of Petitioner Carrier is governed primarily by the Civil
Code.
o HOWEVER, in all matters not regulated by said Code, the rights and obligations of common
carrier shall be governed by the Code of Commerce and by special laws.
Thus, the COGSA, a special law, is suppletory to the provisions of the Civil Code.
- COGSA and NCC
o The Civil Code does not of itself limit the liability of the common carrier to a fixed
amount per package although the Code expressly permits a stipulation limiting such
liability.
o Thus, the COGSA which is suppletory to the provisions of 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.
COGSA provisions as part of the Bill of Lading
The provisions of the Carriage of Goods by Sea Act 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.
o In the case: 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 US $500 per package,
or its peso equivalent, at the time of payment of the value of the goods lost, but in no case
"more than the amount of damage actually sustained."
- Package under COGSA
o When what would ordinarily be considered packages are
shipped in a container supplied by the carrier
and the number of such units is disclosed in the shipping documents,
o = each of those units and not the container constitutes the "package" referred to in
liability limitation provision of Carriage of Goods by Sea Act.
Even if language and purposes of Carriage of Goods by Sea Act left doubt as to
whether carrier-furnished containers whose contents are disclosed should be
treated as packages, the interest in securing international uniformity would
suggest that they should not be so treated.
Certainly, if the individual crates or cartons prepared by the shipper and
containing his goods can rightly be considered "packages" standing by themselves,
they do not suddenly lose that character upon being stowed in a carrier's
container.

2. WARSAW CONVENTION
AMERICAN AIRLINES VS. CA (327 SCRA 482)
- Application of the Warsaw Convention
o The Warsaw Convention to which the Republic of the Philippines is a party and which has
the force and effect of law in this country applies to all international transportation of
persons, baggage or goods performed by an aircraft gratuitously or for hire.

36

As enumerated in the Preamble of the Convention, one of the objectives is "to regulate in a
uniform manner the conditions of international transportation by air".
Jurisdiction for action for damages under the Warsaw Convention (Art. 28[1])
o Domicile of the carrier
o Principal place of business of the carrier
o Where the carrier has business through which contract is made
o Place of destination
Transportation by successive carriers deemed as for undivided transportation (Art. 1[3])
o Transportation to be performed by several successive carriers shall be deemed to be one
undivided transportation if it had been regarded by the parties as a single operation
Whether it has been agreed upon under the form of a single contract or a series of
contracts.
o It SHALL NOT lose its international character merely because one contract or series of contracts
is to be performed entirely within the territory subject of the sovereignty of the same
contracting (state).
o

PAL VS. CA (255 SCRA 48, 257 SCRA 33)


- Warsaw convention not an exclusive enumeration of instances of carriers liability for breach of
contract
o While the WC has the force and effect of law in the Philippines, it DOES NOT OPERATE
As an exclusive enumeration of the instances when a carrier shall be liable for
breach of contract, or
As an absolute limit of the extent of liability,
Nor does it preclude the operation of the NCC or other pertinent laws
- Validity of provisions limiting carriers liability contained in bills of lading
o The validity of provisions limiting the liability of carriers contained in bills of lading have
been upheld, although the SC has likewise cautioned against blind reliance on adhesion
contracts where the facts and circumstances warrant that they should be disregarded
- No absolute obligation on the part of a carrier to accept cargo
o There is no absolute obligation on the part of a carrier to accept a cargo.
o Where a common carrier accepts a cargo for shipment for valuable consideration, it takes
the risk of delivering it in good condition as when it was loaded.
And if the fact of improper packing
Is known to the carrier or its personnel, or
Apparent upon observation
But it accepts the goods nonetheless
= it is not relieved of liability for loss or injury resulting therefrom.
- Estoppel on the part of the common carrier
o A common carrier is estopped from blaming a passenger for not declaring the value of the
cargo shipped and which would have otherwise entitled him to recover a higher amount of damages
when he had been effectively prevented from doing so upon the advise of the
common carriers personnel for reasons best known to themselves.
Where the failure to file the formal claim within the prescriptive period
contemplated in the air waybill was largely due to the carriers own doing, the
consequences of which cannot, in all fairness, be attributed to the passenger.
o Even if the claim for damages was conditioned on the timely filing of a formal claim, that
condition was deemed fulfilled considering that the collective action of the carriers
personnel in tossing around the claim and leaving it unresolved for an indefinite period of
time was tantamount to voluntarily preventing its fulfillment, and the filing of the baggage
freight claim constitutes substantial compliance with the requirement of filing of a formal
claim.
- Operation of the WC

37

The WC is as much a part of Philippine law as the NCC, Code f Commerce and other
municipal special laws, and the provisions therein contained, specifically its limitation of
carriers liability are operative in the Philippines, but only in appropriate situations
Recognition of the WC does not preclude the operation of the NCC or other
pertinent laws in the determination of the extent of liability of the carrier.
The WC declares the carrier liable in the enumerated cases and under certain limitations.
HOWEVER it does not operate as
An exclusive enumeration of instances of liability for breach of contract of
carriage, or
As an absolute limit of the extent of that liability of the operation of the NCC or
other pertinent laws.
It DOES NOT regulate, much less exempt, the carrier from liability for damages for
violating the rights of its passengers under the contract of carriage, especially if
willful misconduct on the part of the carriers employees is found or established.

SANTOS III VS. NORTHWEST (210 SCRA 256)


- Section 28(1) of the WC re: where to file suit, is a matter of jurisdiction, not venue; reasons
o The working of Article 32, which indicates the places where the action for damages must
be brought, underscores the mandatory nature of Sec. 28(1)
o 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.
o The convention does not contain any provision prescribing rules of jurisdiction other than
Sec. 28(1), which means that the phrase rules as to jurisdiction used in Art. 32 must only
refer to Art. 28(1)
- Passengers ultimate destination that determines the country where suit to be filed
o It is the passengers ultimate destination, not an agreed stopping place that determines
the country where suit against the international carrier is to be filed.
The contract is a single undivided operation, beginning with the place of departure
and ending with the ultimate place of destination.
The use of the singular in this expression indicates the understanding of the parties
to the Convention that every contract of carriage has one place of departure and
one place of destination.
An intermediate place of destination where the carriage may be broken is not
regarded as a place of destination.
- Allegation of tort against international carrier does not exclude action from WC provision
o If the injury occurs as described in Art. 17, any relief available is subject to the conditions
and limitation established by the WC, regardless of the particular cause of action which
forms the basis on which a plaintiff could seek relief.
PAL VS. SAVILLO (557 SCRA 56)
- Claim covered by the WC can no longer be recovered under local law if 2 years already lapsed
o Article 19 of the Warsaw Convention provides for liability on the part of a carrier for
"damages occasioned by delay in the transportation by air of passengers, baggage or
goods."
o Article 24 excludes other remedies by further providing that "(1) in the cases covered by
articles 18 and 19, any action for damages, however founded, can only be brought subject
to the conditions and limits set out in this convention."
o Therefore, a claim covered by the Warsaw Convention can no longer be recovered under
local law, if the statute of limitations of two years has already lapsed.
- WC does not exclusively regulate the relationship between passenger and carrier on an
international flight

38

(United Airlines v. Uy) SC distinguished between the (1) damage to the passengers baggage
and (2) humiliation he suffered at the hands of the airlines employees.
The first cause of action was covered by the Warsaw Convention which prescribes
in two years.
The second was covered by the provisions of the Civil Code on torts, which
prescribes in four years.
In this case: private respondents Complaint alleged that both PAL and Singapore Airlines
were guilty of gross negligence, which resulted in his being subjected to "humiliation,
embarrassment, mental anguish, serious anxiety, fear and distress."
The emotional harm suffered by the private respondent as a result of having been
unreasonably and unjustly prevented from boarding the plane should be
distinguished from the actual damages which resulted from the same incident.
Under the Civil Code provisions on tort, such emotional harm gives rise to
compensation where gross negligence or malice is proven.
Had the present case merely consisted of claims incidental to the airlines delay in
transporting their passengers, the private respondents Complaint would have
been time-barred under Article 29 of the Warsaw Convention. However, the
present case involves a special species of injury (moral damages).
These claims are covered by the NCC provisions on tort, and not within the
purview of the Warsaw Convention. The 4-year prescriptive period applies.

ICTS VS. PRUDENTIAL GUARANTEE (320 SCRA 244)


- Legal relationship between arrastre operator and a consignee
o The legal relationship between an arrastre operator and a consignee is akin to that between
a warehouseman and a depositor.
o As to both the nature of the functions and the place of their performance, an arrastre
operator's services are clearly not maritime in character.
- Burden of Proof in claim for loss filed by a consignee
o In a claim for loss filed by a consignee, the burden of proof to show compliance with the
obligation to deliver the goods to the appropriate party devolves upon the arrastre
operator.
Since the safekeeping of the goods rests within its knowledge, it must prove that
the losses were not due to its negligence or that of its employees.
- Goods shipped under Shippers Load and Count
o This means that the shipper was solely responsible for the loading of the container, while the
carrier was oblivious to the contents of the shipment.

Protection against pilferage of the shipment was the consignee's lookout.


The arrastre operator was, like any ordinary depositary, duty-bound to take good care
of the goods received from the vessel and to turn the same over to the party entitled to their
possession, subject to such qualifications as may have validly been imposed in the contract
between the parties.
The arrastre operator was not required to verify the contents of the container
received and to compare them with those declared by the shipper because, as
earlier stated, the cargo was at the shipper's load and count.
The arrastre operator was expected to deliver to the consignee only the
container received from the carrier.
- Lack of bad order survey does not toll prescriptive period
o The lack of a bad order survey does not toll the prescriptive period for filing a claim for
loss, because the consignee can always file a provisional claim within 15 days from the
time it discovers the loss or damage.
Such a claim would place the arrastre operator on notice that the shipment
sustained damage or loss, even if the exact amount thereof could not be specified
at the moment.

39

In this manner, the arrastre operator can immediately verify its culpability and
liability. A provisional claim seasonably filed is sufficient compliance with the liability
clause.
Claim of loss a condition precedent for bringing action
o In order to hold the arrastre operator liable for lost or damaged goods, the claimant
should file with the operator a claim for the value of said goods "within fifteen (15) days
from the date of discharge of the last package from the carrying vessel.
o The filing of the claim for loss within the 15-day period is in the nature of
a prescriptive period for bringing an action
and is a condition precedent to holding the arrastre operator liable.
o This requirement is a defense made available to the arrastre operator, who may use or
waive it as a matter of personal discretion.
o Purpose: It gives the arrastre contractor a reasonable opportunity to check the validity of
the claim, while the facts are still fresh in the minds of the persons who took part in the
transaction, and while the pertinent documents are still available. Such period is sufficient
for the consignee to file a provisional claim after the discharge of the goods from the vessel.
o From when does 15-day period start? The 15-day period for filing claims should be
counted from the date the consignee learns of the loss, damage or misdelivery of goods.

NORTHWEST AIRLINES VS. CA (284 SCRA 408)


- Scope of WC; does not exclude liability for other breaches
o It should be deemed a LIMIT OF LIABILITY only in those cases
where the cause of the death or injury to person, or destruction, loss or damage to
property or delay in its transport is not attributable to or attended by any willful
misconduct, bad faith, recklessness, or otherwise improper conduct on the part
of any official or employee for which the carrier is responsible,
and there is otherwise no special or extraordinary form of resulting injury.
o In other words, the Convention's provisions do 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 type of damage.
KLM VS. CA (65 SCRA 237)
- WC n/a when an airline refuses to transport a passenger with confirmed reservation
o The applicability of Art. 30 of the WC presupposes the occurrence of either an accident or
delay, and not the refusal to transport a passenger with a confirmed reservation
- Duty to inform customers of conditions limiting its liability
o The airline is chargeable with the duty and responsibility of specifically informing its
passengers of conditions prescribed in their tickets, or at the very least, to ascertain that the
passengers had read them before they accepted their passage tickets.
- Carriage by successive air carriers
o Effect of the provision in the passage ticket that carriage by successive air carriers is to be
regarded as a single operation is to make the ticket-issuing carrier liable for tortious
conduct of other carriers.
UNITED AIRLINES VS. UY (318 SCRA 576)
- Prescriptive period for filing of action
o Action must be filed within 2 years from
Date of arrival, or
When ought to arrive, or
Date on which the transportation stopped.
o Purpose of two-year period

40

An absolute bar to suit and not to be made subject to the various tolling provisions of
the laws of the forum.
This therefore forecloses the application of our own rules on interruption of
prescriptive periods.
o Purpose of second par., Art. 29
This was intended only to let local laws determine whether an action had been
commenced within the two (2)-year period
Within our jurisdiction an action shall be deemed commenced upon the
filing of a complaint.
Method of calculating period of limitation
o Determined by the law of the court to which the case is submitted
Applicability of WC
o Within our jurisdiction we have held that the Warsaw Convention can be applied, or
ignored, depending on the peculiar facts presented by each case.
o The Convention's provisions do 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 type of damage.
o Neither may the Convention be invoked to justify the disregard of some extraordinary
sort of damage resulting to a passenger and preclude recovery therefor beyond the limits
set by said Convention.
o The Convention does not preclude the operation of the Civil Code and other pertinent
laws.
It does not regulate, much less exempt, the carrier from liability for damages for
violating the rights of its passengers under the contract of carriage, especially if willful
misconduct on the part of the carrier's employees is found or established.

LUFTHANSA VS. CA (238 SCRA 290)


- Article 30; delay
o Presupposes the occurrence of either an accident or a delay.
o Meaning of Delay
In the case: Lufthansa prays this court to take heed of jurisprudence in the United
States where the term "delay" was interpreted to include "bumping-off" or failure
to carry a passenger with a confirmed reservation.
These decisions in the United States are not controlling in this jurisdiction.
In its ordinary sense, "delay" means to prolong the time of or before; to
stop, detain or hinder for a time, or cause someone or something to be
behind in schedule or usual rate of movement in progress.
o "Bumping-off," which is the refusal to transport passengers with
confirmed reservation to their planned and contracted
destinations, totally forecloses said passengers' right to be
transported, whereas delay merely postpones for a time being the
enforcement of such right.
Consequently, Article 30 does not contemplate bumping-off, but simple delay

X.

SPECIAL LAWS IN TRANSPORTATION (B)


1. SALVAGE LAWS

FERNANDEZ VS. THOMPSON (38 PHIL. 683)


- Compensation of salvors; right to interfere and participate in salvage

41

o
o

GR: Parties taking possession of an abandoned vessel or cargo have a right to retain it
until it is completed, and no person has the right to interfere with them, provided
They are able to effect the salvage
They are conducting the business with fidelity and vigor.
Exception: If their own means are inadequate, they are bound to accept additional assistance,
if offered.
Those beginning a salvage service, and in the successful prosecution of it, are entitled to be
regarded as the meritorious salvors of whatever is preserved when wrongfully
interrupted in the work by others who complete the salvage.

2. SHIP MORTGAGE DECREE


CRESCENT PETROLEUM VS. MV LOR (474 SCRA 623)
- Two tests to determine whether a case involving contracts comes within the admiralty and
maritime jurisdiction of a court
o Locational Test (English Rule)
Maritime and admiralty jurisdiction, within a few exceptions, is exercised only on
contracts made upon the sea and to be executed thereon
o Subject Matter Test (American Rule)
The criterion in determining whether a contract is maritime depends on the nature
and subject matter of the contract
PHL adopts this rule.
- Purpose of Ship Mortgage Decree
o Enacted to accelerate the growth and development of the shipping industry and to extend
the benefits accorded to overseas shipping under PD214 to domestic shipping
o Enacted primarily to protect Filipino suppliers, and was not intended to create a lien from a
contract for supplies between foreign entities delivered in a foreign port
- Requisites for maritime liens on necessaries to exist
o The necessaries must have been furnished to and for the benefit of the vessel
o The necessaries must have been necessary for the continuation of the voyage of the vessel
o The credit must have been extended to the vessel
It is presumed that in the absence of fraud or collusion, where advances are made to a
captain in a foreign port, upon his request, to pay for necessary repairs or supplies to
Prosecute her voyage, or
To pay harbor dues, or
For pilotage, towage and like services rendered to the vessel
They are made upon the credit of the vessel as well as upon that of her owners.
o There must be necessity for the extension of credit
A necessity of credit will be presumed where it appears that the repairs and supplies
were necessary for the ship and that they were ordered by the master.
o The necessaries must be ordered by persons authorized to contract on behalf of the vessel
i.e. the managing owner, the ships husband, master or any person with whom the
management of the vessel at the port of supply is entrusted.
PNB/NDC VS. CA (XXX SCRA XXX)
- Maritime lien
o Any person furnishing repairs, supplies, or other necessaries to a vessel on credit will have
a maritime lien on the said vessel. Such lien, if it arose prior to the recording of a
preferred mortgage lien, shall have priority over the said mortgage lien.
- Those who provide credit to a master of a vessel for the purpose of discharging a maritime lien
also acquired a lien over the said vessel

42

Furnishing money to a master in good faith to obtain repairs or supplies or to remove liens,
in order to forward the voyage of the vessel, raises a lien just as though the things for
which money was obtained to pay for had been furnished by the lender
o A person who extends credit for the purpose of discharging a maritime lien is NOT
ENTITLED to the said lien where the funds were not furnished to the ship on the order
of the master and there was no evidence that the money was actually used to pay debts
secured by the lien.
Nature of a maritime lien
o A maritime lien constitutes a present right of property in the ship, a jus in re, to be
afterward enforced in admiralty by process in rem.
o From the moment the claim or privilege attaches, it is inchoate, and when carried into
effect by legal process, by a proceeding in rem, it relates back to the period when it is first
attached.
Priority over all claims against the vessel
o A preferred mortgage lien shall have priority over all claims against the vessel, except,
among others, maritime liens arising prior in time to the recording of the preferred
mortgage.
o

3. LAND TRANSPORTATION AND TRAFFIC CODE


PEOPLE VS. NAVARRO (351 SCRA 462)
- Drivers licenses
o A person can still drive a vehicle even without possessing the necessary license, albeit
violating traffic rules.
MANUEL VS. CA (227 SCRA 29)
- In the case: that the driver was without license CANNOT exempt the owner of the bus from their
own fault
VILLANUEVA VS. DOMINGO (438 SCRA 485)
- Liabilities of registered owner
o The registered owner of any vehicle is directly and primarily responsible to the public
and to third persons while it is being operated.
- Whether or not driver is authorized by actual owner is irrelevant
o Whether the driver is authorized or not by the actual owner is IRRELEVANT to
determining the liability of the registered owner, who the law holds primarily and
directly responsible for any accident, injury or death caused by the operation of the vehicle
in the streets and highways.
o To require the driver of the vehicle to be authorized by the actual owner before the
registered owner can be held accountable is to defeat the very purpose why motor vehicle
legislations are enacted in the first place
- Main purpose of vehicle registration
o The easy identification of the owner who can be held responsible for any accident,
damage or injury caused by the vehicle
Such easy identification prevents inconvenience and prejudice to a third party injured by
one who is unknown or unidentified
To allow a registered owner to escape liability by claiming that the driver was not
authorized by the new (actual) owner results in the public detriment the law seeks
to avoid.

43

METRO TRAFFIC VS. GONONG (187 SCRA 432)


- LOI 43
o What the LOI actually punishes is not illegal parking per se, but parking of stalled vehicles
Great difference between illegally parked and stalled vehicles
o Coverage and purpose
LOI 43 deals with motor vehicles "that stall on the streets and highways' and not
those that are intentionally parked in a public place in violation of a traffic law or
regulation.
The purpose of the LOI evidently is to discipline the motorist into keeping his vehicle in
good condition before going out into the streets so as not to cause inconvenience to the
public when the car breaks down and blocks other vehicles.
o What is confiscated under the LOI; object of the measure
Not the drivers license, but the vehicle itself
This is to ensure that only motor vehicles in good condition may use the public
streets, and this is effected by confiscating the license plates and canceling the
certificates of registration of those vehicles that are not roadworthy.
- Nature of license plate as a property right
o While it is true that the license plate is strictly speaking not a property right, it does not
follow that it may be removed or confiscated without lawful cause. Due process is a
guaranty against all forms of official arbitrariness.
MALLARI VS. CA (334 SCRA 147)
- Rules in overtaking; in negotiating a curve
o A driver abandoning his proper lane for the purpose of overtaking another vehicle in an
ordinary situation has the duty to see to it that the road is clear and not to proceed if he
cannot do so in safety.
o When a motor vehicle is approaching or rounding a curve, there is special necessity for
keeping to the right side of the road and the driver does not have the right to drive on
the left hand side relying upon having time to turn to the right if a car approaching from
the opposite direction comes into view.
- Presumption of negligence of driver
o Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle
has been negligent if at the time of the mishap he was violating a traffic regulation.]
- Negligence of driver is binding on the owner
PEZA VS. ALIKPALA (160 SCRA 31)
- Disqualification of drive at the time of accident to operate any motor vehicle, he having only a
TOP which had already expired, relieving the company of liability from the insurance policy
o In the case: whether the LTC agent was correct or not in his opinion that driver Amar had
violated some traffic regulation warranting confiscation of his license and issuance of a
TVR in lieu thereof, this would not alter the undisputed fact that Amar's licence had
indeed been confiscated and a TVR issued to him, and the TVR had already expired at the
time that the vehicle being operated by him killed two children by accident. Neither would
proof of the renewal of Amar's license change the fact that it had really been earlier
confiscated by the LTC agent.

4. IATA TARIFF RULES


AMERICAN AIRLINES VS. CA (327 SCRA 482) [SUPRA]
- General Pool Partnership Agreement

44

Members of the IATA are under a general pool partnership agreement wherein they
act as agent of each other in the issuance of tickets to contracted passengers to
boost ticket sales worldwide
and at the same time provide passengers easy access to airlines which are
otherwise inaccessible in some parts of the world.
o Booking and reservation among airline members are allowed even by telephone and it has
become an accepted practice among them.
On successive carriers
o A member airline which enters into a contract of carriage consisting of a series of trips to be
performed by different carriers is authorized to receive the fare for the whole trip and
through the required process of interline settlement of accounts by way of the IATA
clearing house an airline is duly compensated for the segment of the trip serviced.
o

AIR FRANCE VS. CA (126 SCRA 449)


- Ticket Validity for one year
o An airplane ticket is valid for one year.

A ticket can no longer


be used for travel if its validity has expired before the passenger completes his trip.
To complete the trip, the passenger must purchase a new ticket for the remaining
portion of the journey.
o
Applicable fare is that
on the date of departure

All journeys must be


charged for at the fare (or charge) in effect on the date on which transportation
commences from the point of origin.

Any ticket sold prior to


a change of fare or charge (increase or decrease) occurring between the date of
commencement of the journey, is subject to the above general rule and must be
adjusted accordingly.

A new ticket must be


issued and the difference is to be collected or refunded as the case may be.

No
adjustment
is
necessary if the increase or decrease in fare (or charge) occurs when the
journey is already commenced

XI.

CONTRACTS IN MARITIME COMMERCE (A)


1. BILL OF LADING
2. ELECTRONIC BILL OF LADING

REYMA BROKERAGE VS. PHIL. HOME (202 SCRA 564)


- Nature of bill of lading; both receipt and contract
o A bill of lading operates as both a receipt and as a contract
Receipt of the goods shipped
Recites the date and place of shipment
Describes the goods as to quantity, weight, dimensions, identification marks
and condition, quality and value.
Contract to transport and deliver the same as therein stipulated
Names the contracting parties (which include the consignee)
Fixes the route, destination, and freight rates and charges
Stipulates the rights and obligation assumed by the parties

45

PHILMAGEN VS. SWEET LINES (212 SCRA 17)


- Bills of lading as actionable documents
o Such bills of lading can be categorized as actionable documents which under the Rules
must be properly pleaded either as causes of action or defenses, and the genuineness and
due execution of which are deemed admitted unless specifically denied under oath by the
adverse party. The rules on actionable documents cover and apply to both a cause of action
or defense based on said documents
KENG HUA VS. CA (286 SCRA 257)
- Nature of a bill of lading
o Receipt for the goods shipped.
o Contract by which three parties (shipper, carrier and consignee) undertake specific
responsibilities and assume stipulated obligations.
- Acceptance of bill of lading = perfected and binding contract
o The acceptance of a bill of lading by the shipper and the consignee, with full knowledge of
its contents, gives rise to the presumption that the same was a perfected and binding
contract.
EVERETT STEAMSHIP VS. CA (297 SCRA 496)
- Two requisites for a valid stipulation limiting the common carriers liability for loss
o Must be reasonable under the circumstances
o Must have been freely and fairly agreed upon
- Bill of lading as a contract of adhesion
o On contracts of adhesion in general
Contracts of adhesion, wherein one party imposes a ready-made form of contract on
the other, are contracts not entirely prohibited. The one who adheres to the contract is
in reality free to reject it entirely; if the adheres he gives his consent.
o Stipulations in such a contract are valid and binding
Such provisions have been held to be a part of the contract of carriage, and valid
and binding upon the passenger, regardless of the latters lack of knowledge or
assent to the regulation.
o Greater vigilance of the courts is required (NCC 24)
- Consignee is bound by the bill of lading
o Even if the consignee was not a signatory to the contract of carriage between a shipper and
the carrier, the consignee can still be bound by the contract.
Consignees right to recover from shipper/carrier for loss or damage
There is no question of the right, in principle, of a consignee in a bill of
lading to recover from the carrier or shipper for loss of, or damage to
goods being transported under said bill, although that document may
have been-as in practice it oftentimes is-drawn up only by the consignor
and the carrier without the intervention of the consignee.
Basis for right:
o a relation of agency that may exist between him and the shipper or
consignor, or
o his status as stranger in whose favor some stipulation is made in
said contract, and who becomes a party thereto when he demands
fulfillment of that stipulation, in this case the delivery of the goods
or cargo shipped.
o On fine print: In neither capacity can he assert personally, in bar
to any provision of the bill of lading, the alleged circumstance
that fair and free agreement to such provision was vitiated by its
being in such fine print as to be hardly readable.

46

Such provisions on liability limitation are as much a part


of a bill of lading as through physically in it and as though
placed therein by agreement of the parties.

PROVIDENT INSURANCE VS. CA (419 SCRA 480)


- Stipulations in bill of lading
o The bill of lading defines the rights and liabilities of the parties in reference to the contract
of carriage. Stipulations therein are valid and binding in the absence of any showing
that the same are contrary to law, morals, customs, public order and public policy.
Where the terms of the contract are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of the stipulations shall control.
- Bills of lading as contracts of adhesion
o Adhesion contracts in general
A contract of adhesion, defined as one where one of the parties imposes a readymade form of contract which the other party may accept or reject, but which the
latter cannot modify. One party prepares the stipulation in the contract, while the
other party merely affixes his signature or his "adhesion" thereto, giving no room
for negotiation and depriving the latter of the opportunity to bargain on equal
footing. Nevertheless, these types of contracts have been declared as binding as
ordinary contracts, the reason being that the party who adheres to the contract is
free to reject it entirely.
o Acceptance of bill of lading
The acceptance of the bill without dissent raises the presumption that all the terms
therein were brought to the knowledge of the shipper and agreed to by him
In the absence of fraud or mistake, he is estopped from thereafter denying
that he assented to such terms.
BELGIAN OVERSEAS VS. PHIL. FIRST (383 SCRA 23) [SUPRA]
- Bill of lading; nature
o First, it is a receipt for the goods shipped.
o Second, it is a contract by which three parties -- namely, the shipper, the carrier, and the
consignee -- undertake specific responsibilities and assume stipulated obligations.
- Acceptance of bill of lading
o In a nutshell, the acceptance of the bill of lading by the shipper and the consignee, with full
knowledge of its contents, gives rise to the presumption that it constituted a perfected and
binding contract.
- Stipulation in bill of lading limiting liability
o A stipulation in the bill of lading limiting to a certain sum the common carrier's liability for
loss or destruction of a cargo -- unless the shipper or owner declares a greater value58 -- is
sanctioned by law.
o There are, however, two conditions to be satisfied:
(1) the contract is reasonable and just under the circumstances, and
(2) it has been fairly and freely agreed upon by the parties.
o The rationale for this rule is to bind the shippers by their agreement to the value (maximum
valuation) of their goods.
- Separate from the other Letter of Credit Arrangements
o The contract of carriage, as stipulated in the bill of lading in the present case, must be
treated independently of the contract of sale between the seller and the buyer, and the
contract of issuance of a letter of credit between the amount of goods described in the
commercial invoice in the contract of sale and the amount allowed in the letter of credit
will not affect the validity and enforceability of the contract of carriage as embodied in the
bill of lading.

47

3. CHARTER PARTY
PLANTERS PRODUCTS VS. CA (226 SCRA 476)
- Charter Party, defined
o 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;
o a contract of affreightment by which the owner of a ship or other vessel lets the whole or a
part of her to a merchant or other person for the conveyance of goods, on a particular
voyage, in consideration of the payment of freight
- Types of charter parties
o Contract of affreightment which involves the use of shipping space on vessels leased by the
owner in part or as a whole, to carry goods for others;
Two Types
Time Charter vessel is leased to the charterer for a fixed period of time
Voyage Charter the ship is leased for a single voyage
In both cases, the charter-party provides for the hire of vessel only, either for a
determinate period of time or for a single or consecutive voyage.
The shipowner is tasked to
o supply the ship's stores,
o pay for the wages of the master and the crew, and
o defray the expenses for the maintenance of the ship.
o Charter by demise or bareboat charter, by the terms of which the whole vessel is let to the
charterer with a transfer to him of its entire command and possession and consequent control over
its navigation, including the master and the crew, who are his servants.
- Common Carrier vs. Private Carrier
o Lies in the nature of the business: if the undertaking is a single transaction, not a part of the
general business or occupation, although involving the carriage of goods for a fee, the
person or corporation offering such service is a private carrier
o Degree of diligence
Private ordinary diligence
Common extraordinary diligence
o Presumption of negligence
Private no presumption; negligence must be proved by the person alleging
damages
Common presumption of negligence/fault
- When does charterer become a private carrier
o When the charter is limited to the ship only remains a common carrier
Because the ship-owner retains possession and control of the ship, although the
holds may for the moment be the property of the charterer
o When it includes both the vessel and the crew becomes a private carrier, at least insofar as the
particular voyage concerning the charter-party is concerned
- What must be proved in suit against common carrier for damages
o Fact of shipment
o Its consequent loss or damage while the same was in the possession, actual or constructive,
of the carrier.
- When a ship-owner is liable for damage to cargo resulting from improper stowage
o Only when the stowing is done by stevedores employed by him, and therefore under his
control and supervision, not when the same is done by the consignee or stevedores under
the employ of the latter.

48

MARITIME AGENCIES VS. CA (187 SCRA 709)


- Charterers liability for damaged goods
o In the case: As regards the goods damaged or lost during unloading, the charterer is liable
therefore, having assumed this activity under the charter party free of expense to the vessel.
The difficulty is that Transcontinental has not been impleaded in these cases and
so is beyond our jurisdiction. The liability imposable upon it cannot be borne by
Maritime which, as a mere agent, is not answerable for injury caused by its
principal.
The agent shall be liable for the act or omission of the principal only if the
latter is undisclosed.
SMC VS. INQUITO HEIRS/ OUANO VS. CA (384 SCRA 87)
- Charter party, defined
o A contract by virtue of which the owner or the agent of a vessel binds himself to transport
merchandise or persons for a fixed price.
o A contract by virtue of which the owner or the agent of the vessel leases for a certain price
the whole or a portion of the vessel for the transportation of goods or persons from one
port to another.
- Types of charter party
o Demise or bareboat charter
The charterer mans the vessel with his own people and becomes, in effect, the
owner of the ship for the voyage or service stipulated, subject to liability for damages caused
by negligence.
o Contract of affreightment
The owner of the vessel leases part or all of its space to haul goods for others. It is a
contract for special service to be rendered by the owner of the vessel. Under such
contract the ship owner retains the possession, command and navigation of the
ship, the charterer or freighter merely having use of the space in the vessel in
return for his payment of the charter hire.
Otherwise put, a contract of affreightment is one by which the owner of a ship or
other vessel lets the whole or part of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment of freight.
Types of contracts of affreightment
Time charter
o The leased vessel is leased to the charterer for a fixed period of
time
Voyage charter
o The ship is leased for a single voyage.
Duties of charterer and ship-owner in both cases:
o The charterer provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive voyage,
the ship owner to supply the ships store, pay for the wages of the
master of the crew, and defray the expenses for the maintenance of the
ship.
Liabilities in a contract of affreightment
This leaves the general owner in possession of the ship as owner for the
voyage, the rights and the responsibilities of ownership rest on the owner.
The charterer is free from liability to third persons in respect of the ship.

ADR SHIPPING VS. GALLARDO (329 SCRA 82)

49

Ambiguities in contracts
o Ambiguities in a contract are interpreted strictly, albeit not unreasonably, against the
drafter thereof when justified in light of the operative facts and surrounding
circumstances.
NATIONAL STEEL VS. CA (283 SCRA 45)
- True test of a common carrier
o The true test of a common carrier is the carriage of passengers or goods, provided it has space, for
all who opt to avail themselves of its transportation service for a fee.
o Failing such test PRIVATE CARRIER
- On private carriers
o Private carriage is undertaken by special agreement and the carrier does not hold himself
out to carry goods for the general public.
o The most typical, although not the only form of private carriage, is the charter party a
maritime contract by which the charterer, a party other than the ship-owner, obtains the
use and service of all or some part of a ship for a period of time or a voyage/s.
o Actions against private carrier; burden of proof
In an action against a private carrier for loss of, or injury to, cargo, the burden is
on the plaintiff to prove that the carrier was negligent or unseaworthy, and the fact that
the goods were lost or damaged while in the carriers custody does not put the burden of
proof on the carrier.
- Duties of stevedoring company
o A stevedore company engaged in discharging cargo has the duty to load the cargo in a
prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence.
Where the officers and members and crew of the vessel do nothing and have no
responsibility in the discharge of cargo by stevedores the vessel is not liable for loss
of, or damage to, the cargo caused by the negligence of the stevedores.
- Demurrage, defined
o The compensation provided for in the contract of affreightment for the detention of the
vessel beyond the laytime.
o Given to compensate the ship-owner for non-use of the vessel.
- Laytime, defined
o That period of time agreed on for loading and unloading of cargo.
o Laytime runs according to the particular clause of the charter party.
Laytime expressed in running days this means days when the ship would be run
continuously, and holidays are not expected
Qualification of weather permitting excepts only those days when bad weather
reasonably prevents the work contemplated
- WWDSHINC (Weather, working days, Sundays and holidays included)
o Where laytime is qualified as WWDSHINC, the running of the laytime is subject to the
weather, and would cease to run in the even unfavorable weather interferes with the
loading of cargo.

4. BOTTOMRY-RESPONDENTIA

XII.

CONTRACTS IN MARITIME COMMERCE (B)

1. MULTI-MODAL TRANSPORT
2. FREIGHT FORWARDING
3. ARRASTRE-STEVEDORING

50

COMPANIA VS. ALLIED WORKERS (77 SCRA 24)


- Arrastre, defined
o Comprehends the handling of cargo on the wharf or between the establishment of the
consignee or shipper and the ships tackle.
- Stevedoring, defined
o Handling of the cargo in the holds of the vessel or between the ships tackle and the holds
of the vessel.

4. CONTRACT OF TOWAGE
BARRIOS VS. GO THONG (7 SCRA 535)
- Salvage; derilict and quasi-derelict
o A ship which is lost or abandoned at sea is considered a derelict and, therefore, proper subject
of salvage.
o A ship in a desperate condition, where persons on board are incapable, by reason of their mental and
physical condition, of doing anything for their own safety, is a quasi-derelict and may, likewise,
be the proper subject of salvage.
o Definition the compensation allowed to persons by whose assistance
a ship or her cargo has been saved, in whole or in part, from impending peril on
the sea,
or in recovering such property from actual loss, as in case of shipwreck, derelict, or
recapture.
o Elements of a valid salvage claim
1) a marine peril,
(2) service voluntarily rendered when not required as an existing duty or from a
special contract, and
(3) success in whole or in part, or that the service rendered contributed to such
success.
- In this case: NO MARINE PERIL not a quasi-derilict no valid salvage claim merely a
relation of towage
o Compensation in towage
Only the OWNER of the towing vessel, to the exclusion of the crew of the said
vessel, may be entitled to remuneration.
o Salvage vs. Towage
TOWAGE the crew does not have any interest or rights in the remuneration
pursuant to the contract.
SALVAGE the crew of the salvaging ship is entitled to salvage, and can look to
the salvaged vessel for its share.

XIII. PUBLIC SERVICE


1. PUBLIC UTILITIES
KMU VS. GARCIA (239 SCRA 386)
- Public Utilities
o Public utilities are privately owned and operated businesses whose service are essential to the
general public. They are enterprises which specially cater to the needs of the public and conduce

51

to their comfort and convenience. As such, public utility services are impressed with public
interest and concern.
Section 16(c) of the Public Service Act
o Requisites for the fixing and determination of rates
(a) the rates to be approved should be proposed by public service operators;
(b) there should be a publication and notice to concerned or affected parties in the
territory affected;
(c) a public hearing should be held for the fixing of the rates
o Under the foregoing provision, the Legislature delegated to the defunct Public Service
Commission the power of fixing the rates of public services. Respondent LTFRB, the
existing regulatory body today, is likewise vested with the same powers "to 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."
The Legislature has delegated to the Public Service Commission the power of
fixing the rates of public services, but it has not authorized the Public Service
Commission to delegate that power to a common carrier or other public service.
o Delegation of legislative power
Such delegation of legislative power to an administrative agency is permitted in order to
adapt to the increasing complexity of modern life. As subjects for governmental
regulation multiply, so does the difficulty of administering the laws. Hence,
specialization even in legislation has become necessary.
Given the task of determining sensitive and delicate matters as route-fixing and
rate-making for the transport sector, the responsible regulatory body is entrusted
with the power of subordinate legislation. With this authority, an administrative
body and in this case, the LTFRB, may implement broad policies laid down in a statute by
"filling in" the details which the Legislature may neither have time or competence to
provide.
On the presumption of public need
o Certificate of Public Convenience (CPC) An authorization granted by the LTFRB for the
operation of land transportation services of public uses as required by law.
Requirements for grant of CPC
The applicant must be a citizen of the Philippines, or a corporation or copartnership, association or joint-stock company constituted and organized
under the laws of the Philippines, at least 60 per centum of its stock or paidup capital must belong entirely to citizens of the Philippines;
The applicant must be financially capable of undertaking the proposed
service and meeting the responsibilities incident to its operation; and
The applicant must prove that the operation of the public service proposed
and the authorization to do business will promote the public interest in a
proper and suitable manner.
o In other words Before a CPC will be issued, the applicant must
prove by proper notice and hearing that the operation of the
public service proposed will promote public interest in a proper
and suitable manner.
Proper notice and hearing before the PSC can exercise its power to issue a
CPC.
Public convenience/necessity
Something fitting or suited to the public need
Exists when the proposed facility or service meets a reasonable want of the
public and supply a need which the existing facilities do not adequately
supply.

52

Must be established by evidence, empirical data, statistics, etc. in a public


hearing conducted for that purpose.
Basis of Power to Issue CPC
The power of a regulatory body to issue a CPC is founded on the condition
that after full-dress hearing and investigation, it shall find, as a fact, that
the proposed operation is for the convenience of the public.
The applicant must prove its capacity to furnish the service it undertakes
to render.

2. REGULATORY AND FRANCHISING BODIES


LTO VS. CITY OF BUTUAN (322 SCRA 805)
- LTO (Land Transportation Office) vs. LTFRB (Land Transportation Franchising and Regulatory
Board
o LTO deals primarily with the registration of all motor vehicles and licensing of drivers thereof
[registration and licensing functions]
o LTFRB regulates the operation of public utilities or for hire vehicles and to grant franchises or
certificates of public convenience [franchising and regulatory functions]
- LGUs and tricycles-for-hire
o LGUs have the power to regulate the operation of tricycles-for-hire and to grant franchises
for the operation thereof
Franchise A special privilege to do certain things conferred by government on
an individual or corporation, and which does not belong to citizens generally of
common right.
o The power of LGUs to regulate the operation of tricycles and to grant franchises for the
operation thereof is still subject to DTC guidelines.

3. FUNCTION
PAL VS. CAB (270 SCRA 538)
- Powers of Civil Aeronautics Board
o The CAB is expressly authorized by R.A. No. 776 to issue a temporary operating permit or
Certificate of Public Convenience and Necessity, and nothing contained in the said law
negates the power to issue said permit before the completion of the applicant's evidence
and that of the oppositor thereto on the main petition.
o Assuming arguendo that a legislative franchise is a prerequisite to the issuance of a permit,
the absence of the same does not affect the jurisdiction of the CAN to hear the application,
but only tolls upon the ultimate issuance of the requested permit.
o The power to authorize and control the operation of a public utility is admittedly a
prerogative of the legislature, since Congress is that branch of government vested with
plenary powers of legislation.
- On franchises
o The franchise is a legislative grant, whether made directly by the legislature itself, or by
any one of its properly constituted instrumentalities.
The grant, when made, binds the public, and is, directly or indirectly, the act of the
state.
o A franchise may be derived indirectly from the state through a duly designated agency,
and to this extent, the power to grant franchises has frequently been delegated, even to
agencies.
Privileges conferred by grant by local authorities as agents for the state constitute as
much a legislative franchise as though the grant had been made by an act of the legislature.

53

In this case: There is nothing in the law nor in the Constitution, which indicates that a
legislative franchise is an indispensable requirement for an entity to operate as a domestic
air transport operator. Although Section 11 of Article XII recognizes Congress' control over
any franchise, certificate or authority to operate a public utility, it does not mean Congress
has exclusive authority to issue the same. Franchises issued by Congress are not required
before each and every public utility may operate.
In many instances, Congress has seen it fit to delegate this function to government
agencies, specialized particularly in their respective areas of public service.
Public convenience and necessity
o The terms "convenience and necessity", if used together in a statute, are usually held not to
be separable, but are construed together.
Both words modify each other and must be construed together. The word
'necessity' is so connected, not as an additional requirement but to modify and
qualify what might otherwise be taken as the strict significance of the word
necessity.
o When it exists; what it is - Public convenience and necessity exists when the proposed
facility will meet a reasonable want of the public and supply a need which the existing
facilities do not adequately afford.
It does not mean or require an actual physical necessity or an indispensable thing.
The convenience of the public must not be circumscribed by according to the word
necessity its strict meaning or an essential requisite.
The use of the word "necessity", in conjunction with "public convenience" in a
certificate of authorization to a public service entity to operate, does not in any
way modify the nature of such certification, or the requirements for the issuance of
the same. It is the law which determines the requisites for the issuance of such
certification, and not the title indicating the certificate.
o

REPUBLIC VS. EXPRESS TELECOM (373 SCRA 316)


- Power of the National Telecommunications Commission (NTC)
o In the regulatory telecommunications industry, the NTC has the sole authority to issue
Certificates of Public Convenience and Necessity for the installation, operation, and
maintenance of communications facilities and services, radio communications systems,
telephone and telegraph systems.
Such power includes the authority to determine the areas of operations of
applicants for telecommunications services.
Section 16 of the Public Service Act authorizes the then PSC, upon notice and
hearing, to issue Certificates of Public Convenience for 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 interests in a proper and suitable manner.
o On NTC legal standing
The NTC has legal standing to file and initiate legal action in cases where it is clear
that its inaction would result in an impairment of its ability to execute and perform
its functions.
- Public Telecommunications Policy Act
o Among the declared national policies under R.A. No. 7925 is the healthy competition
among telecommunications carriers, and clearly the need for a healthy competitive
environment in telecommunications is sufficient impetus for the NTC to consider all those
applicants who are willing to offer competition, develop the market and provide the
environment necessary to greater public service.
A healthy competitive environment shall be fostered, one in which
telecommunications carriers are free to make business decisions and to interact
with one another in providing telecommunications services, with the end in view

54

of encouraging their financial viability while maintaining affordable rates. The


NTC is clothed with sufficient jurisdiction to act on matters solely within its
competence.
NPC VS. CA (279 SCRA 506)
- Public Utility
o 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.
o The term implies public use and service.
- On the PIA
o Clearly then, the PIA is authorized to render indirect service to the public by its
administration of the PHIVIDEC industrial areas like the PIE-MO and may, therefore, be
considered a public utility.
As it is expressly authorized by law to perform the functions of a public utility, a certificate
of public convenience, as suggested by the Court of Appeals, is not necessary for it to avail
of a direct power connection from the NPC.
However, such authority to be a public utility may not be exercised in such a
manner as to prejudice the rights of existing franchisees. In fact, by its actions, PIA
recognized the rights of the franchisees in the area.
- On the NPC
o It is only after a hearing (or an opportunity for such a hearing) where it is established that
the affected private franchise holder is incapable or unwilling to match the reliability and
rates of NPC that a direct connection with NPC may be granted."
- Right to supply electric power
o The determination of which of two public utilities has the right to supply electric power to
an area which is within the coverage of both is certainly not a rate-fixing function which
should remain with the ERB. It deals with the regulation of the distribution of energy
resources which, under Executive Order No. 172, was expressly a function of ERB.
However, with the enactment of Republic Act No. 7638, the Department of Energy took
over such function. Hence, it is this Department which shall then determine whether
CEPALCO or PIA should supply power to PIE-MO.
- Exclusivity of public franchise
o Exclusivity of any public franchise has not been favored by this Court such that in most, if
not all, grants by the government to private corporations, the interpretation of rights,
privileges or franchises is taken against the grantee.
Exclusivity is given by law with the understanding that the company enjoying it is
self-sufficient and capable of supplying the needed service or product at moderate or
reasonable prices.
It would be against public interest where the firm granted a monopoly is merely an
unnecessary conduit of electric power, jacking up prices as a superfluous
middleman or an inefficient producer which cannot supply cheap electricity to
power intensive industries. It is in the public interest when industries dependent
on heavy use of electricity are given reliable and direct power at the lower costs
thus enabling the sale of nationally marketed products at prices within the reach of
the masses.
QUISUMBING VS. MERALCO (380 SCRA 195)
- R.A. 7832 (Anti-Electricity and Electric Transmission Lines/Materials Pilferage Act)
o The immediate disconnection of electrical supply may only be validly effected only when
there is prima facie evidence of its illegal use. To constitute prima facie evidence, the
discovery of the illegal use must be "personally witnessed and attested to by an officer of
the law or a duly authorized representative of the Energy Regulatory Board (ERB).

55

Prima facie evidence of illegal use of electricity The prima facie presumption that will
authorize immediate disconnection will arise only upon the satisfaction of certain
requisites. One of these requisites is the personal witnessing and attestation by an officer of
the law or by an authorized ERB representative when the discovery was made.
Before immediate disconnection may be allowed
o That an ERB representative was allegedly present when the meter was examined in the
MERALCO laboratory will not cure the defect that he was not around when the discovery
of the illegal use of electricity.
o Had the law intended the presence of the owner or his/her representative to suffice, then it
should have said so. Embedded in our jurisprudence is the rule that courts may not
construe a statute that is free from doubt. Where the law is clear and unambiguous, it must
be taken to mean exactly what it says, and courts have no choice but to see to it that the
mandate is obeyed.
o The law says that before immediate disconnection may be allowed, the discovery of the
illegal use of electricity must have been personally witnessed and attested to by an
officer of the law or by an authorized ERB representative.
Contractual right to disconnect electrical service
o The Company reserves the right to discontinue service in case the Customer is in arrears in
the payment of bills or for failure to pay the adjusted bills in those cases where the meter
stopped or failed to register the correct amount of energy consumed, or for failure to
comply with any of these terms and conditions, or in case of or to prevent fraud upon the
Company.
o Before disconnection is made in case of or to prevent fraud, the Company may adjust the
bill of said Customer accordingly and if the adjusted bill is not paid, the Company may
disconnect the same.
o In case of disconnection, the provisions of Revised Order No. 1 of the former Public Service
Commission (now the Board of Energy) shall be observed. Any such suspension of service
shall not terminate the contract between the Company and the Customer.
Need to give notice of disconnection to an alleged delinquent customer
One can not deny the vital role which a public utility such as MERALCO,
having a monopoly of the supply of electrical power in Metro Manila and
some nearby municipalities, plays in the life of people living in such areas.
Electricity has become a necessity to most people in these areas, justifying
the exercise by the State of its regulatory power over the business of
supplying electrical service to the public, in which petitioner MERALCO is
engaged. Thus, the state may regulate, as it has done through Section 97 of
the Revised Order No. 1 of the Public Service Commission, the conditions
under which and the manner by which a public utility such as MERALCO
may effect a disconnection of service-e to a delinquent customer. Among
others, a prior written notice to the customer is required before
disconnection of the service. Failure to give such prior notice amounts to a
tort.
o

COGEO-CUBAO VS. CA (207 SCRA 343)


- Certificate of public convenience
o Definition An authorization issued by the Public Service Commission for the operation
of public services for which no franchise is required by law.
o CPC as property
A certification of public convenience is included in the term "property" in the
broad sense of the term. Under the Public Service Law, a certificate of public
convenience can be sold by the holder thereof because it has considerable material
value and is considered as valuable asset.

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Although there is no doubt that it is private property, it is affected with a public


interest and must be submitted to the control of the government for the common
good.
Hence, insofar as the interest of the State is involved, a certificate of public
convenience does not confer upon the holder any proprietary right or
interest or franchise in the route covered thereby and in the public
highways.
However, with respect to other persons and other public utilities, a certificate
of public convenience as property, which represents the right and
authority to operate its facilities for public service, cannot be taken or
interfered with without due process of law. Appropriate actions may be
maintained in courts by the holder of the certificate against those who
have not been authorized to operate in competition with the former and
those who invade the rights which the former has pursuant to the
authority granted by the Public Service Commission.

REPUBLIC VS. MERALCO (391 SCRA 700)


- Public Utilities
o When private property is used for a public purpose and is affected with public interest,
it ceases to be juris privati only and becomes subject to regulation.
The regulation of rates to be charged by public utilities is founded upon the police
power of the State and statutes prescribing rules for the control and regulation of
public utilities are a valid exercise thereof.
The regulation is to promote the common good. Submission to regulation may be
withdrawn by the owner by discontinuing use; but as long as use of the property is
continued, the same is subject to public regulation.
- Rates prescribed
o The rates prescribed by the state must be one that yields a fair return on the public utility
upon the value of the property performing the service and one that is reasonable to the
public for the services rendered.
o The balancing of just and reasonable rates involves a balancing of the investor and the
consumer interests.
- Power to fix rates
o The power to fix rates is a legislative function; determination of whether the rates so fixed
are reasonable and just is a purely judicial question and is subject to the review of the
courts.
- Just and reasonable rate
o What is a just and reasonable rate is a question of fact calling for the exercise of discretion, good
sense, and a fair, enlightened and independent judgment.
o In the fixing of rates, the ONLY STANDARD which the legislature is required to prescribe
for the guidance of the administrative authority is that the rate must be reasonable and
just.
Even in the absence of an express requirement as to reasonableness, this standard may be
implied.
o The requirement of reasonableness comprehends such rates which must not be so low as to
be confiscatory, or too high as to be oppressive.
In determining whether a rate is confiscatory, it is essential also to consider the
given situation, requirements and opportunities of the utility.
- Factors in determining just and reasonable rates
o Major factors in determining the just and reasonable rates charged by a public utility
Rate of return

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Definition a judgment percentage which, if multiplied with the rate base,


provides a fair return on the public utility for the use of its property for the
service to public.
Not prescribed by statute, but by administrative and judicial pronouncements
The Court has consistently adopted a 12% rate of return for public utilities
Rate base
An evaluation of the property devoted by the utility to the public service
or the value of invested capital or property which the utility is entitled to a
return.
The return itself
i.e. the computed revenue to be earned by the public utility based on the
rate of return and rate base.
o Other factors to consider
Financial condition of the public utility
Particular reasons involved for the request of the rate increase
The quality of services rendered by the public utility
The existence of competition
The element of risk or hazard involved in the investment
The capacity of consumers, etc.
o On rate regulation Rate regulation is the art of reaching a result that is good for the public
utility and is best for the public.
Findings of administrative bodies
o Factual findings of administrative bodies on technical matters within their area of expertise
should be accorded not only respect but even finality if they are supported by substantial
evidence even if not overwhelming or preponderant.
o Function of the court The function of the court, in exercising its power of judicial review,
is to determine whether under the facts and circumstances, the final order entered by the
administrative agency is unlawful or unreasonable.
Income tax not included in the computation of operating expenses of a public utility
o By its nature, income tax payments of a public utility are not expenses which contribute to
or are incurred in connection with the production of profit of a public utility.
o Income tax should be borne by the taxpayer alone as they are payment made in exchange
for benefits received by the taxpayer from the State.

PHILCOMSAT VS. ALCUAZ (180 SCRA 218)


- Delegation of legislative power; establishment of rates
o Delegation of legislative power may be sustained only upon the ground that some
standard for its exercise is provided and that the legislature in making the delegation has
prescribed the manner of the exercise of the delegated power.
o Delegation of fixing of rates
Therefore, when the administrative agency concerned, respondent NTC in this
case, establishes a rate, its act must both be non- confiscatory and must have been
established in the manner prescribed by the legislature; otherwise, in the absence
of a fixed standard, the delegation of power becomes unconstitutional.
In case of a delegation of rate-fixing power, the ONLY STANDARD which the
legislature is required to prescribe for the guidance of the administrative authority
is that the rate be reasonable and just.
However, it has been held that even in the absence of an express requirement as to
reasonableness, this standard may be implied.
- When rate-fixing power of administrative bodies is quasi-judicial or is legislative; necessity of
notice and hearing
o Aside from statute, the necessity of notice and hearing in an administrative proceeding depends on
the character of the proceeding and the circumstances involved. In so far as generalization is

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possible in view of the great variety of administrative proceedings, it may be stated as a


general rule that notice and hearing are
Not essential to the validity of administrative action where the administrative
body acts in the exercise of executive, administrative, or legislative functions;
but where a public administrative body acts in a judicial or quasi-judicial matter, and
its acts are particular and immediate rather than general and prospective, the
person whose rights or property may be affected by the action is entitled to notice
and hearing.
Temporary rate fixing order is not exempt from the procedural requirements of notice and
hearing
o While respondents may fix a temporary rate pending final determination of the application
of petitioner, such rate-fixing order, temporary though it may be, is not exempt from the
statutory procedural requirements of notice and hearing, as well as the requirement of
reasonableness.
Assuming that such power is vested in NTC, it may not exercise the same in an
arbitrary and confiscatory manner.
Categorizing such an order as temporary in nature does not perforce entail the applicability
of a different rule of statutory procedure than would otherwise be applied to any other order
on the same matter unless otherwise provided by the applicable law.
Nature and scope of the power of the State to regulate the conduct and business of public
utilities
o The power of the State to regulate the conduct and business of public utilities is limited
by the consideration that it is not the owner of the property of the utility, or clothed with
the general power of management incident to ownership, since the private right of
ownership to such property remains and is not to be destroyed by the regulatory power.
The power to regulate is not the power to destroy useful and harmless enterprises,
but is the power to protect, foster, promote, preserve, and control with due regard
for the interest, first and foremost, of the public, then of the utility and of its
patrons.
Any regulation, therefore, which operates as an effective confiscation of private
property or constitutes an arbitrary or unreasonable infringement of property
rights is void, because it is repugnant to the constitutional guaranties of due
process and equal protection of the laws.
Method of determining reasonableness of the rate fixed
o The inherent power and authority of the State, or its authorized agent, to regulate the
rates charged by public utilities should be subject always to the requirement that the
rates so fixed shall be reasonable and just.
A commission has no power to fix rates which are unreasonable or to regulate
them arbitrarily. This basic requirement of reasonableness comprehends such rates
which must not be so low as to be confiscatory, or too high as to be oppressive.
o Reasonable and just rate What is a just and reasonable rate is not a question of formula
but of sound business judgment based upon the evidence it is a question of fact calling for
the exercise of discretion, good sense, and a fair, enlightened and independent judgment.
In determining whether a rate is confiscatory, it is essential also to consider the given
situation, requirements and opportunities of the utility.
A method often employed in determining reasonableness is the fair return upon
the value of the property to the public utility.
Competition is also a very important factor in determining the reasonableness of
rates since a carrier is allowed to make such rates as are necessary to meet
competition.

MERALCO VS. LUALHATI (510 SCRA 455)


- Rate-fixing

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o
o

There is nothing in the Administrative Code which indicates that it bars the regulatory
body from approving rates without prior COA audit.
Rate-fixing calls for a technical examination and a specialized review of specific details which the
courts are ill-equipped to entersuch matters are primarily entrusted to the administrative
or regulatory authority.
Such findings on matters within their technical area of expertise are generally
accorded not only respect but finality if such findings are supported by substantial
evidence.

ENERGY REGULATORY BOARD VS. CA (357 SCRA 30)


- Interpretations of administration agencies
o The interpretation of an administrative government agency like the ERB, which is tasked to
implement a statute, is accorded great respect and ordinarily controls the construction of
the courts.
o A long line of cases establish the basic rule that the courts will not interfere in matters which
are addressed to the sound discretion of government agencies entrusted with the regulation of
activities coming under the special technical knowledge and training of such agencies.
o When an administrative agency renders an opinion or issues a statement of policy, it
merely interprets a pre-existing law and the administrative interpretation is at best
advisory for it is the courts that finally determine what the law means.
Thus, an action by an administrative agency may be set aside by the judicial
department if there is an error of law, abuse of power, lack of jurisdiction or grave
abuse of discretion clearly conflicting with the letter and spirit of the law.
- Exclusivity and the gasoline service station business
o While in the rigid standards governing public utility regulation exclusivity, upon the
satisfaction of certain requirements, is allowed, exclusivity is more the exception rather
than the rule in the gasoline service station business.
Some factors determining the allowance or disallowance of an application for outlet
construction:
(a) The operation of the proposed petroleum products retail outlet will promote
public interest in a proper and suitable manner considering the need and
convenience of the end-users.
(b) Reasonable expectation of a commercially viable operation.
(c) The establishment and operation thereof will not result in a monopoly,
combination in restraint of trade and ruinous competition.
(d) The requirements of public safety and sanitation are properly observed.
(e) Generally, the establishment and operation thereof will help promote and
achieve the purposes of Republic Act No. 6173
- Reduction in the earnings of a business not sufficient to prove ruinous competition
o In order that the opposition based on ruinous competition may prosper, it must be shown
that the opponent would be deprived of fair profits on the capital invested in its business.
The mere possibility of reduction in the earnings of a business is not sufficient to
prove ruinous competition. It must be shown that the business would not have
sufficient gains to pay a fair rate of interest on its capital investment.
PADUA VS. RANADA (390 SCRA 633)
- Primary administrative jurisdiction and exhaustion of administrative remedies
o In this era of clogged court dockets, the need for specialized administrative boards or
commissions with the special knowledge, experience and capability to hear and determine
promptly disputes on technical matters or intricate questions of facts, subject to judicial
review in case of grave abuse of discretion, is indispensible.
- Power to provisionally fix rates of public utilities without hearing

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o
o

An administrative agency may be empowered to approve provisionally, when demanded


by urgent public need, rates of public utilities without a hearing.
The reason is easily discerned from the fact that provisional rates are by their nature
temporary and subject to adjustment in conformity with the definitive rates approved
after final hearing.
In this case: From the foregoing, it is clear that a hearing is not necessary for the grant of
provisional toll rate adjustment. The language of LOI No. 1334-A is not susceptible of
equivocation. It "directs, orders and instructs" the TRB to issue provisional toll rates
adjustment ex-parte without the need of notice, hearing and publication. All that is
necessary is that it be issued upon (1) a finding that the main petition is sufficient in form
and substance; (2) the submission of an affidavit showing that the increase in rates
substantially conforms to the formula, if any is stipulated in the franchise or toll operation
agreement, and that failure to immediately impose and collect the increase in rates would
result in great irreparable injury to the petitioner; and (3) the submission of a bond. Again,
whether or not CITRA complied with these requirements is an issue that must be
addressed to the TRB.

and they lived happily ever after.


THE END.
/JPL, SBC-VPSG

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