Transportation Law Cruz v. Sun Holidays, Inc., (2010). Art.
Holidays, Inc., (2010). Art. 1732, CC defining "common (b) Standard diligence required of the carrier; and
I. Introduction
1. Governing Laws
(a) Art. 1732 to 1763, CC
(b) Sec. 349-379, 573 to 736 and 806-869, Code of Commerce
 In case of conflict between the two (2) sets of laws, the Civil
Code, being the later law, generally prevails.
 There are special laws that also govern particular cases such
as:
(a) Public Service Act
(b) COGSA
(c) Land Transportation and Traffic Code
2. Concept of “Common Carrier”
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
Caltex (Phil.), Inc. v. Sulpicio Lines, Inc., (1999). A common carrier
is a person or corporation who may choose to employ and to
remunerate him.
First Philippine Industrial Corp. v. CA, (1998). A common carrier is
one who holds himself out to the public as engaged in the
business of transporting persons or property from place to place,
for compensation, offering his services to the public generally.
Perena v. Zarate, (2012), BERSAMIN. A carrier is a person or
corporation who undertakes to transport or convey goods or
persons from one place to another, gratuitously or for hire.
The true test for a common carrier is not the quantity or extent of
the business actually transacted, or the number and character of
the conveyances used in the activity, but whether the undertaking
is a part of the activity engaged in by the carrier that he has held
out to the general public as his business or occupation.
Despite catering to a limited clientèle, the Pereñas operated as a
common carrier because they held themselves out as a ready
transportation indiscriminately to the students of a particular
school living within or near where they operated the service and
for a fee. As such, there were bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the
circumstances of each case.
carriers" has deliberately refrained from making distinctions on
whether the carrying of persons or goods is the carrier’s principal
business, whether it is offered on a regular basis, or whether it is
offered to the general public. From the nature of their business
and public policy, common carriers are bound to observe
extraordinary diligence for the safety of the passengers
transported by them according to all the circumstances of each
case.
Crisostomo v. CA, (2003). Travel Agent Not a Common Carrier -
By definition, a contract of carriage or transportation is one
whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one place
to another for a fixed price. Such person or association of persons
are regarded as carriers and are classified as private or special
carriers and common or public carriers.
A travel agent is not a common carrier since he does not
undertake to transport a person from one place to another, but
simply to make travel arrangements in their behalf, which
includes the procuring of tickets and facilitating travel permits or
visas as well as booking customers for tours. A travel agent is
bound to observe the due diligence of a good father of a family
and not the extraordinary diligence imposed on common carriers.
First Phil. Industrial v. CA, (1998). The test for determining
whether a party is a common carrier of goods is:
(1) He must be engaged in the business of carrying goods for
others as a public employment, and must hold himself out as
ready to engage in the transportation of goods for person
generally as a business and not as a casual occupation;
(2) He must undertake to carry goods of the kind to which his
business is confined;
(3) He must undertake to carry by the method by which his
business is conducted and over his established roads; and
(4) The transportation must be for hire.
An entity engaged in carrying of petroleum products over its
pipeline network for hire as a public employment is deemed to be
a common carrier, because it undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its
services, and transports the goods by land and for compensation.
The fact that it has limited clientele does not exclude it from the
definition of a common carrier.
(a) Common Carrier v. Private Carrier
NASECO v. CA, (1997). At the outset, it is essential to establish
whether the contract of carriage was entered into as a common
carrier or as a private carrier, since the resolution of this
preliminary question determines:
(a) The law applicable to the case;
(c) Burden of proof applicable to the case
Loadmaster Customs Services v. Glodel Brokerage Corp., (2011).
One engaged in the business of transporting goods by land,
through its trucking service, is a common carrier, as distinguished
from agreement and it does not hold itself out to carry out goods
for the general public. Also, a customs broker where the
transportation of goods is an integral part of its business is also
regarded as a common carrier.
Loadstar Shipping Co. v. Pioneer Asia Insurance, (2006). Where a
company is engaged in the business of transporting cargo by
water and for compensation, offering its services indiscriminately
to the public, it is, without doubt, a common carrier. The voyage-
charter agreement in this case did not in any way convert the
common carrier into a private carrier. We have already resolved
this issue with finality in Planters Products, Inc. v. CA where we
ruled that:
“A public carrier shall remain as such, notwithstanding the charter
of the whole or portion of a vessel by one or more persons,
provided the charter is limited to the ship only, as in the case of a
time-charter or voyage-charter. It is only when the charter
includes both the vessel and its crew, as in a bareboat or demise
that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned.
Indubitably, a shipowner in a time or voyage charter retains
possession and control of the ship, although her holds may, for
the moment, be the property of the charterer.”
PHILAMGEN v. PKS Shipping Co., (2003). Common Carrier as
Public Service – The definition of “common carrier” can best be
shown by looking at the provision of Art. 1732, CC and Sec. 13(b)
of the Public Service Act.
Much of the distinction between a "common or public carrier"
and a "private or special carrier" lies in the character of the
business, such that if the undertaking is an isolated transaction,
not a part of the business or occupation, and the carrier does not
hold itself out to carry the goods for the general public or to a
limited clientele, although involving the carriage of goods for a
fee,3 the person or corporation providing such service could very
well be just a private carrier. The fact that a person or corporation
engaged itself in the business of carrying of goods for others,
although for a limited clientele, undertaking to carry such for a
fee, then the regularity of its activities indicates more than just
casual activity on its part, and make it a common carrier.
Neither can the concept of a common carrier change merely
because individual contracts are executed or entered into with
patrons of the carrier. Such restrictive interpretation would make
it easy for a common carrier to escape liability by the simple
expedient of entering into those distinct agreements with clients.
Asia Lighterage v. CA, (2003). Petitioner is clearly a common
carrier because its principal business is that of lighterage, offering
its barges to the public for carrying or transporting goods by water
for compensation, done on an irregular rather than scheduled
manner, albeit with an old limited clientele. A common carrier
need not have fixed and publicly known routes, nor does it have
to maintain terminals or issue tickets.
NASECO v. CA, (1997). The true nature of a common carrier is the
carriage of passengers or goods, provided it has space, for all who
opt to avail themselves of its transportation service for a fee. A
carrier which does not qualify under the above test is deemed a
private carrier. “Generally, private carriage, such as the rendering
of tramping service, is undertaken by special agreement and the
carrier does not hold himself out to carry goods for the general
public. The most typical, although not the only form of private
carriage, is the charter party, a maritime contract by which the
charterer, a party other than the shipowner, obtains the use and
service of all or some part of a ship for a period of time or a
voyage or voyages."
In private carriage, the rights and obligations of parties, including
liabilities for damage to cargo, are determined primarily by
stipulations in their contract of carriage or charter party. In such
case, the burden of proof is on the other party to show that the
private carrier was responsible for the loss of, or injury to, the
cargo.
CLV: SC decision was more in conformity with the findings of both
lower court and CA that petitioner was a private carrier and is not
in agreement with bulk of SC Decision on the matter.
Planters Products v. CA, (1993). When carrier in the ordinary
course of business transports goods as a common carrier and
thereby bound by law to observe extraordinary diligence, the
entering into charter party, where the ship captain, its officers and
compliment are under the employ of shipowner and therefore
continues to be under its direct supervision and control, does not
transform carrier into private carrier for such purpose. This is
because the charterer, a stranger to the crew and to the ship,
cannot be charged with duty to care for his cargo when charterer
does not have any control of the means of doing so.
A common carrier shall remain as such, notwithstanding the
charter of the whole or portion of a vessel, provided the charter is
limited to the ship only, as in the case of time charter or voyage
charter. It is only when the charter includes both the vessel and its
crew, as in a bareboat or demise charter, that a common carrier
becomes private, at least insofar as the particular voyage covering
the charter party is concerned.
De Guzman v. CA, (1998). Art. 1732, CC makes no distinction
between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only as
an ancillary activity, nor does it make distinctions between one
who offers the services to the “general public” or a narrow
segment of the general population. Therefore, one who “back-
hauled” goods for other merchants from Manila to Pangasinan,
even when such activity was only periodical or occasional and was
not its principal line of business would be subject to the
responsibilities and obligations of a common carrier.
Malayan Insurance Co. v. Phil. First Insurance Co., (2012). A
common carrier becomes a private carrier when it undertakes to
carry a special cargo or chartered to a special person only. In such
case, the Civil Code provisions on common carriers should not be
applied where the carrier is not acting as such but as a private
carrier.
Mindanao Terminal and Brokerage Services v. Phoenix
Assurance Co. of New York, (2009). Stevedoring Not a Common
Carrier – Mindanao Terminal, a stevedoring company which was
charged with the loading and stowing the cargoes, does not
operate a business that is classified as a common carrier.
Consequently, it had duly exercised the required degree of
diligence in loading and stowing the cargoes, which is the ordinary
diligence of a good father of a family. There is no specific
provision of law that imposes a higher degree of diligence than
ordinary diligence for a stevedoring company or one who is
charged only with the loading and stowing of cargoes.
(b) Customs Broker as Common Carrier
Schmitz Transport v. Transport Venture, Inc., (2005)
Facts:
1. Schmitz Transport, as custom broker, undertook to transport
the cargoes from vessel’s shipside to consignee’s warehouse
at Cainta.
2. It then retained TVI to send a barge and tugboat at shipside.
3. The operation was done outside of the breakwaters and
while a storm signal was raised, and cargo was lost due to
the rough waves.
Issue:
(1) WON Schmitz can be liable for the obligations of a carrier,
and that any negligence committed by it was deemed the
negligence of its principal
(2) WON TVI’s contract was with Schmitz and had no contract
of carriage with the consignee, and therefore cannot be
liable to the consignee
Held:
1. Schmitz is liable as a common carrier. As long as a person
holds itself to the public for the purpose of transporting
goods as a business, it is already considered a common
carrier regardless if it owns the vehicle used or has to hire
one. The fact of loss of the cargo therefore made Schmitz
liable to the consignee
2. Consignee’s claim against TVI cannot be based on the breach
of contract of carriage. While TVI acted as private carrier for
Schmitz, for which it was under no duty to observe
extraordinary diligence, it was still required to observe
ordinary diligence to ensure the proper and careful handling,
care and discharge of the carried goods.
3. The gross negligence of TVI is discharging the cargo outside
of the breakwaters under a storm signal constituted
negligence for which it can be held liable to consignee
A.F. Sanchez Brokerage v. CA, (2005)
Facts:
1. Brokerage firm was engaged as customs broker but with
duties to pay the customs duties, taxes and storage fees for
the cargo and to deliver the merchandise to the client’s
premises.
2. Evidence showed that the merchandise was in good
condition when delivered to the brokerage firm at the NAIA,
but were damaged when delivered to the client.
3. Brokerage firm contends that it was the defect in the
packaging of the merchandise which it raised at the NAIA
that was the main cause for the damage, and therefore its
negligence cannot be presumed, and was not liable for the
obligations of a common carrier
Issue: WON the Brokerage firm may be held liable as a common
carrier
Held:
1. Brokerage firm is also considered a common carrier, and for
which the delivery of the merchandise in bad condition
raises the presumption of negligence.
2. Art. 1732 does not distinguish between one whose principal
business activity is the carrying of goods and one who does
such carrying only as an ancillary activity.
3. The rule is that if the improper packing is known to the
carrier or his employees or is apparent upon ordinary
observation, but the common carrier nevertheless accepts
the same without protest or exception, he is not relieved of
liability for the resulting damage.
Calvo v. UCPB General Insurance Co. Inc., (2002). When
transportation of goods is an integral part of a customs broker’s
functions, it is also a common carrier, for to declare otherwise
would be to deprive those with whom it contracts the protection
which the law affords them notwithstanding the fact that the
obligation to carry goods for its customers, is part and parcel of its
business.

(c) Lack of Certificate of Public Convenience
Loadstar Shipping v. CA, (1999). A certificate of public
convenience is not a requisite for the incurring of liability under
the Civil Code provisions governing common carriers. That liability
arises the moment a person or firm acts as a common carrier,
without regard to whether or not such carrier has also complied
with the requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate of
public convenience or other franchise.
(d) Liability of the Registered Owner of Motor Vehicle
Villanueva v. Domingo, (2004). The registered owner of any
vehicle is directly and primarily responsible to the public and third
persons while it is being operated; and whether the driver is
authorized or not by the actual owner is irrelevant to determining
the liability of the registered owner whom the law holds primarily
and directly responsible for any accident, injury or death caused
by the operation of the vehicle in the streets and highways. The
main purpose of vehicle registration is the easy identification of
the owner who can be held responsible for any accident, damage
or injury caused by the vehicle.
Equitable Leasing Corp. v. Suyong, (2002). Registered Owner of
Vehicle Liable for the Death and Injuries – Regardless of sale of
motor vehicle, the registered owner is the lawful operator insofar
as he public and third persons are concerned. In contemplation of
law, the owner operator of record is the employer of the driver,
the actual operator and employer being considered as merely its
agent.
3. Nature of Business and Degree of Diligence of Common
Carriers
China Airlines v. Chiok, (2003). The business of common carriers
is imbued with public interest and duty, and the law governing
them imposes an exacting standard.
Japan Airlines v. Simangan, (2008). In an action for breach of
contract of carriage, all that is required of plaintiff is to prove the
existence of such contract and its non-performance by the carrier
through the latter’s failure to carry the passenger safely to his
destination.
Northwest Airlines, Inc. v. Chiong, (2008). Although initially, the
burden of proof was with the passenger to prove that there was a
breach of contract of carriage, the burden of evidence shifted to
the airline when the former adduced sufficient evidence to prove
the facts he had alleged – at that point, the airline had the burden
of going forward to controvert (passenger’s) prima facie case, the
burden of evidence to establish its claim.
Singapore Airlines Ltd. v. Fernandez, (2003). The contract of air
carriage is a peculiar one. Imbued with public interest, the law
requires common carriers to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence
of very cautious persons with due regard for all the circumstances.
In an action for breach of contract of carriage, the aggrieved party
does not have to prove that the common carrier was at fault or
was negligent. All that is necessary to prove is the existence of the
contract and the fact of its non-performance by the carrier.
Delsan Transport Lines v. CA, (2001). From the nature of their
business and for reasons of public policy, common carriers are
bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of passengers transported by them,
according to all the circumstance of each case. In the event of
loss, destruction or deterioration of the insured goods, common
carriers shall be responsible unless the same is brought about,
among others, by flood, storm, earthquake, lightning or other
natural disaster or calamity. In all other cases, if the goods are
lost, destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence.
Loadstar Shipping v. CA, (1999). The business of a common
carrier impinges directly and intimately upon the safety and well-
being and property of those members of the general community
who happen to deal with such carrier. The law imposes duties and
liabilities upon common carriers for the safety and protection of
those who utilize their services and the law cannot allow a
common carrier to render such duties and liabilities merely
facultative by simply failing to obtain the necessary permits and
authorizations.
(a) Degree of Diligence Required; Presumption of Fault
Victory Liner, Inc. v. Gammad, (2004). In a contract of carriage, it
is presumed that the common carrier was at fault/negligent when
a passenger dies or is injured. Unless presumption is rebutted, the
courts need not even make an express finding at fault or
negligence on the part of the common carrier.
Lea Mer Industries, Inc. v. Malayan Insurance Co. Inc., (2005).
Extraordinary diligence requires rendering service with the
greatest skill and foresight to avoid damage and destruction to the
goods entrusted for carriage and delivery. Common carriers are
presumed to have been at fault or to have acted negligently for
loss of or damage to the goods that they have transported.
Loadmaster Customs Services v. Glodel Brokerage Corp., (2011).
Extraordinary diligence is that extreme measure of care and
caution which persons of unusual prudence and circumspection
observe for securing and preserving their own property or rights.
This exacting standard imposed on common carriers in a contract
of carriage of goods is intended to tilt the scales in favor of the
shipper who is at the mercy of the common carrier once the
goods have been lodged for shipment. The responsibility of two or
more persons who are liable for a quasi-delict is solidary.
Whenever an employee’s negligence causes damage or injury to
another, there instantly arises a presumption juris tantum that the
employer failed to exercise diligentissimi patris families in the
selection (culpa in eligiendo) or supervision (culpa in vigilando) of
its employees.
(b) Defenses Available to the Common Carrier
Lea Mer Industries, Inc. v. Malayan Insurance, (2005). This
presumption can be rebutted only by proof that:
(1) They observed extraordinary diligence, or
(2) That the loss or damage was occasioned by any of the
following causes:
(a) Flood, storm, earthquake, lightning, or other natural disaster
or calamity;
(b) Act of the public enemy in war, whether international or
civil;
(c) Act or omission of the shipper or owner of the goods;
(d) The character of the goods or defects in the packing or in the
containers;
(e) Order or act of competent public authority.
4. Distinctions in Carriages of Cargo and Passengers
 Although the Civil Code and Code of Commerce in contracts
of carriage are concerned with the same cause of action,
particularly culpa contractual, nevertheless, both Codes
provide for clear-cut divisions between contracts of carriage
of cargo and contracts of carriage of passengers, because
the rights and defenses in each kind of contract are different
from the other
 There are also special rules that pertain to air
transportation.
II. Contract of Carriage of Passengers
1. Nature of Contract of Carriage of Passengers
Baritua v. Mercader, (2001). A common carrier, from the nature
of its business and for reasons of public policy, is bound to
observe extraordinary diligence for the safety of the passenger it
transports.
LRTA v. Navidad, (2003). The law requires common carriers to
carry passengers safely using the utmost diligence of very cautious
persons with due regard for all circumstances. In case of death or
injury to a passenger, a common carrier is presumed to have been
at fault or negligent.
Northwest Airlines v. Catapang, (2009). Passengers have the right
to be treated by a carrier’s employees with kindness, respect,
courtesy and due consideration. They are entitled to be protected
against personal misconduct, injurious language, indignities and
abuses from such employees. So it is that any discourteous
conduct on the part of these employees toward a passenger gives
the latter an action for damages against the carrier.
Japan Airlines v. CA, (1998). A contract to transport passengers is
quite different in kind, and degree from any other contractual
relation. It is safe to conclude that it is a relationship imbued with
public interest. Failure on the part of the common carrier to live
up to the exacting standards of care and diligence renders it liable
for any damages that may be sustained by its passengers.
However, this is not to say that common carriers are absolutely
responsible for all injuries or damages even if the same were
caused by a fortuitous event. To rule otherwise would render the
defense of "force majeure," as an exception from any liability,
illusory and ineffective.
Fabre v. CA, (1996)
Facts:
1. A group contracted the bus for a particular trip, which met
an accident due to the driver’s fault.
2. The employer alleged non-liability for injuries caused since
the group that hired the bus was directly responsible for the
trip, and that the employer is not a common carrier bound
to extraordinary diligence.
Issue: WON the employer is liable as common carrier
Held:
1. The contract, even if only for a particular trip, still involves a
contract of carriage. Bus owner need not be engaged in the
business of public transportation of the Civil Code provisions
on common carriers to apply.
2. Art. 1732, CC thereof as it defines common carriers, does
not make distinctions between one whose principal business
activity is the carrying of persons or goods or both, and one
who does such carrying only as an ancillary activity.
3. It also avoids making any distinction between a person or
enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis.
4. Neither does it distinguish between a carrier offering its
services to the “general public”, and one who offers services
or solicits business only from a narrow segment of the
general population.
2. Causes of Action Arising from Same Negligent Act
Illustration:
X, Inc. – public utility company
Y – bus driver, recklessly driving
Z – passenger injured.
Z as injured passenger can avail of any of three (3) causes of
action:
(a) Culpa contractual – negligence based on contract;
(b) Culpa aquilina – negligence based on tort;
(c) Culpa criminal – negligence based on a crime
(a) Culpa Contractual
 In the contract of carriage of passengers, it is the obligation
of carrier to convey the passengers safely to the point of
destination.
 In case a passenger is not bought safely thereto, there will
be a breach of contract.
 Any case brought based on culpa contractual will be
captioned “Passenger Z v. X, Inc.” because the contract is
between them.
 The driver is not included as a party to the action, because
he is not a party to the contract, there is no privity as to him.
Mariano, Jr. v. Callejas, (2009). Presumption of Negligence in
Common Carriers of Passengers – The death of the wife of the
petitioner in the course of transporting her to her destination
gave rise to the presumption of negligence of the carrier. To
overcome the presumption, respondents have to show that they
observed extraordinary diligence in the discharge of their duty to
that the accident was caused by a fortuitous event.
Cruz v. Sun Holidays, Inc., (2010). From the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence for the safety of the passengers
transported by them, according to all the circumstances of each
case. When a passenger dies or is injured in the discharge of a
contract of carriage, it is presumed that the common carrier is at
fault or negligent
Villoria v. Continental Airlines, (2012). An airline company is not
completely exonerated from any liability for the tort committed
by its agent’s employees. In an action based on a breach of
contract of carriage, the aggrieved party does not have to prove
that the common carrier was at fault or was negligent – all that he
has to prove is the existence of the contract and the fact of its
non-performance by the carrier.
(b) Culpa Acquilina
 Damage caused to another due to negligence.
 The case will be entitled “Passenger Z v. X, Inc. and Driver Y”
and the defendants will be solidarily liable as joint
tortfeasors
Tiu v. Arriesgado, (2004). In case of injury to a passenger due to
the negligence of the driver of the bus on which he was riding and
of the driver of another vehicle, both drivers as well as the owners
of the two vehicles are jointly and severally liable.
(c) Culpa Criminal
 The driver’s act may amount to a crime: reckless imprudence
resulting in physical injuries.
 The case will be entitled “People v. Driver Y”, and if the
latter is convicted but is insolvent, an action can be pursued
by Passenger Z against X, Inc. to enforce the latter’s
subsidiary liability.
Pajarito v. Seneris, (1978). Conviction of employee is conclusive
upon employer as to his subsidiary liability, although the latter
may not in the strict sense be a party to the criminal case brought
against the employee. The enforcement of the employer’s
subsidiary liability may be conveniently litigated within the same
criminal proceedings because the execution of the judgment is a
logical and integral part of the criminal case. The employer will
have the right to present evidence of the employee’s solvency to
avoid liability.
The weakest cause of action is culpa acquilina where the
employer may raise the defense of due diligence in the selection
and supervision of the driver. Culpa criminal is a stronger cause of
action because as to the company’s subsidiary liability the latter’s
defense are limited; however, the quantum of evidence needed to
convict the employee would have to be guilt beyond reasonable
doubt.
In Transportation Law, culpa contractual is the cause of action. In
a contract of carriage of passengers, it is the obligation of the
common carrier to bring the passengers safely to the point of
destination. If injured, or death occurs, the presumption of
negligence automatically arises, and the common carrier can be
held liable if he fails to prove the extraordinary diligence for the
duration of the carriage.
(d) Nature of Liability Incurred
Perena v. Zarate, (2012), BERSAMIN. Although the basis of the
right to relief of the Zarates – breach of contract of carriage –
against the Perenas was distinct from the basis of the Zarates right
to relief against PNR – quasi-delict under Art. 2176, CC, they
nonetheless could be held jointly and severally liable by virtue of
their respective negligence combining to cause the death of
Aaron.
Loadmaster Customs Services v. Glodel Brokerage Corp., (2011).
Where several causes producing an injury are concurrent and
each is an efficient cause without which the injury would not have
happened, the injury may be attributed to all or any of the causes
and recovery may be had against any or all of the responsible
persons although under the circumstances of the case, it may
appear that one of them was more culpable, and that the duty
owed by them to the injured person was not the same.
(e) Particular Aspects of Responsibility and Liability of
Common Carriers
LRTA v. Navidad, (2003). Under Culpa-Contractual – A common
carrier becomes liable for the death or injury to passenger when:
(a) Through the negligence or willful acts of its employees;
(b) On account of willful acts or negligence of other passengers
or of strangers if the common carrier’s employees through
the exercise of due diligence could have prevented or
stopped the act or omission
Philtranco Service Enterprises v. CA, (1998). Under Quasi-Delict –
Liability of registered owner of a public service vehicle for
damages arising from the tortious act of driver is primary, direct
and joint and several or solidary with the driver, pursuant to Art.
2194, CC. The only recourse of such owner if the judgment is
satisfied by him is to recover what it has paid from its employee
who committed the fault or negligence which gave rise to the
action based on quasi-delict pursuant to Art. 2181.
3. When Does Contract of Carriage Begin?
 The best evidence of a contract of carriage of passenger
Q: May there be a contract of carriage even without a ticket?
A: Yes. The Statute of Frauds covers six (6) contracts, none of
which is a contract of transportation, which means that a contract
of carriage may be oral.
PAN-AM v. IAC, (1988). GR: The defense that a ticket is a
“contract of adhesion” is not acceptable, since “one who adheres
to the contract is in reality free to reject it entirely; if he adheres,
he gives his consent.
British Airways v. CA, (1993). A contract of common of passenger
consists of two (2) aspects, namely:
(a) The contract "to carry (at some future time)," which contract
is consensual and is necessarily perfected by mere consent
(Art. 1356, CC), and
(b) The contract "of carriage" or "of common carriage" itself
which should be considered as a real contract for not until
the carrier is actually used can the carrier be said to have
already assumed the obligation of a carrier
A carrier can be held liable for damages for failure to comply with
the contract to carry which is consensual in nature.
Dangwa Transpo Co. v. CA, (1991). The victim herein, by stepping
and standing on the platform of the bus, is already considered a
passenger and is entitled to all the rights and protection
pertaining to a contract of carriage.
San Diego v. Transit MD, (CA). There was a perfected contract of
carriage, as soon as the old man placed his foot on the platform,
he was already a passenger.
Del Prado v. Manila Electric Co., (1929). Although there is no
obligation on the part of a street railway company to stop its care
to take on intending passengers at other points than those
appointed for stoppage, nevertheless when the motorman sees a
person attempting to board the car while in motion, and at the
place not appointed for stopping, he should not do any act to
increase the peril of such person; and if, in violation of this duty,
the motorman accelerates speed while the intending passenger is
in the act of boarding the care, with the result that he slips and
gets his food crushed under the wheel of the moving car, the
company is civilly liable in damages.
Tamayo v. Pascua, (1985). A bus need not come to a dead stop to
allow passengers to board; it is enough that the bus slows down
to a negligible speed, allowing people to board it without danger
to their lives and limbs. Indeed, it has been held that the duty of
the carrier of passengers owes to its patrons extends to persons
boarding the cars as well as those alighting therefrom. Under such
circumstance it is the driver’s duty to see to it that every person
who wants to board the bus is safe inside before picking up speed
and moving forward.
Sweet Lines v. Teves, (1978). Stipulation in the ticket providing
that any action arising from the contract of carriage must be
prosecuted in Cebu only, is void for being against public policy
since it operated to unduly molest the passengers and effectively
discourage them from brining suits against the common carrier.
4. When Does Contract of Carriage End?
Aboitiz Shipping v. CA, (1989). The relation of carrier and
passenger continues until the passenger has been landed at the
port of destination and has left the vessel owner's dock or
premises. Once created, the relationship will not ordinarily
terminate until the passenger has, after reaching his destination,
safely alighted from the carrier's conveyance or had a
reasonable opportunity to leave the carrier's premises. All
persons who remain on the premises a reasonable time after
leaving the conveyance are to be deemed passengers, and what is
a reasonable time or a reasonable delay within this rule is to be
determined from all the circumstances, and includes a reasonable
time to see after his baggage and prepare for his departure.
La Mallorca v. CA, (1966)
Facts:
1. A married couple, with their little child, were passengers in a
La Mallorca bus which was proceeding to the bus terminal.
2. The bus reached the terminal safely. The couple with their
child went down the bus safely.
3. While waiting for their baggage, the child went in front of
another bus, and was run over and killed.
4. The couple sought to recover damages from the carrier
based on culpa contractual.
Issue: WON the La Mallorca bus was liable
Held:
1. The couple can recover from the carrier under culpa
contractual.
2. The child was still a passenger at the time of the accident
and hence, the carrier was still liable.
3. The contract of carriage ends only after a reasonable time
within which to get out of the bus terminal
5. Statutory Obligations of Carrier
Art. 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for
all the circumstances.
(a) In General
Baritua v. Mercader, (2001). A common carrier, by the nature of
its business and for reasons of public policy, is bound to carry
passengers safely as far as human care and foresight can provide.
It is supposed to do so by using the utmost diligence of very
cautious persons, with due regard for all the circumstances. In
case of death or injuries to passengers, it is presumed to have
been at fault or to have acted negligently, unless it proves that it
observed extraordinary diligence as prescribed in Art. 1733 and
1755, CC.
Yobido v. CA, (1997). As a rule, when a passenger boards a
common carrier, he takes the risks incidental to the mode of
travel he has taken. After all, a carrier is not an insurer of the
safety of its passengers and is not bound absolutely and at all
events to carry them safely and without injury. However, when a
passenger is injured or dies while travelling, the law presumes
that the common carrier is negligent, and therefore the burden of
proof is upon such common carrier that it has exercised the
extraordinary diligence required under the law to avoid damages
or injury to the passengers.
Baliwag Transit, Inc. v. CA, (1996). A common carrier is bound to
carry its passengers safely as far as human care and foresight can
provide, using the utmost diligence of a very cautious person, with
due regard for all the circumstances. In a contract of carriage, it is
presumed that the common carrier was at fault or was negligent
when a passenger dies or is injured. Unless the presumption is
rebutted, the court need not even make an express finding of
fault or negligence on the part of the common carrier. This
statutory presumption may only be overcome by evidence that
the carrier exercised extraordinary diligence as prescribed in Art.
1733 and 1755, CC.
Tiu v. Arriesgado, (2004). Upon the happening of the accident,
the presumption of negligence at once arises, and it becomes the
duty of a common carrier to prove that he observed extraordinary
diligence in the care of his passengers. To overcome such
presumption of negligence, the carrier must show:
(a) The carrier must show the utmost diligence of very cautious
persons as far as human care and foresight can provide, or
(b) That the accident was caused by fortuitous event.
It is such a firmly established principle, as to have virtually formed
part of the law itself, that the negligence of the employee gives
rise to the presumption of negligence on the part of the employer.
Its nature is such that it is primarily intended to provide
compensation for the death or bodily injuries suffered by innocent
third parties or passengers as a result of the negligent operation
and use of motor vehicles.
(b) As to Equipment and Facilities
PNR v. CA, (2007). Railroad companies owe to the public a duty of
exercising a reasonable degree of care to avoid injury to persons
and property at railroad crossings, which duties pertain both to
the operation of trains and to the maintenance of the crossings.
It is true that one driving an automobile must use his faculties of
seeing and hearing when nearing a railroad crossing. However,
the obligation to bring to a full stop vehicles moving in public
highways before traversing any "through street" only accrues
from the time the said "through street" or crossing is so
designated and sign-posted.
The authority in this jurisdiction is that the failure of a railroad
company to install a semaphore or at the very least, to post a
flagman or watchman to warn the public of the passing train
amounts to negligence.
Pestano v. Sumayang, (2000). The fact that the driver was able to
use a bus with a faulty speedometer shows that the employer was
remiss in the supervision of its employees and in the proper care Facts:
of its vehicles. Under Art. 2180 and 2176, CC, the owners and
managers are responsible for damages caused by their 1.
employees, as well as in the defects of equipment used.
Yobido v. CA, (1997). The explosion of a new tire cannot by itself 2.
be considered a fortuitous event to exempt the common carrier 3.
from liability in the absence of showing on the part of the carrier
that other human factors that could have intervened to cause the
blowout of the new tire did not in fact occur. A common carrier 4.
may not be absolved from liability in case of force majeure or
fortuitous event alone; it must still prove that it was not negligent
in causing the death or injury resulting from an accident.
Issue: WON the bus company liable
Trans-Asia Shipping Lines v. CA, (1996). Before commencing the
contracted voyage, the petitioner undertook some repairs on the Held:
cylinder head of one of the vessel's engines. But even before it
could finish these repairs, it allowed the vessel to leave the port of 1.
origin on only one functioning engine, instead of two. Moreover,
even the lone functioning engine was not in perfect condition as 2.
sometime after it had run its course, it conked out.
3.
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 4.
competent officers and crew. The failure of a common carrier to
maintain in seaworthy condition its vessel involved in a contract
of carriage is a clear breach of its duty prescribed in Art. 1755, CC.
Sps. Landingan v. Pantranco, (1970) (c)
Facts: (1)
1. A married couple with two (2) children were passengers in a
bus going to Baguio. Upon reaching an uphill point at the
Kennon Road, the motor suddenly stopped and the bus Facts:
backed down.
2. The driver expertly guided the bus to rest on the 1.
mountainside of the road.
3. But because of the noise, the two children became 2.
frightened and they jumped out of the bus and were killed.
3.
Issue: WON the bus company may be held liable for their death
Held:
4.
1. Yes. The bus, when it stopped, was not in perfect running
condition.
2. It is the carrier’s duty to ensure that the bus is always in Issue: WON Batangas Trans. may be held liable
perfect condition.
3. Here, the defect was not latent Held:
Necesito v. Paras, (1958) 1.
While the Phil. Rabbit bus was traveling fast, its driver
sensed that the wheels did not respond to the movement of
the steering wheel.
The bus hit a rut and it turn-turtled, killing a passenger.
Mechanics of the bus company discovered that the worn-out
gear of the steering wheel had a crack, which could not be
seen by the naked eye from outside.
Phil. Rabbit proved that the defect was attributed to GM
USA and that defect was a factory defect which could not
have been discovered by expert mechanics.
Yes. When a bus company places its bus for the use of the
riding public it must be in good condition.
If it was really the fault of GM, then the bus company’s
remedy would be to go after GM.
While the carrier is not an insurer of the safety of the
passengers, it should nevertheless be held to answer for the
flaws of its equipment, if such flaws were discoverable.
In such case, the manufacturer of the defective applicant is
considered in law the agent of the carrier, and
manufacturer’s good repute will not relieve the carrier from
liability.
Circumstances at Time of Accident
When Vehicle Improperly Parked
Batangas Trans. v. Caguimbal, (1967)
A Batangas Trans. bus going north stopped on the highway
when a passenger wanted to alight.
Another bus was going South fast and recklessly, trying to
pass a carretela.
In trying to overtake the carretela, the driver of the
approaching bus miscalculated and hit the Batangas Trans.
bus, causing the alighting passenger to be thrown out and
killed.
The heirs of the victim sought recovery from Batangas
Trans., which raised the defense of fortuitous event
Batangas Trans. is still liable.
2. In civil law, where a fortuitous event concurs with
negligence, liability is not thereby extinguished.
3. Although the bus was then in a “stop” position it did not
stop on road’s shoulder at the time the passenger was
alighting.
4. That is considered negligence that concurred with fortuitous
even and did not operate to extinguish the liability.
Note: However, since Batangas Trans. and the company of the
other bus were made alternative defendants, both were held
liable: Batangas Bus for culpa contractual and the other company
for culpa acquilina.
(2) When Vehicle Bumped from Behind
Raynera v. Hiceta, (1999). Drivers of vehicles who bump the rear
of another vehicle must be presumed to be the cause of the
accident, unless contradicted by other evidence, since the rear
driver is deemed to have the last clear chance of avoiding the
accident, and therefore deemed negligent.
(3) When Driver Violating Rules at Time of Accident
Mallari, Sr. v. CA, (2000). Under Art. 2185, CC, unless there is
contrary proof, it is presumed that a person driving a motor
vehicle had been negligent if at the time of mishap, he was
violating a traffic regulation, such as when he was driving at the
wrong side of the road.
(4) Rules on Overtaking
Mallari, Sr. v. CA, (2000). The rule is settled that a driver
abandoning his proper lane for the purpose of overtaking another
vehicle in an ordinary situation has the duty to see to it that the
road is clear and not to proceed if he cannot do so in safety. When
a motor vehicle is approaching or rounding a curve, there is
special necessity for keeping to the right side of the road and the
driver does not have the right to drive on the left hand side relying
upon having time to turn to the right if a car approaching from the
opposite direction comes into view. Non-compliance with such
rules constitute negligence.
(5) Hit and Run Driver
Abueva v. People, (2002). A bus driver could not be considered a
hit-a-run driver where he exerted efforts to see to it that the
victim had been attended to, such as when there were several
people assisting the victim, including his co-employer working for
the bus company.
(d) Injuries Caused Employees
Art. 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for
all the circumstances.
Art. 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
Art. 1759. Common carriers are liable for the death of or injuries
to passengers through the negligence or willful acts of the
former's employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of
the common carriers.
This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family in
the selection and supervision of their employees.
R Transport Corp. v. Pante, (2009). Common carriers are liable for
the death or injury to passengers through the negligence or willful
acts of the former’s employees, although such employees may
have acted beyond the scope of their authority in violation of the
orders of the common carriers.
Mallari, Sr. v. CA, (2000). The negligence and recklessness of the
driver of the passenger jeepney is binding against petitioner
Mallari Sr., who admittedly was the owner of the passenger
jeepney engaged as a common carrier, considering the fact that in
an action based on contract of carriage, the court need not make
an express finding of fault or negligence on the part of the carrier
in order to hold it responsible for the payment of damages sought
by the passenger.
(a) Under Art. 1755, CC, a common carrier is bound to carry the
passengers safely as far as human care and foresight can
provide using the utmost diligence of very cautious persons
with due regard for all the circumstances.
(b) Moreover, under Art. 1756, CC, in case of death or injuries to
passengers, a common carrier is presumed to have been at
fault or to have acted negligently, unless it proves that it
observed extraordinary diligence.
(c) Further, pursuant to Art. 1759, CC, it is liable for the death of
or injuries to passengers through the negligence or willful
acts of the former's employees.
Maranan v. Perez, (1967)
Facts:
1. A taxi driver tried to hold-up his passenger, who resisted and
was killed.
2. His heirs sued based on culpa contractual against the taxi
company, which denied liability on the ground that the
driver acted beyond the scope of his authority
Issue: WON the carrier can be held liable for acts of employees
beyond the scope of their authority
Held:
1. It may true that the taxi driver was acting beyond the scope
of his authority, but Art. 1759, CC expressly provides that the
owner is liable for negligence of the employees even if such
acts are beyond the scope of his authority.
2. The taxi company was held liable on culpa contractual
Note: Maranan v. Perez, (1967) repealed the doctrine of De
Gallico v. Manila Railroad, (1955), wherein a security guard rode
on one of the trains to go to his place of duty. While en route, he
killed a passenger riding in the same train. Manila Railroad was
absolved from any liability on the ground that the guard was not
on duty at that time and therefore not acting within the scope of
his authority.
(e) As to Injuries Caused by Other Passengers
(1) The Liability of Carrier is Expressly Covered by Art. 1763, CC
Art. 1763. A common carrier is responsible for injuries suffered by
a passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carrier's employees
through the exercise of the diligence of a good father of a family
could have prevented or stopped the act or omission.
Manila Railroad v. Ballesteros, (1966)
Facts:
1. When a Manila Railroad bus reached one of the
municipalities along its route, the driver stopped the bus and
went down to answer a call of nature.
2. While the driver was thus outside the bus, one of the
passengers went into the driver’s seat and drove off the bus.
3. The bus met an accident, causing injury to another
passenger.
Issue: WON Manila Railroad is liable for the act of the passenger
Held:
1. Manila Railroad is liable for the injuries suffered by some
passengers because its driver was guilty of negligence in
leaving the key on the ignition.
2. Had the driver taken the key with himself, the passenger
could not have driven off with the bus.
3. The carrier is therefore liable for injuries when the carrier’s
employees could have prevented the injuries through the
exercise of the diligence of a good father of a family.

(f) Obligation of Common Carriers for Baggage
Sarkies Tours Phil. v. CA, (1997). Where a common carrier accepts
its passenger’s baggage for transportation and even had it placed
in the vehicle by its own employee, its failure to collect freight
charges is the common carrier’s own lookout, and cannot be used
to exempt the common carrier from liability for the consequent
loss of the baggage.
PAL v. IAC, (1992). Although the baggage of a passenger was
eventually delivered to him, that did not constitute a case of mere
delay in delivery “since the baggage was not delivered at all to the
passenger for the purpose of the trip in contravention of a
common carrier’s undertaking to transport the goods from the
place of embarkation to the ultimate point of destination”. The
non-delivery of luggage during the entire length of passenger’s
stay abroad, is a breach of carrier’s obligation.
5. Defense Available in Culpa Contractual
(a) Proof of Negligence; Presumption
Art. 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
 The carrier is presumed negligent as soon as the injury or
death is proven.
 The carrier must rebut this presumption; otherwise it will be
liable for damages.
LTB v. Tiongson, (O.G.). If a passenger is injured or dies, there
immediately arises the presumption that the common carrier is
negligent. The injured passenger or the heirs of the dead
passenger do not have to prove the carrier’s negligence; all they
have to prove is the fact of injury or death in the course of the
passenger’s carriage, and the law automatically raises the
presumption of negligence.
Zamboanga Transit v. CA, (1969). The presumption may be
rebutted by evidence on any of the following:
(a) Exercise of extraordinary due diligence;
(b) Fortuitous event;
(c) Contributory negligence of the passenger under Art. 1762
and 2179, CC
Only evidence on one of these points is admissible. If the
presumption is not rebutted, the carrier is automatically liable.
(b) Due Diligence in Selection and Supervision of Employees
RCJ Bus Lines, Inc. v. Standard Insurance Co., (2011). In a bus
company, when the employee causes damage due to his own
negligence while performing his own duties, there arises the juris
tantum presumption that the employer is negligent, rebuttable
only by proof of observance of the diligence of a good father of a
family. For failure to rebut such legal presumption of negligence in
the selection and supervision of employees, the employer is
likewise responsible for damages, the basis of the liability being
the relationship of pater familias or on the employer’s own
negligence.
Heirs of Ochoa v. G&S Transport Corp., (2011). G&S as a common
carrier is “bound to carry (a passenger) safely as far as human care
and foresight can provide, using the utmost diligence of very
cautious persons, with due regard for all circumstances”. When
the passenger dies during the course of the travel, then the rules
prevails: "In a contract of carriage, it is presumed that the
common carrier is at fault or is negligent when a passenger dies or
is injured. In fact, there is even no need for the court to make an
express finding of fault or negligence on the part of the common
carrier.”
Unfortunately, G&S miserably failed to overcome the
presumption. Both the courts below found that the accident
which led to the passenger’s death was due to the reckless driving
and gross negligence of the taxi driver, thereby holding G&S liable
to the heirs of the deceased passenger for breach of contract of
carriage. The acquittal of the driver in the criminal case is
immaterial to the determination of the breach of contract.
Fabre v. CA, (1996). For a bus company, due diligence in selection
of employees is not satisfied by finding that the applicant
possessed a professional driver's license. The employer should
also examine the applicant for his qualifications, experience and
record of service. Due diligence in supervision, on the other hand,
requires the formulation of rules and regulations for the guidance
of employees and issuance of proper instructions as well as actual
implementation and monitoring of consistent compliance with the
rules.
Metro Manila Transit Corp. v. CA, (2002). The mere formulation
of various company policies on safety without showing that they
were being complied with is not sufficient to exempt the
employer from liability arising from negligence of its employees. It
is incumbent upon the employer to show that in recruiting and
employing the errant driver the recruitment procedures and
company policies on efficiency and safety were followed.
The act of driver in bringing the victim to the nearest medical
facility does not show adequate supervision by the employer over
its employees; for one, the act was after the fact of negligence on
the driver’s part; for another, the evidence on record shows that
the driver’s act was neither voluntary nor spontaneous as he had
to be prevailed upon by the victim’s companions to render such
assistance.
(c) Coverage of Fortuitous Event
 A fortuitous event covers not only acts of God (lightning,
earthquakes, shipwreck, etc.) but also acts of man (war,
strikes, homicide, recklessness of other driver, latent
mechanical defect, etc.)
 If a fortuitous event is proved, the carrier is absolved from
liability.
 But the fortuitous event must not concur with negligence,
otherwise, it is no longer a defense. In other words, the
fortuitous event must be the sole element relied upon.
Yobido v. CA, (1997). A fortuitous event is possessed of the
following characteristics:
(a) The cause of the unforeseen and unexpected occurrence, or
the failure of the debtor to comply with his obligations, must
be independent of human will;
(b) It must be impossible to foresee the event which constitutes
the caso fortuito, or if it can be foreseen, it must be
impossible to avoid;
(c) The occurrence must be such as to render it impossible for
the debtor to fulfill his obligation in a normal manner; and
(d) The obliger must be free from any participation in the
aggravation of the injury resulting to the creditor.
Based on the foregoing a bus company cannot be exempted from
liability from a tire blowout which cannot be classified simply as a
fortuitous event, in the absence of showing that it has exercised
the extraordinary diligence required of common carriers under
the law.
Cruz v. Sun Holidays, Inc., (2010). In addition to the requisites
provided in Yobido v. CA, to fully free a common carrier from any
liability, the fortuitous event must have been the proximate and
only cause of the loss.
New World International Dev. Inc. v. NYK-Fil Japan Shipping
Corp., (2011). That the loss was occasioned by a typhoon, an
exempting cause under Art. 1734, CC, does not automatically
relieve the common carrier of liability. The latter has the burden
of proving that the typhoon was the proximate and only causes of
loss and that it exercised due diligence to prevent or minimize
such loss before, during and after the disastrous typhoon.
Singapore Airlines, Ltd. v. Fernandez, (2003)
Facts: Airline company assails the award of damages for delay in
the transport of the passenger which it attributed to inclement
weather beyond its control, and the longer route that had to be
taken to avoid the airspace where the Gulf War was then being
fought.
Issue: WON the Airline company may be held liable for damages.
Held:
1. Airline company is still liable, since it was not without
recourse in meeting the bad weather’s consequences to
enable to fulfill its obligations to transport the passengers
safely as scheduled as far as human care and foresight can
provide to their destination.
2. Tagged as a premiere airline as it claims to be able to
foresee and deal with such situation.
3. It likewise showed indifference and negligence by its
absence and insensitivity and as well as lack of diligence in
communicating to its passengers the consequences of the
delay in their flights.
Gatchalian v. Delim, (1991). The death or injury to a passenger
raises the statutory presumption that the common carrier was at
fault or had acted negligently. To exempt a common carrier from
liability for death or physical injuries to passengers upon the
ground of force majeure, the carrier must clearly show not only
the efficient cause of the casualty was entirely independent of
human will but also that it was impossible to avoid.
Bachelor Express, Inc. v. CA, (1990). The act of passenger stabbing
another passenger in the bus is considered as force majeure.
However, to be absolved from liability in the case of force
majeure, the common carrier must still prove that it was not
negligent in causing the injuries resulting from such accident;
otherwise, it would still be held liable.
Nocum v. LTD, (1969)
Facts:
1. One of the bus passengers had firecrackers inside his
baggage, which ignited when another passenger smoked
cigarettes, causing injuries to another passenger.
2. The injured passenger sought to recover damages from the
carrier
Issue: WON the carrier is liable
Held:
1. Carrier is not liable for the injuries caused to a passenger by
exploding firecrackers in the baggage of another passenger.
2. The reason is that the carrier cannot be expected to examine
and search each and every piece of baggage of passengers,
otherwise the bus may not all together be able to leave
3. But this is only true so long as the cause of the accident
(presence of firecrackers) was not apparent and the carrier
or its employees are not guilty of negligence.
4. This illustrates an example when an “act of man” would
exempt the carrier from liability.
(d) Contributory Negligence of Passengers
Art. 1762. The contributory negligence of the passenger does not
bar recovery of damages for his death or injuries, if the proximate
cause thereof is the negligence of the common carrier, but the
amount of damages shall be equitably reduced.
Estacion v. Bernardo, (2006). Contributory negligence is conduct
on the part of the injured party, contributing as a legal cause to
the harm he has suffered, which falls below the standard to which
he is required to conform for his own protection.
But even in a situation where a person has contributed to his own
injuries, it must nevertheless be shown that he performed an act
that brought about his injuries in disregard of warnings or signs of
an impending danger to health and body. The passenger’s act of
hanging on the vehicle is definitely dangerous to his life and limb.
Nonetheless, the underlying precept of the article on contributory
negligence is that the plaintiff who is partly responsible for his
own injury should not be entitled to recover damages in full but
must bear part of the consequences of his own negligence.
Sebena Belgian World Airlines v. CA, (1996)
Facts:
1. Passenger was on board flight originating from Casablanca
to Brussels, although she was on her way back to Manila.
She had valuables in her luggage, and while she stayed
overnight in Brussels her luggage was left on board.
2. When she arrived in Manila, her luggage was missing, and
she demanded the money value thereof and its contents.
3. Airline company refused the liability on the ground that the
loss was due to the passenger’s contributory negligence by
failing to declare the valuables and not heeding the warning
to all passengers not to place valuables in their luggage, and
not retrieving her undeclared valuables from her luggage at
Brussels Airport since her flight from Brussels to Manila
would still have to be confirmed.
Issue: WON the Airline company is liable
Held:
1. The Airline company is liable.
2. Art. 1733, CC requires a common carrier in carriage of goods
to observe extraordinary care in the vigilance over the
goods.
3. The rule remains basically unchanged even when the
contract is breached by tort although non-contradictory
principles on quasi-delict may then be assimilated as also
forming part of the governing law.
4. Airline company is not thus entirely off-track when it has
likewise raised in its defense the tort doctrine of proximate
cause. Unfortunately, the doctrine cannot in this particular
instance support its defense
5. Proximate cause is that which, in the natural and continuous
sequence, unbroken by any efficient intervening cause,
produces injury and without which the result would not
have occurred.
6. It remains undisputed that the passenger’s luggage was lost
while it was in the custody of the airline company.
7. The facts showed that when the luggage was first reported
missing it was subsequently found and again lost in the
custody of the airline company.
8. The loss of said luggage not only once but twice
“underscores the wanton negligence and lack of care on the
part of the carrier”
9. The proven negligence of the airline company foreclosed
whatever rights it might have had to the possible limitation
of liabilities enjoyed by international air carriers under the
Warsaw Convention.
Calalas v. CA, (2000). The agreement by the passenger to taking
an “extension seat” in a bus is not an implied assumption of risk
on his part as to exempt the transport company from liability for
injuries sustained.
Isaac v. Ammen Transportation, (1957)
Facts:
1. The road on which the bus was passing was wide enough for
two buses only.
2. A passenger placed his elbow outside the window railing of
the bus. An incoming bus hit the passenger’s elbow, injuring
it in such a manner that it had to be amputated.
Issue: WON the bus is liable for the injury
Held:
1. Carrier is not liable because the proximate cause of the
injury was the passenger’s own contributory negligence.
2. This is a complete defense to the carrier, and absolves it
from liability.
3. When the injured passenger is guilty of contributory
negligence, his contributory negligence will only serve to
diminish the liability of the carrier and not extinguish it,
except if it is the proximate cause of the injury, in which case
it serves to absolve the carrier from any liability.
1983 Bar, Q. IX: A and his classmates take a bus from UP to
Quiapo. On the way, another Quiapo-bound bus tries to
overtake them. A and his classmates dare the bus driver to run
faster and race with the other bus. The driver takes their dare, to
the delight of A and his friends who cheered him. On rounding
the curve, the bus driver fails to slow down and the bus turns
turtle, resulting in the death of A and injuries to the other
passengers.
The bus carried the following sign: “Do not talk to driver while
bus is on motion, otherwise the company will not assume
liability for any accident.”
Explain briefly the extent of the liability, if any, of the bus
company, giving the legal provisions and principles involved.
A: The bus company is liable for damages to A’s heirs and to all
the injured passengers. Under the Civil Code, a common carrier is
duty bound to exercise extraordinary diligence in carrying its
passengers through the negligence or willful acts of its employees
even if the latter have aced beyond the scope of their authority or
in violation of their orders. This liability cannot be eliminated or
limited by stipulation or by posting notices.
Although it may be urged that A was guilty of contributory
negligence, such an argument loses its force in the face of the
driver’s recklessness in taking the dare. And even if such argument
would be accepted, at most it can only mitigate the amount of
damages, since the proximate cause of the accident was the
driver’s willful and reckless act in running a race with the other
bus.
(e) Doctrine of “Last Clear Chance”
PNR v. Brunty, (2006). The doctrine of last clear chance states
that where both parties are negligent but the negligent act of one
is appreciably later than that of the other, or where it is
impossible to determine whose fault or negligence caused the
loss, the one who had the last clear opportunity to avoid the loss
but failed to do so, is chargeable with the loss. Stated differently,
the antecedent negligence of plaintiff does not preclude him from
recovering damages caused by the supervening negligence of
defendant, who had the last fair chance to prevent the impending
harm by the exercise of due diligence.
PNR v. Brunty, (2006)
Facts:
1. In a situation where the car collided at the train intersection,
the injured party sued PNR on the grounds that they failed
to provide the proper equipment necessary for the crossing
and have not exercised due care in the selection and
supervision of its employees.
2. PNR insisted that the sole and proximate cause of the
accident was the negligence and recklessness of the plaintiff
when they did not approach the cross with due care.
Issue: WON the doctrine of last clear chance apply
Held:
1. No. It was determined that the safety measures installed by
PNR at the railroad crossing were not merely inadequate,
they in fact did not satisfy the well-settled safety standards
in transportation.
2. The plaintiffs could not have foreseen the harm that would
befall them under the prevailing circumstances, and thus
could not be guilty of contributory negligence.
3. The proximate cause of the injury having been established,
the doctrine of last clear chance could not apply.
Tiu v. Arriesgado, (2004). The principle of last clear chance is
applicable only in a suit between the owners and drivers of
colliding vehicles. It does not arise where a passenger demands
responsibility from the carrier to enforce its contractual
obligations, for it would be inequitable to exempt the negligent
driver and its owner on the ground that the other driver was
likewise guilty of negligence.
The common law notion of last clear chance permitted courts to
grant recovery to a plaintiff who has also been negligent provided
that the defendant had the last clear chance to avoid the casualty
and failed to do so. Accordingly, it is difficult to see what role, if
any, the common law of last clear chance doctrine has to play in a
jurisdiction where the common law concept of contributory
negligence as an absolute bar to recovery by the plaintiff, has
itself been rejected, as it has been in Art. 2179, CC.
7. Kabit System
“Kabit system” is an arrangement whereby a person who has
been granted a certificate of public convenience allows other
persons who own motor vehicles to operate them under his
license, sometimes for a fee or percentage of the earnings.
2005 Bar, Q. XIII: Discuss the “kabit system” in land
transportation and its legal consequences.
A: The “kabit system” is an arrangement whereby a person who
has been granted a certificate of public convenience allows
another who owns a motor vehicle to operate under his certificate
for a fee for a percentage of the earnings (Lim v. CA, 2002). The
owner of the certificate of public convenience and the actual
owner of the motor vehicle should be held jointly and severally
liable for damages to third persons as a consequence of the
negligent operation of the motor vehicle (Vargas v. Langcay, 1962)
Lim v. CA, (2002). Although the parties to such an agreement are
not outrightly penalized by law, the kabit system is invariably
recognized as being contrary to public policy and therefore void
and inexistent under Art. 1409, CC.
Tamayo v. Aquino, (1959). Under a kabit system, the registered
owner is liable for culpa contractual or culpa acquilina, as the case
may be.
Jereos v. CA, (1982). Although the registered owner is always
liable, nevertheless the actual operator can be held solidarily
liable with the owners as joint tortfeasors.
Lita Enterprises v. IAC, (1984). A person with a certificate of
public convenience for five (5) jeepneys has only four (4)
jeepneys. An associate attaches his jeepney to the certificate
holder. The rule in case of injury to passengers of bus or jeepney
so attached is: the person in whose name the certificate of public
convenience was issued is the one liable to the general public,
without prejudice to his right to recovery.
First Malayan Leasing v. CA, (1992). Regardless of who is the
actual owner of a motor vehicle, the registered owner is the
operator of the same with respect to the public and third persons,
and as such, directly and primarily responsible for the
consequences of its operation. Legally, the owner/operator of
record is the employer of the driver, with the actual/employer
being considered merely as his agent.
Lim v. CA, (2002). The kabit system undermines the primary
factors considered in the granting of a certificate of public
convenience for the business of public transportation is the
financial capacity of the holder of the license, so that liabilities
arising from accidents may be duly compensated. It renders
illusory such purpose and, worse, may still be availed of by the
grantee to escape civil liability caused by a negligent use of a
vehicle owned by another and operated under his license.
Thus, for the safety of passengers and the public who may have
been wronged and deceived through the baneful kabit system,
the registered owner of the vehicle is not allowed to prove that
another person has become the owner so that he may be thereby
relieved of responsibility.
When a passenger jeepney covered by a certificate of public
convenience is sold to another who continues to operate it under
the same certificate of public convenience under the so-called
kabit system, and in the course thereof the vehicle meets an
accident through the fault of another vehicle, the new owner may
sue for damages against the erring vehicle despite the existence
of the kabit system because:
(a) Neither parties to the kabit system is being held liable for
damages;
(b) The case arose from the negligence of another vehicle using
the public road to whom no representation, or
misrepresentation, as regards the ownership and operation
of the passenger jeepney was made to whom such
representation or misrepresentation, was necessary
2012 Bar, Q. 46: X owns a passenger jeepney covered by
Certificate of Public Convenience. He allowed Y to use its
Certificate of Convenience for a consideration. Y therefore was
operating the passenger jeepney under the same Certificate of
Public Convenience (Kabit System) under the name of X. The
passenger jeepney met an accident. Who will be liable?
(a) Y, the one actually operating the jeepney, will be liable to
the injured party.
(b) X will be the one liable to the injured party despite the fact
that it is Y who is actually operating the jeepney, because
while the Kabit System is tolerated, the public should not
be inconvenienced by the arrangement.
(c) X will not be held liable if he can prove that he is not the
owner anymore.
(d) Public Policy dictates that the real owner, even not the
registered one, will be held liable.
2005 Bar, Q. XIII(2): Procopio purchased an Isuzu passenger
jeepney from Enteng, a holder of a certificate of public
convenience for the operation of public utility vehicle plying the
Calamba-Los Baños route. While Procopio continued offering the
jeepney for public transport services, he did not have the
registration of the vehicle transferred in his name. Neither did
he secure for himself a certificate of public convenience for its
operation. Thus, per the records of the Land Transportation
Franchising and Regulatory Board, Enteng remained its
registered owner and operator. One day, while the jeepney was
traveling southbound, it collided with a ten-wheeler truck
owned by Emmanuel. The driver of the truck admitted
responsibility for the accident, explaining that the truck lost its
brakes.
Procopio sued Emmanuel for damages, but the latter moved to
dismiss the case on the ground that Procopio is not the real
party in interest since he is not the registered owner of the
jeepney. Resolve the motion with reasons.
A: The motion to dismiss should be denied.
The rule enjoining the registered owner of the motor vehicle
under the “kabit system” from proving another person is the
owner is intended to protect third parties. Since this case does not
involve liability of the registered owner to third parties, and it is
the owner of the motor vehicle who is seeking compensation for
damages, the rule is not applicable (Lim v. CA, 2002)
Alternative: The motion to dismiss is misplaced.
Procopio is a real party in interest who stands to be benefited or
injured by the result of the action. Even if not the registered
owner of the jeepney, it was he who was wronged and was
seeking compensation for the damage to his vehicle. Moreover,
the case arose from the admitted negligence of Emmanuel’s
driver where representation with respect to the ownership and
operation of the passenger jeepney was not necessary. Besides
the riding public was not inconvenienced by the illegal
arrangement between Procopio and Enteng (Lim v. CA, 2002)
8. Boundary System
Boundary system is an arrangement whereby the registered
owner of a vehicle allows another person to operate it as a
common carrier under a lease agreement between, and thereby
advoiding the establishment of either an employer-employee
relationship or that of a principal-agent relation.
 The “boundary system” essentially seeks to exempt the
purported owner-lessor from the solidary liable rule
mandated of an employer for the negligent act of his
employee under quasi-delict provisions of the Civil Code.
 Likewise, the “boundary system” would exempt the
registered owner of a vehicle, as a mere lessor of
equipment, from being considered as a party in the common
carrier operations of the purported lessee who is deemed to
be the principal operator of the common carrier operations
to which the vehicle is being devoted to.
Hernandez v. Dolor, (2004). To exempt from liability the owner of
a public vehicle who operates it under the "boundary system" on
the ground that he is a mere lessor would be not only to abet
flagrant violations of the Public Service Law, but also to place the
riding public at the mercy of reckless and irresponsible drivers —
reckless because the measure of their earnings depends largely
upon the number of trips they make and, hence, the speed at
which they drive; and irresponsible because most if not all of
them are in no position to pay the damages they might cause.
Y Transit Co., Inc. v. NLRC, (1994). Transferee of vehicles cannot
prevent levy by asserting ownership because as far as the law is
concerned the one in whose name the vehicle is registered
remains to be the owner and the transferee merely holds as agent
the vehicle for the registered owner.
Magboo v. Bernardo, (1963). An employer-employee relationship
shall be deemed to exist between a jeepney-owner and a driver
under a “boundary system arrangement. The features which
characterizes the “boundary system”:
(a) The driver does not receive a fixed wage but gets only the
excess of the amount of fares collected by him over the
amount he pays to the jeep-owner; and
(b) The gasoline consumed by the jeep is for the account of the
driver.
are not sufficient to withdraw the relationship between them
from that of employer and employee. Consequently, the jeepney-
owner is subsidiarily liable as employer under Art. 103, RPC.
2005 Bar, Q. XIII(3): Baldo is a driver of Yellow Cab Company
under the boundary system. While cruising along the South
Expressway, Baldo’s cab figured in a collision, killing his
passenger, Pietro. The heirs of Pietro sued Yellow Cab Company
for damages, but the latter refused to pay the heirs, insisting
that it is not liable because Baldo is not its employee. Resolve
with reasons.
A: Yellow Cab Company is liable because there exists an e-e
relationship between a jeepney owner and a driver under the
boundary system arrangement in accordance with Art. 103, RPC
(Magboo v. Bernardo, 1963). Indeed to exempt from liability the
owner of a public vehicle who operates it under the “boundary
system” on the ground that he is a mere lessor would be not only
to abet flagrant violations of the Public Service Act Law but also to
place the riding public at the mercy of reckless and irresponsible
drivers reckless because the measure of their earnings depends
largely on the number of trips they make and, hence, the speed at
which they drive; and irresponsible because most, if not all of
them, are in no position to pay the damages they might cause.
2012 Bar, Q. 47: X owns a fleet of taxicabs. He operates it
through what is known as boundary system. Y drives one of such
taxicabs and pays X a fixed amount of Php1 ,000 daily under the
boundary system. This means that anything above Php 1,000
would be the earnings of Y. Y, driving recklessly, hit an old lady
crossing the street. Which statement is most accurate?
(a) X as the owner is exempt from liability because he was not
the one driving.
(b) X as the owner is exempt from liability because precisely the
arrangement is one under the "boundary system".
(c) X will not be exempt from liability because he remains to
be the registered owner and the boundary system will not
allow the circumvention of the law to avoid liability.
(d) Y is the only one liable because he drove recklessly.
9. Air Transportation
Mendoza v. PAL, (1951). Although Art. 349, Code of Commerce
only covers transportation on land and water, it has been held to
also cover transportation through the air.
 Under Art. 1732, CC, carrying or transporting passengers or
goods or both by “air” has been expressly included in the
definition of a common carrier.
(a) Nature of Airline’s Business
PAL v. CA, (1993). A contract of carriage is imbued with public
interest and requires common carriers to carry passengers safely
as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the
circumstances.
Thus, PAL's diversion of its flight due to inclement weather was a
fortuitous event. Nonetheless, such occurrence did not terminate
PAL's contract with its passengers, since the relation of carrier and
passenger continues until the latter has been landed at the port of
destination and has left the carrier’s premises. Hence, until the
passenger has left its premises, PAL was obliged to exercise
extraordinary diligence in safeguarding the comfort, convenience,
and safety of its stranded passengers, and for the unnecessary
inconvenience suffered by such passenger and the lack of care
and concern of its representatives, PAL could be held liable for
damages.
PAL v. CA, (1997). A contract to transport passengers is quite
different in kind and degree from any other contractual relation,
and this is because of the relation which an air carrier sustains
with the public. Its business is mainly with the travelling public. It
invites people to avail of the comforts and advantages it offers.
The contract of air carriage, therefore, generates a relation
attended with a public duty. Neglect or malfeasance of the
carrier's employees naturally could give ground for an action for
damages.
British Airways v. CA, (1998). The nature of an airline’s contract of
carriage partakes of two contracts:
(a) One to deliver a cargo or merchandise to its destination; and
(b) To transport passengers to their destination.
A business intended to serve the travelling public primarily is
imbued with public interest, hence, the law governing common
carriers imposes an exacting standard; neglect or malfeasance by
the carrier’s employees could predictably furnish bases for an
action for damages
Singapore Airlines Ltd. v. Fernandez, (2003). When an airline
company issues a ticket to a passenger, confirmed for a particular
flight on a certain date, a contract of carriage arises. The
passenger then has every right to expect that he be transported
on that flight and on that date. If he does not, then the carrier
opens itself to a suit for a breach of contract of carriage.
(c) Warning Against Abuse of Claims Against Airlines
Yu Eng Cho v. Pan American Airways, (2000). SC will not tolerate
an abuse of the judicial process by passengers in order to pry on
international airlines for damage awards, like “trophies in safari”.
The mere refusal by the airline to accede to the passenger’s
wishes does not necessarily translate into damages in the absence
of bad faith, and the fact that no demand letter was sent earlier to
the airline renders suspect the motive of the passenger in suing
the airline.
(d) Liabilities of Airline Companies
(1) For Employees’ Malfeasance
Morris v. CA, (2001). Neglect or malfeasance of the carrier’s
employees naturally give ground for an action for damages
against the common carrier. Moral damages are recoverable in a
damage suit predicated upon a breach of contract of carriage only
where:
(a) The mishap results in the death of a passenger; and
(b) It is proven that the carrier was guilty of fraud bad faith even
if death does not result
Air France v. Gillego, (2011). In repeatedly ignoring respondent’s
inquiries, petitioner’s employees exhibited an indifferent attitude
without due regard for the inconvenience and anxiety he
experienced after realizing that his luggage was missing.
Inattention to and lack of care for the interest of its passengers
who are entitled to its utmost consideration, particularly as to
their convenience, amount to bad faith which entitles the
passenger to an award of moral damages. What the law considers
as bad faith which may furnish the ground for an award of moral
damages would be bad faith in securing the contract and in the
execution thereof, as well as in the enforcement of its terms, or
any other kind of deceit.
(2) Entries in Passenger’s Travel Documents
Art. 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for
all the circumstances.
Japan Airlines v. Asuncion, (2005)
Facts:
1. A passenger of Japan Airlines was detained for several days
at Narita airport by Japanese immigration officials when
entries in his passport did not conform to his actual physical
attributes, which delayed him immensely from reaching Los
Angeles as previously confirmed in his tickets.
2. He now sues the airline for recovery of damage incurred, for
breach of contract.
Issue: WON JAL is liable for damages
Held:
1. JAL is not liable.
2. When an airline issues a ticket to a passenger, confirmed for
a particular flight on a certain date, a contract of carriage
arises under Art. 1755, CC, and the passenger has every right
to expect that he be transported on that flight and on the
date and it becomes the carrier’s obligation to carry him and
his luggage safely to the agreed destination.
3. Although it may be true that JAL had the duty to inspect
whether its passengers have the necessary travel
documents, however, such duty does not extend to checking
the veracity of every entry in those documents, and has no
duty to vouch for the authenticity of a passport and the
correctness of the entries therein.
4. The power to admit or not an alien into the country is a
sovereign act which cannot be interfered with even by JAL,
and is not within the ambit of their contract of carriage.
Japan Airlines v. Simangan, (2008). Where a passenger, despite
his protestation and valid travel documents, was unceremoniously
bumped off by the airline, damage was already done when he was
offered to fly the next day, which offer did not cure the airline’s
default. A common carrier ought to know the kind of valid
documents a passenger carries.
(3) Accommodations for Stranded Passengers
Japan Airlines v. CA, (1998)
Facts:
1. Passengers of JAL headed for the Philippines were stranded
in Tokyo due to the Mt. Pinatubo eruption.
2. The passengers sought recovery from JAL for the hotel and
meal expenses incurred by them for being stranded up to
the time they actually reached their final destination, even
when delay was caused by force majeure, since airlines have
the obligation to ensure the comfort and convenience of its
passengers.
Issue: WON the passengers may recover the hotel and meal
expenses incurred by them for being stranded
Held:
1. No. There is no dispute that the Mt. Pinatubo eruption was
force majeure not imputable to JAL and which prevented JAL
from proceeding to Manila on schedule.
2. There is no question that when JAL was unable to fulfill its
obligation because of force majeure, it cannot be held liable
for damages for non-performance, and whatever losses or
damages in the form of hotel and meal expenses the
stranded passengers incurred, cannot be charged to JAL.
 Airline passengers must take such risks incident to the mode
of travel.
3. In this regard, adverse weather conditions or extreme
climatic changes are some of the perils involved in air travel,
the consequences of which the passenger must assure or
expect. After all, common carriers are not the insurer of all
risks.
PAL v. CA, (1997). Even assuming arguendo that airline
passengers have no vested right to hotel accommodation
allowances in case a flight is cancelled due to force majeure,
nevertheless the airline company would be liable for damages
when its employees blatantly refused to accord the so-called
amenities equally to its stranded passengers, and there was no
compelling or justifying reason was advanced for such
discriminatory and prejudicial conduct.
(4) Overbooking
Zalamea v. CA, (1993). Even where overbooking of passengers is
allowed as a commercial practice, the airline company would still
be guilty of bad faith and still be liable for damages if it did not
properly inform passengers that it could breach the contract of
carriage even if they were confirmed passengers.
Cathay Pacific Airways, Ltd. v. Vasquez, (2003). It is clear from
Sec. 3 of Economic Regulation No. 7 of the Civil Aeronautics
Board, that overbooking does not exceed 10% of aircraft’s seating
capacity is not considered deliberate and therefore does not
amount to bad faith.
(5) Bumping Off Passengers to Higher Accommodations
Cathay Pacific Airways v. Sps. Vazquez, (2003)
Facts:
1. Sps. Vasquez who held premium club membership were
upgraded to first class from business class and were thereby
separated from their companions who remained in business
class.
2. It turned out that business class was overbooked, which
prompted the airline crew to upgrade the spouses, with no
extra cost
Issue: WON the airline be liable for such an act as constituting
breach of contract
Held:
1. Yes. In previous cases, the breach of contract of carriage
consisted in either the bumping off of a passenger with
confirmed reservation or the downgrading of a passenger’s
seat accommodation from one class to a lower class.
2. Although Sps. Vazquez had priority to be upgraded when the
opportunity arises, they had every right to waive such
opportunity, and there was breach of contract on the part of
the airline to have done so against their wishes.
3. Nevertheless, the breach cannot be considered to have been
done in fraud or bad faith, no harsh words were used nor
evil intent proven.
4. Needless to state, an upgrading is for the better condition
and, definitely, for the benefit of the passengers. In addition,
from commercial practice, overbooking that does not exceed
10% is not considered deliberate and therefore does not
amount to bad faith.
(6) Non-Liability for Transporting Bags in Another Airline
Tan v. Northwest Airlines, (2000). Passenger filed suit against the
airline because his luggage which were transported through
another airline were delated in arrival. There is no willful
misconduct on airline company in transporting baggage through
another airline, especially when it was done due to weight and
balance restrictions and was therefore motivated by safety
measures. For willful misconduct to exist, there must be showing
that the acts complained of were impelled by an intention to
violate the law, or were in persistent disregard of one’s right.
(7) Substituting Aircrafts/Carriers Without Notice
Northwest Airlines v. Savellano, (2003)
Facts: The airline ticket provided that “carrier may without notice
substitute alternate carriers or aircraft, and may alter or omit
stopping places shown on the ticket in case of necessity”
Issue: WON the clause authorize the airline company to change
the route without the consent of the suing passengers
Held:
1. No. The ticket clause did not authorize the airline to decide
unilaterally, even after the distressed flight landed in Seattle,
to substitute an alternate carrier without so much as a by-
your-leave.
2. Substituting aircrafts or carrier without notice is entirely
different from changing stopping places or connecting cities
without notice.
3. More importantly, the clause only allows the change by
showing of necessity, and the airline company has not been
able to demonstrate there was a necessity to change flight
itinerary.
4. However, no moral damages can be adjudged against the
airline company since the evidence show that the staff of the
airline company was motivated to have the plaintiffs reach
their final destination by any means, and there is no showing
that there was motivation for profit, malice or self-interest.
(8) Liability for Damage Cause by Hijacking
Fortune Express v. CA, (1999). A common carrier can be held
liable for failing to prevent a hijacking by frisking passengers and
inspecting their baggage, especially when it had received prior
notice of such threat.
(9) Security Measures Against Terrorism
Northwest Airlines v. Laya, (2002)
Facts:
1. Dr. Laya, unlike other passengers who were allowed to carry
their attache case after inspection, was made to transfer the
contents to envelopes.
2. He was treated in a very rude manner in the process
because he took exception to the varying treatment in his
case.
Issue: WON Dr. Laya may recover damages
Held:
1. Yes, but only for a reasonable amount.
2. The tragic even that unfolded on Sept. 11, 2001
underscored, more than ever, that airport and airline
personnel could not afford any lapse in the implementation
of security measures meant to secure the safety of airline
crew and passengers.
3. While the protection of passengers must take precedent
over convenience, the implementation of security measures
must be attended by basic courtesies.
(d) Matters Relating to Tickets
(1) Binding Terms of Ticket
Sarreal, Sr. v. Japan Airlines, (1992). Purchase of tickets from an
airline company instantaneously binds purchaser to the conditions
of the contract of carriage particularly the check-in time
requirement. Therefore, airline company cannot be held at fault
and the passenger is deemed to be guilty of omission or
negligence for his failure to take the standard procedure for any
passenger with a two-day stopover in a foreign city to confirm the
validity of his ticket and the availability of a seat on his next flight
out of that city
(2) Open-Dated Tickets
Singson v. CA, (1997). The contention of airline company in
refusing to confirm a passenger’s flight reservation back to the
Philippines on the ground that there was no contract of carriage
that could be breached because the client’s ticket was open-dated
is untenable. To begin with, he round trip ticket issued by the
carrier to the passenger was in itself a complete written contract
by and between the carrier and the passenger and had all the
elements of a complete written contract, to wit: consent, cause or
consideration and object; and more importantly, it was already
partially executed.
(3) Rules of Liability on Airline Pooling Agreements
American Airlines v. CA, (2000). Nature of IATA – A contract of
international carriage by air although performed by different
carriers under a series of airline tickets constitutes a single
operation. Members of the IATA are under a general pool
partnership agreement wherein they act as agents of each other
in the issuance of tickets to contracted passengers to boost ticket
sales worldwide and at the same time provide passengers easy
access to airlines which are otherwise inaccessible in some parts
of the world.
A member airline which enters into a contract of carriage
consisting of a series of trips to be performed by different carriers
is authorized to receive the fare for the whole trip and through
the required process of interline settlement of accounts by way of
IATA Clearing House an airline which undertook to transport over
the route covered by the unused portion of the conjunction
tickets, such airline is deemed to have tacitly recognized its IATA
commitment to act as agent of the principal contracting airline
and thereby assumed the obligation to take the place of the
carrier originally designated in the original conjunction ticket.
China Airlines v. Chiok, (2003)
Facts:
1. CAL issued an airline ticket to suing passengers, and
thereafter endorsed to PAL the Hong Kong-to-Manila
segment
2. Because of breach committed during that segment,
passenger sues CAL for recovery of damages.
3. CAL pointed to PAL as the airline liable for the breach
Issue: WON CAL may be held liable
Held:
1. CAL cannot evade liability for the incident even though it
may have been only a ticket issuer for the Hong Kong-Manila
segment.
2. The jurisprudential rule is that the contract of carriage has
always been treated as a single operation, which rule is
supported by the Warsaw Convention and the existing
practice of IATA
3. Under a general pool partnership agreement, ticket-issuing
airline is the principal in a contract of carriage, while the
endorsee-airline is the agent.
4. Consequently, when the breach of contract occurs not on its
flight, but on that to another airline, the principal ticket-
issuing airline is liable.
5. The liability of the ticket-issuing airline remained and does
not cease, regardless of the fact that another airline had
undertaken to carry the passengers to one of their
destinations.
Lufthansa v. German Airlines v. CA, (1994). An airline company
which issued a confirmed ticket to a passenger covering a five-leg
trip abroad different airlines can be held liable for damages
occasioned by the “bumping-off” by one of the airlines contracted
to carry him to a particular designation of the five-leg trip. Sec. 2
of Art. 30 of the Warsaw Convention which expressly stipulates
that in cases where the transportation of passengers or goods is
performed by various successive carriers, the passenger can take
action only against the carrier which performed the
transportation, during which the accident or delay occurred,
cannot apply to a situation of “bumping-off” of a passenger.
The issuance of a ticket by the main airline company covering the
entire five-leg trip abroad successive carriers clearly shows that
the issuing airline is the principal in the contract of carriage, and
should be taken as a guarantee that the successive carriers, would
honor the ticket, assurance of a space therein and transport for
him on each of the particular segments of the trip.
KLM v. CA, (1975). An airline ticket providing that carriage by
successive air carriers is to be regarded as a “single operation”
makes the issuing carrier liable for the tort conduct of the other
carriers as provided in Art. 373 of the Code of Commerce; and
that a provision at the back of the ticket limiting liable to one’s
own conduct does not rebut the liability.
(4) Principle of Lex Loci Contractus
United Airlines v. CA, (2001). The general under doctrine of lex
loci contractus is that the law of the place where a contract is
made or entered into governs with respect to its nature and
validity, obligation and interpretation; and this is true even
though the place where the contract was made is different from
the place where it is to be performed, and particularly so, if the
place of the making and the place of performance are the same.
In this case, although the contract of carriage is performed in the
U.S., the tickets were purchased in the Philippines, and therefore
Philippine law must apply. Even when the tickets were “rewritten
in Washington D.C., such fact did not change the nature of the
original contract of carriage entered into in the Philippines. Hence,
the court should apply the law of the place where the airline
tickets were issued, when the passengers are residents and
nationals of the forum and the tickets is issued in such State by
the defendant airline.
Zalamea v. CA, (1993). In a suit for recovery of damages for
breach of contract of carriage by a foreign airline company, the
law of the place where the airline ticket was issued (lex loci
contractus) shall be applied by the court when the passengers are
residents and nationals of the forum and the ticket is issued in
such state by the defendant airline. Therefore, in case the tickets
were sold and issued by a foreign airline in the Philippines to
Filipinos, the applicable law would be Philippine law.
10. Damages Recoverable (Subject to Limitation of Liability
Clause)
In an action based on culpa contractual, the damage recoverable
are as follows:
(a) Actual damages (dano emergente) – are expenses for
medicine, hospitalization, etc.
(b) Unrealized profits (lucro cesante) – are always recoverable
as compensatory damages which shall be fixed by
determining the net yearly income of the injured or
deceased passenger and multiplying the same by the
number of years that he was expected to live or lead a
gainful existence as determined by mortality tables of life
insurance companies of the Philippines
(c) Moral damages – awarded in culpa contractual in the
following:
(1) Where mishap resulted in the death of a passenger (Art.
1764 in relation to Art. 2206, CC; Japan Airlines v Simangan,
2008)
(2) When carrier was guilty of fraud or bad faith, even if death
did not result (Art. 2220, CC; Sabena Belgian World Airlines
v. CA, 1989)
 If the cause of action is culpa acquilina where passenger
suffered physical injuries, there is no need to prove that the
carrier acted fraudulently or in bad faith.
Lufthansa German Airlines v. IAC, (1992). The inability of the
private respondents to prove fraud and bad faith on the part of
the airlines does not entitle them to moral damages.
PAL v. CA, (2008). In breach of a contract of carriage, moral
damages may be recovered when:
(1) The mishap results in the death of a passenger; or
(2) Where the carrier is guilty of fraud or bad faith; or
(3) Where the negligence of the carrier is so gross and reckless
as to virtually amount to bad faith
The award of exemplary damages is warranted where the air
carrier acted recklessly and malevolently in transporting the
passengers, and its gross negligence amounting to bad faith
entitled the latter to moral damages.
PAL v. Miano, (1995)
Facts:
1. Miano took PAL’s Mabuhay Class, bound for Frankfurt,
Germany, with immediate onward connecting flight via
Lufthasa flight to Vienna.
2. When Miano arrived in Vienna, his baggage was missing and
was only delivered to him 11 days afterwards, with a camera
missing.
3. Miano filed a suit for recovery of the cost of the camera, the
cost of transporting luggage and for moral and exemplary
damages, plus attorney’s fees.
4. The trial court found that PAL’s actuation was not attended
by bad faith, but it awarded damages and attorney’s fees.
Issue: WON PAL may be held liable for breach of contract of
carriage
Held:
1. In breach of contract of carriage by air, moral damages are
awarded only if the defendant acted fraudulently or in bad
faith.
2. On the other hand, exemplary damages can only be awarded
if the defendant acted in wanton, fraudulent, reckless,
oppressive or malevolent manner.
3. The findings of the lower court clearly showed that PAL was
never in bad faith and took proper remedies to locate the
luggage.
4. The award of attorney’s fees must be deleted where the
award of moral and exemplary damages are eliminated.
5. The further delay in tracing the baggage was also attributed
to Miano since there was not tracer telex.
6. “A tracer telex, an airline lingo, is an action of any station
that the airlines operate from whom a passenger may
complaint or have not received his baggage upon his arrival.
The tracer telex, which contained information of the
luggage, is matched with tagless luggage for identification”
PAL v. Lao Lim, (2012). Although exemplary damages are not
recoverable as a matter of right, nonetheless the grant of
exemplary damages was in order since the respondent has been
found entitled to temperate damages, especially so when the
airline acted in bad faith by not informing the passengers of the
erroneous cancellation of their bookings on the flight.
Zulueta v. PAN-AM, (1972)
Facts:
1. Zulueta was a passenger on a PAN-AM flight with his wife
and children from San Francisco to Manila. On a stopover at
Wake Island, the passengers were told that the plane would
leave in 30 minutes
2. After 30 minutes, Zulueta failed to show up, the crew had to
look for him. When he was found, the plane captain called
Zulueta a “brown monkey”.
3. Zulueta answered back and a bitter exchange followed.
4. The captain got angry and ordered the crew to unload
Zulueta’s baggage, and he was left behind.
5. Upon being able to reach Manila, Zulueta filed an action to
recover moral damages.
Issue: WON Zulueta is entitled to moral damages
Held: Yes. The SC awarded P500,000 as moral damages and
P50,000 as attorney’s fees for the harsh treatment of Zulueta.
Lopez v. PAN-AM, (1966)
Facts:
1. VP Lopez with his wife, daughter and son-in-law had tickets
for first class seats on PAN-AM bound for San Francisco.
2. When they arrived in Tokyo, the plane’s crew found out that
the first class tickets had been oversold, and Lopez and his
family were compelled to take the economy seats.
3. When the plane arrived at San Francisco, Filipino officials
and the Filipino community with a band waited for Lopez to
appear from the first class section, but he did not as he was
in the economy section.
4. Lopez was humiliated; thus he filed this suit to recover moral
damages.
Issue: WON VP Lopez is entitled to moral damages
Held:
1. PAN-AM should have informed Lopez of the possible
downgrading to prevent humiliation.
2. The Court awarded Lopez large amounts (P300,000 in moral
damages and P150,000 as attorney’s fees), in view of the
importance of the person of the passenger.
(d) Liability for Death of Passengers
Victory Liner, Inc. v. Gammad, (2004). The common carrier, in
breach of its contract of carriage that results in the death of a
passenger, is liable to pay the following amounts:
(a) Indemnity for death;
(b) Indemnity for loss of earning capacity; and
(c) Moral damages
Damages for loss of earning capacity may be awarded despite the
absence of documentary evidence when:
(a) The deceased is self-employed earning less than the
minimum wage under current labor laws, and judicial notice
may be taken of the fact that in the deceased’s line of work
no documentary evidence is available; or
(b) The deceased is employed as a daily wage worker earning
less than the minimum wage under current labor laws.
Moral damages cannot be lumped with exemplary damages
because they are based on different jural foundations. For actual
damages, only substantiated and proven expenses of those that
appear to have been genuinely incurred in connection with the
death, wake or burial of the victim will be recognized.
(1) Statutory Value of Life Lost
Sulpicio Lines, Inc. v. CA, (1995). In case of death of a passenger,
although under Art. 2206, CC only deaths caused by a crime as
quasi-delict are entitled to actual and compensatory damages
without the need of proof of said damages, however, Art. 1764
expressly makes Art. 2206 applicable to “the death of a passenger
caused by the breach of contract by a common carrier”.
Accordingly, a common carrier is liable for actual or compensatory
damages for the death of its passengers caused by breach of
contract of transportation. The award of damages under Art. 2206
for death of a passenger has been increased to P50,000.
(2) Loss of Earning Capacity (presented in the order of
jurisprudential development)
Davila v. PAL, (1973)
Facts:
1. Davila was a passenger in a PAL plane bound from Iloilo to
Manila, and which was supposed to follow the amber route
which required it to curve from the Mindoro mountains.
2. Pilot did not follow said route and the plane crashed, with all
crew and passengers perishing.
3. Lower court granted Davila’s heirs P6,000 as compensatory
damages.
4. PAL appealed.
Issue: WON the award of damages to Davila’s heir
Held: Since Davila was earning P7,000 at the time of his death and
a life expectancy of 25 years more, the SC increased the
compensatory damages from P6,000 to P175,000 by multiplying
the deceased’s yearly income with his life expectancy based on
mortality tables of life insurance companies in the Philippines.

MD Transit v. CA, (1979). Modified the Villa Rey Transit and Davila
rulings by holding that instead of taking the gross earning only the
net earnings per year was multiplied by the number of years of
life expectancy.
People v. More, (1999). SC reiterated the long-established
formula to determine lost earnings, to wit:
Net Earning Capacity = Life Expectancy x Gross Annual Income –
Living Expenses
“Life Expectancy” – accepted formula for determining life
expectancy is 2/3 multiplied by (80 minus age of the deceased)
per Negros Aviation Co., Inc. v. CA, (1997).
“Gross Annual Income” – deceased’s annual income before
deduction of living expense (50% of gross annual income), per
Davila v. PAL, (1973) and Villa Rey Transit, Inc. v. CA, (1970)
“Living Expenses” – computed at 50% of gross annual income, per
People v. Panida, (1999) and People v. Verde, (1999)
Tugade, Sr. v. CA, (2003). In determining the indemnity for loss of
earning capacity, the SC uses the following formula:
Loss of Earning Capacity = Life Expectancy x (Gross Annual
Income – Living Expenses)
Life Expectancy = 2/3 (80 – age at time of death)
Living Expenses = 50% of gross annual income
Perena v. Zarate, (2012). The basis for the computation of the
dead passenger’s earning capacity was not what he would have
become or what he would have wanted to be if not for its
untimely death, but the minimum wage in effect at the time of his
death. Our law itself states that the loss of the earning capacity of
the deceased shall be the liability of the guilty party in favor of the
heirs of the deceased, and shall in every case be assessed and
awarded by the court “unless the deceased on account of
permanent physical disability not caused by the defendant, had
no earning capacity at the time of his death”
(3) Moral Damages in Event of Death of Passenger
Trans World Air Lines v. CA, (1998). GR: Moral damages are not
recoverable in culpa contractual
XPN: When the presence of bad faith was proven.
However: Phil. Rabbit Bus Lines v. Esguerra, (1982). In breach of
contract of carriage, moral damages may be recovered when it
results in the death of a passenger.
11. Warsaw Convention
GSIS v. Pacific Airways Corp., (2010). To ascertain who among the
aircraft pilots involved in an accident is liable for negligence,
reference must be made to the applicable rules governing the
specific traffic management of aircrafts at an airport. The Rules of
the Air Transportation Office (ATO) apply to all aircrafts registered
in the Philippines, which, among others, provide that the aircraft
on take-off roll undisputedly has the right of way.
For disregarding PAL’s right of way, Pacific Airways Corp.’s pilots
were grossly negligent. Also, since the pilots-in-command have
the final authority as to the disposition of the aircraft, they
cannot, in case of collision occurs, pass the blame to Air
Transportation Office (ATO) for issuing clearance that turn out to
be unsuitable.
South African Airways v. CIR, (2010). Off-line carriers having
general sales agents in the Philippines, are engaged in business in
the Philippines and their income from sales of passage documents
here is income from within the Philippines. In other words, as long
as the uplifts of passengers and cargo occur to or from the
Philippines, income is included in Gross Philippine Billings.
PAL v. CA, (2008). When an airline issues a ticket to a passenger,
confirmed for a particular flight on a certain date, a contract of
carriage arises – the passenger has every right to expect that he
be transported on that flight and on that date, and it becomes the
airline’s obligation to carry him and his luggage safely to the
agreed destination without delay.
(a) Nature and Scope of Warsaw Convention
Santos III v. Northwest Orient Airlines, (1992). The Warsaw
Convention is a treaty commitment voluntarily assumed by
Philippine government and, as such, has the force and effect of
law in this country.
PAL v. Savillo, (2008). The Warsaw Convention applies to “all
international transportation of person, baggage of goods
performed by any aircraft for hire”. It seeks to accommodate or
balance the interests of passengers seeking recovery for personal
injuries and the interests of air carriers seeking to limit potential
liability. It employs a scheme of strict liability favoring passengers
and imposing damage caps to benefit air carriers.
American Airlines v. CA, (2000). The Warsaw Convention, to
which the Philippines is a party and which has the force and effect
of law in this country, applies to all international transportation
of persons, baggage or goods performed by an aircraft
gratuitously or for hire. As enumerated in its Preamble, one of the
objectives is “to regulate in a uniform manner the conditions of
international transportation by air”
When contract of air carriage is a contract of international
transportation, provisions of the Convention automatically apply
and exclusively govern rights and liabilities of airline and its
passengers.
Mapa v. CA, (1997). There are two (2) categories of “international
transportations”:
(a) Where the place of departure and place of destination are
situated within the territories of two High Contracting
Parties regardless of whether or not there be a break in the
transportation or a transshipment; and
(b) Where the place of departure and the place of destination
are within the territory of a single High Contracting Party if
there is agreed stopping place within territory subject to the
sovereignty, mandate, or authority of another power, even
though the power is not a party to the Convention.
When the airline tickets evidencing the contract of transportation
between Mapa and TWA, which were purchased in Bangkok, show
the place of departure and the place of destination to be within
U.S., the contract cannot come within the purview of the first
category of “international transportation”
The linkage of the contract to the Manila-Los Angeles travel
tickets obtained by the Mapas from PAL cannot bring the
arrangements within the second category, where the same were
filled-up only by the Mapas in response to the query “Your
Complete Itinerary” at the time they claimed for their lost pieces
of baggage
Lhuillier v. British Airways, (2010). “International carriage”
means any carriage in which, according to the contract made by
the parties, the place of departure and the place of destination,
whether or not there be a break in the carriage or a
transshipment, are situated either within the territories of two
High Contracting Parties, or within the territory of a single High
Contracting Party, if there is an agreed stopping place within a
territory subject to the sovereignty, suzerainty, mandate, or
authority of another Power, even though that Power is not a party
to the Warsaw Convention. Tortious conduct as ground of
complaint arising from an international carriage are well within
the purview of the Warsaw Convention.
Under Art. 28(1) of the Warsaw Convention, which is jurisdictional
in character, the plaintiff may bring the action for damages
before:
(a) The court where the carrier is domiciled;
(b) The court where the carrier has its principal place of
business;
(c) The court where the carrier has an establishment by which
the contract has been made; or
(d) The court of the place of destination
(b) Salient Aspects of the Warsaw Convention
(1) Provision on Valuation of Cargo
British Airways v. CA, (1998). Under Art. 22(1) of the Warsaw
Convention, a contract of air carriage requires declaration by
passenger of a higher value to recover a greater amount, and that
air carrier is not liable for loss of baggage in an amount in excess
of the limits specified in the tariff which was filed with the proper
authorities, such tariff being binding on the passenger regardless
of the passenger’s lack of knowledge thereof or assent thereto.
Nevertheless, there can be no blind reliance on adhesion of
contracts where:
(a) The fact and circumstances justify that they should be
disregarded; and
(b) When the benefits of limited liability have been waived
when the air carrier failed to raise timely objections during
the trial when questions and answer regarding the actual
claims and damages sustained by the passenger were asked
(2) Provision on Limiting Liability
Northwest Airlines v. CA, (1998). Sec. 22(2) of the Warsaw
Convention does not operate as an exclusive enumeration of the
instances of an airline’s liability, or as an absolute limit of the
extent of that liability. The Convention’s provisions do not
regulate or exclude the following areas:
(a) Liability for other breaches of contract by the carrier;
(b) Misconduct of its officers and employees; and
(c) For some peculiar or exceptional type of damage
Sabena Belgian World Airlines v. CA, (1996). The Warsaw
Convention denies to the carrier availment of the provisions
which exclude or limit the carrier’s liability if the damage is caused
by his willful misconduct or by such default on his part as, in
accordance with the law of the court seized of the case, is
considered to be equivalent to willful misconduct, or if the
damage is similarly caused by any agent of the carrier acting
within the scope of his employment
Under domestic law and jurisprudence, the attendance of gross
negligence (given the equivalent of fraud or bad faith) holds the
common carrier liable for all damages which can be reasonably
attributed, although unforeseen, to the non-performance of the
obligation, including moral and exemplary damages.
(3) On Limitation to Time to File Action
United Airlines v. Uy, (1999). The two (2)-year limitation to file an
action for recovery in Art. 29 of Warsaw Convention is an absolute
bar to suit and not to be made subject to the various tolling
provisions of the laws of the forum – it therefore forecloses the
application of the forum’s rules on interruption of prescriptive
periods, as Art. 29(2) was intended only to let local laws
determine whether an action had been commenced within the
two-year period.
(c) Proper Coverage of Warsaw Convention
PAL v. CA, (1996). While the Warsaw Convention has the force
and effect of law, it does not operate as an exclusive enumeration
of instances when carrier shall be liable for breach of contract or
as an absolute limit of the extent of liability, nor does it preclude
operation of the Civil Code or other pertinent laws.
PAL v. Savillo, (2008). The cardinal purpose of the Warsaw
Convention is to provide uniformity of rules governing claims
arising from international air travel. This, it precludes a passenger
from maintaining an action for personal injury damages under
local law when his or her claim does not satisfy the condition of
liability under the Warsaaw Convention.
Jurisprudence in the Philippines and the U.S. also recognize that
the Warsaw Convention does not “exclusively regulate” the
relationship between passenger and carrier on an international
flight, since there are claims that are considered to be outside the
coverage of the Warsaw Convention.
Art. 19 of the Warsaw Convention provides for liability on the part
of a carrier for “damages occasioned by delay in the
transportation by air of passengers, baggage or goods” Art. 24
excludes other remedies by further providing that (1) in the cases
covered by Art. 18 and 19, any action for damages, however,
founded, can only be brought subject to the conditions and limits
set out in the convention”. Therefore, a claim covered by the
Warsaw Convention can no longer be recovered under local law if
the statute of limitations of two years has already lapsed.
(1) Treatment of Airline Passengers
United Airlines v. Uy, (1999). A cause of action arising from
slashing and loss of personal effects by an airline passenger is well
within coverage of the Warsaw Convention; while a cause of
action arising from the shabby and humiliating treatment received
from airline employees is not.
(2) Off-Loading of Baggage
PAL v. CA, (1996)
Facts:
1. The baggage of spouses, who were passengers in PAL Flight
PR 101 from San Francisco to Manilla were off-loaded during
the stop-over at Honolulu due to weight limitations.
2. The baggage was eventually delivered to Cebu City after
much delay.
3. PAL avers that the express provisions on the tickets
stipulating that liability for delay in delivery of baggage shall
be limited to US$20.00 per kilo of baggage delayed, unless
the passenger declares a higher valuation, constitutes a
contract of carriage between PAL and the passenger-spouses
in compliance with the provisions of the Warsaw
Convention.
4. It was shown from the facts that PAL was guilty of bad faith
through inattention to and lack of care for the interests of its
passengers, who were not accorded proper
accommodations, nor adequate transportation facilities, and
who had to fend for themselves.
Issue: WON PAL may be held liable for the amount of baggage
stipulated
Held:
1. PAL liable beyond the limited amount stipulated.
2. Although the Warsaw Convention has the force and effect of
law in the Philippines, being a treaty commitment assumed
by the Philippine Government, said convention does not
operate as an exclusive enumeration of the instances for
declaring a carrier liable for breach of contract of carriage or
as an absolute limit of the extent of that liability.
3. The Warsaw Convention declares carrier liable in the
enumerate cases and under certain limitations.
4. However, it must not be construed to preclude the
operation of the Civil Code and pertinent laws.
5. It does not regulate, much less exempt, carrier from liability
for damages for violating the rights of its passengers under
the contract of carriage, especially if willful misconduct on
the part of the carrier’s employees is found or established,
which is the case here.
(3) Distinction Between Damages to Baggage and Humiliation
Suffered by Passenger
PAL v. Savillo, (2008). In United Airlines v. Uy, this Court
distinguished between the (1) damage to the passenger’s baggage
and (2) humiliation he suffered at the hands of the airline’s
employees. The first cause of action was covered by the Warsaw
Convention which prescribes in two (2) years, while the second
was covered by the provisions of the Civil Code on torts, which
prescribes in four (4) years
(4) Recovery of Moral Damages for Death of Passenger: Art.
1764 in Relation to Art. 2206(3), CC
Sulpicio Lines, Inc. v. Curso, (2010). GR: Moral damages are not
recoverable in actions for damages predicated on a breach of
contract, unless there is fraud or bad faith.
XPN: Moral damages may be awarded in case of breach of
contract of carriage that results in death of a passenger, under
Art. 1764, in relation to art. 2206(3), CC
The surviving brothers and sisters of a passenger of a vessel that
sinks during a voyage are not entitled to recover moral damages
from the vessel owner as a common carrier. The omission from
Art. 2206(3), CC of brothers and sisters of the deceased passenger
reveals the legislative intent to exclude them from the recovery of
moral damages for mental anguish by reason of the death of the
deceased – the solemn power and duty of the courts to interpret
and apply the law do not include the power to correct the law by
reading into it what is not written.
(5) Use of Delaying Tactics by Airline
United Airlines v. Uy, (1999). The mandate under Art. 29 of the
Warsaw Convention that an action for damages should be filed
within two (2) years from the arrival at the place of destination
does not apply where the airline company employed delaying
tactics.
(d) Jurisdiction of Local Courts under Warsaw Convention
American Airlines v. CA, (2000)
Facts:
1. Passenger purchased from Singapore Airlines in Manila
conjunction tickets for a 9-leg international destination that
would end in Geneva-Copenhagen-New York.
2. In Geneva, the passenger decided to forego his trip to
Copenhagen and go straight to New York.
3. He exchanged the unused portion of the conjunction ticket
with American Airlines which issued its own one-way ticket
from Geneva to New York.
4. At Geneva airport, the passenger was treated with such
indignity that upon his return to the Philippines he filed an
action to recover damages against American Airlines, which
pleaded lack of jurisdiction by the local courts under Art.
28(1) of Warsaw Convention.
Issue: WON the local trial courts can take cognizance of an action
for damages filed by a passenger against an international airline
company in view of Art. 28(1) of the Warsaw Convention
Held:
1. Yes. Although the Philippines is neither the domicile nor the
principal place of business of American Airlines, nor is the
place of destination under the facts given, because the
issuance by American Airlines of a new ticket in Geneva to
cover a one-way trip to New York should be considered as
part of the contract of transportation entered into by the
passenger with Singapore Airlines in Manila, and cannot be
considered as contract of carriage separate and distinct from
that entered into with Singapore Airlines.
2. This position is supported by Art. 1(3) of the Convention
which provides that “transportation to be performed by
several successive carriers shall be deemed, for the purposes
of this convention, to be one undivided transportation,
whether it has been agreed upon under the form of a single
contract or a series of contracts, and it shall not lose its
international character merely because one contract or
series of contracts is to be performed entirely within the
territory subject of the sovereignty, suzerainty, mandate or
authority of the same High Contracting Party”
III. Contract of Carriage of Cargo
1. Applicable Law Based on Destination
(a) Where Destination is Philippine Port (Art. 1753)
Art. 1753. The law of the country to which the goods are to be
transported shall govern the liability of the common carrier for
their loss, destruction or deterioration.
NDC v. CA, (1988). Philippine laws will still apply even when the
collision actually occurred in foreign waters, so long as the port of
destination was in the Philippines.
Philippine Charter Insurance v. Neptune Orient Lines, (2008).
Since the subject cargoes were lost while being transported by
respondent common carrier from Hong Kong to the Philippines,
Philippine law applies pursuant to the Civil Code which provides:
Art. 1753. The law of the country to which the goods are to be
transported shall govern the liability of the common carrier for
their loss, destruction or deterioration.
Art. 1766. In all matters not regulated by this Code, the rights and
obligations of common carriers shall be governed by the Code of
Commerce and by special laws.
The rights and obligations of respondent common carrier are thus
governed by the provisions of the Civil Code, and the COGSA,
which is a special law, applies suppletorily.
(b) Where Destination is a Foreign Port – law of such foreign
country will apply, per Art. 1753, CC
Santos III v. Northwest Orient Airlines, (1992). A passenger’s
“ultimate destination” and not “an agreed stopping place”
determines the laws of the country applicable in a suit against
international carrier.
Eastern Shipping, Inc. v. IAC, (1978). The law of the country to
which goods are to be transported governs the liability of the
common carrier in case of their loss, destruction or deterioration.
2. No Obligation to Accept Cargo
PAL v. CA, (1996). There is no absolute obligation on the part of
carrier to accept a cargo. It is only when a common carrier accepts
cargo for shipment for valuable consideration does it assume the
risk of delivering it in good condition as when it was loaded.
3. No Obligation to Deliver Cargo Immediately in Absence of
Stipulation
Maersk Line v. CA, (1993). While it is true that common carriers
are not obligated by law to carry and to deliver merchandise, and
persons are not vested with the right to prompt delivery, unless
so specifically stated and agreed upon, delivery of shipment of
cargo should at least be made within a reasonable time and
cannot be left to the sole will of the carrier.
4. When Contract of Carriage of Goods Begin?
Cia. Maritima v. Insurance Co. of North America, (1964). In
general, the best evidence of the contract of carriage of cargo is
the bill of lading, or in case of an airplane, a waybill. But: Cargo
can be transported even without it. It is possible to have a
contract of carriage of cargo even without a bill of lading being
issued.
Asian Terminals, Inc. v. Philam Insurance Co. Inc., (2013). Under
Art. 1736, CC, from the time cargo is unconditionally delivered to
the carrier and received by the carrier for transportation, the
liability of the carrier arises.
Saludo, Jr. v. CA, (1992). The extraordinary responsibility of a
common carrier begins from the time the goods are delivered to
the carrier.
5. Bill of Lading
(a) Nature and Function of Bill of Lading
 The Code of Commerce mentions the contents of a bill of
lading twice: Art. 350 and 706.
 This is because of the three (3) important roles that a bull of
lading plays:
(1) Best evidence of existence of contract of carriage of cargo;
(2) Important role it plays as commercial document whereby, if
negotiable, ownership may be transferred by negotiation.
Under Art. 1636, CC, bill of lading is mentioned as a
document of title.
(3) Receipt of the cargo (per COGSA)
Provident Insurance Corp. v. CA, (2004). A bill of lading, which is
in the nature of a contract of adhesion, defines the rights and
liabilities of the parties in reference to the contract of carriage
Maersk Line v. CA, (1993). Bills of lading, although contracts of
adhesion, are not prohibited and the terms thereof binding, since
the party is free to reject it, and yet has accepted the terms
thereof. But the terms of a bill of lading which create an absurd
situation as having the effect of practically leaving the date of
arrival of the shipment to the sole determination and will of the
carrier cannot be enforced.
Unsworth Transport International (Phil.) v. CA, (2011). A bill of
lading is a written acknowledgement of the receipt of goods and
an agreement to transport and to deliver them at a specified place
to a person named or on his or her order. It operates both as a
receipt and as a contract.
Malayan Insurance Co. v. Jardine Davies Transport, (2009). The
presumption that the bill of lading, which may be relied upon to
support a claim for restitution, constitutes prima facie evidence of
the goods therein described may be rebutted by evidence casting
doubts on its veracity. Thus, in the absence of clear, convincing
and competent evidence to prove that the cargo indeed weighed,
albeit the bill of lading qualified it by the phrase “said to weight”,
6,599.23 MT at the port of origin when it was loaded onto the
ship, the fact of loss or shortage in the cargo upon its arrival in
Manila cannot be definitively established.
Lorenzo Shipping v. Chubb and Sons, Inc., (2004). A bill of lading,
aside from being a contract and a receipt, is also a symbol of the
goods covered by it. A bill of lading which has no notation of any
defect or damage in the goods is called a “clean bill of lading”. A
clean bill of lading constitutes prima facie evidence of the receipt
by the carrier of the goods as therein descried.
Keng Hua Paper Products v. CA, (1998). A bill of lading serves two
(2) functions:
(a) It is a receipt for the goods shipped; and
(b) It is a contract by which three (3) parties – namely: the
shipper, the carrier, and the consignee – undertake specific
responsibilities and assume stipulated obligations.
2015 Bar, Q. III(a): Discuss the three-fold character of a bill of
lading?
A: A bill of lading is considered a receipt for the goods shipped to
the common carrier.
It also serves as the contract by which three parties, namely, the
shipper, the carrier, and the consignee undertake specific
responsibilities and assumed stipulated obligations.
Third, it is the evidence of the existence of the contract of carriage
providing for its terms and conditions thereof (Kung Hua Paper
Products Co. Inc. v. CA, G.R. No. 11683, February 12, 1998)
Belgian Overseas Chartering v. Phil. First Insurance, (2002). In a
nutshell, the acceptance of the bill of lading by the shipper and
the consignee, with full knowledge of its contents, give rise to the
presumption that it constituted a perfected and binding contract.
Saludo, Jr. v. CA, (1992). A bill of lading is a written
acknowledgement of the receipt of the goods and an agreement
to transport and deliver them at a specific place to a person
named or on his order; acceptance thereof without dissent raises
the presumption that all terms therein were brought to the
knowledge of the shipper and agreed to by him and estops him
thereafter from denying the same.
(b) Binding Effect of Provisions of Bill of Lading
Telengtan Brothers v. CA, (1994). A bill of lading operates both as
a receipt and a contract. As a contract, its terms and conditions
are conclusive on the parties, including the consignee, as to the
route, destination, freight rates or charges, and stipulates the
rights and obligations assumed by the parties.
MOF Company v. Shin Yang Brokerage Corp., (2009). The bill of
lading is oftentimes drawn up by the shipper/consignor and the
carrier without the intervention of the consignee. However, the
latter can be bound by the stipulations of the bill of lading when:
(a) There is a relation of agency between the shipper or
consignor and the consignee or
(b) When the consignee demands fulfillment of the stipulation
of the bill of lading which was drawn up in its favor.
(c) The availment of the stipulation pour autrui, i.e. when the
consignee demands before the carrier the fulfillment of the
stipulation of the bill of lading which is drawn up in its favor.
Phil. Charter Insurance Corp. v. Owner of M/V “National Honor”,
(2005). The statement in the bill of lading, that the shipment was
in apparent good condition, is sufficient to sustain a finding of
absence of defects in the merchandise, but such statement will
create a prima facie presumption only as to the external condition
and not to that not open to inspection.
Belgian Overseas Chartering v. Phil. First Insurance, (2002).
Limitation of Value of Goods Recoverable – a stipulation in the
bill of lading limiting to a certain sum the common carrier's
liability for loss or destruction of a cargo -- unless the shipper or
owner declares a greater value -- is sanctioned by law. There are,
however, two conditions to be satisfied:
(1) The contract is reasonable and just under the circumstances,
and
(2) It has been fairly and freely agreed upon by the parties.
The rationale for this rule is to bind the shippers by their
agreement to the value (maximum valuation) of their goods.
However, COGSA establishes a statutory provision limiting the
carrier's liability in the absence of a shipper's declaration of a
higher value in the bill of lading. The provisions on limited liability
are as much a part of the bill of lading as though physically in it
and as though placed there by agreement of the parties.
Belgian Overseas Chartering v. Phil. First Insurance, (2002)
Facts:
1. The bill of lading contained no stipulation limiting the
carrier’s liability and neither did the shipper declare a higher
valuation of the goods to be shipped.
2. There was however an insertion of the phrase “L/C
90/0244”.
Issue: WON if the goods are lost, can the shipper claim a higher
value than the $500 limited provided in the COGSA on the basis
of the value appearing in the L/C
Held:
1. No. The inserted reference to the L/C does not amount to a
declaration of the value of the goods as required by the bill.
2. The notation was made only for the convenience of shipper
and the bank possessing the letter of credit.
3. The bill of lading is entirely separate from the L/C
arrangement
Federal Express v. American Home Assurance, (2004). Stipulated
Period of Claim – The filing of a claim with the carrier within the
limitation therefor actually constitutes a condition precedent to
the accrual of a right of action against a carrier for loss of or
damage to the goods.
(c) Types of Bills of Lading
Magellan Manufacturing Corp. v. CA, (1991). An “on board” bill of
lading is one where it is stated that the goods have been received
on board the vessel which is to carry the goods.
A “receiver shipment” bill of lading is one in which it is stated that
the goods have been received for shipment with or without
specifying the vessel by which the goods are to be shipped.
(d) Parties Bound by Terms of Bill
(1) On Consignee
Everett Steamship v. CA, (1998). Even when the consignee is not
a signatory to the contract of carriage between the shipper and
the carrier, which among others limited the liability of the carrier
for loss or destruction of the cargo to a certain sum, unless the
shipper or the owner declares a higher value, the consignee can
still be bound by the contract. When a consignee formally claims
reimbursement for the missing goods from the carrier and
subsequently filed a case against the latter based on the same bill
of lading containing the limiting stipulation, then the consignee
has effectively accepted the provisions of the bill of lading and
thereby made itself a party thereto.
Keng Hua Paper Products v. CA, (1998). A "bill of lading delivered
and accepted constitutes the contract of carriage even though not
signed," because the "(a)cceptance of a paper containing the
terms of a proposed contract generally constitutes an acceptance
of the contract and of all of its terms and conditions of which the
acceptor has actual or constructive notice.” In a nutshell, the
acceptance of a bill of lading by the shipper and the consignee,
with full knowledge of its contents, gives rise to the presumption
that the same was a perfected and binding contract.
When consignee received the bill of lading immediately after
shipment’s arrival, having been given an opportunity to examine
the document, its objection six (6) months later is unavailing.
(2) On Insurer-Subrogee
Philamgen v. Sweet Lines, (1992). An insurer who is subrogated
to the rights of the insured-consignee is bound by the terms of the
bill of lading entered into by the consignee, including the
stipulated period to file a claim for damage to goods shipped.
(e) Over-Shipment Does NOT Adversely Affect Terms of Bill of
Lading
Keng Hua Paper Products v. CA, (1998)
Issue: WON the consignee refuse bill of lading on the ground
that there was over-shipment of goods than the quantity
covered by the L/C?
Held:
1. In a letter of credit, there are three distinct and independent
contracts:
(1) The contract of sale between the buyer and the seller;
(2) The contract of the buyer with the issuing bank, and
(3) The letter of credit proper in which the bank promises to pay
the seller pursuant to the terms and conditions stated
therein. "Few things are more clearly settled in law than that
the three contracts which make up the letter of credit
arrangement are to be maintained in a state of perpetual
separation."
2. A transaction involving the purchase of goods may also
require, apart from a letter of credit, a contract of
transportation specially when the seller and the buyer are
not in the same locale or country, and the goods purchased
have to be transported to the latter.
3. Hence, the contract of carriage, as stipulated in the bill of
lading in the present case, must be treated independently of
the contract of sale between the seller and the buyer, and
the contract for the issuance of a letter of credit between
the buyer and the issuing bank.
4. Any discrepancy between the amount of the goods
described in the commercial invoice in the contract of sale
and the amount allowed in the letter of credit will not affect
the validity and enforceability of the contract of carriage as
embodied in the bill of lading.
5. As the bank cannot be expected to look beyond the
documents presented to it by the seller pursuant to the
letter of credit, neither can the carrier be expected to go
beyond the representations of the shipper in the bill of
lading
(f) Containerization System of Cargo
United States Lines v. Commissioner of Customs, (1987). The
containerization system was devised to facilitate the expeditious
and economical loading, carriage and unloading of cargoes. Under
this system, the shipper loads his cargoes in a specially designed
container, seals the container and delivers it to the carrier for
transportation. The carrier does not participate in the counting of
the merchandise for loading into the container, the actual loading
thereof nor the sealing of the container. Having no actual
knowledge of the kind, quantity or condition of the contents of
the container, the carrier issues the corresponding bill of lading
based on the declaration of the shipper. The bill of lading
describes the cargo as a container simply and it states the
contents of the container either as advised by the shipper or
prefaced by the phrase "said to contain." Clearly then, the matter
quantity, description and conditions of the cargo is the sole
responsibility of the shipper.
Reyma Brokerage v. Phil. Home Assurance, (1991). Even in a
“said-to-contain” bill of lading covering containers, when it is
additionally stated therein by the carrier that “it is a receipt for
the number of packages shown above”, such phrase explicitly
admitted that the containerized shipments had actually the
number of packages declared by the shipper in the bill of lading,
and the carrier is liable for the shortage of cargo actually
delivered. Such express acknowledgement by the carrier makes
the case an exception to the doctrine enunciated in United States
Lines.
Bankers & Manufacturers v. CA, (1992)
Facts: Cases of copper tubings are imported by placement in
containers, with the recital of the bill of lading as “said to
contain”, or “shipper’s load and count”, and the containers were
accepted at pier-side in good condition, and one of the containers
was stripped in the presence of the petitioner’s surveyors, while
the other two (2) were not moved from the container yard and
were not stripped; but later it was found that the shipment
sustained losses by way of theft and pilferage.
Issue: WON the carrier is liable
Held:
1. No. If any inspection of goods was to be done in order to
determine the condition thereof, the same should have
been done at pier-side.
2. The shipment was accepted by petitioner in good order, and
therefore has no cause of action against the carrier.
6. When Does Contract of Carriage of Goods End?
Macam v. CA, (1999). The extraordinary responsibility if the
common carriers lasts from the time the goods are
unconditionally placed in the possession of, and received by the
common carrier until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person
who has a right to receive them, as provided in Art. 1736, CC.
Thus, delivery of the goods to the acknowledged importer,
although it is not the person indicated in the bill of lading, would
be proper delivery.
Asian Terminals, Inc. v. Philam Insurance Co., (2013). It is settled
in maritime law jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier. In this case,
since damage to the goods were caused by stevedores
overtightening of cable sling hold during the discharge from the
vessel’s hatch to the pier, then the damage to the cargo was
incurred during the discharge of the shipment and while under
the supervision of the carrier, and the latter is liable for the
damage caused to the cargo.
Samar Mining Co. v. Nordeutcher Lloyd, (1984)
Facts:
1. The bill of lading provided that it was effective only for the
transport of the goods from Germany to Manila.
2. From Manila, the goods were to be further transported to
Davao.
3. The carrier had unloaded and delivered the goods in the
bonded warehouse in Manila. The never reached Davao.
Issue: WON the carrier is liable for the loss of the goods
Held:
1. No. When the carrier under the terms of the bill of lading
had delivered the goods at the port of destination, at that
point he merely becomes the agent of the consignee and
ceases to be liable as carrier for loss or damage of the goods
transported.
2. Thereafter, loss of goods in its hand for causes beyond its
control and without negligence being proved, cannot sustain
a claim for damage against the carrier.
Lu Do & Lu Ym Corp. v. Binamira, (1957). While delivery of cargo
to customs authorities is not delivery to consignee as provided in
Art. 1736, CC because such goods are still in the hands of the
Government and the owner has no dominion over them, however
the parties may agree to limit the liability of the carrier
considering the goods have still to go through inspection of the
customs authorities before they are actually turned over to the
consignee, and such stipulation is valid because in that situation
the carrier loses control of the goods because of a customs
regulation.
(a) Surrender of Bill of Lading Not Always Necessary to
Establish End of Responsibility and Liability
Republic v. Lorenzo Shipping Corp., (2005). Under Art. 353 of the
Code of Commerce, the surrender of the original bill of lading is
not a condition precedent for a common carrier to be discharged
of its contractual obligation. If surrender of the original bill of
ladings is not possible, acknowledgement of the delivery by
signing the delivery receipt suffices.
7. Obligation and Liability of Common Carriers
(a) Obligation of Carrier – the obligation of the carrier is to take
the cargo to the point of destination safely and if the cargo is
damaged or lost before delivery there is a breach of contract
Art. 1752. Even when there is an agreement limiting the liability of
the common carrier in the vigilance over the goods, the common
carrier is disputably presumed to have been negligent in case of
their loss, destruction or deterioration.
 All that the shipper proves is that the goods arrived in a
damaged condition or that they did not arrive at all.
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3,
4, and 5 of the preceding article, if the goods are lost, destroyed
or deteriorated, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as required in article 1733.
Central Shipping Co. v. Insurance Company of North America,
(2004). The rules for the liability of a common carrier for lost or
damaged cargo as follows:
(a) From the nature of their business and for reasons of public
policy, common carriers are bound to observe extraordinary
diligence over the goods they transport, according to all the
circumstances of each case.
(b) In the event of loss, destruction or deterioration of the
insured goods, common carriers are responsible; that is,
unless they can prove that such loss, destruction or
deterioration was brought about -- among others -- by
"flood, storm, earthquake, lightning or other natural disaster
or calamity."
(c) In all other cases not specified under Art. 1734, CC, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary diligence.
Phil. First Insurance Co. v. Wallem Phil. Shipping, (2009). The
extraordinary responsibility of the common carrier lasts from the
time the goods are unconditionally placed in the possession of,
and received by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them.
Regioinal Container Lines (RCL) of Singapore v. Netherlands
Insurance Co. (Phil.), (2009). While there is sufficient evidence
showing that the fluctuation of the temperature in the
refrigerated container van, as recorded in the temperature chart,
occurred after the cargo had been discharged from the vessel and
was already under the custody of the arrastre operator;
nevertheless, such evidence does not disprove that the condenser
fan – which caused the fluctuation of the temperature in the
refrigerated container – was not damaged while the cargo was
being unloaded from the ship. It is settled in maritime law
jurisprudence that cargoes while being unloaded generally remain
under the custody of the carrier.
Unsworth Transport International (Phil.) v. CA, (2011). When a
freight forwarded undertakes to deliver the goods to the point of
destination, it becomes liable as a common carrier, even when the
goods are carried by a common carrier contracted by it.
Common carriers, as a general rule, are presumed to have been at
fault or negligent if the goods they transported deteriorated or
got lost or destroyed. That is, unless they prove that they
exercised extraordinary diligence in transporting the goods. In
order to avoid responsibility for any loss or damage, therefore,
they have the burden of proving that they observed such
diligence. Mere proof of delivery of the goods in good order to a
common carrier and of their arrival in bad order at their
destination constitutes a prima facie case of fault or negligence
against the carrier. If no adequate explanation is given as to how
the deterioration, loss, or destruction of the goods happened, the
transporter shall be held responsible.
Calvo v. UCPB General Insurance Co., (2002). The extraordinary
diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods
entrusted to it for sale, carriage and delivery. To prove the
exercise of extraordinary diligence, the common carrier must do
more than merely show the possibility that some other party
could be responsible for the damage. It must prove that it used
“all reasonable means to ascertain the nature and characteristics
of goods tendered for transport and that it exercised due care in
the handling thereof. If the improper packaging or, the defects in
the container is known to the carrier or its employees or the
apparent upon ordinary observation, but nevertheless were
accepted without protest or exception, the carrier is not relieved
of liability for damage resulting therefrom.
Republic v. Lorenzo Shipping Corp., (2005). Art. 1733, CC
demands that a common carrier observe extraordinary diligence
over the goods transported by it. Extraordinary diligence is that
extreme measure of care and caution which persons of unusual
prudence and circumspection use for securing and preserving
their own property or rights. This exacting standard imposed on
common carriers in a contract of carriage of goods is intended to
tilt the scales in favor of the shipper who is at the mercy of the
common carrier once the goods have been lodged for shipment.
Hence, in case of loss of goods in transit, the common carrier is
presumed under the law to have been at fault or negligent.
However, the presumption of fault or negligence, may be
overturned by competent evidence showing that the common
carrier has observed extraordinary diligence over the goods.
Phil. Charter Insurance Corp. v. Owner of M.V “National Honor”,
(2005). The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know and
to follow the required precaution for avoiding damage to, or
destruction of the goods entrusted to it for sale, carriage and
delivery. It requires common carriers to render service with the
greatest skill and foresight and "to use all reasonable means to
ascertain the nature and characteristic of goods tendered for
shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires."
Delsan Transport Lines v. CA, (2001). Administrative Exoneration
Does NOT Necessarily Extinguish Civil Liability – Exoneration of
the vessel’s officers and crew by the Board of Marine Inquiry
merely concerns their respective administrative liabilities. It does
not in any way operate to absolve the common carrier from its
civil liability arising from its failure to observe extraordinary
diligence in the vigilance over the goods it was transporting and
for the negligent acts or omission of its employees, the
determination of which properly belongs to the courts.
Asian Terminals, Inc. v. Simon Enterprise, (2013). Claimant Must
Still Prove the Damage Sustained – Though it is true that common
carriers are presumed to have been at fault or to have acted
negligently if the goods transported by them are lost, destroyed,
or deteriorated, and that the common carrier must prove that it
exercised extraordinary diligence in order to overcome the
presumption, the plaintiff must still, before the burden is shifted
to the defendant, prove that the subject shipment suffered actual
shortage.
(b) Presumption of Negligence
Eastern Shipping Lines v. CA, (1994). When goods are lost or
arrive in damaged condition, immediately there arises a
presumption of failure to observe due diligence on the part of the
carrier, and there need not be an express finding of negligence to
sustain such liability.
Belgian Overseas Chartering v. Phil. First Insurance, (2002). Mere
proof of delivery of goods in good order to a common carrier and
of their arrival in bad order at their destination constitutes prima
facie fault or negligence on the part of the carrier. If no adequate
explanation is given as to how the loss, the destruction or the
deterioration of the goods happened, the carrier shall be held
liable therefore.
Regioinal Container Lines (RCL) of Singapore v. Netherlands
Insurance Co. (Phil.), (2009). A common carrier is presumed to
have been negligent if it fails to prove that it exercised
extraordinary vigilance over the goods it transported. When the
goods shipped are either lost or arrived in damaged condition, a
presumption arises against the carrier of its failure to observe that
diligence, and there need not be an express finding of negligence
to hold it liable.
To overcome the presumption of negligence, the common carrier
must establish by adequate proof that it exercised extraordinary
diligence over the goods. It must do more than merely show that
some other party could be responsible for the damage.
(1) Res Ipsa Loquitor
FGU Insurance v. G.P. Sarmiento Trucking, (2002). Res ipsa
loquitur, a doctrine being invoked by petitioner, holds a
defendant liable where the thing which caused the injury
complained of is shown to be under the latter’s management and
the accident is such that, in the ordinary course of things, cannot
be expected to happen if those who have its management or
control use proper care. It affords reasonable evidence, in the
absence of explanation by the defendant, that the accident arose
from want of care. It is not a rule of substantive law and, as such,
it does not create an independent ground of liability. Instead, it is
regarded as a mode of proof, or a mere procedural convenience
since it furnishes a substitute for, and relieves the plaintiff of, the
burden of producing specific proof of negligence. The maxim
simply places on the defendant the burden of going forward with
the proof. Resort to the doctrine, however, may be allowed only
when:
(a) The event is of a kind which does not ordinarily occur in the
absence of negligence;
(b) Other responsible causes, including the conduct of the
plaintiff and third persons, are sufficiently eliminated by the
evidence; and
(c) The indicated negligence is within the scope of the
defendant's duty to the plaintiff.
Thus, it is not applicable when an unexplained accident may be
attributable to one of several causes, for some of which the
defendant could not be responsible.
Res ipsa loquitur generally finds relevance whether or not a
contractual relationship exists between the plaintiff and the
defendant, for the inference of negligence arises from the
circumstances and nature of the occurrence and not from the
nature of the relation of the parties.
Tabacalera Insurance v. North Front Shipping, (1997). Although
carrier is able to prove that vessel was inspected prior to actual
loading by shipper and found fit to take a load of corn grains; was
issued a permit to sail by the Coast Guard; and the master of the
vessel testified that the corn grins were farm wet when loaded,
nevertheless, such matter was disproved by the clean bill of lading
issued by the carrier which did not contain a notation that the
corn grains were wet and improperly dried. The master of the
vessel, being a veteran, should have known at the outset that corn
grains that were farm wet and not properly dried would
eventually deteriorate when stored in sealed and hot
compartments as in hatches of a ship. Equipped with this
knowledge, the master and his crew should have undertaken
precautionary measures to avoid or lessen the cargo’s possible
deterioration as they were presumed knowledgeable about the
nature of such cargo. Since no such measure was taken, carrier
was liable for the loss.
The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know and
to follow the required precaution for avoiding damage to,
destruction of the goods entrusted to it for safe carriage and
delivery.
(d) When Presumption of Negligence Does NOT Arise;
Defenses –
(1) Fortuitous even (Art. 1739 and 1934, CC)
Art. 1739. In order that the common carrier may be exempted
from responsibility, the natural disaster must have been the
proximate and only cause of the loss. However, the common
carrier must exercise due diligence to prevent or minimize loss
before, during and after the occurrence of flood, storm or other
natural disaster in order that the common carrier may be
exempted from liability for the loss, destruction, or deterioration
of the goods. The same duty is incumbent upon the common
carrier in case of an act of the public enemy referred to in article
1734, No. 2.
(2) Defect in cargo; and
(3) Defect in packaging or crating of cargo;
(4) Act of another party, such as shipper or owner of goods (Art.
1734 and 1743, CC)
Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due
to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster
or calamity;
(2) Act of the public enemy in war, whether international
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.
Art. 1743. If through the order of public authority the goods are
seized or destroyed, the common carrier is not responsible,
provided said public authority had power to issue the order.
Belgian Overseas Chartering v. Phil. First Insurance, (2002).
When the cargo is shown to have been damaged, the
presumption of fault or negligence of the common carrier will not
arise, when the carrier shows that the damage was due to any of
the causes provided for under Art. 1734, CC, thus:
(1) Flood, storm, earthquake, lightning, or other natural disaster
or calamity;
(2) Act of the public enemy in war, whether international
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.
This is a closed list for fortuitous events; if the causes of
destruction, loss or deterioration is other than the enumerated
circumstances, then the carrier is liable therefor.
(1) Force Majeure as Defense
Central Shipping Co. v. Insurance Co. of N.A., (2004). The defense
of fortuitous event or natural disaster cannot be successfully
made when the injury could have been avoided by human
precaution.
Lea Mer Industries, Inc. v. Malayan Insurance, (2005). Also, it
must be shown that the fortuitous event must have been the
proximate and only cause of the loss.
Schmitz Transport v. Transport Venture, Inc., (2005). The
unloading outside the breakwater, instead of inside the
breakwater, while a storm signal was up constituting negligence.
The proximate cause of the loss was the carrier’s negligence in
deciding to unload the cargoes at an unsafe place and while a
typhoon was approaching.
PHILAMGEN v. MGG Marine Services, (2002). In order that a
common carrier may be absolved from liability where the loss,
destruction or deterioration of the goods is due to a natural
disaster or calamity, it must further be shown that the such
natural disaster or calamity was the proximate and only cause of
the loss; there must be "an entire exclusion of human agency
from the cause of the injury of the loss."
Moreover, even in cases where a natural disaster is the proximate
and only cause of the loss, a common carrier is still required to
exercise due diligence to prevent or minimize loss before, during
and after the occurrence of the natural disaster, for it to be
exempt from liability under the law for the loss of the goods. If a
common carrier fails to exercise due diligence--or that ordinary
care which the circumstances of the particular case demand -- to
preserve and protect the goods carried by it on the occasion of a
natural disaster, it will be deemed to have been negligent, and the
loss will not be considered as having been due to a natural
disaster under Art. 1734(1).
Edgar Cokaliong Shipping v. UCPB Gen. Insurance, (2003). When
the ship sank due to fire, which resulted from a crack in the
auxiliary engine fuel oil service tank which because of its location
could not subjected to inspection and care by the crew, the loss
cannot be deemed to be caused by force majeure, since fire is not
considered a natural disaster or calamity. Since the loss of the
cargoes raises the presumption of negligence on the part of the
common carrier, the shipping company failed in its legal obligation
to show that it exercise extraordinary vigilance over the goods
transported, or that the vessel was seaworthy.
DSR-Senator Lines v. Federal Phoenix Assurance, (2003). Fire Not
Falling Within the Exemptions for Carrier’s Liability – Art. 1734
which enumerates the exemptions from a common carrier’s
liability for the loss, destruction or deterioration of goods, does
not include fire among those enumerated which would exempt a
carrier from liability. Since the peril of fire is not comprehended
within the exceptions in Art. 1734, then the common carrier shall
be presumed to have been at fault or to have acted negligently,
unless it proves that it has observed the extraordinary diligence
required by law.
Even if fire were to be considered a natural disaster within the
purview of Art. 1734, it is required under Art. 1739 that the
natural disaster must have been the proximate and only cause of
the loss, and that the carrier has exercised due diligence to
prevent or minimize the loss before, during or after the
occurrence of the disaster.
(2) Contributory Negligence of Owner
Tabacalera Insurance v. North Front Shipping, (1997). Damage to
the goods, without proper explanation on the part of carrier to
show how the damage was sustained, would necessarily lead to
the conclusion that carrier has not complied with its obligation to
observe extraordinary diligence. Nevertheless, the consignee
would be guilty of contributory negligence, when it is shown that
it was seasonably notified of the arrival of the barge but did not
immediately start the unloading operations, and without proper
explanation of the delay in unloading. The facts show that the loss
could have been completely avoided or at least minimized had
unloading been commenced immediately. For its contributory
negligence, the consignee should share at least 40% of the loss.
Cia Maritima v. CA, (1988). The furnishing of inaccurate weight of
the cargo by the shipper constitutes only contributory negligence
to mitigate the carrier’s liability, but did not serve to excuse
entirely the carrier’s liability by the use of a higher-capacity
equipment which was then available.
8. Limitation of Liability by Valuation of Damaged Cargo
(a) Inter-Island Trade: Applicable Law on Limitation of Liability
Art. 1749. A stipulation that the common carrier's liability is
limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered. by the
owner or shipper for the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under the circumstances,
and has been fairly and freely agreed upon.
Illustration: If a shipper ships cargo worth P1,000 with X, Inc.,
and cargo is completely damaged, generally, the liability of X,
Inc. will be P1,000. But will it be valid for shipper and carrier to
agree on a reduced liability? What will be the liability of carrier if
there is no agreement with respect thereto?
A: Heacock v. Macondray, (1921). Three stipulations that may be
inserted in a bill of lading limiting liability
(1) No Liability – the carrier will not be liable at all for the
negligent acts of its crew and employees. This is void for
being contrary to public policy
(2) Limited Liability – regardless of the value of the cargo, the
maximum liability of the carrier will be, for example,
P500.00. This is void for being contrary to public policy
(3) Qualified Liability – this is the only stipulation in a bill of
lading which can validly limit liability
Under Qualified liability, carrier fixes the maximum liability in the
event shipper does not declare any value or a value up to a certain
amount. Should shipper declare a higher value, and willing to pay
higher freightage the carrier shall accordingly be liable for greater
damage. In effect, carrier becomes an insurer for higher
insurance.
Shewaran v. PAL, (1966)
Facts:
1. A PAL ticket, on the reverse side, stated in fine print that if
the value of the baggage is not stated, and the baggage is
lost, the maximum liability of PAL is P100.00
2. If the value in excess of P100.00 is stated, PAL will charge
extra because PAL is being held liable for an amount
exceeding P100.00.
3. Shewaran, a Hindu from Davao, boarded a PAL plane for
Manila.
4. Among his baggage was a camera worth P800.00 and it was
lost.
5. PAL offered to pay P100.00. Shewaran wanted full payment
of P800.00
Issue: WON Shewaran may recover full payment
Held:
1. Since this is a stipulation on qualified liability which operates
to reduce the liability of the carrier, the carrier and the
shipper must agree thereupon. Otherwise, the carrier will be
liable for the full amount.
2. PAL is fully liable for P800 because Shewaran did not agree
to the stipulation on the ticket, as manifested by the fact
that Shewaran did not sign the ticket. The ticket should have
been signed.
Ong Yui v. CA, (1979). Repealing Shewaran Doctrine – the
qualified liability appearing on the ticket is binding even if the
passenger did not sign it.
Everett Steamship Corp. v. CA, (1998). A stipulation printed in a
bill of lading limiting common carrier’s liability for loss or
destruction of a cargo to a certain sum, unless shipper or owner
declares a greater value, is sanction by law, particularly Art. 1749
and 1750, CC, provided such stipulation must be “reasonable and
just under the circumstances, and has been freely and fairly
agreed upon”
It should be noted that Art. 1749 and 1750 require that the
stipulation limiting the common carrier’s liability for loss must be
“reasonable and just under the circumstances and has been freely
and fairly agreed upon.” The printing of such limiting stipulation in
small print on the bill of lading does not make the bill of lading
invalid nor can it be argued that the stipulation has not been
“fairly and freely” agreed upon as to be binding on the carrier. At
most, the situation only calls for a greater vigilance on the part of
the courts when dealing with such contracts of adhesion in that
said contracts must be carefully scrutinized “in order to shield the
unwary (or weaker party) from deceptive schemes contained in
ready-made covenants.”
In this case, since the shipper is in the trading business, it cannot
be said to be ignorant of the business transactions it entered into
involving the shipment of its goods to its customers. The shipper
could have known, or should know the stipulations in the bill of
lading and there it should have declared a higher valuation of the
goods shipped.
(1) Qualified Liability Clause Inapplicable When Carrier
Negligent
American Home Assurance v. CA, (1992). The law on average of
the Code of Commerce on limiting of liability cannot apply when
the common carrier is negligent.
(2) When “Limited Liability” Clause Part of Private Carrier
Arrangement
Valenzuela Hardwood v. CA, (1997). A stipulation in a charter
party that the “owners shall not be responsible for loss, split,
short-landing, breakages and any kind of damage to the cargo” is
NOT void as being contrary to public policy contained in Art. 1745,
CC, when it is clear from the arrangement that the carrier merely
acted as a private carrier under the terms of the charter party.
In a contract of private carriage, the parties may validly stipulate
that responsibility for the cargo rests solely on the charterer,
exempting the shipowner from liability for loss of or damage to
the cargo caused even by the negligence of the ship captain.
Coastwise Lighterage Corp. v. CA, (1995)
Facts: By the contract of affreightment for the transport of
molasses which was damaged, the carrier refused to acknowledge
liability on the ground that the contract transformed the carrier
into a private carrier, and for which it has exercised ordinary
diligence as to avoid liability.
Issue: WON the carrier may be held liable
Held:
1. The contract between the shipper and the carrier was a
“charter agreement”. The distinctions between bareboat or
demise charter and a contract of affreightment are as
follows:
(a) Under the demise or bareboat charter of the vessel, the
charterer will generally be regarded as the owner for the
voyage or service stipulated. The charterer mans the vessel
with his own people and becomes the owner pro hac vice,
subject to liability to others for damages caused by
negligence. To create a demise, the owner of a vessel must
completely and exclusively relinquish possession, command
and navigation thereof to the charterer, anything short of
such a complete transfer is a contract of affreightment (time
or voyage charter party) or not a charter party at all.
(b) A contract of affreightment is one in which the owner of the
vessel leases part or all of its space to haul goods for others.
It is a contract for special service to be rendered by the
owner of the vessel and under such contract the general
owner retains the possession, command and navigation of
the ship, the charterer or freighter merely having use of the
space in the vessel in return for his payment of the charter
hire
An owner who retains possession of the ship, remains liable as a
carrier and must answer for any breach of duty as to the care,
loading and unloading of cargo.
(b) Overseas Trade: COGSA Provides for Valuation Clauses on
Cargo
(a) If no value is stated, the maximum liability of the carrier is
$500 per package;
(b) If value is stated, apply the rule of qualified liability
Asian Terminals, Inc. v. Philam Insurance Co. Inc., (2013). The
COGSA or Public Act No. 521 of the 74th US Congress was accepted
to be made applicable to all contracts for the carriage of goods by
sea to and from Philippine ports in foreign trade by virtue of C.A.
65.
Insurance Company of N.A. v. Asian Terminals, Inc., (2012). The
term "carriage of goods" in the COGSA covers the period from the
time the goods are loaded to the vessel to the time they are
discharged therefrom.
The carrier and the ship shall be discharged from all liabilities in
respect of loss or damage unless suit is brought within one (1)
year after the delivery of the goods or the date when the goods
should have been delivered.
Cua v. Wallen Phil. Shipping, Inc., (2012). Under Sec. 3(6) of the
COGSA, the carrier is discharged from liability for loss or damage
to the cargo "unless the suit is brought within one year after
delivery of the goods or the date when the goods should have
been delivered." Jurisprudence, however, recognized the validity
of an agreement between the carrier and the shipper/consignee
extending the one-year period to file a claim.
American Insurance v. Macondray, (1971)
Facts:
1. A bill of lading read “N.Y. to Cebu City” charges were pre-
paid.
2. The goods were unloaded in Manila and transshipped from
Manila to Cebu in an inter-island vessel.
3. The goods arrived in Cebu in damaged condition
Issue: WON the original carrier or the inter-island vessel is liable
Held:
1. Original carrier will be the one liable for any liability, even if
connecting carriers intervened, without prejudice to the
original carrier’s right to recover from the connecting carrier.
2. This rule applies also to contracts of carriage of passengers
Magellan Mfg. Marketing v. CA, (1991). Transhipment, in
maritime law, is defined as "the act of taking cargo out of one ship
and loading it in another," or "the transfer of goods from the
vessel stipulated in the contract of affreightment to another
vessel before the place of destination named in the contract has
been reached," or "the transfer for further transportation from
one ship or conveyance to another."
There is transhipment whether or not the same person, firm or
entity owns the vessels. In other words, the fact of transhipment
is not dependent upon the ownership of the transporting ships or
conveyances or in the change of carriers, as the petitioner seems
to suggest, but rather on the fact of actual physical transfer of
cargo from one vessel to another.
Belgian Overseas Chartering v. Phil. First Insurance, (2002).
“Package” under Sec. 4(5) of COGSA when limiting carrier’s
liability to US$5,000 per package would ordinarily be considered
as packages are shipped in a container supplied by the carrier and
the number of such units is disclosed in the shipping documents,
each of those units and not the containers constitutes the
“package” referred to under COGSA.
Philippine Charter Insurance Corp. v. Neptune Orient Lines,
(2008). When the shipper in Hong Kong did not declare the actual
value of the goods as insured before shipment and that the said
value was inserted in the bill of lading and for which no additional
charges were paid, then the stipulation in the bill of lading that
the carrier’s liability shall not exceed US$5,000 per package
applies. Such stipulation in the bill of lading limiting the carrier;s
liability for the loss of the subject cargoes is allowed under Art.
1749, CC and Sec. 4(5) of the COGSA

UCPB General Insurance Co., Inc. v. Aboitiz Shipping Corp.,
(2009). Art. 366 of the Code of Commerce requires that the claim
for damage or average must be made within 24 hours from
receipt of the merchandise if, as in this case, damage cannot be
ascertained merely from the outside packaging of the cargo.
The requirement to give notice of loss or damage to the goods is
not an empty formalism. The fundamental reason or purpose of
such a stipulation is not to relieve the carrier from just liability,
but reasonably to inform it that the shipment has been damaged
and that it is charged with liability therefor, and to give it an
opportunity to examine the nature and extent of the injury. This
protects the carrier by affording it an opportunity to make an
investigation of a claim while the matter is still fresh and easily
investigated so as to safeguard itself from false and fraudulent
claims.
We have construed the 24-hour claim requirement as a condition
precedent to the accrual of a right of action against a carrier for
loss of, or damage to, the goods. The shipper or consignee must
allege and prove the fulfillment of the condition. Otherwise, no
right of action against the carrier can accrue in favor of the
former.
Sec. 3(6) of the COGSA provides a similar claim mechanism as the
Code of Commerce but prescribes a period of three (3) days
within which notice of claim must be given if the loss or damage is
not apparent
The provision in the last paragraph of Sec. 3(6) that “the notice in
writing need not be given if the state of the goods has at the time
of their receipt been the subject of joint survey or inspection” can
apply only when it is clear that the shipper or consignee was
represented by a proper agent when the survey or inspection was
conducted.
Wallem Phil. Shipping, Inc. v. S.R. Farms, Inc., (2010). With
respect to the prescriptive period involving claims arising from
shortage, loss of or damage to cargoes sustained during transit,
the law that governs the instant case is the COGSA, Sec. 3(6).
Petitioner claims that pursuant to the above-cited provision,
respondent should have filed its Notice of Loss within three days
from delivery. It asserts that the cargo was fully discharged from
the vessel on April 15, 1992, but that respondent failed to file any
written notice of claim.
The Court agrees, since under Sec. 3(6) of the COGSA, notice of
loss or damages must be filed within three (3) days of delivery.
Admittedly, respondent did not comply with this provision. Under
the same provision, however, a failure to file a notice of claims
within three (3) days will not bar recovery if a suit is nonetheless
filed within one (1) year from delivery of the goods or from the
date when the goods should have been delivered.
Unsworth Transport Int. (Phil.) v. CA, (2011). It is to be noted that
the Civil Code does not limit the liability of the common carrier to
a fixed amount per package. In all matters not regulated by the
Civil Code, the rights and obligations of common carriers are
governed by the Code of Commerce and special laws. Thus, the
COGSA supplements the Civil Code by establishing a provision
limiting the carrier’s liability in the absence of a shipper’s
declaration of a higher value in the bill of lading.
In the present case, the shipper did not declare a higher valuation
of the goods to be shipped. Contrary to the CA’s conclusion, the
insertion of the words "L/C No. LC No. 1-187-008394/ NY 69867
covering shipment of raw materials for pharmaceutical Mfg."
cannot be the basis of petitioner’s liability.31 Furthermore, the
insertion of an invoice number does not in itself sufficiently and
convincingly show that petitioner had knowledge of the value of
the cargo.
(c) Warsaw Convention on Air Transportation
PAN-AM v. Rapadas, (1992). A passenger of an airline is bound by
the terms of a passenger ticket declaring that the limitations of
liability set forth in the Warsaw Convention in case of loss,
damage or destruction to a registered luggage of the passenger.
The Warsaw Convention governs the availment of the liability
limitations where the baggage checked is combined with or
incorporated in the passenger ticket.
Santos III v. Northwest Orient Airlines, (1991).
(a) The Convention for Unification of Certain Rules Relating to
International Transportation by Air (the Warsaw
Convention), is a treaty commitment voluntarily assumed by
the Philippine government and, as such, has the force and
effect of law in the Philippines.
(b) Although the Warsaw Convention was drafted at the time
the airline industry was still in its infancy, the Convention
contains provisions anticipating developments, and more
importantly, the treaty has not been rejected by the
Philippine government, and therefore, the doctrine of rebus
sic stantibus does not operate automatically to render the
treaty inoperative and there is a necessity for a formal act of
rejection, usually made by the head of State.
(c) When a contract of carriage provides for transportation of
passengers "within the territories of two High Contracting
Parties," then it is an “international” transportation and the
provisions of the Warsaw Convention automatically apply
and exclusively govern the rights and liabilities of the airline
and its passenger. The places enumerated by Art. 28(1) of
the Convention where an action for damages may be
brought are jurisdictional in nature which can be waived.
(d) The allegation of willful misconduct resulting in tort is
insufficient to exclude a case from the Warsaw Convention,
because the provisions thereof clearly show the aim to
accommodate all of the multifarious bases on which a claim
might be founded in different countries, whether under
code law or common law, or under contract or torts, etc.
PAL v. CA, (1992). The assurance made by an airline company that
it will compensate passenger’s loss for the baggage is a sufficient
admission that indeed, passenger has the right to avail himself of
the suit for the recovery of the damage sustained. The airline
cannot capitalize on the limited liability clause under Art. 22(2) of
Warsaw Convention because of the unequivocal condition set
forth under Art. 4(4), that if the carrier accepts baggages without
a baggage check having been delivered, or if the baggage check
does not contain the particulars set out by the article, the carrier
shall not be entitled to avail itself of those provisions of the
Convention which exclude or limit liability.
9. Limited Periods to Recover on Damage to Cargo
(a) Applicable Laws on Period to File Claims
 Art. 366 of the Code of Commerce and COGSA cover the
steps that shipper or consignee must take to recover
damages from carrier in the event carrier refuses to pay:
(1) Inter-island trade is covered by Art. 366
(2) Overseas trade is covered by COGSA
(b) Inter-Island Trade
Art. 366 of the Code of Commerce provides that if the goods
arrived in damages condition:
(1) If damage is apparent, shipper must file a claim immediately
(it may be oral or written)
(2) If damage is not apparent (e.g. cargo is in a container), he
should file a claim within 24 hours from delivery
Rosario Farmer’s Coop. v. Manila Railroad, (1963). Under Art.
366, filing of claim under either (a) or (b) is a condition precedent
for recovery. If no claim is filed, there will be no recovery even if
an action therefor is meritorious (because the claim is part of the
cause of action). If the claim is filed, but carrier refuses to pay:
enforce carrier’s liability in court by filing a case:
(a) Within six (6) years, if no bill of lading has been issued;
(b) Within ten (10) years if a bill of lading had been issued
New Zealand Insurance v. Choa Ty, (1955). Undelivered or Lost
Goods or Cargo – In order that the conditions provided in Art. 366
of the Code of Commerce may be demanded, there should be a
consignment of goods, through a common carrier, by a consignor
in one place to a consignee in another place, and the delivery of
the goods by the carrier to the consignee. Art. 366 does not have
any application where the goods or cargo were never delivered to,
or receiver by, the consignee.
PAL v. CA, (1996). Delay in Filing Claim Due to Default of Carrier –
Where failure to file a normal claim within the prescriptive period
contemplated in air waybill was largely due to the fault of
carrier’s representatives, the condition was deemed fulfilled
considering the collective action of carrier’s personnel in tossing
around the claim and leaving it unresolved for an indefinite period
of time, which was tantamount to “voluntarily preventing its
fulfillment,” and therefore the filing of the baggage freight claim
constituted substantial compliance with the requirement for filing
of a formal claim.
Lorenzo Shipping v. Chubb and Sons, Inc., (2004). The 24-hour
period prescribed by Art. 366 of the Code of Commerce within
which claims must be presented does not begin to run until the
consignee has received such possession of the merchandise that
he may exercise over it the ordinary control pertinent to
ownership. In other words, there must be delivery of the cargo by
the carrier to the consignee at the place of destination.
Federal Express v. American Home Assurance, (2004). Under Art.
366, Code of Commerce, filing of a claim with the carrier within
the time limitation therefor actually constitutes a condition
precedent to the accrual of a right of action against a carrier for
loss of or damage to the goods.
Phil. Charter Insurance v. Chemoil Lighterage, (2005). The
requirement that a notice of claim should be filed within the
period stated by Art. 366 of Code of Commerce is not an empty or
worthless proviso. Filing of a claim with the carrier within the time
limitation therefore actually constitutes a condition precedent to
the accrual of a right of action against a carrier for loss of, or
damage to, the goods. If it fails to do so, no right of action against
the carrier can accrue in favor of the former.
(c) Overseas Trade
Under COGSA, where goods arrive in damaged condition from a
foreign port to a Philippine port of entry:
(1) Upon discharge of goods, if damage is apparent, claim
should be filed immediately;
(2) If damage is not apparent, claim should be filed within three
(3) days from delivery
Unlike in Art. 366 of Code of Commerce, under COGSA such a
claim is not a condition precedent, but an action must be filed
against carrier within a period of one (1) year from discharge; if
there is no delivery, the one-year period starts to run from the
day the vessel left port (in case of undelivered or lost cargo), or
from delivery to the arrastre (in case of damaged cargo).
Dole Phil. v. Maritime Co., (1987). The written extrajudicial
demand by creditor does not toll the running of the one (1) year
prescriptive period under COGSA since an action must be filed
within the period.
Ang v. American SS Agencies, (1967). Cargo Misdelivered –
Where there was delivery to the wrong person, the prescriptive
period is 10 years because there is a violation of contract, and
COGSA does not apply to misdelivery.
Rizal Surety v. Macondray, (1968). Cargo Undelivered – A vessel
arrived in Manila on October 25. It left Manila on October 31. The
bill of lading of the shipper showed that the cargo was aboard the
vessel, but it was never delivered. The shipper brought an action
against the carrier for non-delivery.
Since there was no tally sheet and no delivery, the prescriptive
period for filing the action should be counted from the last day on
which the carrier had an opportunity to make the delivery, i.e.,
October 31 when it departed.
Union Carbide v. Manila Railroad, (1977). Cargo Delivered
Damaged – In the case when the vessel docked at the pier, where
the cargo has been unloaded and delivered to the arrastre, the
one-year period begins to run from the date of delivery to the
arrastre operator (This is differentiated from Rizal v. Macondray
which involved undelivered goods, while this case dealt with
damaged but delivered goods)
Mitsui O.S.K. Lines v. CA, (1998). Cardo Delivered Late – Carrier
undertook to deliver goods to France within 28 days from initial
loading. However, while in Taiwan, the goods were not
transshipped immediately, with the result that goods arrived in
France late during the “off season”. Consignee paid only half of
the value of the goods and balance was charged against loss
sustained due to late arrival. Shipper now seeks to recover the
unpaid balance from carrier which opposes the same since the
“loss or damage” to goods shipped under Sec. 3(6) of COGSA has
been barred by the lapse of the one-year period.
Indeed, what is in issue in this petition is not the liability of
petitioner for its handling of goods as provided by Sec. 3(6) of the
COGSA, but its liability under its contract of carriage with private
respondent as covered by laws of more general application. Since
the concept of “loss” or “damage”. Since the concept of “loss” or
“damage” involves the deterioration of the goods due to delay in
their transportation, the claims of the shipper do not constitute
“loss or damage” within the meaning of Sec. 3(6) of COGSA which
requires the suit to be brought within one (1) year from the time
the cause of action accrued. Therefore, the one-year prescriptive
period under COGSA is inapplicable; what applies is Art. 1144, CC
which provides for a prescriptive period of 10 years.
Belgian Overseas Chartering v. Phil. First Insurance, (2002).
When There Has Been Joint of Cargo – The requirement of 3-day
notice of loss under Sec. 3(6) of COGSA does not apply if the state
of the goods, at the time of their receipt, has been the subject of a
joint inspection or survey. Also as stated in the same provision, a
failure to file a notice of claim within three (3) days will not bar
recovery if it is nonetheless filed within a year. This one-year
prescriptive period also applies to the shipper, the consignee, the
insurer of the goods or any legal holder of the bill of lading.
U.S. Insurance v. Cia Maritima, (1967). When There is Local
Transshipment – Cargo was loaded in New York for Davao City.
Since most of the cargo was for Manila, and did not make a trip to
Davao. Instead, the goods for Davao were transshipped on an
inter-island vessel. The cargo arrived in a damaged condition.
The one-year period of the COGSA shall still apply since the
contract of carriage is from New York to Davao. The inter-island
vessel from Manila to Davao is considered merely a connecting
vessel and the transshipment did not constitute a separate
contract of carriage.
(1) COGSA’s (In) Applicability to Claims to Insurance
Filipino Merchant’s Ins. Co. v. Alejandro, (1986). Insurer Seeks
Recovery – The insurer of the goods is also bound by the one (1)
year prescriptive period under COGSA to recover as a subrogee,
because the claim interposed by the insurer is still based on the
carriage of goods.
Mayer Steel Pipe Corp. v. CA, (1997). Insurer Refusing to Pay
Claims – Shipper, prior to shipping, insured the merchandise
against all risks with South Sea Surety. The merchandise were
damaged during the voyage. Insurer opposed the claim on the
ground, among others, that it was filed more than one (1) year
from discovery of the damage to the merchandise and therefore
barred by COGSA.
Sec. 3(6) of COGSA states that the carrier and the ship shall be
discharged from all liability for loss or damage to the goods if no
suit is filed within one (1) year after delivery of goods or date
when they should have been delivered.
The provision applies only to carrier’s liability which is
extinguished if no suit is brought within one year. But the liability
of the insurer is not extinguished because the insurer’s liability is
based not on the contract of carriage but on the contract of
insurance.
COGSA governs the relationship between carrier and shipper, the
consignee and/or the insurer and defines the obligations of the
carrier under the contract of carriage. It does not, however, affect
relationship between shipper and insurer which is governed by
Insurance Code.
10. Abandonment

Five (5) Cases of Abandonment:
(a) Art. 365, Code of Commerce
(b) Art. 371, Code of Commerce
(c) Art. 587, Code of Commerce
(d) Art. 687, Code of Commerce
(e) Sec. 138, Insurance Code
In all these cases, abandonment has two (2) characteristics:
(a) It is a unilateral right: it is perfected by mere notice; and
(b) Once perfected, ownership over damaged goods passes to
carrier and carrier must pay shipper the market value of
goods at the point of destination.
Aboitiz Shipping v. CA, (2008). When the vessel is totally lost in
which case there is no vessel to abandon, abandonment is not
required. Because of such total loss the liability of the shipowner
or agent for damages is extinguished.
(a) Art. 365, Code of Commerce
Where the shipper ships goods and goods arrive in damaged
condition and damage is so great that shipper may not use goods
for the purpose for which they had been shipped, the shipper may
exercise the right of abandonment.
Notice to the carrier is sufficient – consent of carrier is not
necessary and once perfected, ownership over damaged goods
passes to carrier and carrier must pay shipper market value of
goods at point of destination.
Illustration: Shipper loads cargo with a vessel of X, Inc. The goods
arrive at the point of destination in: (a) damaged condition; (b)
the damage is so great the Shipper cannot use it for the purpose
for which the cargo was shipped.
In this instance, the Code of Commerce allows Shipper to exercise
the right of abandonment. The consent of X, Inc. is not necessary.
Upon giving notice, the unilateral right of Shipper to abandon is
perfected and ownership of the damaged cargo passes to X, Inc.,
which must pay the market value of the damaged goods at the
point of destination.
(b) Art. 371, Code of Commerce
Shipper and carrier agree in advance that cargo must arrive on a
certain date. The date arrives and cargo has yet arrived due to
carrier’s fault. Shipper may exercise the right of abandonment by
notifying carrier, and once having done so, ownership over
undelivered cargo passes to carrier, and once having done so,
ownership over undelivered cargo passes to carrier and carrier
must pay shipper market value of the goods at the point of
destination.
Distinction Between Two Articles: Art. 371 must be distinguished
from Art. 358 which provides that when cargo is delivered to a
carrier, the latter must begin the trip immediately. Under Art. 371,
the shipper and carrier agree in advance that the cargo must
arrive on a date certain.
Illustration: Shipper loads cargo with X, Inc. with the agreement
that the cargo will arrive in Manila on Nov. 5, 2002. The date came
but the cargo did not arrive due to the fault of the carrier. In this
case, Art. 371 of the Code of Commerce allows Shipper to exercise
the right of abandonment by notifying carrier thereof. Once
notice is given, ownership over the undelivered cargo passes to
carrier and carrier must pay shipper market value of the goods at
the point of destination.
(c) Art. 578, Code of Commerce
Reflects hypothecary nature of maritime transactions. Where
vessel carries goods and goods are damaged and the liability of
carrier for damaged goods exceeds the value of vessel, owner or
ship agent may exercise the right of abandonment. Notice to
shipper(s) of exercise of this right will suffice and once all have
done so, ownership over vessel passes to shipper(s) and all
liability of shipowner for the damaged cargo is limited to the value
of abandoned vessel.
(d) Art. 687, Code of Commerce
The charterers and shippers may abandon the merchandise
damaged if the cargo should consist of liquids and they have
leaked out, nothing remaining in the containers but one-fourth
(1/4) of their contents, on account of inherent defect or fortuitous
event
(e) Sec. 138, Insurance Code
Permits the exercise of right of abandonment for constructive
loss, which takes place when vessel suffers damage in excess of ¾
of its insured value. Insured then exercises the right of
abandonment by notifying the insurer. Thereafter, ownership
over damaged vessel passes to insurer, and insurer must pay
insured as if it were an actual total loss.
Abandonment-Constructive Loss:
GR: Where there is partial loss, and vessel has not been insured
for the full insurable value, there is co-insurance when the owner
of vessel bears part of the loss.
Illustration: If the right of abandonment is not exercised and the
vessel is insured for P80,000 (4/5 of its insurable value) and
suffers damage amounting to P60,000, the insurer in such a case
recovers only P48,000, but he continues to be the owner of the
damaged vessel. He bears loss of P12,000 as co-insurer of vessel
to the extent of 1/5 of full insurable value.
IV. Applicable Provisions of Code of Commerce
Article Provision
Art. 351 Only refers to a schedule that carriers must keep
Art. 352 Passengers are both carriage of passengers and
cargo
Art. 353 Best evidence of carriage of cargo is bill of lading,
and 354 but in its absence, parties may present other
evidence.
Thus, Art. 354 states: “In the absence of the bill of
lading, their respective claims shall be
determined by legal proof which each of the
contracting parties may present, in conformity
with the general provisions established in this
Code for commercial contracts
Art. 355 Read together with Art. 1736, CC: Liability of
carrier for care of cargo begins from moment
unconditionally delivered by shipper to carrier for
purpose of carriage
Art. 356 Authorizes a carrier to examine cargo should the
and 357 carrier suspect that such cargo may be suspicious
in nature. This right is important today with the
danger of explosives, hijacking and terrorism and
the attempts at smuggling. (Also Sec. 2530 and
2531 of P.D. 1464, Tariff and Customs Code)
Art. 358 Read with Art. 1747, CC: The occurrence of a
and 359 fortuitous even will not extinguish the liability of
carrier where the fortuitous even concurs with
either undue delay in starting the trip or
unjustified deviation
Art. 360 Contracting parties to contract of carriage of
cargo are: The carriers and the shipper. Shipper
has the right to change the name of consignee at
any time and the carrier must respect this new
designation
Art. 361 Repealed by Art. 1745. Goods are transported at
the risk of the carrier, and any stipulation to the
contrary is void. Except: In a pure private carrier
arrangement where such stipulation is valid.
Art. 362 Repealed by Art. 1752, CC where there is now a
presumption of negligence in the event of
damage to cargo
Art. 363 Cargo must be delivered in the condition in which
it was received.
Art. 364 Measure of damage to cargo is market value of
the cargo at the point of destination
Art. 367 Permits parties to submit valuation of damage of
cargo to arbiters
Art. 368 Obligation of vessel to deliver to consignee who
has been designated by shipper
 Art. 369 Consignation is allowed in the following cases:
(a) Consignee cannot be found
(b) Consignee refuses to accept the goods
(c) Consignee refuses to pay freightage
Art. 370 Covers the agreement between carrier and
and 371 shipper for delivery of goods on a certain date
and consequent right of abandonment, which has
been previously discussed.
Art. 372 Repealed by Art. 1749, CC. Subject matter is the
validity of a carrier to stipulate in a bill of lading
for a reduction of its liability for damages
Art. 373 The original carrier that enters into an
interconnecting contract of carriage shall be liable
for damages caused by its connecting carriers.
Art. 374, The carriers are given several remedies under the
375 and Code of Commerce for collection of freightage:
376
(a) Retaining Lien – the carrier cannot be
compelled to deliver or surrender cargo
until the freightage is paid
(b) Carrier’s Lien – the carrier may deliver the
cargo and waive the retaining lien but will
have a right of preference over the cargo for
a period of 30 days (as amended by Art.
2241, CC)
(c) Civil Case for Collection of Sum of Money
(d) Consignation (Art. 369, Code of Commerce)
Art. 377 The liability of carrier for damages arising from
failure to comply with the rules and regulations
on delivery of cargo
Art. 378 Carrier must keep registry of cargo
Art. 379 Provisions of the Code of Commerce on
Transportation are equally applicable to persons
who, although they do not personally effect the
transportation of objects, contract to do so
through others
V. Arrastre
1. Definition
Arrastre is a broad term which refers to a contract for the
unloading of goods from a vessel. But in mercantile law, the term
has a technical meaning as it applies only to overseas trade.
When a person brings in cargo from abroad, he cannot unload and
deliver the cargo by himself. This is done by the arrastre operator,
which will then deliver the cargo to the importer.
Phil. First Insurance Co. v. Wallem Phil. Shipping, Inc., (2009).
The functions of an arrastre operator involve the handling of
cargo deposited on the wharf or between the establishment of
the consignee or shipper and the ship's tackle. Being the
custodian of the goods discharged from a vessel, an arrastre
operator's duty is to take good care of the goods and to turn them
over to the party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work so
its drivers/operators or employees should observe the standards
and measures necessary to prevent losses and damage to
shipments under its custody.
Asian Terminals, Inc. v. Philam Insurance Co., (2013). The
functions of an arrastre operator involve the handling of cargo
deposited on the wharf or between the establishment of the
consignee or shipper and the ship’s tackle. Being the custodian of
the goods discharged from a vessel, an arrastre operator’s duty is
to take good care of the goods and to turn them over to the party
entitled to their possession.
Handling cargo is mainly the arrastre operator’s principal work so
its drivers/operators or employees should observe the standards
and measures necessary to prevent losses and damage to
shipments under its custody.
While it is true that an arrastre operator and a carrier may not be
held solidarily liable at all times, yet when it is shown that it was
the arrastre operator’s people who took direct control of the
unloading and the selection of the defective equipment used,
then they would be held liable with the carrier.
2. Management Contract
(a) Parties in Arrastre Contract
The Management Contract is executed between:
(a) Republic of the Philippines; and
(b) Arrastre Operator – private party awarded the privilege of
operating the arrastre service
However, the implementation of the Management Contract
affects several “third parties”, namely, the importer-consignee
and the carrier.
Philippine Ports Authority v. Nasipit Integrated Arrastre, (2008).
An arrastre contract is not an ordinary agreement involving
merely parties therein, as it affects the public in general. In all
contracts, the law must protect all parties in securing fair play and
equity to prevail.
(b) Relationship Between Consignee and Arrastre Operator
Firemen’s Fund v. Cia. General de Tabacos, (1970). Arrastre
operator, for the privilege of that undertaking signs a
Management Contract with the Philippine Government. But
among the stipulations in the Management Contract are
provisions that adversely affect the importer. The Management
Contract contains stipulations in favor of a third person (pour
autrui), and if there is stamped across the Delivery Permit that the
importer received the goods subject to the Management
Contract, then shall be bound by the same.
There are four (4) stipulations in the Management Contract which
adversely affect the importer although he is not a party to the
arrastre contract:
(a) Formal claim – documented with invoices and other
shipping documents, within 30 days from date of final entry
with the Bureau of Customs (including bill of lading, packing
list)
(b) Arrastre operator is given 60 days to act on the claim
(c) If claim is rejected, file an action within one (1) year.
However, if the claim is not acted upon, the one (1) year
period begins to run from the date of the expiration of the
60-day period.
(d) Qualified Liability – P2,000 per package unless the shipper
declares a higher value (Note: A container is considered as
one package)
Note: Conditions (a) and (b) are conditions precedents, otherwise,
consignee/shipper cannot recover
Firemen’s Fund v. Tabacalera, (1970). The adverse stipulations of
the Revised Management Contract will affect the importer only of
the delivery permit is stamped “SUBJECT TO RMC”. In this case,
there appeared no such stamp, and the importer was held not
bound by the RMC. This case repealed all previous ones which
held that the importer is liable to the RMC by merely accepting
the services of the arrastre operator. Now, the importer will be
subject to the RMC stipulations only if his delivery permit is
stamped “Subject to Revised Management Contract”
Summa Insurance Corp. v. CA, (1996). In cargo handling services,
an arrastre operator is bound by the Management Contract it had
executed with the Bureau of Customs. A management contract,
which is a sort of a stipulation pour autrui within the meaning of
Art. 1311, CC, is also binding on a consignee and the insurer, as
successor-in-interest of the consignee.
Metro Port Service, Inc. v. IAC, (1992). A provision limiting the
liability of arrastre operator through the imposition of a
requirement that a “formal claim” must be made within 30 days
from filing of entry, to protect the legitimate interest of the
public, must be deemed to have been complied with when
consignee filed a “provisional claim” within the 30-day period,
because as of that date the arrastre operator was given
reasonable opportunity to check the validity of the claim while the
facts were still fresh in the minds of the person who took part in
the transaction and while pertinent documents were still
available.
It did not matter that the provisional claim was for the whole
amount of the invoice; it is sufficient as long as the name of the
carrying vessel, its date of arrival and the corresponding bill of
lading are attached.
International Container Terminal Services, Inc. v. FGU Insurance,
(2008). While the Management Contract executed by the arrastre
operator with the Bureau of Customs provides a limitation of its
liability to P3,500 per package, nonetheless the insurance
subrogee is entitled to recover the actual value of the shipment
lost while in the custody of the arrastre operator since by its own
act of not charging the corresponding arrastre fees based on the
value of the shipment after it came to know of such declared
value from the marine insurance policy, the arrastre operator
cannot now escape liability for the actual value thereof. The value
of the merchandise or shipment may be declared or stated not
only in the bill of lading or shipping manifest, but also in other
document required by law before shipment is cleared from the
piers.
Phil. First Insurance Co. v. Wallem Phil. Shipping, (2009). In
Fireman’s Fund Insurance Co. v. Metro Port Service, Inc. the Court
explained the relationship and responsibility of an arrastre
operator to a consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre
operator is akin to that of a depositor and warehouseman. The
relationship between the consignee and the common carrier is
similar to that of the consignee and the arrastre operator. Since it
is the duty of the ARRASTRE to take good care of the goods that
are in its custody and to deliver them in good condition to the
consignee, such responsibility also devolves upon the CARRIER.
Both the ARRASTRE and the CARRIER are therefore charged with
and obligated to deliver the goods in good condition to the
consignee.
The liability of the arrastre operator was reiterated in Eastern
Shipping Lines, Inc. v. CA with the clarification that the arrastre
operator and the carrier are not always and necessarily solidarily
liable as the facts of a case may vary the rule.
Latest Decision on the Matter:
Asian Terminals, Inc. v. Malayan Insurance Co., (2011). Asian
Terminals, Inc., implores us to take judicial notice of Sec. 7.1, Art.
VII of the Management Contract for cargo handling services it
entered into with the PPA, which limits petitioner’s liability to
P5,000 per package. The Management Contract entered into by
the petitioner and the Philippine Ports Authority (PPA) is clearly
not among the matters which the courts can take judicial notice
of.
3. Liability and Obligations of Arrastre Operator
(a) Nature of Arrastre’s Obligations
Summa Insurance v. CA, (1996). In the performance of its
obligations, an arrastre operator should observe the same degree
of diligence as that required of a common carrier and a
warehouseman as enunciated under Art. 1733, CC and Section
3(8) of the Warehouse Receipts Law, respectively. Being the
custodian of the goods discharged from a vessel, an arrastre
operator's duty is to take good care of the goods and to turn them
over to the party entitled to their possession.
Therefore, if goods were damaged while in possession of arrastre
operator, he shall be liable therefor.
Phil. First Insurance v. Wallem Phil. Shipping, (2009). The records
are replete with evidence which show that the damage to the
bags happened before and after their discharge and it was caused
by the stevedores of the arrastre operator who were then under
the supervision of the shipping company.
It is settled in maritime law jurisprudence that cargoes while being
unloaded generally remain under the custody of the carrier. In the
instant case, the damage or losses were incurred during the
discharge of the shipment while under the supervision of the
carrier. Consequently, the carrier is liable for the damage or losses
caused to the shipment.
Asian Terminals v. Daehan Fire and Marine Insurance Co., (2010).
The limitations on loss stipulated in the Management Contract
does not apply if the value of the cargo shipment is
communicated to the arrastre operator before the discharge of
the cargoes. What would be unfair and arbitrary is to hold the
arrastre operator liable for the full value of the merchandise after
the consignee has paid the arrastre charges only on the basis
much lower than the true value of goods.
(b) Burden of Proof in Arrastre Claims
ICTSI v. Prudential Guarantee, (1999). In a claim for loss filed by a
consignee, the burden of proof to show compliance with the
obligation to deliver the goods to the appropriate party upon the
arrastre operator, since the safekeeping of the goods rest within
its knowledge, it must prove that the losses were not due to its
negligence or that of its employees.
(c) Period Within Which to Claim on Arrastre
ICTSI v. Prudential Guarantee, (1999). In order to hold the
arrastre operator liable for lost or damaged goods, claimant
should file with operator a claim for the value of said goods within
15 days from date of discharge of the last package from the
carrying vessel, which is in the nature of a prescriptive period for
bringing an action and is a condition precedent to hold the
arrastre operator liable. The said requirement is not an empty
formality, since it gives the arrastre contractor a reasonable
opportunity to check the validity of the claim, while the facts are
still fresh in the minds of the persons who took part in the
transaction, and while the pertinent documents are still available.
Note: The Court expressly acknowledged that the ruling was not
consistent with the old ruling in a long line of cases that the 15-
day period for filing claims should be counted from the date the
consignee learns of the loss, damage or misdelivery of the goods.
But the Court acknowledged that filing a claim within 15 days
from knowledge of the claim would still qualify as a substantial
compliance with the rule, citing Insurance Co. of North America v.
Manila Port Service, (1970)
(d) Solidary Liability of Carrier and Arrastre Operator
Eastern Shipping Lines v. CA, (1994). Carrier and arrastre operator
are liable for improper delivery of goods to consignee.
(e) Obligations of Arrastre Operator Under “Shipper’s Load
and Count” Shipment
ICTSI v. Prudential Guarantee, (1999). When consigned goods are
shipped under “Shipper’s Load and Count”, the shipper is solely
responsible for the container’s load, and the carrier would then be
oblivious of the contents of the shipment. Protection against
pilferage of the shipment are then the consignee’s lookout. The
arrastre operator is, like an ordinary depositary, duty-bound to
take good care of the goods received from the vessel and to turn
the same over the party entitled to their possession, subject to
such qualification as may have validly been imposed in the
contract between the parties.
The arrastre operator is not required to verify the contents of the
container received and to compare them with those declared by
the shipper because the cargo was at the shipper’s load and
count, and is expected to deliver to the consignee only the
container received from the carrier.
VI. Freight Forwarder
Unsworth Transport Int. (Phil.) v. CA, (2011). The term "freight
forwarder" refers to a firm holding itself out to the general public
(other than as a pipeline, rail, motor, or water carrier) to provide
transportation of property for compensation and, in the ordinary
course of its business,
(1) To assemble and consolidate, or to provide for assembling
and consolidating, shipments, and to perform or provide for
break-bulk and distribution operations of the shipments;
(2) To assume responsibility for the transportation of goods
from the place of receipt to the place of destination; and
(3) To use for any part of the transportation a carrier subject to
the federal law pertaining to common carriers.
A freight forwarder’s liability is limited to damages arising from its
own negligence, including negligence in choosing the carrier;
however, where the forwarder contracts to deliver goods to their
destination instead of merely arranging for their transportation, it
becomes liable as a common carrier for loss or damage to goods.
A freight forwarder assumes the responsibility of a carrier, which
actually executes the transport, even though the forwarder does
not carry the merchandise itself.
VII. FOB, FAS and CIF Designations
1. Importance of Such Designations
 These initials give rise to a presumption in commercial
practice based on commercial customs
 In both instances of CIF or FOB, a carrier intervenes
2. Two Aspects Involved
(a) Transfer of Ownership – when does ownership pass to
buyer?
 Res perit domino – if goods are lost in transit, the owner
bears the loss. But when does one become owner of goods?
 Insurance – when is the buyer or the seller said to have
insurable interest over the goods
(b) Taxation – when is the transaction taxable according to
Philippine Law which usually depends upon the place where
the transaction was perfected?
3. Definitions of Commercial Terms
(a) FOB – Free on Board
 A price quotation with FOB presumes that the seller shall
comply with his obligation to deliver the cargo to the vessel.
 Thereupon, it is the buyer who shall pay the freightage and
thus the vessel is deemed the agent of the buyer so that
delivery to the vessel is delivery to the buyer.
P70,000 FOB Mla. (not CIF Mla.)
Or P70,000 CIF NY (not FOB NY)
FOB Mla – Once the vessel is in Manila, the seller loads the sugar
on board.
(1) After the sugar is loaded, the obligation of the seller is
finished. When does B become the owner of the sugar?
(2) Since the buyer pays for the freightage from Manila to New
York, the vessel is considered the agent of B. The carrier
becomes the agent of B, hence delivery to it is delivery to B;
B acquires ownership in Manila
(3) B, as owner shall bear the risk of loss; and
(4) Since the sale was perfected in Manila, the seller pays the
sales tax in the Philippines
(c) CIF – Cost, Insurance and Freight
The price quotation on CIF presumes that the seller shall pay cost
of crating and packaging, insurance and the freightage. The carrier
is deemed to be the agent of the seller, so that throughout the
entire trip ownership is retained by the seller and only passes to
the buyer upon reaching the point of destination and the cargo is
discharged in favor of the buyer. Insurable interest is with the
seller and taxes are not due as the sale is deemed perfected only
upon reaching the point of destination.
Illustration Continued: CIF-NY: The cost of putting the sugar into
sacks, insurance premium and freight shall be borne by the seller
A. The seller is the owner of the sugar from Manila to New York.
Under the rule on res perit domino, the seller as the owner still
shall bear the risk of loss of the sugar. The seller insured the sugar
since as owner he still has insurable interest. Since ownership
does not pass to buyer until delivery of the sugar in New York,
there is no sales tax due in the Philippines.
VIII. Miscellany
1. Substantial Compliance with Early Warning Device
Requirement
Eastern Assurance & Surety Corp. v. LTFRB, (2003). Under E.O.
202, LTFRB has the power to require insurance companies to
group themselves for the purpose of providing passenger accident
insurance coverage. Administrative bodies like the LTFRB have
expertise in specific matters within the purview of their respective
jurisdictions, and the law concedes to them the power to
promulgate rules and regulations to implement policies of a given
statute – provided such rules and regulations conform to the
terms and standards prescribed by that statute that purport to
carry its general policies into effect. By providing passenger
accident insurance policies to operators of PUVs, insurance
companies and their businesses directly affect public land
transportation. By limiting its regulation of such companies to the
segment of their business that directly affects public land
transportation, the LTFRB has acted within its jurisdiction in
issuing the assailed Circulars.
3. Chicago International Civil Aviation Convention
CIR v. Pilipinas Shell Petroleum, (2012). The provisions of the
1944 Chicago Convention of International Civil Aviation, which
forms binding international law, requires the contracting parties
not to charge duty on aviation fuel already on board any aircraft
that has arrived in their territory from another contracting state.
Though initially aimed at establishing uniformity of taxation
among parties to the treaty to prevent double taxation, the tax
exemption now generally applies to fuel used in international
travel by both domestic and foreign carriers.

Butuan Sawmill v. CA, (1966). Ownership over the cargo will pass
the buyer upon delivery by the seller to the vessel. Buyer will then
have insurable interest and the sale shall be considered as having
been perfected in the Philippines so that sales tax would be due
from the seller.
(b) FAS – Free Alongside Ship: has the same presumptions as
FOB
Illustration: A seller in Manila has 1,000 piculs of sugar which he
wants to sell to a buyer B in New York for P70,000. His quotations
will be:
Baliwag Transit v. CA, (1996). The placing of kerosene lamp or
torch at the end of the road, near the rear portion of the parked
truck to serve as an early warning device is substantial compliance
with the requirements of Sec. 34(g) of Land Transportation and
Traffic Code which requires “appropriate parking lights or flares
visible 100 meters away shall be displayed at the corner of the
vehicle whenever such vehicle is parked on highways or in places
that are not well-lighted or, is placed in such manner as to
endanger passing traffic”, in lieu of the triangular reflectorized
plates in red and yellow issued by the LTO
2. Power of the LTFRB