Hernan, Jan Vernon L.

Transportation Law
2A

Asia Lighterage and Shipping v. CA

FACTS:
Asia Lighterage and Shipping, Inc was contracted as carrier to deliver 3,150 metric tons of
Better Western White Wheat in bulk, (US$423,192.35) to the consignee‘s (General Milling
Corporation) warehouse at Bo. Ugong, Pasig City insured by Prudential Guarantee and Assurance,
Inc. against loss/damage for P14,621,771.75.

It appears that on August 17, 1990, the transport of said cargo was suspended due to a
warning of an incoming typhoon. PSTSI III was tied down to other barges which arrived ahead of
it while weathering out the storm that night. A few days after, the barge developed a list because
of a hole it sustained after hitting an unseen protuberance underneath the water. It filed a Marine
Protest on August 28, 1990 and also secured the services of Gaspar Salvaging Corporation to
refloat the barge.

The barge was then towed to ISLOFF terminal before it finally headed towards the
consignee’s wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge again
ran aground due to strong current. 7 days later, a bidding was conducted to dispose of the damaged
wheat retrieved & loaded on the 3 other barges. The total proceeds from the sale of the salvaged
cargo was P201,379.75.

ISSUES:

1. Whether petitioner is a common carrier.

2. Assuming petitioner is a common carrier, whether it exercised extraordinary care and diligence
in its care and custody of the consignee’s cargo.

HELD:

1. Petitioner is a common carrier.

Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.

In De Guzman vs. CA it was held that the definition of common carriers in Article 1732 of the
Civil Code makes no distinction between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as an ancillary activity. There is
also no distinction between a person or enterprise offering transportation service on a
regular/scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis.

The test to determine a common carrier is “whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his occupation rather than
the quantity or extent of the business transacted.” In the case at bar, the petitioner admitted that it
is engaged in the business of shipping, lighterage and drayage, offering its barges to the public,
despite its limited clientele for carrying/transporting goods by water for compensation.

2. The findings of the lower courts should be upheld. Petitioner failed to exercise extraordinary
diligence in its care and custody of the consignee’s goods.

Common carriers are bound to observe extraordinary diligence in the vigilance over the goods
transported by them. They are presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated. To overcome the presumption of negligence in the case
of loss, destruction or deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence.There are, however, exceptions

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

In the case at bar, the barge completely sank after its towing bits broke, resulting in the total loss
of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should not be held liable
for the loss of the cargo. However, petitioner failed to prove that the typhoon is the proximate and
only cause of the loss of the goods, and that it has exercised due diligence before, during and after
the occurrence of the typhoon to prevent/minimize the loss. The evidence show that, even before
the towing bits of the barge broke, it had already previously sustained damage when it hit a sunken
object while docked at the Engineering Island. It even suffered a hole. Clearly, this could not be
solely attributed to the typhoon. Thus, when petitioner persisted to proceed with the voyage, it
recklessly exposed the cargo to further damage.

Moreover, petitioner still headed to the consignee’s wharf despite knowledge of an incoming
typhoon. During the time that the barge was heading towards the consignee’s wharf on September
5, 1990, typhoon “Loleng” has already entered the Philippine area of responsibility.
MINDANAO TERMINAL and BROKERAGE vs. PHOENIX ASSURANCE
FACTS:
Del Monte Philippines contracted petitioner Mindanao Terminal and Brokerage Service,
Inc, a stevedoring company, to load and stow a shipment of 146,288cartons of fresh green Bananas
and 15,202 cartons of fresh pineapples belonging to Del Monte Produce into the cargo hold of the
vessel M/v Mistrau. The vessel was docked at the port of Davao and goods were to be transported
to Incheon, Korea in favour of consignee Taegu Industries.Del Monte Produce insured the
shipment under an open cargo policy with private respondent Phoenix Assurance Company of
New York, a non-life insurance company, and private respondent McGee & Co, the underwriting
manager/agent of Phoenix. Upon arrival of M/V Mistrau in Incheon, it was discovered upon
discharge that some of the cargo was in bad condition. The damage surveyor of Korea, Byeong,
surveyed that 16,069 cartons of the banana shipment and 2,185 cartons of the pineapple shipment
were so damaged that they no longer had commercial value.Del Monte Produce filed a claim under
the open cargo policy. McGee s Marine Claims evaluated the claim and recommended that
payment in the amount of $210,266.43 be made. Del Monte issued a subrogation receipt to Phoenix
and McGee.Phoenix and McGee instituted an action for damages against Mindanao Terminal RTC
ruled that the only participation of Mindanao Terminal was to load the cargoes on board the vessel
and signed the foreman s report unless they were properly arranged and tightly secured to
withstand voyage across the open seas.

It was found that the cargoes were damages on account of a typhoon which M/V Mistrau
had encountered during the voyage. It was held that Phoenix and McGee had no cause of action
against Mindanao Terminal because the latter, whose services were contracted by Del Monte, a
distinct corporation from Del Monte Produce, had no contract with the assured Del Monte
Produce.CA reversed the RTC s decision which sustained Phoenix s and McGee s argumentthat
the damage in the cargoes was the result of the improper stowage by Mindanao Terminal. It
imposed on Mindanao Terminal, as the stevedore of the cargo, the duty to exercise extraordinary
diligence in loading and stowing the cargoes.It further held that even with the absence of a
contractual relationship between Mindanao Terminal and Del Monte Produce, the cause of action
of Phoenix and McGee could be based on quasi-delict under Article 2176 of the Civil Code.

ISSUE:

Whether or not Mindanao Terminal was careless and negligent in the loading and stowage of the
cargoes onboard M/V Mistrau making it liable for damages?

Whether Phoenix and McGee has a cause of action against Mindanao Terminal under CC 2176 on
quasi-delict?

Whether Mindanao Terminal observed the degree of diligence required by law of a stevedoring
company?

RULING:

The company filed by Phoenix and McGee against Mindanao Terminal states a cause of action.The
present action is based on quasi-delict, arising from the negligent and careless loading and stowing
of the cargoes belonging to Del Monte Produce.

Even assuming that both Phoenix and McGee have only been subrogated in the rights of
Del Monte Produce, who is not a party to the contract of service between Mindanao Terminal and
Del Monte, still the insurance carriers may have a cause of action in light of the Court s consistent
ruling that the act that breaks the contract may be also a tort.

In fine, a liability for tort may arise even under a contract, where tort is that which breaches
the contract. In the present case, Phoenix and McGee are not suing for damages for in juries arising
from the breach of the contract of service but from the alleged negligent manner by which
Mindanao Terminal handled the cargoes belonging to Del Monte Produce. Despite the absence of
contractual relationship between Del Monte. Produce and Mindanao Terminal, the allegation of
negligence on the part of the defendant should be sufficient to establish a cause of action arising
from quasi-delict.Article 1173 of the Civil Code is very clear that if the law or contract does not
state the degree of diligence which is to be observed in the performance of an obligation then that
which is expected of a good father of a family or ordinary diligence shall be required.Mindanao
Terminal, a stevedoring company which was charged with the loading and stowing the cargoes of
Del Monte Produce aboard M/V Mistrau, had acted merely as a labor provider in the case at bar.
There is no specific provision oflaw that imposes a higher degree of diligence than ordinary
diligence for a stevedoring company or one who is charged only with the loading and stowing of
cargoes.

It was neither alleged nor proven by Phoenix and McGee that Mindanao Terminal was
bound by contractual stipulation to observe a higher degree of diligence than that required of a
good father of a family. We therefore conclude that following Article 1173, Mindanao Terminal
was required to observe ordinary diligence only in loading and stowing the cargoes of Del Monte
Produce aboard M/V Mistrau.Mindanao Terminal, as a stevedore, was only charged with the
loading and stowing of the cargoes from the pier to the ship s cargo hold; it was never the custodian
of the shipment of Del Monte Produce. The loading and stowing of cargoes would not have a far
reaching public ramification as that of a common carrier and a warehouseman; the public is
adequately protected by our laws on contract and on quasi-delict. The public policy considerations
in legally imposing upon a common carrier or a warehouseman a higher degree of diligence is not
present in a stevedoring outfit which mainly provides labor in loading and stowing of cargoes for
its clients. Phoenix and McGee failed to prove by preponderance of evidence that Mindanao
Terminal had acted negligently. 1avvphi1Phoenix and McGee relied heavily on the deposition of
Byeong Yong Ahn and on the survey report of the damage to the cargoes. Byeong, whose
testimony wasrefreshed by the survey report, found that the cause of the damage was improper
stowage due to the manner the cargoes were arranged. As admitted by Phoenix and McGee in their
Comment before us, the latteris merely a stevedoring company which was tasked by Del Monte to
load and stow the shipments of fresh banana and pineapple of Del Monte Produce aboard the M/V
Mistrau. How and where it should load and stow a shipment in a vessel is wholly dependent on
the shipper and the officers of the vessel. we are of the opinion that damage occurred aboard the
carrying vessel during sea transit, being caused by ship s heavy rolling and pitching under
boisterous weather while proceeding from 1600 hrs on 7th October to 0700 hrs on 12th October,
1994 as described in the sea protest. As it is clear that Mindanao Terminal had duly exercised the
required degree of diligence in loading and stowing the cargoes, which is the ordinary diligence of
a good father of a family, the grant of the petition is in order.

Philippine Airlines v. Savillo

FACTS:
Savillo was a judge of the RTC of Iloilo.He was invited to participate in the 1993 ASEAN
Seniors Annual Golf Tournament in Jakarta Indonesia. So, in order to take part in such event, he
purchased a ticket from PAL with the following itinerary: Manila-Singapore-Jakarta-Singapore-
Manila. PAL would take them from Manila to Signapore, while Singapore Airlines would take
them from Singapore to Jakarta. When they arrived in Singapore, Singapore Airlines rejected the
tickets of Savillo because they were not endorsed by PAL. It was explained that if Singapore
Airlines honoured the tickets without PALS’ endorsement, PAL would not pay Singapore Airlines
for their passage. Savillo demanded compensation from both PAL and Singapore Airlines, but his
efforts were futile. He then sued PAL after 3 years, demanding moral damages. PAL , in its MTD,
claimed that the cause of action has already prescribed invoking the Warsaw Convention
(providing for a 2 year prescriptive period). Both RTC and CA ruled against PAL.

Issues:

What is the applicable law, the Civil Code or the Warsaw Convention? Has the action
prescribed?

Held:

The Civil Code is applicable. Therefore the action has not yet prescribed for the
prescription period is 4 years. If cause of action claims moral damages, not covered by Warsaw
Convention. Article 19 of the Warsaw Convention provides for liability on the part of a carrier for
“damages occasioned by delay in the transportation by air of passengers, baggage or goods. Article
24 excludes other remedies by further providing that “(1) in the cases covered by articles 18 and
19, any action for damages, however founded, can only be brought subject to the conditions and
limits set out in this convention.” Therefore, a claim covered by the Warsaw Convention can no
longer be recovered under local law, if the statue of limitations of two years has elapsed.
Nevertheless, this Court notes that jurisprudence in the Philippines and the United States also
recognizes that the Warsaw Convention does not “exclusively regulate” the relationship between
passenger and carrier on an international ight.

In U.S. v. Uy, this Court distinguished between the (1) damage to the passenger’s baggage and (2)
humiliation he su ered at the hands of the airline’s employees. The First cause of action was
covered by the Warsaw Convention which prescribes in two years, while the second was covered
by the provisions of the Civil Code on torts, which prescribes in four years.

In Mahaney v. Air France (US case), the court therein ruled that if the plainti were to claim
damages based solely on the delay she experienced- for instance, the costs of renting a van, which
she had to arrange on her own as a consequence of the delay the complaint would be barred by the
two–year statute of limitations. However, where the plainti alleged that the airlines subjected her
to unjust discrimination or undue or unreasonable preference or disadvantage, an act punishable
under the US law, then the plainti may claim purely nominal compensatory damages for
humiliation and hurt feelings, which are not provided for by the Warsaw Convention.

In the Petition at bar, Savillo’s 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” therefore this case is not covered by the Warsaw
Convention.

When the negligence happened before the performance of the contract of carriage, not covered by
the Warsaw Convention. Also, this case is comparable to Lathigra v. British Airways. In that case,
it was held that the airlines’ negligent act of recon rming the passenger’s reservation days before
departure and failing to inform the latter that the ight had already been discontinued is not among
the acts covered by the Warsaw Convention, since the alleged negligence did not occur during the
performance of the contract of carriage but, rather, days before the scheduled ight.

In the case at hand, Singapore Airlines barred Savillo from boarding the Singapore Airlines ight
because PAL allegedly failed to endorse the tickets of private respondent and his companions,
despite PAL’s assurances to Savillo that Singapore Airlines had already con rmed their passage.
While this fact still needs to heard and established by adequate proof before the RTC, an action
based on these allegations will not fall under the Warsaw Convention, since the purported
negligence on the party of PAL did not occur during the performance of the contract of carriage
but days before the scheduled ight. Thus, the present action cannot be dismissed based on the
Statue of Limitations provided under Article 29 of the Warsaw Convention.
EDNA DIAGO LHUILLIER v BRITISH AIRWAYS
FACTS:
On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint for damages
against respondent British Airways before the Regional Trial Court (RTC) of Makati City.
The tortuous conduct by the flight attendants of said Airways, which prompted petitioner
to file a case for damages, allegedly transpired when petitioner boarded respondent’s
flight 548 from London, United Kingdom to Rome, Italy. On May 30, 2005, respondent,
by way of special appearance through counsel, filed a Motion to Dismiss on grounds of
lack of jurisdiction over the case and over the person of the respondent. Respondent
alleged that only the courts of London, United Kingdom or Rome, Italy, have jurisdiction
over the complaint for damages pursuant to the Warsaw Convention, Article 28(1) of
which provides: “An action for damages must be brought at the option of the plaintiff,
either before the court of domicile of the carrier or his principal place of business, or where he has a
place of business through which the contract has been made, or before the court of the
place of destination.”

ISSUE:
Whether or not Philippines, a signatory to the Warsaw Convention, should adhere to the
provision of the Warsaw Convention in the determination of its jurisdiction with respect to a
case for damages involving a tortuous conduct committed by an airline personnel while
in an international carrier against a Filipino citizen.

HELD:
Yes. It is settled that the Warsaw Convention has the force and effect of law in this
country. In Santos III v. Northwest Orient Airlines, 210 SCRA 256 (1992), we held that:
The Republic of the Philippines is a party to the Convention for the Unification of
Certain Rules Relating to International Transportation by Air, otherwise known as the
Warsaw Convention. It took effect on February 13, 1933. The Convention was concurred in
by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument
of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited with
the Polish government on November 9, 1950. The Convention became applicable to the
Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued
Proclamation No. 201, declaring our formal adherence thereto, “to the end that the same and
every article and clause thereof may be observed and fulfilled in good faith by the Republic
of the Philippines and the citizens thereof.” The Convention is thus a treaty commitment
voluntarily assumed by the Philippine government and, as such, has the force and effect of law
in this country