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CHAPTER 1

PRELIMINARY CONSIDERATIONS

 What law governs transportation laws in the Philippines


Primary law is the Civil Code of the Philippines, but in the absence of the provision of
and all matters not regulated by the Civil Code, the Code of Commerce and other
special laws (such as COGSA, Salvage Law, etc.) are suppletory (Article 1766 NCC)
1. Examples: Special laws having to do with transportation laws
(a) Carriage of goods by Sea Act
(b) Salvage Law
(c) Public Service Law (CA 146)

 Article 12 Section 11 of the Constitution


No franchise/ certificate (of public convenience)/any other form of authorization for
the “operation” of a public utility (e.g., common carriers for public transportation)
shall be granted - except to Filipino citizens. However, in case of corporations or
associations created under Philippine laws, at least 60% of the capital is owned by
Filipino citizens; xxx. Xxx. (Note: If natural person, must be Filipino; if juridical person,
at least 60% of capital own by Filipino/s)
 Public Utility (defined; Metropolitan Cebu Water District vs. Adala, GR
168914, July 4, 2007; National Power Corporation vs. Court of Appeals, GR
112702, September 26, 1997 [p. 233])
A "public utility" is a business or service engaged in regularly supplying the
public with some commodity or service that is of public consequence - such as
transportation, electricity, gas, water, telephone or telegraph services
1. Can an individual alien or foreign corporation fully own 100% of the “facilities” of
public utility – without complying with the 60% Filipino capital requirements of the
Constitution? (People vs. Quasha, L-6055, June 12, 1953; Tatad vs. Sec. Garcia, Gr.
No. 114222, April 16, 1995)
YES. Article 12 Section 11 of the 1987 Constitution refers to “operation” of the
public utility which qualifies only Filipinos (if natural person), or at least 60% of the
capital to be owned by Filipino/s (if it is corporation/association)- for the issuance of
the franchise/certificate of public convenience/other form of authorization. Now, an
alien owning 100% of the “facilities or equipments” of the public utility is different
from “operation” of the public utility. In other words, an alien may own 100% of the
facilities and equipments of the public utility, but he is not qualified to procure a
franchise/certificate of public convenience/other form of authorization for the
operation of the public utility into business in view of the Constitutional requirement
that only Filipinos, or if corporation/association at least 60% of the capital must be
owned by Filipino/s, are qualified to operate public utility
Note: In transportation business, an alien can legally own 100% of the facilities (e.g.,
all the buses, trains, or airplanes, terminals and other facilities used in the operation
of the public utility (in this case public transportation) – but not Constitutionally
qualified to procure Certificate of Convenience/Franchise for the operation of that
transportation business
Examples of public utility: Public transportation business, water supplies through
pipelines, electric distribution through electric posts and wires, landline telephone
service through posts and wires and among others relevant to the operation of the
public utility
 Article 1732 NCC: Common carrier defined (*)
Common carriers are persons (natural persons), corporations, firms or associations
(juridical persons) engaged in the business of offering their services to the public
(whether general public or portion of the general public) for a fee/compensation,
regarding the business of carrying/transporting passengers and/or goods by land,
water, or air
1. From a legal sense, do we have to distinguish a common carrier from a private
carrier?
YES. The main distinction among others, is that, (a) under Article 1733 NCC, a
common carrier is to observe extraordinary diligence in the transportation of
passengers and/or goods, while private carrier is to observe merely diligence of a
good father of a family (or ordinary diligence), and (b) that in case of injury of
passenger or damaged to goods, generally, the burden of proof is on the common
carrier because under Article 1734 in relation to Article 1735 NCC, the common
carrier is presumed at fault/negligent, while no presumption against private
carrier. These delineations between common carrier and a private carrier is
discussed in more details ahead.
2. TRUE TEST for determining whether it is a common carrier (Vlasons Shipping Inc. vs.
Court of Appeals, G.R. No. L-112350, December 12, 1997; p. 13)
“It has been held that the true test of a common carrier is one that offers its
transportation services of passengers and/or goods to all the public who wants to
avail of its transportation service for a fee (whether for the general public or certain
portion of the public) - such that a carrier which does not qualify under the above
test is deemed a private carrier (i.e., not a common carrier). Generally, ‘private
carriage’ (private carrier) is one that does not hold himself out to the public to
transport passengers and/or goods rather it transports merely by special
agreement
Note:
a. Example offering services to the "general public": Common carrier transporting
passengers and/or goods for ALL the public from any point of the Philippines to
any point of the Philippines
b. Example offering services to “certain portion of the public”: Common carrier
transporting passengers and/or goods for ALL the public but only from Enrile to
Tuguegarao and vice versa (portion of the general public)
3. Operator of oil pipelines (First Philippine Industrial Corp. vs. Court of Appeals, G.R.
No. 125948, December 29, 1998; p. 9)
Considered as common carrier. Reason: The definition of common carrier under
Article 1732 CC defining common carrier does not specify whether the transportation
should be done by a motorized vehicle. Here, the operator of oil pipeline satisfies the
definition of Article 1732 CC, i.e., provided the pipeline operator offers its oil
transportation services through pipeline for a fee whether he has many or few
clients - so long as he offers his transportation service to all those who want to
avail of its transportation services
4. One who transports passengers and/or goods: (Loadstar Shipping Co., Inc. vs. Court
of Appeals, G.R. No. 131621, September 28, 1999)
a. By ancillary activity (in local idiom, as “a sideline” asides from his "other
principal" business)
Still a common carrier, provided whenever he has the time to transport
passengers and/or goods, he offers his transportation service for a fee to all
who want to avail
b. By occasional, episodic or unscheduled basis (i.e., private vans for hire)
Still a common carrier, provided whenever he has the time to transport
passengers and/or goods, he offers his transportation service for a fee to all
who want to avail - whenever has the opportunity
c. By scheduled basis (e.g., a private jeepney who transports his barangay mates
from Enrile to Piat during Sundays to attend the mass)
Still a common carrier, provided whenever he has the time to transport
passengers and/or goods, he offers his transportation service for a fee to all
who want to avail - during Sundays
Reason: Article 1732 avoids making any distinction between a person or
company offering transportation service whether on regular, scheduled or
ancillary, occasional, episodic or unscheduled basis - NEITHER: Article 1732
distinguish offering its transportation services to the “general public” or "portion
of the general public" - SO LONG: That he offers for a fee to all who want to avail
of its transportation service if he is to transport passengers and/or goods
5. Suppose the carrier has no Certificate of Public Convenience or Franchise from
LTFRB - can it still be a common carrier or private carrier?
Still a common carrier provided he offers his transportation service for a fee to all
who want to avail of its transportation service if he is to transport passengers and/or
goods
Reason: Article 1732 does not distinguish whether or not the common carrier should
be a holder of Certificate of Public Convenience or Franchise
6. Suppose the carrier has no motor - can it still be a common carrier or private
carrier?
Still a common carrier provided he offers his transportation service for a fee to all
who want to avail of its transportation service if he is to transport passengers and/or
goods
Reason: Article 1732 does not distinguish whether or not the common carrier should
be a holder of Certificate of Public Convenience or Franchise
7. Is travel agent a common carrier?
NO. Because travel agent merely facilitates procurement of travel ticket or travel
permit or visas, as well as booking of customers. On other words it does not fit the
definition of common carrier under Article 1732 NCC because travel agency does not
transport goods and/or passengers, rather it merely brings together the common
carrier and the passenger/owner of the goods to enter into contract of carriage
(Crisostomo vs. Court of Appeals, GR 138334, August 24, 2003)

 PRIVATE carriers (i.e., not a common carrier)


1. Perena vs. Court of Appeals, GR No. 157915, August 29, 2012
In this case of Perena vs. CA, the Supreme Court held a school bus as common
carrier.
Reason: While it is true that the school bus provides its transportation services only
few certain portion of the public (i.e., students), nevertheless, the school bus is
offering and ready its transportation service to the public particularly all other
students who are willing to avail of its transportation service
2. Florida Bus Line (common carrier) has its regular route from Tuguegarao City to
Manila. However, one time, the bus is hired by CSU students for a special trip to
Baguio City
QUESTION: Is it still a common carrier, or converted into a private carrier?
Answer: Common carrier.
Reason: Article 1732 NCC provides, "Common carriers are persons (natural persons),
corporations, firms or associations (juridical persons) engaged in the business of
offering their services to the public (whether general public or portion of the general
public) for a fee/compensation, regarding the business of carrying/transporting
passengers and/or goods by land, water, or air." Now, is Florida Bus Line by the
nature of its activity, engaged in the business of transportation offering its services
to the public? YES. Article 1732 NCC does not distinguish between regular trip and
special trip so long as the carrier engaged in the business of offering its
transportation service to the public for a fee, then it is a common carrier.
3. Common carriers and private carriers – why distinguish the two
Common carrier Private/special carrier
Bound to observe extraordinary Bound to observe the diligence of
diligence over the good and/or good father of a family (man of
passengers ordinary prudence)
Diligence of a good father of a
family: Reasonable care consistent
with that person of ordinary
prudent would have observed when
confronted with similar situation
(Crisostomo vs. CA, GR 138334,
August 25, 2003)
Burden of proof belongs to common Burden of proof belongs to the
carrier that it observed plaintiff that the carrier is at
extraordinary diligence fault/negligent
Strict provisions under NCC on Strict provisions under NCC on
common carrier applies common carrier does not apply
In transport of goods, the common In transport of goods, the parties
can limit its liability to a degree are free to stipulate regarding the
less than extraordinary diligence is limitation of liability or non-liability
valid – provided in accordance with of carrier (of course, pursuant to
Article 1744 NCC and such Article 6 NCC, so long as it is not
limitation of liability must not be against the law, public order, public
unreasonable, unjust or contrary to policy, morals or good customs)
public policy pursuant to Article Reason: In law on common carrier,
1745 NCC the law seeks to protect the welfare
of the public – which is not
applicable with private carrier which
does not offer transportation
service to the public.
Ex: non-liability of private carrier on
goods transported in view of
agreement at the risk of shipper
(Vlasons; supra); non-liability
ofprivate carrier on damaged goods
even if captain is negligent
(Valenzuela Hardwood vs. CA, G.R.
No. 102316, June 30, 1997; p. 16)

4. Tabacalera Insurance vs. North Front Shipping, GR No. 119197, May 16, 1997
The "charter-party" is an agreement whether (a) Contract of Affreightment, or (b)
Bareboat/Demise Charter -
???wherein entire space of ship, or some principal space of the ship is let by the
shipowner/shipagent to one person or more (charterer) for a specified time (time
charter) or use (voyage charter)
For a Contract of Affreightment, this ship is a common carrier. This Contract of
Affreightment may either be time charter (wherein the vessel is leased to the
charterer for a fixed period of time), or voyage charter (wherein the ship is leased for
a single voyage). In both cases whether time charter or voyage charter, the charter-
party agreement provides for the hire of the VESSEL (ship) ONLY so that the
shipowner/shipagent is responsible to all crews and the captain of his ship and
their wages, and also the supplies necessary for the ship (e.g., those things
necessary for the ship voyage such as oil for the ship, drinking water, foods for the
crews and captain, the maintenance of the ship for the travel, etc.) - SO LONG: As
pursuant to Article 1732 NCC, the shipowner/shipagent offers its transportation
business to the public for a fee
Note: For Bareboat/Demise Charter (whether time charter or voyage charter), the
ship is a private carrier because it is converted from common carrier to private carrier
(Continental Co., Ltd. Vs. Liberation Steampship Co., CV-58173, April 29, 1983)
4.1. Importance of distinguishing “Contract of Affreightment” (i.e., Voyage
charter/Time charter) and “Bareboat/demise Charter” - which vessel/ship by
nature is used as common carrier
Contract of Affreightment Bareboat/Demise Charter
(whether time charter or voyage (whether time charter or voyage
charter) charter)
Common carrier because charter- Converted from common carrier
party agreement is that the to private carrier because the
shipowner/shipagent provides for charter party agreement is that the
the hire of the VESSEL (ship) ONLY (1) shipowner/shipagent
so that the shipowner/shipagent completely surrendered the
(not the charterer) is the employer possession and control of his
of the crews and the captain of his vessel (ship) to the charter (in this
ship and their wages, and also the case the charterer becomes the
supplies necessary for the ship owner of the ship pro hac vice
(e.g., those things necessary for [owner of the ship in the
the ship voyage such as oil for the meantime]), AND THAT (2) the
ship, drinking water, foods for the captain and crews are under the
crews and captain, the supervision and control of the
maintenance of the ship for the charterer.
travel, etc.) - SO LONG: As BUT suppose in a bareboat/demise
pursuant to Article 1732 NCC, the charter, the crews and captain are
shipowner/shipagent offers its supplied by the
transportation business to the shipowner/shipagent, is the
public for a fee common carrier still converted to
private carrier? YES, so long as the
captain and crews are under the
supervision and control of the
charterer - viz., the charterer is the
employer pro hac vice of the crews
and captain (Puromines vs. CA, GR
No. 91228, Mar 22, 1993)

The shipowner/shipagent is liable ???The charterer is liable in


in case of breach of contract of personam in case of breach of
carriage (injury of passengers contract of carriage (injury of
and/or damaged to goods) passengers and/or damaged to
goods).
Suppose the charterer cannot pay?
The vessel ITSELF (of the
shipowner) would be liable IN REM
(i.e., an action against the thing
[i.e., vessel itself]. NOW, this action
in rem being an action against the
thing is an action against the vessel
(the thing) itself subject to levy to
compensate for all the damages of
the damaged goods and injured
passengers, and not an action
against the shipowner/shipagent -
HOWEVER: The bareboat/demise
charterer would in turn liable to
the shipowner.
Suppose the damage to goods
and/or injury to passengers was
due to "unseaworthiness" of the
ship that OCCURRED BEFORE the
shipowner turned over the ship to
the bareboat/demise charterer?
The vessel itself still liable for
damages via action in rem.
HOWEVER, the shipowner cannot
in turn hold the bareboat/demise
charterer liable to him - BUT: On
the contrary, it would be the
shipowner liable to the
bareboat/demise charterer
Being a common carrier, the Being a private carrier, the degree
degree of diligence required in the of diligence required in the
transportation of goods and/or transportation of goods and/or
passengers is "extraordinary passengers is "diligence of a good
diligence" father of a family"
For liability due to quasi-delict: The obligations are the same as above
Note: Liability for quasi-delict exists when the vessel common carrier or
vessel private carrier caused damaged not on the goods or injury on
passengers being transported by it - BUT: Liability to third person/s due
to damaged on his goods and/or his injury with whom no pre-existing
contract
Example: The vessel negligently collided with another vessel, causing
damage on the latter ship and its goods and injury to its passengers

5. Vessel as private/special carrier (Valenzuela Hardwood vs. CA, G.R. No. 102316, June
30, 1997; p. 16)
ISSUE: Whether a vessel private carrier, can stipulate that it can be exempted from
any liability
HELD: YES. “X xx, a common carrier undertaking to carry a special cargo to a special
PERSON ONLY (viz., the carrier does not offer its transportation service to the public),
becomes a private carrier” - and that being a private carrier, a
stipulation/agreement between shipowner/shipagent with the charterer that the
shipowner/shipagent is exempted from liability from the negligence of the captain
and crews is valid
Reason: Strict provisions of the Civil Code on common carriers do not apply to private
carriers, not they apply to a common carrier converted into a private carrier
5.1. Loadstar Shipping Co., Inc. vs. Court of Appeals, G.R. No. 131621, September
28, 1999
Issue: When the vessel does not have certificate of public convenience, and
that it transported the goods of only one person - sufficient to become a
private carrier for the purpose of limiting its liability or even exemption of
liability?
Held: NO. First, the fact the carrier has no Certificate of Public Convenience
does not deter from being a common carrier - so long as it offers to the public
(whether general public or certain portion of the public) its transportation
service. Secondly, the fact that the carrier carried the goods of one person
only is merely coincidental because along with the transporting goods of such
one person, the carrier by practice offers its transportation service to the
public carrying passengers and with that, rendered the carrier as a common
carrier
Question: Suppose the carrier carries goods only (no passengers allowed), and
at the time of the damaged of goods, it carried only the goods of one person -
is it a common carrier or private carrier?
Answer: If the carrier offers its transportation service to the public, then it is a
common carrier such that the fact that it carried only the goods of one
passenger, is merely coincidental (as for example rarity of customers; or such
one person occupied the entire space of the carrier).
 Article 1733 NCC (Observance of extraordinary diligence over the passengers and/or
goods)
Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe EXTRAORDINARY DILIGENCE in the vigilance over the GOODS
and for the safety of the PASSENGERS transported by them - according to (or
depending upon) all the circumstances of each case (because Article 1734 NCC and
also force majeure exempts common carrier from liability)
Such extraordinary diligence in the vigilance over the GOODS is further expressed in
Articles 1734, 1735, and 1745, Nos. 5, 6, and 7 - WHILE: The extraordinary diligence
for the safety of the PASSENGERS is further set forth in Articles 1755 and 1756.
1. “Extraordinary diligence” – explained
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 (Compania Maritima v. CA, 164 SCRA
685 [p.20]; Philippine Charter Insurance Corp vs. Unknown Owner of Vessel M/V
National Honor, GR 161833, July 8, 2005)
2. Non-ownership of the vessel does not affect observance of extraordinary diligence
of common carrier (Cebu Salvage Corp. vs. Philippine Home Assurance Corp., 512
SCRA 667, January 25, 2007; p. 21)
FACTS: In this case, ALS Timber Ent. owned the vessel, which vessel was
leased/rented by Cebu Salvage Corp. to transport the passengers and goods for a fee
for the public who opt to avail its services (hence, Cebu Salvage Corp is a common
carrier even if it merely rented the vessel from ALS). Cebu Salvage (lessee of the
vessel of ALS), entered into agreement with MCCI to transport the products of the
latter. During voyage, the products of MCCI damaged.
ISSUE: Cebu Salvage Corp alleged that having merely rented the vessel and therefore
does not own the vessel, it is not therefore a common carrier but rather merely a
private carrier - and being a private carrier, it is not required to observe
extraordinary diligence in the vigilance over the goods of MCCI.
HELD: Cebu Salvage Corp is a common carrier. “Non-ownership of the common
carrier (vessel or vehicle) does not render ineffective observance of extraordinary
diligence in the vigilance over the goods and for the safety of the passengers
transported by the carrier.
X xx. To permit a common carrier to escape its responsibility for the goods it agreed
to transport (by the expedient of alleging non-ownership of the vessel) would
radically derogate from the carrier’s duty of extraordinary diligence.”
3. For a vessel to be seaworthy, it must be adequately equipped for the voyage and
manned with sufficient number of competent officers and crews (Loadstar Shipping
Co., Inc. vs. Court of Appeals, G.R. No. 131621, September 28, 1999; p. 21)
“For a vessel to be seaworthy, it must be adequately equipped before the voyage
and manned with a sufficient number of competent officers and crews. The failure
of a common carrier to maintain in seaworthy condition its vessel involved in a
contract of carriage is a clear breach of its duty to observe extraordinary diligence.
3.1. Trans-Asia Shipping Lines, Inc. vs. Court of Appeals, GR No. 118126, March 4,
1996
Principle: For a vessel to be seaworthy, it must be adequately equipped for
the voyage and manned with a sufficient number of competent officers and
crew
Facts: Common carrier (vessel) took its voyage despite one of its two engines
was mechanically defective – which should be that two engines must be
functioning. While voyaging, the functioning engine also malfunctioned.
Held: Plainly, the vessel was unseaworthy even before the voyage began. For
a vessel to be seaworthy, it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew. The failure
of a common carrier to maintain in seaworthy condition its vessel involved in
a contract of carriage is a clear breach of its duty to observe extraordinary
diligence.
CHAPTER 2
VIGILANCE OVER THE GOODS
 Article 1734 NCC (Exemptions of common carrier from liability for damage/loss of
goods)
Common carriers are responsible for the loss or damage of the goods – UNLESS: The
same is due to any of the following causes ONLY (exclusive/closed lists):
(1) Natural disaster/calamity such as flood, storm, earthquake, lightning, or other
natural disaster or calamity (e.g., tsunami; rouge wave; remember these are all
act of God);
HOWEVER under Article 1739: For the common carrier to be completely free from
liability, the PROXIMATE AND ONLY CAUSE of such damage/loss of the goods
was due to natural disaster - meaning, the common carrier did not commit
intervening negligence by observing "due diligence" before, during and after the
natural disaster. “Due diligence” is the diligence required depending on the
attending/present circumstances of person, place and time - meaning, "due
diligence" to be observed by the common carrier before, during and after the
natural disaster depending on the circumstance of the natural disaster - example,
when the natural disaster poses no danger to the life and limb of the crews of the
common carrier, it is believed that extraordinary diligence must be observed, in
comparison when there is danger to the life/limb of the crews, the diligence
required is proportionate to the danger but less than extraordinary diligence
(2) Act of the public enemy in war, whether international or civil (e.g., international
war when Philippine at war with other country/ies; civil war of the Philippine
government against Filipinos such as Maute group, Abu Sayyaf group, NPA);
Note: Relate this with Article 1739, the same with "natural disaster" as explained
above
(3) Act/omission of the shipper (i.e., one who shipped the goods himself whether as
owner or consignor), or owner of the goods - that caused damage/loss on the
goods;
(4) The character of the goods (e.g., perishable goods despite due diligence by the
common carrier to prevent damage/loss), or defects in the packing of the goods
or defect in the containers of the goods - committed by the shipper/owner of the
goods;
(a) What diligence required of the common carrier in case of loss/damage to
goods - due to character of the goods, defect in packing or defects in
container of the goods committed by the shipper or owner of the goods?
Article 1742: The common carrier must still observe due diligence to
prevent/lessen the loss/damage - otherwise, the common carrier is liable for
damages
(5) Order/act of competent public authority
HOWEVER under Article 1743: The order/act of the competent public authority
must be within his authority/power (i.e., competent) - AND: That such order/act
must also be lawful (Mauro Ganzon vs. Court of Appeal, GR No. L-48757, May 30,
1988; p. 64).
QUESTION: Suppose the Mayor ordered the captain of the vessel common carrier
to dump the scrap irons into the sea. Is that a lawful order of the public authority?
ANSWER: NO. Such order of the mayor dumping iron scraps into the sea is an
"unlawful order" as it is unlawful to dump iron scraps into the sea (Ganzon vs.
Court of Appeal, GR No. L-48757, May 30, 1988 (p. 64))
QUESTION: Suppose the public authority acted or issued an order that is unlawful
and also beyond his power/authority - is there possibility that the common carrier
can still free itself from liability for damage/loss of goods?
ANSWER: YES - provided the public authority acted with grave or irresistible
threat, violence or force which is also considered as force majeure (Pedro De
Guzman vs. Court of Appeals, GR No. L-47822, December 12, 1988; p. 71)

 Article 1735 (Presumption of negligence/fault on the part of common carrier)


In all cases OTHER THAN those mentioned in Nos. 1, 2, 3, 4, and 5 of Article 1734 –
IF: The goods are lost/damaged, the common carrier is PRESUMED negligent/at
fault - UNLESS: It prove that it observed extraordinary diligence required under
Article 1733
1. Interrelating Article 1734 and Article 1735
General rule (Article 1735): In case of damage/loss of goods, the common carrier is
presumed at fault/negligent unless it exercised extraordinary diligence in the
vigilance over the goods
Exception: Five (5) exclusive instances under Article 1734
Hence: Pursuant to Article 1735, if the common carrier is presumed at fault/negligent
because the damage/loss of goods is not due to any of the five (5) exclusive instances
under Article 1734 - how then can the common carrier free itself from liability:
Common carrier should prove that it exercised extraordinary diligence in the
vigilance over the goods
QUESTION: But supposed, the damage/loss of the goods is due to any of the 5
exclusive instances under Article 1734, is there presumption of negligence against
the common carrier?
ANSWER: NONE - pursuant to Article 1735
QUESTION: Supposed, the damage/loss of the goods is due to any of the 5 exclusive
instances under Article 1734 and therefore there is no presumption of negligence
against the common carrier pursuant to Article 1735 - the question, is that enough to
free the common carrier from liability?
ANSWER: NO.
a. Under Article 1739: In case the damage/loss is due to natural disaster or act of
public enemy - the natural disaster or act of public enemy must be proximate and
only cause of the damage/loss without any concurrent negligence of the common
carrier - BUT: Before, during and after the natural disaster must still observe due
diligence to minimize/prevent damage/loss of the goods despite the existence of
natural disaster or act of public enemy
b. Under Article 1742: In case the damage/loss is due to character of the goods, or
the defective packing or defective container of the goods committed by the
shipper/owner of the goods - the common carrier must still observe due
diligence to minimize/prevent damage/loss of the goods
c. Under Article 1743: If the damage/loss of the goods is due to act/order of public
authority - the public authority must have the power/authority to do such make
such act/ order (and that such act/order must be lawful)
2. Is "force majeure" (such as armed robbery) included under Article 1734? (Pedro De
Guzman vs. Court of Appeals, GR No. L-47822, December 12, 1988; p. 71)
NO. Five instances under Article 1734 are exclusive and closed list such that
force majeure is not included. Hence, pursuant to Article 1735, in case of
loss/damage of goods not due to any of the five closed list enumerated under
Article 1734, the common carrier is presumed negligent/at fault (Note: You
must distinguish between fortuitous event and force majeure; fortuitous event is
generally an act of God, while force majeure is generally act of man)
QUESTION: We now know that the common carrier is still presumed negligent
despite the damage/loss of the goods is due to force majeure - can the
common carrier still free itself from liability?
ANSWER: YES - provided such force majeure is of grave or irresistible threat,
violence or force - such as armed robbery
3. Article 1734 (1): “Flood, storm, earthquake, lightning, or other natural disaster or
calamity” (i.e., these are all acts of God; fortuitous events)
3.1. Fortuitous event
Fortuitous event is an unforeseeable, or though foreseeable nevertheless it is
inevitable
3.2. Common carrier exemption from liability due to fortuitous event– its
requisites
(1) Event is impossible to foresee, or foreseeable but inevitable
(a) "Impossible to foresee" - exemplified
As when the common carrier vessel began taking its voyage without
warning from the weather forecast from PAGASA
But, before the voyage, the common carrier received a bad weather
forecast from PAGASA, then the fortuitous event is foreseeable
Note: Mere difficulty to foresee the fortuitous event is not tantamount
to impossibility to foresee/unforeseeable (Sicam vs. Jorge, GR 159617,
August 8, 2007). Example: Before the common carrier took its voyage,
thought the sky is partly clear and partly dark and it is uncertain whether
there would be a good or bad weather, and there is no PAGASA weather
forecast - nevertheless, the common carrier took its voyage and along its
voyage, bad weather happened and caused damaged to goods - here,
the common carrier is liable for damages as such fortuitous event is
merely difficult to foresee
(b) "Foreseeable but inevitable" - exemplified
As when the common carrier vessel took its voyage with a clear daylight
and without warning from the weather forecast from PAGASA, and while
at voyage in the middle of the sea, the clear sky begins to turn into dark
clouds with thunders. Here, the fortuitous event is foreseeable but
inevitable as the common carrier cannot do anything against the act of
God
(2) Article 1739: Even if the damage/loss caused by fortuitous event,
nevertheless, the such fortuitous event must be the proximate and only
cause of such damage/loss (i.e., no intervening negligence on the part of the
common carrier); and
(3) Article 1739: The common carrier exercised due diligence before, during
and after the natural disaster (fortuitous event) to minimize/prevent
damage/loss of the goods
3.3. Is fire considered natural disaster/fortuitous event under Article 1734 (1) NCC
(Eastern Shipping Lines, Inc. vs. The Nisshin Fire and Marine Insurance Co., GR
No. L-71478, May 29, 1987; p. 23)
Facts: “En route from Kobe, Japan, to Manila, while on voyage, the vessel
caught fire and sank, resulting in the total loss of ship and cargo
Held: IT DEPENDS.
a. When fire is caused by act of man whether wilful or negligent, then the
common carrier is presumed negligent - considering that it is not included
under any of the 5 exclusive lists under Article 1734.
HOWEVER: The common carrier can free itself from liability provided it
exercised extraordinary diligence to minimize/prevent damage/loss of the
goods (Article 1735)
b. When fire is caused by natural disaster (e.g., lightning), then the common
carrier is not presumed negligent - considering that lightning is included
under the five closed lists
HOWEVER: Pursuant to Article 1739, for the common carrier to free itself
from liability, the fire must be the proximate and only cause of the
damage/loss, but the common must have observed due diligence before,
during and after the fire to minimize/prevent damage/loss of the goods
4. Pedro De Guzman vs. Court of Appeals, GR No. L-47822, December 12, 1988 (p. 71)
Principles: Force majeure includes act of robbers/hijackers who acted with grave or
irresistible threat, violence or force
Facts: A cargo truck (common carrier for goods) was hijacked by armed men and
took the truck including its cargo (i.e., loss of goods)
Issue: Is the act by armed men deemed as force majeure?
Held: IT DEPENDS. If the hijackers acted with grave or irresistible threat, violence or
force, then it is regarded as force majeure
Issue: So what if the hijackers’ act is deemed as force majeure – is the common
carrier presumed at fault/negligent?
Held: YES. Because force majeure is not included among the five closed lists of
Article 1735. Pursuant to Article 1735, the defense of the common carrier is that it
observed extraordinary diligence
5. The Philippine American General Insurance Co. vs. Court of Appeals, GR No.
116940, June 11, 1997 (p. 36)
Principle: Overloading of cargoes on common carrier renders the vessel unseaworthy
for voyage – hence, negligence attaches
Facts: The common carrier carried substantial loads of goods on its deck despite the
vessel is not designed therefor (viz., overloading). As result of which, the vessel sank
together with its cargoes
Issue: When does a common carrier seaworthy?
Held: “For a vessel to be seaworthy, it must be adequately equipped for the voyage
and manned with a sufficient number of competent officers and crews (Loadstar
Shipping Co., Inc. vs. Court of Appeals, G.R. No. 131621, September 28, 1999; p. 21)
Issue: Is the common carrier negligent for being “unseaworthy”?
Held: YES. Because of overloading
Issue: Pursuant to Article 1735 that if the cause of the damage/loss of the goods is
not due to any of the five (5) instances under Article 1734, the common carrier is
presumed at fault/negligent – HOWEVER: Despite being presumed at fault/negligent,
the common carrier can be free from liability if it can prove that it exercised
extraordinary diligence in the vigilance over the goods. The question is, was the
common carrier able to refute the presumption of fault/negligence by proving
extraordinary diligence?
Held: NO. How could the common carrier proved extraordinary diligence when in the
first place, the vessel was already negligent from the beginning before its voyage
because of overloading rendering it unseaworthy for the voyage
Issue: Can the shipagent/shipowner of the common carrier invoke Article 587 of the
Code of Commerce in order to exempt himself from liability under the principle of
"Limited Liability Rule" (i.e., Article 587 Code of Commerce: Where the
shipowner/shipagent can free itself from liability by abandoning the vessel including
its equipment and freightage earned during voyage)?
Held: NO. Article 587 Code of Commerce only applies when the negligence was
committed solely/only by the captain (without the participation of the
shipowner/shipagent). In the case at bar, it is proven that the shipowner/shipagent
also committed negligence for failure to supervise/oversee the vessel by preventing
the captain from overloading the vessel
5.1.1. Article 586 Code of Commerce:“Shipagent” (i.e., he is the agent of the
shipowner)
He is a person entrusted by the shipowner for the provisioning of a vessel (e.g.,
fuel for vessel, foods and necessities for vessel officers and crews, etc.), or who
represents the vessel in behalf of the shipowner in the port in which the vessel
may be found (e.g., transacting with shippers)
Note: Under the Law on Agency, the act of agent is the act of the principal

 Article 1736 NCC (Duration of observance of extraordinary diligence over the goods)
The EXTRAORDINARY RESPONSIBILITY (extraordinary diligence) of the common
carrier LASTS FROM the time the goods are UNCONDITIONALLY RECEIVED by AND
PLACED IN THE POSSESSION of the common carrier for transportation UNTIL the
same are DELIVERED (actually or constructively) (1) to the consignee (i.e., one who
will receive the goods at the place of destination), or (2) to the person who has a
right to receive the goods - BUT: Without prejudice to the provisions of Article 1738
 Article 1738 (Extraordinary diligence continues when goods stored in warehouse
of common carrier)
The extraordinary liability of the common carrier continues to be operative even
during the time the goods are STORED IN THE WAREHOUSE of the carrier at the
place of destination - UNTIL: The consignee has been ADVISED of the arrival of
the goods AND has had REASONABLE OPPORTUNITY thereafter to remove them
(from the warehouse) or otherwise dispose of them (goods).
 Article 1737 (Extraordinary diligence continues even when goods temporarily
unloaded or stored in transit)
The common carrier's duty to observe extraordinary diligence over the goods
REMAINS in full force and effect even when they are (1) TEMPORARILY UNLOADED
(e.g., broken trip where goods are temporarily unloaded by common carrier and then
later reloaded when it starts again its trip) or (2) STORED IN TRANSIT (goods
stored/left in the vehicle/vessel of the common carrier while on broken trip), UNLESS
the shipper or owner (of the goods) has made use of his RIGHT OF STOPPAGE IN
TRANSITU (i.e., while common carrier in transport, the shipper/owner of goods
communicated to the common carrier to stop delivering the goods to the place of
destination - in which case, the degree of diligence to be observed by common carrier
is no longer extraordinary diligence but diligence of a good father of a family).
Note: Diligence of good father of a family: Reasonable care consistent with that
ordinary prudent person would have observed when confronted with similar
situation (Crisostomo vs. CA, GR 138334, August 25, 2003)
Comments:
1. Macam vs. Court of Appeals, GR No. 125524, August 25, 1999 (p. 49)
Principle: Article 1736 NCC (Duration of observance of extraordinary diligence over
the goods)
The extraordinary responsibility (extraordinary diligence) of the common carrier lasts
from the time the goods are unconditionally received and placed in the possession of
the common carrier for transportation until the same are delivered (actually or
constructively) by the carrier to the consignee (i.e., one who will receive the goods at
the place of destination) or delivered to the person who has a right to receive them
- without prejudice to the provisions of Article 1738 (i.e., common carrier’s
observance of extraordinary diligence even when goods stored at warehouse of
common carrier).
Facts: The shipper Macam (in Philippines) as seller entered into sale of goods with
GPC as buyer (in Hongkong), and the goods to be shipped from Philippines to
Hongkong. Before shipment of the goods, shipper Macam entered into contract with
Solidbank in the Philippines for the latter bank to make advance payment to shipper
Macam for the value of the goods. The buyer GPC (in Hongkong) also entered into
contract with Pakistan Bank (in Hongkong) for the latter bank to pay Solidbank in the
Philippines after the arrival of the goods in Hongkong regarding the amount that
Solidbank advanced to shipper Macam, and subsequently, for the buyer GPC to pay
Pakistan Bank that it to Solidbank. Now, regarding the shipment of the goods from
the Philippines to Hongkong, shipper Macam transacted with the WALLEM (local
agent of common carrier [China Ocean Shipping Co.] in the Philippines). In the bill of
ladings (B/L) issued by the common carrier, it is stipulated therein that the
consignee of the goods in Hongkong is Pakistan Bank and the buyer GPC merely as
notify party (i.e., party to be notified by common carrier when the goods already
arrived in Hongkong). The B/L is therefore given to the consignee Pakistan Bank
(being the consignee as stipulated in the B/L) which B/L subsequently to be
surrendered by the consignee Pakistan Bank to the common carrier before the latter
surrenders the goods to Pakistan Bank in Hongkong. Now, when the goods reached
Hongkong, the common carrier delivered the goods directly to buyer GPC and not to
the consignee Pakistan Bank seemingly in violation of the stipulations in the B/L
(that the common carrier shall deliver the goods to consignee Pakistan Bank being
the consignee). Now the problem, after the buyer GPC received the goods from the
common carrier, the buyer GPC failed to pay consignee Pakistan Bank - in view of
which, the consignee Pakistan Bank refused to pay Solidbank in the Philippines.
Solidbank demanded the common carrier to pay back the value of the goods it
advanced for the shipper Macam on ground that the common carrier violated the
B/L by delivering the goods not to consignee Pakistan Bank but directly to buyer GPC
who is merely a notify party, but the common carrier refused to pay Solidbank,
hence, Solidbank demanded the shipper Macam to pay back the amount it advanced
to him, which shipper Macam complied. Therefore, in order to recover the price of
the goods, shipper Macam demanded payment from the common carrier for the
latter’s failure to comply with the B/L by delivering the goods to the buyer GPC who
is merely a notify party instead to the Pakistan Bank being the consignee.
Issue: Did the common carrier validly delivered the goods directly to the buyer GPC
instead to consignee Pakistan Bank?
Held: YES. Because what Article 1736 provides that the goods can be delivered to the
consignee (Pakistan Bank) or to the person who has the right to receive such goods.
Now, who is this “person who has the right to receive such goods”? Certainly, the
GPC, being the buyer, is a person who has the right to receive the goods from the
common carrier pursuant to Article 1736 – even if GPC was not designated as
consignee in the B/L. In which, case, the common carrier is not liable for misdelivery
of the goods
2. Samar Mining Company vs. Nordeutscher Lloyd, GR L-28673 October 23, 1984 (p.
51)
Facts: Consignee entered into contract of carriage of goods with the common carrier
regarding goods imported by consignee into the Philippines from other country. A
B/L was issued to the consignee and stipulated therein (a) that the common carrier
shall not be liable for damage/loss of goods while the goods not in its actual
custody/possession, and (b) that the common carrier upon its arrival in Manila, shall
tranship the goods from Manila to Davao. Now, after the goods arrived in Manila,
the common carrier unloaded the goods in good order and condition and delivered
the goods to the warehouse of AMCYL in Manila awaiting transhipment of the
goods to Davao (Note: AMCYL is not a warehouse own by the common carrier; it is a
3rd party). The good were however, not delivered to the consignee in Davao.
Consignee filed civil action against the common carrier for damages for the loss of
his goods. However, the common carrier refused to pay on ground that it is
stipulated in the B/L that the common carrier is not liable for the damage/loss of the
goods while not in its actual possession/custody, and in the case at bar, the good
were loss while in the actual possession and custody of AMCYL warehouse
Issue: Is the stipulation in the B/L that the common carrier shall not be liable for the
damage/loss of the goods while not in its actual possession – valid?
Held: YES. This stipulation in the B/L is not against the law, morals, good customs,
public policy or public order
Issue: Article 1736 provides that the extraordinary diligence of the common carrier
begins from the time the goods are unconditionally received and placed in the
possession of the common carrier for transportation until the goods are delivered,
actually or constructively, by the carrier to the consignee, or to the person who has
a right to receive them, without prejudice to the provisions of Article 1738. The
question is, is Article 1736 applies in favor of the common carrier that its duty to
observe extraordinary diligence ceased from the time it delivered the goods to the
consignee in Manila? In other words, was there valid delivery by the common
carrier to the consignee in Manila?
Held: YES. Remember that in the B/L, it is also stipulated that upon arrival of the
goods in Manila, the common carrier shall undertake to tranship the goods from
Manila to Davao. On that note, the moment the goods reached Manila and the
common carrier unloaded the good from the vessel, there was a consignee in Manila
that received the goods, and this consignee is the common carrier itself. Why?
Because it is stipulated in the B/L that once the goods reached Manila, it will be the
common carrier to tranship the goods from Manila to Davao, hence, the common
carrier by transhipping the goods from Manila, it acted as agent-consignee of the
principal-consignee in Davao. And so the common carrier being a consignee,
pursuant to Article 1736, is a person who has the right to receive the delivery of the
goods in Manila. Therefore, the moment the goods reached Manila, the common
carrier is no longer acting as common carrier but merely as agent-consignee of the
principal-consignee in Davao. And being no longer as common carrier but
technically as agent-consignee, it's duty to observe extraordinary diligence ceased
Issue: Article 1736 provides, “without prejudice to the provisions of Article 1738”,
and under Article 1738, “The extraordinary liability of the common carrier (i.e.,
observance of extraordinary diligence) continues to be operative even during the
time the goods are stored in a warehouse of the common carrier at the place of
destination, until the consignee has been advised of the arrival of the goods and has
had reasonable opportunity thereafter to remove them or otherwise dispose of
them.” Now, the question is, in the case at bar, pursuant to Article 1738, should the
common carrier continue to observe extraordinary diligence while goods were inside
the warehouse of AMCYL?
Held: NO. First, when the goods reached Manila, the goods did not yet reach its
place of destination which in this case, Davao. More importantly, the warehouse
does not belong to the common carrier but to AMCYL, a 3rd-party
3. Servando vs. Philippine Steam Navigation Co., GR No. 36481-2, October 23, 1982
(p. 56)
Principle: When the warehouse where goods were stored does not belong to the
common carrier, then common carrier is not bound to observe extraordinary
diligence over the goods while they are stored in said warehouse as it has no control
thereof
Facts: When the goods reached its destination, the common carrier discharged the
goods into the warehouse of Bureau of Customs with the prior consent of the
consignee. The common carrier therefore notified the consignee about the arrival of
the goods and are now in the warehouse of the Bureau of Customs. Later, while the
goods were in the said warehouse, a fire broke out destroying the goods.
Issue: Is Article 1738 applicable against the common carrier as regards the duty of
the common carrier to observe of extraordinary diligence in the vigilance over the
goods while the goods in the warehouse of the common carrier?
Held: NO. The warehouse where the goods were stored is not the warehouse of the
common carrier but rather owned by 3rd party (Bureau of Customs) over which the
common carrier has no control thereof. Hence, the common carrier is not to be
blamed for any damage/loss of the goods while in the warehouse of the Bureau of
Customs
4. Sabena Belgian World Airlines vs. CA, G.R. No. 104685, March 14, 1996 (p. 26)
Facts: “On August 21, 1987, plaintiff was a passenger on board Flight SN 284 of
Airline originating from Casablanca with stopover in Brussels, Belgium, then
afterwhich, flight to Manila. (At the Casablanca airport) Plaintiff checked in her
luggage which contained her valuables for which she was issued Tag No. 71423.
When the airline reached Brussels, the plaintiff stayed overnight in a hotel (i.e.,
stopover) and her luggage was left on board the same airline Flight SN 284 (i.e.,
stored in transit under Article 1737)
When the airline arrived at Manila International Airport on September 2, 1987, her
luggage was missing.
Airline asserts that the loss of the luggage was due to plaintiff’s sole if not
contributory negligence because she did not declare her valuable items in her
checked-in luggage at the flight counter in Casablanca Airport when she checked in
for her flight from Casablanca so as the airline would have advised her to secure an
insurance for her valuable items and required her to pay additional charges
otherwise the airline would have refused acceptance of her baggage as required by
the generally accepted practices of international carriers; that Section 9(a), Article IX
of General Conditions of carriage requiring passengers to collect their checked
baggage at the place of stopover, passenger neglected to claim her baggage at the
Brussels Airport (stopover; overnight in Brussels); that passenger should have
retrieved her undeclared valuables from her baggage at the Brussels Airport since her
flight from Brussels to Manila will still have to be confirmed by the airline company
inasmuch as only her flight from Casablanca to Brussels was confirmed; that Airline
incorporated in all Sabena Plane Tickets, including Sabena Ticket No. 082422-
72502241 issued to passenger in Manila on August 21, 1987, a warning that ‘Items of
value should be carried on your person’ and that some carriers assume no liability for
fragile, valuable or perishable articles and that further information may be obtained
from the carrier for guidance’; that granting without conceding that Airline is liable,
its liability is limited only to US $20.00 per kilo due to passenger’s failure to declare a
higher value on the contents of her checked in luggage and pay additional charges
thereon.
Issue No. 1: Whether the common carrier (Airline) is presumed negligent regarding
the loss of valuables of the passenger
Held: YES. Article 1735 provides that when the loss of the goods is not due to any of
the five closed lists under Article 1734, then the common carrier is presumed at
fault/negligent In the case at bar, the loss of the goods is not due to any of the five
closed lists
Issue No. 2: When did the common carrier's duty to observe extraordinary diligence
began?
Held: Article 1736 provides that the extraordinary diligence of the common carrier
lasts from the time the goods are unconditionally received by and placed in the
possession of the common carrier for transportation until the same are delivered to
the owner of the goods. In the case at bar, the common carrier unconditionally
received the luggage of the plaintiff, and that such luggage has not been received by
the plaintiff at the place of destination which is Manila (obviously, the luggage was
lost).
Issue No. 3: Is the common carrier's duty to observe extraordinary diligence
continues when the plaintiff left the airline and took her hotel at the stopover in
Brussels and left her luggage inside the airline?
Held: YES. Article 1736 provides the common carrier's duty to observe extraordinary
diligence continues even when the goods are store in transitu (i.e., the plaintiff left
her luggage inside the airline at the stopover in Brussels).
Issue No. 4: In order to mitigate its liability for damages, can the airline asserts that
the plaintiff committed contributory negligence for the loss of her luggage under
Article 1741?
Held: NO. Article 1741 provides that "If the shipper/owner of the goods MERELY
CONTRIBUTED to the loss/damage of the goods, BUT the PROXIMATE CAUSE (i.e.,
not proximate and only cause) thereof being still that of the negligence of the
common carrier, the common carrier is liable for damages but equitably reduced.
Now, PROXIMATE CAUSE is that which, by natural and continuous sequence of
events unbroken by any efficient intervening cause, produces injury without which
the result would not have occurred. In the case at bar, the plaintiff did not
contribute to the loss of her luggage because it is not negligence to leave her luggage
inside the airline which we call it "stored in transitu," neither that the plaintiff
contributed to the cause of the loss of her luggage because from the time the
luggage was unconditionally accepted by the airline and placed in its custody in
Casablanca airport, to the time the luggage was stored in transitu inside the airline
at stopover in Brussels, to the time the luggage was discovered loss in Manila, there
was no efficient intervening cause on the part of the plaintiff’s act/omission that
could have been the cause of or even contributed to the loss of the luggage
5. Tabacalera Insurance Co. vs. Court of Appeals, GR No. 119197, May 16, 1997 (p. 32)
Principle: Contributory negligence on the part of the owner of the goods under
Article 1738 when he did not removed his goods from the warehouse of the common
carrier after having been advised of the arrival of his goods despite reasonable
opportunity to do so
Facts: The common carrier issued clean bill of lading (i.e., no annotation by the
common carrier on the bill of lading regarding any defect/character of the goods or
its packing/container) regarding sacks of corn grains consigned to RFM. After the
arrival of the goods at its destination, it is stored at the place of the common carrier,
and then advised/notified the consignee RFM about said arrival - but RFM
committed delays because it did not immediately begin unloading the goods. When
the goods were finally unloaded by RFM from the place of the common carrier, there
were shortage of goods about 26 metric tons.
(1) Issue: What is the effect of common carrier issuing a “clean bill of lading”?
Held: It means that the goods were received by the common carrier in “good
condition.” Hence, the common carrier could no longer allege that it received the
goods in bad order/condition.
(2) Issue: In the case at bar, is the common carrier presumed at fault/negligent?
YES. Under Article 1735, when the cause of the loss/damage on goods is not due
to any of the five closed lists under Article 1734 - then the common carrier is
presumed at fault/negligent
(a) Issue: What is the defense of the common carrier to refute such presumption
of fault/negligence under Article 1735?
Held: Article 1735 provides, common carrier must prove that it observed
extraordinary diligence in the vigilance over the goods
(3) Issue: In the case at bar, was the common carrier able to refute such
presumption of fault/negligence under Article 1735?
Held: NO. Because the no evidence shown by the common carrier that it
observed extraordinary diligence in the vigilance over the goods. In the case at
bar, it is not known who caused the loss of the goods, i.e., it could be due to the
fault/negligence of the common carrier or it could also be due to the delay of
unloading operation of the consignee RFM. Considering that the common carrier
cannot prove that the loss of the goods was due to any of the 5 closed lists under
Article 1734, under Article 1735, the common carrier is therefore presumed
negligent which unfortunately, it was not able to refute such presumption.
(4) Issue: What evidence does the consignee (i.e., receiver of the goods at the place
of destination) has to prove against the common carrier – so that presumption of
fault/negligent attaches against the common carrier?
Held: The consignee has only to prove that he has contract of carriage of goods
with the common carrier, and the goods were received by common carrier in
good condition (or unconditionally), and that the goods arrived with
damages/loss – and afterwhich, the common carrier is now presumed at
fault/negligent. HENCE: It is not automatic that just because the goods arrived
with damage/loss, the common carrier is already ipso jure presumed
negligent/fault
(5) Issue: It is undisputed that the common carrier is presumed negligent not having
able to prove that it observed extraordinary diligence in the vigilance over the
goods. But can the common carrier lessen its liability by proving “contributory
negligence” against RFM?
Held: YES. While it is true that the common carrier was not able to refute the
presumption of negligence for the loss of the goods - NEVERTHELESS: The loss of
the goods was not solely due to the negligence of the common carrier since the
consignee RFM also committed contributory negligence because it did not start
removing operations despite already notified by the common carrier of the
arrival of the goods and had reasonable opportunity to do removed those
goods (Article 1738)
6. Sarkies Tours Philippines, Inc. vs. Court of Appeals, GR No. 108897, October 2, 1997
(p. 40)
Principles:
(a) When the common unconditionally received the goods in good order (i.e., either
by issuing clean bill of lading, or no bill of lading issued – and that no reservation
made by common carrier [e.g., defects of goods, defects on package/container,
etc.]), and the arrival of the goods at the place of destination in bad order
produces presumption that common carrier is at fault/negligent
(b) The failure of the passenger in paying freight charge of his baggage/goods is not
the fault of the passenger - but it is the common carrier’s own lookout
Facts: Passenger boarded the bus (common carrier), and with the help of
employee of the common carrier, the passenger’s three (3) pieces luggage placed
inside the baggage compartment of the bus without paying the corresponding
baggage fare. During the stopover in Daet, it was discovered that one (1) of her
luggage was missing, which loss was caused when the common carrier did not
ensure that bus baggage compartment was securely fastened/locked
Issue: Is the common carrier presumed at fault/negligent?
Held: YES. Under Article 1735, when the loss of the goods is not due to any of the
5 closed lists under Article 1734, then the common carrier is presumed negligent.
In the case at bar, it was proven that the loss was due to a non-secured baggage
compartment of the bus which is among those five closed lists under Article
1734.
Issue: What are those stages where the common carrier is to observe
extraordinary diligence in the vigilance over the goods?
Answer: The stages are three-tiered:
(1) Article 1736: From the time the common carrier unconditionally received the
goods for transportation up to the time the goods received by the person who
has the right to receive
(2) Article 1737: Even during the time goods are temporarily unloaded or stored
in transit
(3) Article 1738: When goods reached its destination and are stored in the
warehouse of the common carrier - until the common carrier advised the
consignee about the arrival of the goods and had reasonable opportunity
after advice to remove them or dispose of them
Issue: What is the legal effect when the common carrier unconditionally received
the goods for transportation (i.e., clean bill of lading) – and the goods are
discovered damaged/loss either along the way or upon arrival at the place of
destination?
Held: The goods having been received unconditionally by the common carrier for
transportation, it means that the goods were received in good order – and as
such, when the goods are discovered damaged/loss at the place of destination,
the presumption is that common carrier is at fault/negligent
Issue: Can the common carrier free itself from liability because the passenger did
not declare his three (3) luggage and correspondingly pay the baggage fare
(freightage) thereof – since the passenger outright placed his three (3) luggage
inside the baggage compartment of the bus though with the help of its
employee?
Held: NO. The failure of the passenger in paying freightage for the three (3)
pieces of luggage is not the passenger's fault but the common carrier’s own
lookout. To make matter worse for the common carrier, it was even the
employee of the common carrier who helped the passenger load the three (3)
pieces of luggage into the bus baggage compartment without such employee
requiring the passenger to have her luggage be declared and pay the
corresponding charge therefor
7. Coastwise Lighterage Corp. vs. Court of Appeals, GR No. 114167, July 12, 1995 (p.
43)
Principle: When the common received the goods in good order (i.e., clean bill of
lading), and when the goods reached its destination, they are already in bad order –
THEN: The common carrier presumed at fault/negligent
Note: Charter party agreement can either be (a) Contract of Affreightment [whether
Voyage Charter or Time Charter], or (b) Bareboat/demise Charter
Facts: The common carrier (vessel) entered into Contract of Affreightment (i.e.,
whether Voyage Charter or Time Charter) with the charterer (i.e., in the case at bar,
the shipper-consignee) to carry the goods of the latter. When the cargo reached its
destination, the cargoes were damaged
Issue No. 1: The shipowner of the common carrier entering into Contract of
Affreightment with the charterer, is the common carrier converted into private
carrier?
Held: NO. Because in Contract of Affreightment (whether Voyage Charter or Time
Charter), the command and navigation of the vessel remains with the shipowner of
the common carrier and not the charterer. IN CONTRAST WITH: Demise/Bareboat
Charter Contract, the command and navigation of the vessel is no longer of the
shipowner but completely transferred by the shipowner to the charterer, hence,
insofar as between the shipowner and demise/bareboat charterer, the shipowner is
converted from being a common carrier to a private carrier (and as such, the
shipowner need only to observe ordinary diligence and not extraordinary diligence)
Note: Suppose, the demise/bareboat charterer used the vessel for transporting
the goods of all those who opt to avail of its transportation services (i.e., open
to the public) - THEN:
(1) The category of the shipowner to that of the demise/bareboat charterer - is
private carrier
(2) The category of the demise/bareboat charterer to that of the shippers - is
common carrier
(3) The relationship between shipowner and shippers is none - because there is
no contractual relationship between them - BUT: Only between the
demise/bareboat charterer and the shippers.
However, the demise/bareboat charterer can have a cause of action against
the shipowner when former received the vessel from the latter without
knowledge of its being unseaworthy
Issue No.2: We now know that in Contract of Affreightment (whether Voyage
charter or Time Charter), the shipowner is still a common carrier and not converted
into private carrier insofar as the relationship between the shipowner and charterer
is concerned - because the command and navigation of the vessel belongs to the
shipowner. The question is, what is then the degree of diligence required of the
shipowner in the vigilance over the goods of the charterer?
Held: Being still a common carrier, pursuant to Article 1733, the shipowner must
observe extraordinary diligence in the vigilance over the goods
Issue No. 3: What legal effect when the shipowner as common carrier received the
goods in good order, but when it reached its destination, the goods are already in
bad order/condition?
Held: The shipowner being still a common carrier, and pursuant to Article 1735, the
cause damage being not one of those 5 closed lists under Article 1734, the common
carrier is presumed at fault/negligent – UNLESS: This presumption is rebutted
proving that it exercised extraordinary diligence in the vigilance over the goods
Issue No. 4: Was the shipowner acting as common carrier able to refute such
presumption of fault/negligence?
Held: NO. Because it was proven that the patron (one who commands the vessel) of
the shipowner is not licensed, hence, the common carrier is unseaworthy for being
manned by incompetent officer (Note: For a vessel to be seaworthy, it must be
adequately equipped for the voyage and manned with sufficient number of
competent officers and crews [Loadstar Shipping Co., Inc. vs. Court of Appeals, G.R.
No. 131621, September 28, 1999])
8. PAL vs. Court of Appeals, GR No. 119706, March 14, 1996 (p. 47)
When the common carrier unconditionally accepts a cargo despite knowledge of its
improper packing, or unconditionally accepts a cargo even without actual
knowledge of such improper packing but apparent by mere ordinary observation
(i.e., implied knowledge) - then the common carrier cannot escape liability in case
such cargo is damaged resulting from said improper packing of the cargo
Note: When common carrier unconditionally accepts goods for transportation and
reached the destination with already loss/damaged goods, then the common carrier
is presumed at fault/negligent
9. Arrastre operator and stevedore – distinguished (p. 47)
Stevedoring refers to the loading of cargo into the vessel at the port of origin, or the
unloading of cargo from the vessel at the port destination – WHILE: Arrastre
operator refers to the transportation of cargo unloaded from the vessel to the
agreed establishment/place (e.g., delivery into the warehouse/place as instructed by
the consignee).
A stevedore is therefore not a common carrier because it is not involved in the
transportation of goods – WHILE: Arrastre operator can be a common carrier for it is
involved in transporting the goods for all who want to avail of its transportation,
hence, must observe extraordinary diligence in the vigilance over the goods pursuant
Article 1733 - and pursuant to Article 1735, the arrastre operator is presumed at
fault/negligence in case of damage/loss of goods not due to any of the 5 closed list
under Article 1734. (Philippine First Insurance Co. vs. Wallem Phils. Shipping Inc. GR
No. 165647, March 26, 2009; p. 48)
10. Article 1737 (Extraordinary diligence continues even when goods temporarily
unloaded or stored in transit)
The common carrier's duty to observe extraordinary diligence over the goods
remains in full force and effect even when they are temporarily unloaded or stored
in transit (goods stored in the common carrier), unless the shipper or owner (of the
goods) has made use of his right of stoppage in transitu.
a. Right of stoppage in transitu
Refers to the right of an unpaid shipper or owner of the goods to stop the goods
in transit - as when the buyer is or becomes insolvent while the goods are being
transported to the buyer.
 Effect of the exercise by the shipper/owner of his right of stoppage in
transitu
It is as if the shipper/owner never parted with the goods he caused to be
shipped, and thereby, the common carrier ceases to be a common carrier but
converted into a mere bailee or depository – and as such, the common carrier
is no longer bound to exercise extraordinary diligence over the goods, but
merely diligence of a good father of a family (i.e., diligence of a man of
ordinary prudence/care, not extraordinary prudence/care)
Note: Diligence of good father of a family: Reasonable care consistent with
that ordinary prudent person would have observed when confronted with
similar situation (Crisostomo vs. CA, GR 138334, August 25, 2003)
b. "Stored in transit"
Explained in the case of Sarkies Tours Philippines, Inc. vs. Court of Appeals, GR
No. 108897, October 2, 1997 (p. 40) and the case of Sabena Belgian World
Airlines vs. CA, G.R. No. 104685, March 14, 1996 (p. 26)
c. "Temporarily unloaded"
It means that the goods are in transport, and the common carrier before reaching
its destination (i.e., in between the place of departure to the place of destination),
it temporarily unloaded the goods from the common carrier, and later, when the
common carrier is to resume its transportation, it again loaded the goods into the
common carrier. Now, during the goods were temporarily unloaded from the
common carrier, the latter is still to observe extraordinary diligence.

 Article 1739 (Exemption of common carrier in times of fortuitous event or act or


enemy in war)
For the common carrier to be completely exempted from liability for the
damage/loss of goods due to natural disaster under Article 1734 (1), the natural
disaster must be the PROXIMATE AND ONLY CAUSE of such damage/loss - BUT:
Before, during and after the existence of the natural disaster, the common carrier
must observe due diligence to prevent/minimize damage/loss of the goods
(otherwise, the damage/loss is NOT ONLY due to natural disaster, instead the
common carrier is deemed to have committed concurrent negligence rendering it
liable for damages); Note: “Due diligence” is the diligence required depending on the
circumstances of person, place and time
NOW: The same duty abovementioned must be observed by the common carrier in
case of damage/loss of goods due to act of the public enemy (in war, whether
international or civil) referred to in Article 1734 (2)
1. Under Article 1739, two requisites that makes the common carrier completely free
from liability for the loss/damage of the goods due to natural disaster
a. The "PROXIMATE AND ONLY CAUSE" of the loss/damage of the goods must be
due to natural disaster only; and
b. That the common carrier exercised due diligence to prevent/minimize
loss/damage before, during and after the natural disaster
(1) "Due diligence" required of the common carrier before, during and after the
natural disaster (explained)
It is submitted that "due diligence" is the diligence required by law according
to time and circumstances of the natural disaster.
(2) "Due diligence" required of the common carrier in case of public enemy
referred to under Article 1734 No. 2 (explained)
It is submitted to be same as the due diligence required before, during and
after the natural disaster.
2. Explaining the two requisites together, (1) The "PROXIMATE AND ONLY CAUSE" of
the loss/damage of the goods must be due to natural disaster only; and (2) That the
common carrier exercised DUE DILIGENCE to prevent/minimize loss/damage
BEFORE, DURING AND AFTER the natural disaster
For the common carrier to be completely free from liability for damages, the two
requisites must concur.
FIRST REQUISITE: That the "proximate and only cause" of the loss/damage was due
to natural disaster/public enemy ONLY
Proximate cause: Is that which, in natural and continuous sequence of
events, unbroken by any efficient intervening cause, produces loss/damage
to the goods - such that without such event, the loss/damage of the goods
would not have happened
But proximate cause of the loss/damage to goods due to natural
disaster/public enemy is not enough for free the common carrier from
liability - but must also be that the natural disaster/public enemy is "only
cause" of such loss/damage to goods. Meaning the common carrier did not
commit any contributory/intervening negligence to the loss/damage to
goods alongside the natural disaster/public enemy - but solely and purely
due to natural disaster/public enemy
SECOND REQUISITE: That the common carrier exercised DUE DILIGENCE to
prevent/minimize loss/damage BEFORE, DURING AND AFTER the natural disaster
If before, during and after the natural disaster/public enemy, the common
carrier did not exercise "due diligence", then while the proximate cause of
the loss/damage to goods was due to natural disaster/public enemy,
nevertheless, such natural disaster/public is not the only cause of the
loss/damage of goods - because also with the intervening negligence by the
common carrier committed before, during and after the natural
disaster/public enemy - which thereby renders the common carrier liable for
damages
3. But suppose before the occurrence of the natural disaster or public enemy that
caused loss/damage to the goods, the common carrier already incurs delay due to
its negligence - is the common carrier liable for damages?
YES. Article 1740: If the common carrier negligently incurs in delay in transporting
the goods, a natural disaster shall not free such carrier from responsibility/liability
a. "Negligently incurs delay" (explained)
Of course if the delay of transportation of goods was solely because of natural
disaster or public enemy, the common is not liable for damages.
However, when the delay due to negligence of the common carrier preceded the
natural disaster or occurrence of public enemy, then the common carrier is liable
for damages due to delay - despite the goods are loss/damaged due to natural
disaster/public enemy
(1) Examples of common carrier “already incurs delay” in transporting goods
due to its “negligence”
Negligence by deviating from its designated route without valid reason, tire
exploded (which Supreme Court decided not a fortuitous event),
unseaworthiness of the vessel, broken part of the vehicle common carrier due
to insufficient inspection, etc.
b. Liability of common carrier due to "mere delay" - even if the goods are not
loss/damaged
There is no question that when the delay was due to negligence of the common
carrier, the latter is liable for damages. However, there are cases where the
common carrier is liable due to "pure delay" or by reason of "mere delay alone"
- even if the goods are not loss/damaged
(1) When there is no agreement as to date of arrival of the goods
The goods must arrive at the place of destination within reasonable time
(Maersk Line vs. Court of Appeals, GR No. 94761 May 17, 1993 [p.60] - citing
the case of Saludo Jr. Vs. CA, GR 95535, March 23, 1992)
(2) When the agreement on arrival of the goods is merely estimated
The goods must arrive at the place of destination within reasonable time
reckoned from the estimated date of arrival
(3) When there is agreement as to specific date of arrival of the goods at the
place of destination
Common carrier is bound to deliver the goods on date as agreed - and liable
for any delay regardless what cause the delay. This because what controls is
their agreement which is the private law existing between the parties
(Maersk Line vs. Court of Appeals, GR No. 94761, May 17, 1993; p. 60)
BUT: If there is delay, plus loss/damage to goods, the common carrier would be
liable for damaged for both delay and loss/damage on goods

 Article 1741 (Contributory negligence on the part of shipper/owner of the goods)


When the shipper/owner of the goods merely contributed to the damage/loss of the
goods, but the proximate cause (but not the only cause) of such damage/loss is still
due to the negligence/fault of the common carrier - THEN: Then the common carrier
would still be liable but equitably reduced (viz., both the common carrier and
shipper/owner of the goods shall be equitably liable depending on the damage/loss
caused by each - which we call it "contributory negligence")
1. Article 1739 in contrast with Article 1741 - insofar as "natural disaster" is
concerned
Article 1739 (Exemption of common carrier in times of natural disaster/public enemy
in war)
For the common carrier to be completely exempted from liability for the
damage/loss of goods due to natural disaster under Article 1734 (1), the natural
disaster must be the PROXIMATE AND ONLY CAUSE of such damage/loss - BUT:
Before, during and after the existence of the natural disaster, the common carrier
must observe due diligence to prevent/minimize damage/loss of the goods
Note: The same rule/duty abovementioned must be observed by the common
carrier in case of damage/loss of goods due to act of the public enemy (in war,
whether international or civil)
MEANING: Unlike Article 1739, under Article 1741, the proximate and only cause of
the damaged/loss of the goods is not due to natural disaster - but the shipper’s
negligence also contributed, however, the proximate cause (but not the only cause)
of the damage/loss is still that of the common carrier and not of the shipper
2. “Proximate cause”
It is natural and continuous sequence of events that produced injury/damage/loss
uninterrupted by any efficient intervening cause – so that without such natural and
continuous sequence of events, the injury/damage/loss would not have happened
3. Explaining “Contributory negligence” – in relation to transportation of goods by
common carrier
When the damage/loss of the goods is caused both by the fault/negligence of the
common carrier and the shipper, then the totality of the damage/loss is not to be
borne by the common carrier alone. The liability of the common carrier is equitably
reduced - and because of this equitable reduction of liability, its liable only for the
damage/loss proximately caused by its fault/negligence, and the shipper is liable for
his own damage/loss proximately caused by his own fault/negligence. Now, in the
case of Lambert vs. Castillon, GR 160709, February 23, 2005 regarding contributory
negligence, the defendant (e.g., common carrier) must thus be held liable only for
the damages actually caused by his negligence. The determination of the amount of
reduction of liability varies depending on the circumstances of each case.
4. Tabacalera Insurance Co. vs. Court of Appeals, GR No. 119197, May 16, 1997 (p. 32)
Principle: Doctrine of Contributory Negligence
Facts: The common carrier issued clean bill of lading regarding sacks of corn grains
consigned to RFM. After the arrival of the goods at its destination, the common
carrier advised/notified the consignee RFM about said arrival but did not
immediately begin unloading the goods so that there were unreasonable delays of
unloading. When the goods finally unloaded by RFM, there were already shortage of
goods of about 26 metric tons.
(a) Issue: Is there presumption of fault/negligence on the part of the common
carrier?
Held: YES. Considering that cause of the loss is not proven (but the loss is proven),
hence, pursuant to Article 1735, when the cause of the loss is not due to any of
the five closed list under Article 1734, then the common carrier is presumed at
fault/negligence in case of loss/damage to goods
Note: The common carrier was not able to refute such presumption of
fault/negligent by clear and convincing evidence
(b) Issue: In the case at bar, does the consignee RFM committed “contributory
negligence”?
Held: YES. The loss of the goods is not solely due to common carrier’s
fault/negligence. Pursuant to Article 1741, while it is true that the proximate
cause of the is due to common carrier's fault/negligence - however, that
fault/negligence of the common carrier is not the only cause because the
consignee also committed negligence that contributed to the fault/negligence of
the common carrier (which we call it “contributory negligence” on the part of the
consignee). This contributory negligence of the consignee occurred when despite
having been seasonably notified by the common carrier about the arrival of the
goods, and having been given reasonable opportunity to get his goods, the
consignee did not do. In this case, 40% of the damage/loss should be borne by
consignee RFM proximately caused by his own fault/negligence of delayed
unloading - AND: 60% by the common carrier proximately caused by its own
fault/negligence

 Article 1742 (Due diligence by common carrier even in faulty package or character of
goods; Note: Relate Article 1742 with Article 1734 [4])
Even if the deterioration/damage/loss of the goods is caused by the character of the
goods, or the faulty(defective) packaging/containers of the goods – nevertheless,
the common carrier still has the obligation to observe DUE DILIGENCE to
lessen/prevent further damage/loss
Note: This "due diligence" is similar to Article 1739 wherein despite the existence of
fortuitous event/natural disaster, the common carrier must still observe due
diligence before/during/after the fortuitous event to lessen/prevent further
damage/loss of the goods
Note: “Due diligence” is the diligence required depending on the demand of
circumstances of person, place and time
1. Calvo vs. UCPB General Insurance Co., 379 SCRA 510, March 19, 2002 (p. 63)
Facts: The shipper was the one who made the packing/container of the goods. When
the shipper contracted with the common carrier for the transportation of his goods,
the common carrier has knowledge about the defective/improper packing/container
of the goods, or the common carrier has no knowledge about such
defective/improper packing/container but such defective/improper
packing/container is apparent (visible to the eye) upon ordinary observation – but
despite of which, the common carrier unconditionally received the goods for
transportation (viz., clean bill of lading [i.e., no annotation written by the common
carrier on the B/L it issued regarding any defect in the packing/container]). When the
goods arrived at destination, they were already damaged
Issue: What degree of diligence should be observed by the common carrier – should
it be due diligence to lessen/prevent the damage/loss pursuant to Article 1742
considering that the common carrier alleged defective packing/container of the
goods?
Held: NO. Diligence required is extraordinary diligence. While it is true that Article
1734 (4) exempts common carrier from liability when the damage/loss of the goods
due to character of the goods, or defect is packing or its container – NEVERTHELESS:
The moment common carrier unconditionally received the goods (i.e., without
protest raised by the common carrier about any defect in the packing/container) for
transportation despite knowledge about the character of the goods or
defective/improper packing/container of the goods, or the common carrier has no
knowledge about such defective/improper packing/container but such
defective/improper packing/container is apparent upon ordinary observation –
then, it is as if the common carrier received the goods in good order (i.e., as if the
goods have no defect in character/packing/container) - and with that, pursuant to
Article 1735 when the goods is loss/damaged is not due to any of the 5 closed list
under Article 1734, then the common carrier is presumed at fault/negligence, unless
it proved EXTRAORDINARY DILIGENCE. This presumption the common carrier not
able to rebut, neither it proved it exercised extraordinary diligence.
Note: Under Article 1736, when the common carrier unconditionally received the
goods, it must observe extraordinary responsibility (diligence) beginning from
unconditional receipt of the goods up to the time delivered to the consignee
Issue: Is there presumption of fault/negligence against the common carrier?
Held: YES. As mentioned, under Article 1735, when the goods is loss/damaged is not
due to any of the 5 closed list under Article 1734, then the common carrier is
presumed at fault/negligence, unless the common carrier proves it observed
extraordinary diligence to prevent such loss/damage.
Issue: When then the common carrier under the law is not liable for damages and
not presumed at fault/negligence for the loss/damage of the goods due to its
character or defect in packing/container?
Answer: When the common carrier before accepting the goods, he gave his protest
as to the character of the goods (e.g., perishable), or protest as to the defect in
packing/container made by the shipper - THEN: The common carrier is not presumed
at fault/negligence pursuant to Article 1735 because the loss/damage is due to one
of the 5 closed list under Article 1734 [4] (i.e., loss/damage of goods due to its
character or defect in packing/container), and hence, not liable for any damages
because the loss/damage is due to character of the goods or defect in
packing/container pursuant to Article 1734 [4]
1.1. Philippine Charter Insurance vs. M/V National Honor, 463 SCRA 202, July 8,
2005 (p. 63)
The common carrier received from shipper goods sealed and packed in a
wooden container (viz., it was the shipper who sealed and packed the goods in
a wooden container and then the common carrier merely received it for
transportation). The contents inside the wooden crater cannot be seen by the
common carrier from outside. The common carrier issued a B/L stating therein
“shipment in apparent good condition.” When the goods reached destination,
and while the wooden crater is being lifted for unloading, the bottom of the
wooden crater broke that caused the goods plunged on the ground causing
damage.
Issue: When the goods arrived in bad order, is there presumption against the
common carrier?
Held: zzzYES. Article 1735 (Presumption of negligence/fault on the part of
common carrier): In all cases OTHER THAN those mentioned in Nos. 1, 2, 3, 4,
and 5 of the preceding article (Article 1734) – IF: The goods are lost, destroyed
or deteriorated, common carriers are PRESUMED to have been at fault or to
have acted negligently, UNLESS they prove that they observed extraordinary
diligence as required under Article 1733.
Issue: When the common carrier received the goods sealed and packed by the
shipper himself, and the common carrier issued B/L stating therein that the
goods in “shipment in apparent good condition”, is there any presumption
against the common carrier?
Held: YES. But this presumption brought about by the words "shipment in
apparent good condition" is only to the “external condition” of the shipment
meaning it refers to the container woods that contained the goods as it is
visible & apparent to the eye of the common carrier which in this case the
container is apparently in good condition. In the case at bar, the crater woods
that contained the sealed goods were made by the shipper himself, and as the
common carrier received it, the common carrier sees the external condition of
the shipment which is the wooden crater in apparent good condition, the
common carrier then issued B/L stating therein in good faith "shipment in
apparent good condition", viz., the wooden crater in good condition as it is
"apparent" to the common carrier because there is no apparent defect on the
container made of wooden crater. It would have been different when the B/L
generally stated, the wooden crater "in good order/condition" without the
word "apparent."
Issue: In the case at bar, pursuant to Article 1735, the common carrier is
presumed negligent when the cause of the damage/loss of the goods is not due
to any of the five closed list under Article 1734. In the case at bar, is the
common carrier liable for damages?
Held: NO. Because pursuant to Article 1734 (4), the damage was due to defect
in the container of the goods.
Note: In this case, considering that the common carrier not liable for damages,
it is assumed that the common carrier also observed "due diligence" to
prevent/minimize loss/damage of the goods pursuant to Article 1742
2. Article 1742: "Even if the deterioration/damage/loss of the goods is caused by the
character of the goods, or the faulty(defective) packaging/containers of the goods –
nevertheless, the common carrier still has the obligation to observe due diligence to
lessen/prevent further damage/loss"
2.1. Iron Bulk Shipping Philippines Co. vs. Remington Industrial Sales Corp., 417
SCRA 229, December 8, 2003 (p. 64)
Even when at the time the common carrier received steel sheets (goods) to have
been covered with rust due to natural character of the iron to get rust all the
more when exposed to sea, nevertheless, pursuant to Article 1742, the common
carrier must still exercise due diligence to lessen/prevent further deterioration
of the steel. In this case, , the common carrier in observing due diligence, it
should have applied additional safety measures to make sure the iron sheets
protected from (further) corrosion such that the common carrier cannot assert
that the character of the goods being iron, is prone to rusting especially so
when exposed the salty nature of the sea. The Supreme Court even applied
Article 1736 which pronounced, "This observance of extraordinary responsibility
(i.e., due diligence) lasts from the common carrier received the goods until
delivered to the consignee either constructively/actually."

 Article 1743 (Common carrier not liable for order of public authority who has power
to issue such order)
If through the order of public authority the goods are seized/destroyed, the common
carrier is not responsible, provided said public authority had power/authority to
issue such order.
Note: Connect this with Article 1734 (5)
1. zzzGanzon vs. Court of Appeal, GR No. L-48757, May 30, 1988 (p. 64)
Principle: In order to excuse the common carrier from liability under Article 1734 (5)
NCC, the order of competent public authority must be lawful. Now, if such order is
unlawful, the common carrier can still free itself from liability when such order
completely overpower the will of the common carrier (force majeure; i.e., public
authority acted with grave or irresistible threat, violence or force)
Facts: The captain of common carrier dumped the goods (scrap iron) into the sea
upon order of the mayor accompanied by three armed policemen
Issue: Is the common carrier presumed negligent/at fault?
Held: YES. Because the damage/loss of the goods is not due to any of the five closed
list under Article 1734, hence, pursuant to Article 1735, the common carrier is
presumed negligent/at fault
Issue: In the case at bar, what remedy has the common carrier to free itself from
liability?
Held: It must either prove that:
a. The order of the Mayor is lawful;
b. Even the order of the Mayor is unlawful, it must prove that the captain of the
common carrier cannot do anything because the Mayor acted with grave or
irresistible threat, violence or force (i.e., force majeure)
Issue: Is the order of the Mayor lawful?
Held: NO. It is unlawful because it is obviously unlawful to dump the goods into the
sea
Issue: Granting that the order of the Mayor is unlawful, is the order of the Mayor
deemed force majeure?
Held: NO. In order to constitute force majeure, the Mayor should have acted with
grave or irresistible threat, violence or force, thereby completely overpower the will
of the captain of the common carrier rendering him a mere instrument. In the case
at bar the mere fact that the mayor was accompanied by three (3) armed
policemen, is not sufficient to render the will of the captain overpowered without
force/intimidation actually committed against the captain (e.g., without the any or
all of the three armed men pointed their gun against the captain)

 Article 1744 (Agreement as to vigilance over goods less than extraordinary diligence)
A stipulation between the common carrier and the shipper or owner that the former
shall only observe degree of vigilance over the goods less than extraordinary
diligence is valid (e.g., diligence of a good father of a family otherwise known also as
ordinary diligence) – PROVIDED:
Note: Diligence of good father of a family: Reasonable care consistent with that
ordinary prudent person would have observed when confronted with similar
situation (Crisostomo vs. CA, GR 138334, August 25, 2003)
(1) The agreement is in writing and signed by the shipper or owner of the goods
(Note: One of the exceptions to the general rule that oral contract is binding);
(2) The agreement is supported by a valuable consideration other than the
transportation service rendered by the common carrier; and
(3) The agreement is reasonable, just and not contrary to public policy
Comments:
1. Question: If the common carrier and the shipper validly entered into agreement that
the former shall observe only ordinary diligence – the question is, if the goods were
damaged/loss – would there be presumption of fault/negligence under Article 1735
against the common carrier?
Answer (Opinion): NO. Article 1735 provides "common carriers are presumed
negligent unless it observed extraordinary diligence." Hence, by legal implication
therefore, the common carriers are presumed negligent/at fault because of the high
degree in the vigilance over the goods which is extraordinary diligence. So, if the
diligence agreed is only ordinary diligence, the common carrier is not presumed
negligent/at fault in case of damage/loss of the goods
2. “In writing and signed by the shipper or owner”
This is one of the exceptions to the general rule that oral contract is binding. Under
this Article 1744, the agreement must be in writing
3. “Supported by a valuable consideration - other than the transportation service
rendered by the common carrier
Examples that are allowed: Discount/reduction in the freightage because they are
"valuable consideration" (Civil Code, Book V, Justice Edgardo Paras, 14th Edition
2000, p. 490)
(a) Loadstar Shipping Co. vs. Court of Appeals, GR 131621, September 28, 1999 (p.
68)
There are three (3) kinds of stipulations/agreements have often been made in a
bill of lading.
(1) FIRST: Exempting the common carrier from any and all liability for
damage/loss caused by the common carrier's own negligence
Example: The transportation of the goods shall be "at shipper's/owner's own
risk".
(2) SECOND: Unqualified limitation of the common carrier's liability for damages
to an agreed limited/lesser liability
Example: The agreement simply states: "The common carrier's liability is
limited only to the value of the goods", or "The common carrier's liability is
limited only to P500." This is an "unqualified" limitation of liability because
there is no valuable consideration given by the common carrier in exchange to
the limited liability - viz., there is no reciprocity
(3) THIRD: Qualified limitation of the liability for damages of the common carrier
to an agreed limited/lesser liability
Examples of agreement under a "qualified" limitation of common carrier's
liability:
(a) Agreement that the common carrier limits its liability to a reasonable
amount - unless the shipper declares a higher value of the goods so that
shipper will be charged for a higher freightage amount
(b) Article 1749: A stipulation that the common carrier's liability is limited to
the “value of the goods "as written on the B/L – UNLESS: The shipper or
owner of the goods declares a greater/higher value of the goods (for a
higher freightage) - is binding
HERE: The FIRST and SECOND stipulations are VOID as being contrary to public
policy, and also there is "no valuable consideration" given to the shipper for the
latter in agreeing to shipper's/owner's own risk or agreeing to common carrier's
limited liability for damages. WHILE: The THIRD stipulation is valid because there
is "valuable consideration" given by the common carrier in favor of the
shipper/owner of the goods for the common carrier's limited liability, i.e., at
times, the shipper undervalues his goods in order to reduce the freightage,
hence, the common carrier gives the shipper two (2) options, i.e., if the shipper
agrees to declare the true/higher value of his goods, then the common carrier
cannot limit its liability, but if the shipper undervalue his goods to in order to pay
lower freightage, then the common carrier can validly (proportionately) limit its
liability
4. “Reasonable, just and not contrary to public policy”
Question: Article 1744 provides that diligence must be less than that of the
"extraordinary" diligence. The question is, can it be stipulated that the degree of
diligence is “less than 'ordinary' diligence”?
NO. Article 1745 (4) provides, it is unreasonable, unjust and contrary to public policy
when common carrier exercise a degree of diligence less than “ordinary
diligence/diligence of good father of a family” in the vigilance over the good. Hence,
being against public policy, such agreement is VOID
Note: Diligence of good father of a family: Reasonable care consistent with that
ordinary prudent person would have observed when confronted with similar situation
(Crisostomo vs. CA, GR 138334, August 25, 2003)
Question: In determining whether the agreed limited liability of the common carrier
is “reasonable, just and not against public policy” – what are things that you should
consider?
Answer: Consider (1) Article 1745 referring to void stipulations for being
unreasonable, unjust or against public policy, (2) Article 1746 referring to refusal of
common carrier to transport the goods unless the shipper agrees limited liability of
the common carrier, and (3) Article, 1751 referring to situation that the common
carrier has no competitor in the transportation of goods, which situation is taken
advantage of by the common carrier in wresting the consent of the shipper to agree
to limited liability of the common carrier
 Article 1745 (Stipulations that are VOID being unreasonable, unjust and contrary to
public policy)
Any of the following or similar stipulations are void for being unreasonable, unjust
and contrary to public policy:
(1) Stipulation that the goods are transported at the risk of the owner or shipper
(i.e., even if the common carrier is negligent)
(2) Stipulation that the common carrier will not be liable for any damage/loss of the
goods (i.e., even if the common carrier is negligent)
(3) Stipulation that the common carrier need not observe any diligence in the
custody/vigilance of the goods;
(4) Stipulation that the common carrier shall exercise a degree of diligence less than
ordinary diligence in the vigilance over the goods (i.e., less than good father of a
family, or of a man of ordinary prudence/diligence)
Note: Diligence of good father of a family: Reasonable care consistent with that
ordinary prudent person would have observed when confronted with similar
situation (Crisostomo vs. CA, GR 138334, August 25, 2003)
(5) Stipulation that the common carrier is not responsible for the acts or omission of
its own employees (i.e., even if the its employee is negligent)
(6) Stipulation that the common carrier's liability is dispensed/limited for acts of
thieves, or robbers who do NOT ACT with grave or irresistible threat, force or
violence (Note: Such grave/irresistible threat, force or valance must be upon
person and not upon things);
(7) Stipulation that the common carrier is not liable for damage/loss of the goods
because of defective condition of its vehicle/ship/airplane or other equipment
used in the contract of carriage
1. "Stipulation that the goods are transported at the risk of the owner or shipper" (i.e.,
even if the common carrier is negligent)
Loadstar Shipping Co. vs. Court of Appeals, GR 131621, September 28, 1999 (p. 68)
Facts: Common carrier received goods for transport. Along the voyage, the vessel
sank along with its cargoes. In the B/L, is it stipulated that the goods are to be
transported at “owner’s risk.”
Issue: Is the stipulation valid?
Held: NO. Article 1745 (1) provides Stipulation that the goods are transported at the
risk of the owner or shipper is void for being unreasonable, unjust and contrary to
public policy
2. “Stipulation that the common carrier's liability is dispensed/limited for acts of
thieves, or robbers who do NOT ACT with grave or irresistible threat, force or
violence” (upon person)
2.1. Pedro De Guzman vs. Court of Appeals, GR No. L-47822, December 12, 1988
(p. 71)
Principles: Force majeure exempts common carrier from liability – provided the
robbers/hijackers acted with grave or irresistible threat, violence or force
Facts: The truck (common carrier) was hijacked by armed men and took the
truck including its cargo. Shipper filed civil case against the common carrier.
Pending the civil case, the owner of the common carrier filed criminal action
against the robbers, where they were held guilty beyond reasonable doubt and
in fact, the Judgment of Conviction even ruled that the robbers acted with
irresistible force.
(a) Issue: Is the act by armed men deemed as force majeure?
Held: YES. Because the robbers acted with grave or irresistible threat,
violence or force as this in fact even ruled by the RTC in criminal action
finding the robbers guilty beyond reasonable doubt
(b) Issue: Despite existence of force majeure, is the common carrier still
presumed negligent?
Held: YES. Because Article 1735 provides that the common carriers is
presumed negligent when the cause of the damage/loss (in this case, force
majeure) is not included in the 5 closed list under Article 1734 unless it
exercised extraordinary diligence
(c) Issue: If the common carrier is presumed at fault/negligence and must
observe extraordinary diligence even if there is force majeure, the question
is, what is then the remedy of the common carrier to free itself from
liability?
Held: Common carrier should prove that the cause of the damage/loss of
the goods is due to force majeure, i.e., robbers acted with grave or
irresistible threat, violence or force - because how could the common
carrier observe extraordinary diligence if it is prevented by the grave or
irresistible threat, violence or force act of the robbers
2.2. Bascos vs. Court of Appeals, GR 101089, April 7, 1993 (p. 75)
Facts: CIPTRADE (it is not a common carrier but merely a contractor) undertook
to transport the goods of the JIBFAIR. CIPTRADE (being not a common carrier)
subcontracted BASCOS (common carrier) to transport the goods of JIBFAIR.
BASCOS failed to deliver the goods. CIPTRADE paid JIBFAIR because of their
contract that CIPTRADE will pay JIBFAIR in case of theft, hijacking/robbery, and
non-delivery of the goods. Now, CIPTRADE having been subrogated, filed civil
action against BASCOS for breach of contract of carriage. BASCOS in attempt to
be free from liability, alleged that the cargo truck was hijacked along the way.
Pending the civil case, BASCOS filed criminal case for robbery against the
accused, but the criminal court has not yet reached final Judgment on the
criminal case.
In the civil case filed by CIPTRADE against BASCOS, the owner of the BASCOS
common carrier testified on his own Affidavit about hijacking/robbery,
however, his Affidavit is based on what has been told her by his truck helper -
hence, the testimony of the owner of BASCOS is hearsay. When such Affidavit
of the owner of BASCOS common carrier was formally offered in evidence in
court, the shipper failed to object – hence, it was admitted in evidence because
it is relevant pursuant to Rule 128 Section 3 Rules on Evidence (but its probative
evidentiary value is a different matter). Now the question, did such Affidavit of
the owner of BASCOS common carrier proved that the act of the hijackers was
grave or irresistible threat/force/violence
Held: NO. There is stark difference between admitted evidence and the
probative evidentiary value of such evidence. In replete jurisprudential laws,
hearsay evidence though admitted in evidence for lack of objection,
nevertheless, is wanting of evidentiary value. What should have been done by
the common carrier is to present its truck helper who has personal knowledge
about the hijacking and prove that the act of the hijackers/robbers was
grave/irresistible threat, force/violence

 Article 1746 (When can shipper can annul the agreement he entered into regarding
limited liability of the common carrier)
When shipper/owner of the goods entered into agreement with common carrier
regarding the latter's limited liability - the shipper/owner may (extrajudicially) annul
such agreement when the common carrier refused to transport the goods unless the
shipper/owner of the goods agrees to common carrier's limited liability
1. Article 1746 – explained
The contract of carriage is already perfected, the reason why Article 1746 says “may
be annulled by shipper” (i.e., valid until annulled).
As regards "the shipper may annul", it means that the contract limiting liability is
merely voidable and not void, viz., valid until annulled - HENCE: The shipper must
communicate to the common carrier that he already annulled the agreement
regarding limited liability of the common carrier before the goods are transported by
the common carrier
As regards the method of annulling the contract of limited liability, the shipper can
annul it extrajudicially without need of filing action (Civil Code, Book V, Justice
Edgardo Paras, 14th Edition 2000, p. 492). This is an exception to the general rule
under Article 1390 2nd Paragraph NCC that voidable contract can only be annulled
by judicial action
2. Who can annul the contract of carriage?
Article 1746 gives only the shipper/owner of the goods (consignee-owner) the right
to annul the agreement
3. Under Article 1746, why the shipper can annul the contract/agreement limiting the
common carrier's liability?
Since the shipper/owner of the goods was constrained to agree to such limitation of
liability because the common carrier refused to carry the goods unless the
shipper/owner of the goods agrees to such limited liability - in which case, there is
some kind of UNDUE INFLUENCE that vitiated the consent of the shipper thereby
making the agreement as voidable
Note: Article 1330 NCC: A contract where consent is given through mistake, violence,
intimidation, undue influence, or fraud is voidable.
 When can there be undue influence?
Article 1337 NCC: There is undue influence when a person takes improper
advantage of his power over the will of another, depriving the latter of a
reasonable freedom of choice. The following circumstances shall be considered:
the confidential, family, spiritual and other relations between the parties, or the
fact that the person alleged to have been unduly influenced was suffering from
mental weakness, or was ignorant or in financial distress

 Article 1747 (Agreement common carrier’s limiting liability rendered ineffective in


case of unjustified delay or change of stipulated/usual route)
Even if there is (valid) agreement limiting common carrier’s liability, this agreement
cannot be availed of by the common carrier in case the goods damaged/loss –
WHEN:
(a) The common carrier delayed in transporting the goods - without just cause; or
(b) The common carrier changed the agreed route, or if no agreed route but the
common carrier changed its usual route – without just cause
1. “The common carrier delayed in transporting the goods - without just cause”
Examples of causes that justified the delay: The 5 closed list under Article 1734,
force majeure, rally/riots along the road/highway (Article 1748), , traffic along the
way, etc.
2. "The common carrier changed the agreed route, or if no agreed route but the
common carrier changed its usual route – without just cause "
Examples of causes that justified the delay: The 5 closed list under Article 1734,
force majeure, rally/riots along the road/highway (Article 1748), traffic along the
way, etc.
3. When should the goods arrived at its destination (Saludo, Jr. vs. Court of Appeals,
GR 95536, March 23, 1992 [pp. 78-79])
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. 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... notwithstanding any accident or delay by inevitable necessity
Hypothetical question: Suppose there is delay on the part of the common carrier,
but nevertheless no damage on the goods – the question is, the common carrier
still liable for damages?
Answer: YES. Not for damage/loss of goods as there is none, but under Article
1170 NCC: Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof,
are liable for damages
Another issue in the case: Customary that before the common carrier issues B/L, the
goods must be delivered to it by the shipper. Suppose the common carrier issued B/L
even if it did not yet receive the goods for transport – is there a valid contract of
carriage?
Held: YES. There is no law that requires that the receipt of goods and issuance of B/L
must be simultaneous or that the goods be received first before issuance of B/L.
However, once B/L is issued by the common carrier, it creates presumption that the
common carrier received the goods but rebuttable by contrary evidence - such that if
the common carrier able to prove that while it is true that it issued B/L nevertheless,
the shipper did not really deliver the goods to it – hence, there is no contract of
carriage