Chapter 1

GENERAL CONCEPTS IN TRANSPORTATION LAW

Contract of Transportation
nThere is contract of transportation where a person obligates himself to transport persons or
property from one place to another for a consideration.
nThe contract may therefore involve carriage of passengers or carriage of goods.
nThe person who obligates himself to transport the goods or passengers may be a common
carrier or a private carrier.
Parties in a contract of carriage
nPassenger one who travels in a public conveyance by virtue of contract, express or implied,
with the carrier as to the payment of fare or that which is accepted as an equivalent thereof
(Nueca v. Manila Railroad Co., G.R. 31731-R, Jan. 30, 1968)
nCommon Carrier one that holds itself out as ready to engage in the transportation of goods
for hire as a public employment and not as a casual occupation. (De Guzman v. CA, G.R. L47822, Dec. 22, 1988)
Baliwag Transit v. CA,
G.R. 80447, Jan. 31, 1989
Facts:
nThe parents of George, who is already of legal age filed a case against Baliwag for breach of
contract alleging that because of the negligent manner by its driver, George was thrown off the
bus as a result of which the latter sustained multiple serious physical injuries.
nHis parents was seeking reimbursement of their medical expenses and other incidental expenses
incurred by them due to hospitalization of George.
nWhile the case was pending, George signed a waiver of claim in favor of Baliwags insurer,
Fortune Insurance.
Ruling: Since the suit is one for breach of contract of carriage, the release of claims executed by
George, as the injured party, discharging Fortune Insurance and Baliwag from any and all
liability is valid.
nSignificantly, the contact of carriage was actually between George, as the paying passenger,
and Baliwag, as the common carrier. x x x x Since the contract may be violated only by the
parties thereto, as against each other, in an action upon that contract, the real parties in interest,
either as plaintiff or as defendant, must be parties to said contract.
nIn the absence of any contract of carriage between Baliwag and Georges parents, the latter
are not real parties in interest in an action for breach of that contract.
Parties in Carriage of Goods
nShipper is the person who delivers the goods to the carrier for transportation. He is the person
who pays the consideration or on whose behalf payment is made.
nConsignee is the person to whom the goods are to be delivered. The consignee may be the
shipper himself or a third person who is not actually party to the contract.
nCarrier (Ibid)
Everett Steamship Corp. v. CA
G.R. 122494, Oct. 8, 1998
Facts:

Hernandez Trading imported three crates of bus spare parts from Japan. The crates were
shipped on board "ADELFAEVERETTE," a vessel owned by petitioner's principal, Everett Orient
Lines.
nUpon arrival at the port of Manila, it was discovered that one of the crates was missing. The loss
was confirmed and admitted by Everett.
n

However, Everett offered to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum
amount stipulated under Clause 18 of the covering bill of lading which limits the liability of
petitioner. Hernandez rejected.
nThe trial found in favor of Hernandez. On appeal, Everett argued that consent of the consignee
to the terms and conditions of the bill of lading is necessary to make such stipulations binding upon
it .
n

Ruling:
nWhen Hernandez formally claimed reimbursement for the missing goods from Everett and
subsequently filed a case against the it based on the very same bill of lading, it accepted the
provisions of the contract and thereby made itself a party thereto, or at least has come to court to
enforce it.
nHowever, the liability of the carrier under the limited liability clause stands, which is limited to
One Hundred Thousand (Y100,000.00) Yen.
Perfection of Contract involving Carriage In General
nIf contract to carry, i.e. an agreement to carry the passenger at some future date, perfection
takes place upon mere consent since such contract is consensual in nature.
nIf contract of carriage, which is a real contract, perfection takes place when the carrier is
actually used and the latter has assumed its obligation as a carrier.
Specific Perfections of Contract of Carriage: AIRCRAFT
nIf contract to carry, there is perfection even if no tickets have been issued provided there was
meeting of minds with respect to the subject matter and the consideration.
nIf contract of carriage, there is perfection if it was established that the passenger had CHECKED
IN at the departure counter, passed through customs and immigration, boarded the shuttle bus
and proceeded to the ramp of the aircraft.
Specific Perfections of Contract of Carriage: BUSES, JEEPNEYS, STREET CARS
nOnce the bus or jeepney stops, it is in effect making a continuous offer to the passengers. Hence,
it is the duty of the driver to stop their conveyances for a reasonable length of time in order to
afford passengers an opportunity to board and enter.
nIf passenger is injured upon boarding, liability based on contract of carriage already attaches
to the common carrier since the passenger was deemed to be accepting the offer when he
attempted to board. The contract is perfected from that precise moment.
Specific Perfections of Contract of Carriage: TRAINS
nPerfection takes place when a person, with bona fide intention to use the facilities of the carrier
and possessing sufficient fare with which to pay for his passage, has presented himself to the
carrier for transportation in the place and manner that he will be transported.
nWhere a person has already purchased a LRT token and while waiting on the platform
designated for boarding fell thereon and hit by the train, he was deemed a passenger.
British Airways v. CA,
G.R. 92288, Feb. 9, 1993
Facts:

On two occasions, private respondent recruitment agency was not able to send its workers to
Saudi Arabia despite the fact that its principal there had already purchased pre-paid tickets
because petitioners computers broke down.
nPrivate respondent thereafter filed a case on breach of contract of carriage. Petitioner argued
that there was no perfected contract.
n

Ruling:
nPetitioner's repeated failures to transport private respondent's workers in its flight despite
confirmed booking of said workers clearly constitutes breach of contract and bad faith on its part.
n There is no dispute as to the Petitioners consent to the said contract "to carry" its contract
workers from Manila to Jeddah.
The appellant's consent thereto, on the other hand, was manifested by its acceptance of the PTA
or prepaid ticket advice that ROLACO Engineering has prepaid the airfares of the Petitioner's
contract workers advising the appellant that it must transport the contract workers on or before
the end of March, 1981 and the other batch in June, 1981.
nAccordingly, there could be no more pretensions as to the existence of an oral contract of
carriage imposing reciprocal obligations on both parties.
n

Common Carrier Defined

nArt. 1732. Common carriers are persons, corporation, firms or associations engaged in the
business of carrying or transporting passengers or good or both by land, water, or air, for
compensation, offering their services to the public.
nA common carrier is also defined as one that holds itself out as ready to engage in the
transportation of goods for hire as a public employment and not as a casual occupation, (De
Guzman v. CA, G.R. L-47822, Dec. 22, 1988)
Concept of Common Carrier analogous to Public Service
nPublic Service includes every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental.
nDone for general business purposes, any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed
route.
Whatever may be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries and water craft.
nEngaged in the transportation of passengers or freight or both, shipyard, marine repair shop,
wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat
and power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar public services.
Sorita v. Public Service Commission, G.R. L-20965, Oct. 29, 1966
Held:
nIn drawing the line between "steamboats, motorships, and steamship lines" on one side and
pontines, ferries, and water crafts" on the other, Congress apparently means to accept the view
that "boat, craft and watercraft" are usually applied to small vessels, while larger vessels are
usually referred to by the terms "steamer, steamship or vessel"
Test in determining whether a party is a common carrier of goods
n

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
nHe must undertake to carry goods of the kind to which his business is confined.
nHe must undertake to carry by the method by which his business is conducted and over his
established roads.
n

The transportation must be for hire. [First Philippine Industrial Corp. v. CA, G.R. 125948, Dec. 29,
1998]
nProvided it has space, for all who opt to avail themselves of its transportation service for a fee
[National Steel Corp. v. CA, G.R. No. 112287, Dec. 12, 1997, quoting Mendoza v. PAL, 90 Phil.
836]
n

Common Carrier: Basic Rules

STILL A COMMON CARRIER:
nEven if hauling is only ancillary.
nEven if clientele is limited.
nEven if it has no fixed and publicly known route, maintains no terminals and issues not tickets.
nEven if means transportation is not through motor vehicle.
Ancillary Activity Immaterial
nArt. 1732 makes no distinction between one whose principal business activity is carrying of
persons or goods or both, and one who does such carrying only as an ancillary, nor does it make
distinctions between one who offers the service to the general public or a narrow segment of the
general population.
nTherefore, a party 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. [See De Guzman v.
CA, G.R. L-47822, Dec. 22, 1988]
Limited Clientele Not a Defense
Facts:
nPetitioner entered into a contract with SMC for the transfer of paper and kraft board from the
port area to SMCs warehouse.
Held:
nShe is still a common carrier although she does not indiscriminately hold her services out to the
public but offers the same to select parties with whom she may contract in the conduct of her
business. [Virgines Calvo v. UCPB General Insurance Co., G.R. 148496, Mar. 19, 2002]
Facts:
nRespondent shipping company transported the 75,000 bags of cement to Petitioner in its barge.
The bags of cement perished after its barge sank while being towed by a tug boat.
Held:
nRespondent is a common carrier because it was engaged in the business of carrying goods for
others for a fee. The regularity of its activities in the area indicates more than just a casual
activity on its part. Neither can the concept of a common carrier change merely because
individual contracts are executed or entered into with the patrons of the carrier. [Phil. American
General Insurance Co., et al. v. PKS Shipping Co., G.R. 149038, Apr. 9, 2003]
No fixed route, No terminal, No Ticket issued also not a Defense

Facts:
nPetitioner is involved in the business of carrying goods through its barges. It has no fixed and
publicly known route, maintains no terminals, and issues no tickets.
Held:
nPetitioner is still a common carrier because its principal business is that of lighterage and
drayage and it offers its barges to the public for carrying or transporting by water for
compensation. [Asia Lighterage and Shipping, Inc. v. CA, G.R. 147246, Aug. 19, 2003]
Drayage service is usually provided by a national trucking/shipping company or an International
shipment brokerage firm in addition to the transportation of the freight to and from the exhibit
site. Drayage service provides for:
- Completing inbound carrier's receiving documents;
- Unloading and delivery of the goods to your booth/stand space from the
receiving dock;
- Storing of empty cartons/crates and extra products at a on/near-site
warehouse;
- Pickup of the goods from your booth/stand space to the receiving dock and
loading back into the carrier; or
- Completing outbound carrier's shipping documents.
n

Means used in transporting not material [First Philippine Industrial Corp. v. CA, G.R. 147246, Aug.
19, 2003]
Issue:
nAre pipeline operators common carriers as to subject them to business taxes on common carriers?
Held:
nYes. The Code makes no distinction as to the means of transporting, as long as it is by land,
water or air. It does not provide that the transportation of the passengers or goods should be by
motor vehicle. In fact, in the US, oil pipe line operators are considered common carriers. Also
under the Petroleum Act of the Philippines (RA 387).
Effect when Common Carrier enters into a charter party
nIf only by contract of affreightment, whether voyage or time charter, it remains a common
carrier.
nIf by bareboat or demise charter, a common carrier is transformed into a private carrier.
Planters Products Inc. v. CA,
G.R. 101503, Sept. 15, 1993
nIt 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 charterparty is concerned.
nIndubitably, 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.
Common Carrier v. Private Carrier
(National Steel Corp. v. CA, supra)
nThe 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.
nAs a general rule, private carriage is undertaken by special agreement and carrier does not
hold himself out to carry goods for the general public.
nIn 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

(demise or bareboat. 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.
FGU Insurance v. G.P. Sarmiento Trucking, G.R. 141910, Aug. 6, 2002
Facts:
nGPS, as the exclusive hauler of Conception Industries, undertook to deliver thirty (30) units of
Condura refrigerators from latters plant in Alabang to Dagupan City. While the truck was
traversing the north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac,
it collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to
the cargoes. Petitioner FGU as subrogee to Concepcion Industries filed a complaint for damages
and breach of contract of carriage against GPS and its driver.
Issue No. 1:
nWHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER.
Held:
nGPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or
offering its services to no other individual or entity, cannot be considered a common carrier. The
above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief.
nA breach upon the contract confers upon the injured party a valid cause for recovering that
which may have been lost or suffered.
n

The remedy serves to preserve the interests of the promisee that may include his:
Expectation interest," which is his interest in having the benefit of his bargain by being put in as
good a position as he would have been in had the contract been performed; or
n
n

Reliance interest," which is his interest in being reimbursed for loss caused by reliance on the
contract by being put in as good a position as he would have been in had the contract not been
made; or
nRestitution interest," which is his interest in having restored to him any benefit that he has
conferred on the other party
n

The effect of every infraction is to create a new duty, that is, to make recompense to the one
who has been injured by the failure of another to observe his contractual obligation unless he can
show extenuating circumstances, like proof of his exercise of due diligence (normally that of the
diligence of a good father of a family or, exceptionally by stipulation or by law such as in the
case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous event,
to excuse him from his ensuing liability. .
n

In this case, the delivery of the goods in its custody to the place of destination - gives rise to a
presumption of lack of care and corresponding liability on the part of the contractual obligor the
burden being on him to establish otherwise. GPS has failed to do so.
nRespondent driver, on the other hand, without concrete proof of his negligence or fault, may not
himself be ordered to pay petitioner.
n

The driver, not being a party to the contract of carriage between petitioners principal and
defendant, may not be held liable under the agreement.
nA contract can only bind the parties who have entered into it or their successors who have
assumed their personality or their juridical position.
nConsonantly with the axiom res inter alios acta aliis neque nocet prodest, such contract can neither
favor nor prejudice a third person.
n

Petitioners civil action against the driver can only be based on culpa aquiliana, which, unlike
culpa contractual, would require the claimant for damages to prove negligence or fault on the
part of the defendant.
n

Issue No. 2:
nWHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT CASE.
Held:
nRes 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.
nThe maxim simply places on the defendant the burden of going forward with the proof.
n

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.
nThus, 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.
n

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.
nNevertheless, the requirement that responsible causes other than those due to defendants
conduct must first be eliminated, for the doctrine to apply, should be understood as being
confined only to cases of pure (non-contractual) tort since obviously the presumption of negligence
in culpa contractual, as previously so pointed out, immediately attaches by a failure of the
covenant or its tenor.
n

In the case of the truck driver, whose liability in a civil action is predicated on culpa acquiliana,
while he admittedly can be said to have been in control and management of the vehicle which
figured in the accident, it is not equally shown, however, that the accident could have been
exclusively due to his negligence, a matter that can allow, forthwith, res ipsa loquitur to work
against him.
n

Common Carrier v. Towage

nIn towage, one vessel is hire to bring another vessel to another place. Thus, a tugboat may be
hired by a common carrier to bring the vessel to a port. In this case, the operator of the tugboat
cannot be considered a common carrier.
nIn maritime law, towage refers to a service rendered to a vessel by towing for the mere purpose
of expediting her voyage without reference to any circumstances of danger. It usually confined to
vessels that have received no injury or damage.
Common Carrier v. Arrastre
An Arrastre operator performs the following functions:
nReceive, handle, care for, and deliver all merchandise imported and exported, upon or passing
over Government-owned wharves and piers in the port;
nRecord or check all merchandise which may be delivered to said port at shipside;
nIn general, furnish light, and water services and other incidental services in order to undertake its
arrastre service
Hence, the functions of an arrastre operator has nothing to do with the trade and business of
navigation, nor to the use or operation of vessels.
nAn arrastre operator is like a depositary or warehouseman.
nEven if the arrastre service depends on, assists, or furthers maritime transportation, it may be
deemed merely incidental and does not make its service maritime
Common Carrier v. Stevedoring
nThe function of stevedores involve the loading and unloading of coastwise vessels calling at the
port.
n

Governing Laws on Common Carrier

nCOASTWISE SHIPPING:
- New Civil Code (Arts. 1732-1766)
- Code of Commerce
nCARRIAGE FROM FOREIGN PORTS TO PHIL PORTS:
- New Civil Code (primary)
- Code of Commerce (suppletory)
- Carriage of Goods by Sea Act [COGSA] (suppletory)
CARRIAGE FROM PHIL PORT TO FOREIGN PORTS:
- The laws of the country to which the goods are to be transported.
nOVERLAND TRANSPORTATION:
- Civil Code (primary)
- Code of Commerce (suppletorily)
- R.A. 4136 [The Land Transportation and Traffic Code]
n

AIR TRANSPORTATION:
- Civil Code (primary)
- Code of Commerce (suppletorily)
- For international carriage Warsaw Convention [Convention for the Unification of
Certain Rules Relating to the International Carriage by Air]
n

Nature of Business of Common Carriers, KMU V. Garcia, GR 115381, Dec. 23, 1994
nCommon carriers are public utilities within the contemplation of the public service law.

Public utilities are privately owned and operated businesses whose services are essential to the
general public.
nThey are enterprises which specially cater to the needs of the public and conduce to their
comfort and convenience.
nWhen, one devotes his property to a use in which the public has an interest, he, in effect grants
to the public an interest in that use, and must submit to the control by the public for the common
good, to the extent of the interest he has thus created.
n

Salient Provisions in R.A. 4136 on Registration of Vehicles

nMotor vehicle defined: Any vehicle propelled by any power other than muscular power using the
public highways, but excepting road rollers, trolley cars, street-sweepers, sprinklers, lawn mowers,
bulldozers, graders, fork-lifts, amphibian trucks, and cranes if not used on public highways,
vehicles which run only on rails or tracks, and tractors, trailers and traction engines of all kinds
used exclusively for agricultural purposes.
nTrailers having any number of wheels, when propelled or intended to be propelled by
attachment to a motor vehicle, shall be classified as separate motor vehicle with no power rating.
The distinction between "passenger truck" and "passenger automobile" shall be that of common
usage: Provided, That a motor vehicle registered for more than nine passengers shall be classified
as "truck": And Provided, further, That a "truck with seating compartments at the back not used for
hire shall be registered under special "S" classifications. In case of dispute, the Commissioner of
Land Transportation shall determine the classification to which any special type of motor vehicle
belongs.
n

Articulated vehicle - means any motor vehicle with a trailer having no front axle and so attached
that part of the trailer rests upon motor vehicle and a substantial part of the weight of the trailer
and of its load is borne by the motor vehicle. Such a trailer shall be called as "semi-trailer."
n

Professional driver - means every and any driver hired or paid for driving or operating a motor
vehicle, whether for private use or for hire to the public. Any person driving his own motor vehicle
for hire is a professional driver.
nOwner -The actual legal owner of a motor vehicle, in whose name such vehicle is duly registered
with the Land Transportation Commission.
n

The "owner" of a government-owned motor vehicle is the head of the office or the chief of the
Bureau to which the said motor vehicle belongs.
nParking or parked - A motor vehicle is "parked" or "parking" if it has been brought to a stop on
the shoulder or proper edge of a highway, and remains inactive in that place or close thereto for
an appreciable period of time .
n

A motor vehicle which properly stops merely to discharge a passenger or to take in a waiting
passenger, or to load or unload a small quantity of freight with reasonable dispatch shall not be
considered as "parked", if the motor vehicle again moves away without delay.
n

Sec. 5(a) - No motor vehicle shall be used or operated on or upon any public highway of the
Philippines unless the same is properly registered for the current year in accordance with the
provisions of this Act.
n

Sec. 5(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other encumbrances of
motor vehicles, in order to be valid, must be recorded in the Land Transportation Commission and
must be properly recorded on the face of all outstanding copies of the certificates of registration
of the vehicle concerned.
n

Section 16. Suspension of registration certificate. - If on inspection, as provided in paragraph (6)

of Section four hereof, any motor vehicle is found to be unsightly, unsafe, overloaded, improperly
marked or equipped, or otherwise unfit to be operated, or capable of causing excessive damage
to the highways, or not conforming to minimum standards and specifications, the Commissioner
may refuse to register the said motor vehicle, or if already registered, may require the number
plates thereof to be surrendered to him, and upon seventy-two hours notice to the owner of the
motor vehicle, suspend such registration until the defects of the vehicle are corrected and/or the
minimum standards and specifications fully complied with.
n

Section 21. Operation of motor vehicles by tourists. - Bona fide tourist and similar transients who
are duly licensed to operate motor vehicles in their respective countries may be allowed to
operate motor vehicles during but not after ninety days of their sojourn in the Philippines.
nAfter ninety days, any tourist or transient desiring to operate motor vehicles shall pay fees and
obtain and carry a license as hereinafter provided.
n

If any accident involving such tourist or transient occurs, which upon investigation by the
Commissioner or his deputies indicates that the said tourist or transient is incompetent to operate
motor vehicles, the Commissioner shall immediately inform the said tourist or transient in writing
that he shall no longer be permitted to operate a motor vehicle.
n

Speed Restrictions
nSection 35(a) Any person driving a motor vehicle on a highway shall drive the same at a careful
and prudent speed, not greater nor less than is reasonable and proper, having due regard for
the traffic, the width of the highway, and of any other condition then and there existing; and
nNo person shall drive any motor vehicle upon a highway at such a speed as to endanger the life,
limb and property of any person, nor at a speed greater than will permit him to bring the vehicle
to a stop within the assured clear distance ahead.
Exceptions to Rate Speed
nA physician or his driver when the former responds to emergency calls;
nThe driver of a hospital ambulance on the way to and from the place of accident or other
emergency;
nAny driver bringing a wounded or sick person for emergency treatment to a hospital, clinic, or
any other similar place;
nThe driver of a motor vehicle belonging to the Armed Forces while in use for official purposes in
times of riot, insurrection or invasion;
The driver of a vehicle, when he or his passengers are in pursuit of a criminal;
A law-enforcement officer who is trying to overtake a violator of traffic laws; and
nThe driver officially operating a motor vehicle of any fire department, provided that exemption
shall not be construed to allow useless or unnecessary fast driving of drivers aforementioned.
n
n

10

Section 36. Speed limits uniform throughout the Philippines. - No provincial, city or municipal
authority shall enact or enforce any ordinance or resolution specifying maximum allowable
speeds other than those provided in this Act.
n

Correct Driving
nPass to the right when meeting persons or vehicles coming toward him.
nPass left when overtaking persons or vehicles going the same direction.
nConduct to the right of the center of the intersection of the highway when turning left.
nApplicable every person operating a motor vehicle or an animal-drawn vehicle.
Exceptions:
nDifferent course of action is required in the interest of the safety and the security of life, person
or property; or
nBecause of unreasonable difficulty of operation in its compliance.
Overtaking a vehicle [Sec. 39]
nPass at a safe distance to the left;
n Not again drive to the right side of the highway until safety is clear of such overtaken vehicle.
Exceptions: Passing at right allowed
nOn highways with two or more lanes; or
nWhen to be overtaken vehicle is turning left.
Duty of Driver of Vehicle to be Overtaken [Sec. 40]
nTo give way to the overtaking vehicle on suitable and audible signal being given by the driver
of the overtaking vehicle; and
n Not to increase the speed of his vehicle until completely passed by the overtaking vehicle.
Restrictions on overtaking and passing [Sec. 41]
nDo not drive to the left side of the center line of a highway in overtaking or passing another
vehicle proceeding in the same direction, unless such left side is clearly visible, and is free of
oncoming traffic for a sufficient distance ahead to permit such overtaking or passing to be made
in safety.
Do not overtake:
nwhen approaching the crest of a grade;
nupon a curve in the highway;
ndriver's view along the highway is obstructed within a distance of five hundred feet ahead.
Exception: When on a highway having two or more lanes for movement of traffic in one direction
where the driver of a vehicle may overtake or pass another vehicle: Provided,
nException to exception: On a highway within a business or residential district, having two or more
lanes for movement of traffic in one direction, overtaking or passing at right is allowed.
Do not overtake:
nat any railway grade crossing;
nat any intersection of highways unless such intersection or crossing is controlled by traffic signal,
or unless permitted to do so by a watchman or a peace officer.
nException: On a highway having two or more lanes for movement of traffic in one direction
where the driver of a vehicle may overtake or pass another vehicle on the right.
nNothing in this section shall be construed to prohibit a driver overtaking or passing upon the right
another vehicle which is making or about to make a left turn.
Do not overtake, pass or attempt to pass:

11

between any points indicated by the placing of official temporary warning or caution signs
indicating that men are working on the highway;
nin any "no-passing or overtaking zone."
Right of way [Sec. 42]
When two vehicles approach or enter an intersection at approximately the same time:
nDriver of the vehicle on the left to yield the right of way to the vehicle on the right;
nDriver of vehicle traveling at an unlawful speed forfeits right of way.
n

Driver of a vehicle approaching but not having entered an intersection:

To yield right of way to a vehicle within such intersection or turning therein to the left across the
line of travel of such first-mentioned vehicle;
nProvided, driver of the vehicle turning left has given a plainly visible signal of intention to turn.
n

Driver of any vehicle upon a highway within a business or residential district:

To yield right of way to a pedestrian crossing such highway within a crosswalk;
nException: at intersections where the movement of traffic is being regulated by a peace officer
or by traffic signal.
nEvery pedestrian crossing a highway within a business or residential district, at any point other
than a crosswalk shall yield the right of way to vehicles upon the highway.
n

When about to approach through highway or raildroad crossing:

nFull stop before traversing;
nProvided, That when it is apparent that no hazard exists, the vehicle may be slowed down to
five miles per hour instead of bringing it to a full stop.
Exception to the right of way rule [Sec. 43]
nYield right of way to all vehicles approaching when entering a highway from a private road or
drive;
nYield to police or fire department vehicles and ambulances when such vehicles are operated on
official business and the drivers thereof sound audible signal of their approach;
Yield to all vehicles approaching from either direction when entering a "through highway" or a
"stop intersection.
nProvided, That nothing in this subsection shall be construed as relieving the driver of any vehicle
being operated on a "through highway" from the duty of driving with due regard for the safety
of vehicles entering such "through highway" nor as protecting the said driver from the
consequence of an arbitrary exercise off such right of way.
n

NO PARKING
n(a) Within an intersection
n(b) On a crosswalk
n(c) Within six meters of the intersection of curb lines.
n(d) Within four meters of the driveway entrance to and fire station.
n(e) Within four meters of fire hydrant
n(f) In front of a private driveway
n(g) On the roadway side of any vehicle stopped or parked at the curb or edge of the highway
n(h) At any place where official signs have been erected prohibiting parking.
Reckless driving [Sec. 48]

12

No person shall operate a motor vehicle on any highway recklessly or without reasonable
caution considering the width, traffic, grades, crossing, curvatures, visibility and other conditions of
the highway and the conditions of the atmosphere and weather, or so as to endanger the
property or the safety or rights of any person or so as to cause excessive or unreasonable
damage to the highway.
Right of way for police & other emergency vehicles [Sec. 49]
nUpon the approach of any police or fire department vehicle, or of an ambulance giving audible
signal,
nThe driver of every other vehicle shall immediately drive the same to a position as near as
possible and parallel to the right-hand edge or curb of the highway
nClear of any intersection of highways, and
nShall stop and remain in such position, unless otherwise directed by a peace officer, until such
vehicle shall have passed.
Vehicle Tampering [Sec. 50]
nNo unauthorized person shall sound the horn, handle the levers or set in motion or in any way
tamper with a damage or deface any motor vehicle.
n

Prohibition on Vehicle Hitching

[Sec. 51]
nNo person shall hang on to, ride on, the outside or the rear end of any vehicle; and
nNo person on a bicycle, roller skate or other similar device, shall hold fast to or hitch on to any
moving vehicle; and
nNo driver shall knowingly permit any person to hang on to or ride, the outside or rear end of his
vehicle or allow any person on a bicycle, roller skate or other similar device to hold fast or hitch
to his vehicle.
Prohibition on Sidewalk Driving or Parking [Sec. 52]
nNo person shall drive or park a motor vehicle upon or along any sidewalk, path or alley not
intended for vehicular traffic or parking.
Driving Under The Influence [Sec.53]
nNo person shall drive a motor vehicle while under the influence of liquor or narcotic drug.
Obstruction of Traffic [Sec. 54]
nNo person shall drive his motor vehicle in such a manner as to obstruct or impede the passage of
any vehicle;
nNor, while discharging or taking on passengers or loading or unloading freight, obstruct the free
passage of other vehicles on the highway.
Duty of Driver In Case of Accident [Sec. 55]
nIn the event that any accident should occur as a result of the operation of a motor vehicle upon a
highway, the driver present, shall show his driver's license, give his true name and address and
also the true name and address of the owner of the motor vehicle.
No driver of a motor vehicle concerned in a vehicular accident shall leave the scene of the
accident without aiding the victim, except under any of the following circumstances:
1. If he is in imminent danger of being seriously harmed by any person or persons
by reason of the accident;
2. If he reports the accident to the nearest officer of the law; or
3. If he has to summon a physician or nurse to aid the victim.
n

Traffic Violations

13

For registering later than seven days after acquiring title to an unregistered motor vehicle or
after conversion of a registered motor vehicle requiring larger registration fee than that for which
it was originally registered, or for renewal of a delinquent registration.
nFor failure to sign driver's license or to carry same while driving.
n

Driving a vehicle with a delinquent or invalid driver's license

nDriving a motor vehicle with delinquent, suspended or invalid registration, or without registration
or without the proper license plate for the current year
nDriving a motor vehicle without first securing a driver's license
n

Driving a motor vehicle while under the influence of liquor or narcotic drug.
Violation of Section thirty-two, thirty-four (a), (b) and (b-1), thirty-five and forty-six
nViolations of Sections forty-nine, fifty and fifty-two.
n
n

For making, using or attempting to make or use a driver's license, badge, certificate or
registration, number plate, tag or permit in imitation or similitude of those issued under this Act, or
intended to be used as or for a legal license, badge, certificate, plate, tag or permit or with
intent to sell or otherwise dispose of the same to another, or false or fraudulently represent as
valid and in force any driver's license, badge, certificate, plate, tag or permit issued under this
Act which is delinquent or which has been suspended or revoked
n

For using private passenger automobiles, private trucks, private motorcycles, and motor wheel
attachments for hire, in violation of Section seven, subsections (a), (b), and (c), of this Act
n For permitting, allowing, consenting to, or tolerating the use of a privately-owned motor vehicle
for hire in violation of Section seven, subsections (a), (b), and (c), of this Act,
n

For violation of any provisions of this Act or regulations promulgated pursuant hereto, not
hereinbefore specifically punished
nIn the event an offender cannot pay any fine imposed pursuant to the provisions of this Act, he
shall be made to undergo subsidiary imprisonment as provided for in the Revised Penal Code.
n

If, as the result of negligence or reckless or unreasonable fast driving, any accident occurs
resulting in death or injury of any person, the motor vehicle operator at fault shall, upon
conviction, be punished under the provisions of the Revised Penal Code.
n

Presumption of Negligence
nArt. 2185, Civil Code It is presumed that a person driving a motor vehicle is negligent if at the
time of the mishap, he was violating any traffic regulation, unless the contrary.
Registered Owner Rule
nThe person who is the registered owner of a vehicle is liable for any damage caused by the
negligent operation of the vehicle although the same was already sold or conveyed to another
person at the time of the accident.
nThis is subject to the right of recourse by the registered owner against the transferee or buyer.
nThe registered owner rule is applicable whenever the persons involved are engaged in what is
known as the kabit system.
CLASSIFICATIONS OF MOTOR REGISTRABLE VEHICLES [Sec. 7]
nPrivate passenger automobiles;
nPrivate trucks;
14

nPrivate motorcycles, scooters, or motor wheel attachments

nPublic utility automobiles;
nPublic utility trucks;
nTaxis and auto-calesas
nGarage automobiles
nGarage trucks
nHire trucks;
j) Trucks owned by contractors and customs brokers and customs agents;
k) Undertakes;
l) Dealers;
m) Government automobiles
n) Government trucks;
o) Government motorcycles;
p) Motor vehicles of tourists [for 90 days];
q) Special

Vehicles registered under classification under (a), (b) & (c) cannot be used for hire under any
circumstances and cannot be used to solicit, accept, or be used to transport passengers or freight
for pay.
nLaborers necessary to handle freight in private trucks may ride on it (but not to exceed 10
laborers)
n Dealers vehicle can be operated only for the purpose of transporting the vehicle itself from the
pier or factory to the warehouse or sales room or for delivery to a prospective purchaser or for
test or demonstration
n

CONCLUSIVE PRESUMPTION OF A VEHICLE IS FOR HIRE

nA vehicle habitually used to carry freight not belonging to the registered owner thereof, or
passengers not related by consanguinity or affinity within the fourth civil degree to such owner,
shall be conclusively presumed to be "for hire."
KABIT SYSTEM
nIt 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,
sometime for a fee or percentage of earning.
nSuch arrangement is void for being contrary to public policy [Abelardo Lim, et al. v. CA, GR
125817, Jan. 16, 2002]
PARTIES IN KABIT SYSTEM COVERED BY IN PARI DELICTO RULE
nEx pact illicito non oritur action No action arises out of an illicit bargain.
nHaving entered into an illegal contract, parties to the kabit system cannot seek relief from the
courts, and each must bear the consequences of his acts.
Teja Marketing v. IAC, GR 65510, Mar. 9, 1987
nFacts: Petitioner was constrained to file an action for damages because private respondent
allegedly failed to pay the balance of the purchase price of its motorcycle sold. The motorcycle
which was used for sidecar remained under the name of petitioner and operated under its
franchise under an arrangement called kabit system.

15

Held: Dismissal of case sustained. Both parties are in pari delicto. The court will not aid either
party to enforce an illegal contract.
n

Chapter 2
OBLIGATIONS OF THE PARTIES
OBLIGATION OF CARRIER:
nDuty to Accept;
nDuty to Deliver Goods On Time;
nDuty to Deliver Goods at the Place and to the person named in the BL; and
nDuty to Exercise Due Diligence
OBLIGATION OF SHIPPER OR PASSENGER
nDuty to exercise due diligence.
nDuty to pay the amount of freight or passage on time.
1. Carriers Duty to Accept
A common carrier granted CPC is duty bound to accept passengers or cargo without any
discrimination.
Exceptions:
nDangerous objects or substances including dynamites and other explosives;
nUnfit for transportation;
nAcceptance would result in overloading;
Contrabands or illegal goods;
nGoods are injurious to health;
nGood will likely be exposed to untoward danger like flood, capture by enemies and the like;
nLivestock with disease or exposed to disease;
nStrike; and
nFailure to tender goods on time
Rule on Hazardous and Dangerous Substances
nA carrier may be granted authority to carry goods that are by nature dangerous and
hazardous. A carrier specially designed to carry dangerous chemicals and goods may be
granted CPC for such purpose.
nAll other carriers may validly refuse to accept such cargoes.
n

MARINA Memorandum Circular No. 105, Apr. 6, 1995

Documentary Requirements for Special Permit to Carry Dangerous/Hazardous Cargoes
and Goods in Packaged Form:
nLetter of Intent
nPPA Clearance on packaging, marking and labeling of cargoes or goods in packaged forms
nCargo Stowage Plan
Classification of Dangerous or Hazardous Goods Under MC 105
nClass 1 Explosives
nClass 2 Gases: Compressed, liquefied or dissolved under pressure
nClass 3 Inflammable Liquids
nClass 4 Inflammable Solids or Substances: a) Inflammable Solid; b) Inflammable Solids, or
Substances liable to spontaneous combustion; and c) Inflammable Solids, or Substances which in
contact with waters emit inflammable gases;

16

Class 5 a) Oxidizing Substances; b) Organic Peroxide

nClass 6 - a) Poisonous (toxic) substances; b) Infectious Substances
nClass 7 Radioactive Substances
nClass 8 Corrosives
nClass 9 Miscellaneous Dangerous Substances
n

MARINA Memorandum Circular No. 147

Rules on carriage of vehicles, animals, forest products, fish and aquatic products, minerals
and mineral products & toxic and hazardous materials on board vessels:
nMaster to accept only if these are covered by necessary clearance from appropriate agencies;
nNon-compliance will subject the shipowner and master administrative penalties without prejudice
to criminal or civil suits
2. Carriers Duty to Deliver The Goods
General Rule:
nCarrier is not an insurer against delay in transportation of goods.
Exception:
nWhen there is agreement as to the time of delivery
When delay is deemed reasonable
nOrdinary Goods 2 months [Maersk Line v. CA, May 17, 1993]
nPerishable Goods 2 to 3 days [Dissenting: Tan Chiong Sian v. Inchausti, GR 6092, Mar. 8,
1912]
Rules on Delay on Overland Transportation (Code of Commerce)
Art. 358, Code of Commerce:
nIf there is no period fixed for the delivery of the goods the carrier shall be bound to forward
them in the first shipment of the same or similar goods which he may make to the point of
delivery; and should he not do so, the damages caused by the delay should be for his account.
Delay When Period Is Fixed
nArt. 370. If a period has been fixed for the delivery of the goods, it must be made within such
time, and, for failure to do so, the carrier shall pay the indemnity stipulated in the bill of lading,
neither the shipper nor the consignee being entitled to anything else. If no indemnity has been
stipulated and the delay exceeds the time fixed in the BL, the carrier shall be liable for the
damages which the delay may have caused.
Procedure in Abandonment by Consignee In Case of Delay (Type 2)
nArt. 371. In case of delay through the fault of the carrier referred to in the preceding articles,
the consignee may leave the goods transported in the hands of the former, advising him thereof in
writing before their arrival at the point of destination.
nWhen this abandonment takes place, the carrier shall pay the full value of the goods as if they
had been lost or mislaid.
If the abandonment is not made, the indemnification for the losses and damages by reason of
the delay cannot exceed the current price which the goods transported would have had on the
day and at the place in which they should have been delivered; this same rule is to be observed
in all other cases in which this indemnity may be due.
n

FIVE TYPES OF ABANDONMENT UNDER MERCANTILE LAW

nWHEN DAMAGE IS SO GREAT [Art. 365, Code of Commerce]
nWHEN GOODS ARRIVE BEYOND THE DATE AGREED ON [Art. 371, Code of Commerce]

17

ABANDONMENT BY SHIPOWNER WHEN LIABILITY EXCEEDS VALUE OF VESSEL [Art. 578, Code
of Commerce]
nDAMAGE TO GOODS IN LIQUID FORM [Sec. 687, Code of Commerce]
nCONSTRUCTIVE LOSS UNDER THE INSURANCE CODE [Sec. 138, Insurance Code of the Phil.]
n

1st Type: WHEN DAMAGE IS SO GREAT

nWhere 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 have been shipped, the shipper
may exercise right of abandonment.
nNOTICE TO THE CARRIER IS SUFFICIENT consent of carrier is not necessary and once
perfected, the ownership over damaged goods passes to the carrier and carrier must pay the
shipper market value of goods at point of destination.
2nd Type: WHEN GOODS ARRIVE BEYOND DATE AGREE ON
nUnder this set-up, shipper and carrier agreed in advance that cargo must arrive on a certain
date.
nThe date has passed but the cargo has not yet arrived due to carriers fault.
nShipper/consignee may exercise the right of abandonment by NOTIFYING the carrier.
nOnce carrier has been notified, ownership over the goods undelivered passes to carrier.
nBut carrier must pay shipper market value of the goods at the point of destination.
3rd Type: ABANDONMENT BY SHIPOWNER WHEN LIABILITY EXCEEDS VALUE OF VESSEL
nReflects the hypothecary nature of maritime transactions.
nInstances when vessel carries goods and goods are damaged.
nLiability of the carrier over the damage goods exceeds the value of the vessel.
nShipowner of ship agent may exercise right of abandonment by simply NOTIFYING TO THE
SHIPPER.
nLiability of the shipowner is now limited to the value of the vessel.
4th Type: DAMAGE TO GOODS IN LIQUID FORM
nCharterers and shippers may abandon the merchandise damaged if cargo should consist of
liquids;
nThe contents have leaked out;
nWhat remains in the container is but of its content;
nThe cause was on account of inherent defect or fortuitous event.
5th Type: CONSTRUCTIVE LOSS UNDER THE INSURANCE CODE
nShipowners right of abandonment for constructive loss;
nTakes place when vessel suffers damage in excess of of its insured value;
nNotice to Insurer from the insured is sufficient;
nThereafter, ownership over the damaged vessel passes to the insurer; and
nInsurer must pay insured as if it were an ACTUAL LOSS.
Characteristics of Abandonment
nIt is unilateral right;
nIt is perfected by mere notice;
nOnce perfected, ownership over damaged goods passes to carrier; and
nCarrier must pay the shipper market value of goods at the point of destination
Bar, Mercantile Law [1979]

18

Problem:
nA, in Manila, shipped on board a vessel of B, chairs to be used in the moviehouse of consignee C
in Cebu. No date for delivery or indemnity for delay was stipulated. The chairs, however, were
not claimed promptly by C and were shipped by mistake back to Manila, where it was
discovered and re-shipped to Cebu. By the time the chairs arrived, the date of inauguration of
the moviehouse passed by and it had to be postponed. C brings an action for damages against B
claiming loss of profits during the Christmas season when he expected the moviehouse to be
opened. Decide the case with reason
Suggested Answer:
nC may sue B for the loss of his profits provided that ample proof thereof are presented in court.
The carrier is obligated to transport the goods without delay. The carrier is liable if he is guilty of
delay in the shipment of cargo, causing damages to the consignee.
Mora in Civil Law distinguished from Mora in Mercantile Law
nUnder Art. 1169, Civil Code requires demand by the creditor in order that delay may exist.
Exceptions:
nObligation or law expressly so provides;
nTime is of the essence; and
nDemand would be useless.
BUT under the Code of Commerce, demand, as a general rule, is not necessary in commercial
contracts in order for the obligor to incur delay [Arts. 61, 62 & 63, Code of Commerce].
nExceptions: a) When fixed by contract, b) when recognized or allowed by law.
nIn commercial contracts, time is always of the essence.
n

Code of Commerce Provisions on Mora [Arts. 61, 62,& 63]

nArt. 61. Day of grace, courtesy or others which under any name whatsoever defer the fulfillment
of commercial obligations, shall not be recognized, except those which the parties may have
previously fixed in contract or which are based on a definite provision of law.
nArt. 62. Obligations which do not have a period previously fixed by the parties or by the
provisions of this Code, shall be demandable ten days after having been contracted if they give
rise only to an ordinary action, and on the next day if they involve immediate execution.
Art. 63. The effect of default in the performance of commercial obligation shall commence:
1. In contracts with a day for performance fixed by the will of the parties or by
the law, on the day following their maturity;
2. In those which do not have such day fixed, from the day on which the creditor
makes judicial demand on the debtor or notifies him of protest of loss and damages made
against him before a judge, notary or other public official authorized to admit the same.
n

SUMMARY: When Debtor incurs Delay in Commercial Contracts

nIf period of performance is fixed, debtor incurs delay the day following the day fixed, without
need of demand;
nIf no period fixed, ten (10) days from execution of contract and on 11th day, debtor incurs delay
without need of demand;
nPotestative period (e.g. when the debtor desires) debtor in delay from date of demand.
Note: distinguish from a potestative condition, e.g. if the debtor desires. Under the Civil Code
and Code of Commerce, such condition is void.

19

KINDS OF DELAY UNDER CIVIL CODE

nMora solvendi Delay of an obligor to deliver or to perform an obligation:
a. Mora solvendi ex re delay when the obligation is to give or to deliver;
b. Mora solvendi ex persona delay when the obligation is to do or to perform a personal
service.
nMora accipiendi Delay of an obligee in accepting the delivery of the thing due;
nCompensatio morae Delay in reciprocal obligations (Art. 1169, last par.). Neither party is in
default unless the other is ready to comply with his obligation.
UNDER CIVIL CODE: DEMAND NECESSARY FOR DELAY
nIn Compania General de Tabacos vs. Araza, 7 Phil. 455, held: The contract does not provide for
the payment of any interest. There is no provision in it declaring expressly that the failure to pay
when due should put the debtor in default. There was therefore no default which would make him
liable for interest until a demand was made. There was no evidence of any demand prior to the
presentation of the complaint. The plaintiff is therefore entitled to interest only from the
commencement of the action.
DEEMED MERCHANCE UNDER THE CODE OF COMMERCE
nThose who, having legal capacity to engage in commerce, habitually devote themselves thereto
[Art. 1]
nLegal presumption of habituality: From the moment a person who intends to engage in
commerce announces through circulars, newspapers, handbills, posters exhibited to the public, or
in any manner whatsoever, an establishment which has for its object some commercial operation
[Art. 3]
COMMERCIAL CONTRACTS GOVERNED BY CODE OF COMMERCE
nArt. 50. Commercial contracts, in everything relative to their requisites, modifications, exceptions,
interpretations, and extinction and to the capacity of their contracting parties, shall be governed
in all matters not expressly provided for in this Code or in special laws, by the general rules of
civil law.
nHIERARCHICAL APPLICABILITY OF LAWS TO COMMERCIAL TRANSACTIONS:
1. Code of Commerce
2. Commercial customs (in the absence of #1); and
3. Civil Code (in the absence of 1 & 2)
PERFECTION OF COMMERCIAL CONTRACTS BY CORRESPONDENCE
nArt. 54. Contracts entered into by correspondence shall be perfected from the moment an
ANSWER IS MADE ACCEPTING THE OFFER OR THE CONDITIONS by which the latter may be
modified.
nAbove is in contrast to Art. 1319, NCC where negotiated contracts by correspondence are
perfected only FROM THE TIME THE OFFEROR HAS ACTUAL KNOWLEDGE OF ACCEPTANCE
PERFECTION OF COMMERCIAL CONTRACTS BY AGENT OR BROKER
nArt. 55. Contracts in which an agent or broker intervenes shall be perfected WHEN THE
CONTRACTING PARTIES SHALL HAVE ACCEPTED HIS OFFER.
nCompare Art. 1989, NCC: If the agent contracts in the name of the principal, exceeding the scope
of his authority, and the principal does not ratify the contract, it shall be void if the party with whom
the agent contracted is aware of the limits of the powers granted by the principal. In this case,
however, the agent is liable if he undertook to secure the principals ratification.

20

CONSEQUENCE OF DELAY
nArt. 1740, NCC: If the common carrier negligently incurs in delay in transporting the goods, a
natural disaster shall not free such carrier from responsibility.
nArt. 1747: If the common carrier, without just cause, delays the transportation of the goods or
changes the stipulated or usual route, the contract limiting the common carriers liability cannot be
availed of in case of the loss, destruction or deterioration of the goods
RIGHT OF PASSENGER IN CASE OF DELAY
nCode of Commerce: Art. 698
nIn case a voyage already begun has been interrupted;
nPassengers to pay the fare in proportion to the distance covered;
nNo right to recover for losses and damages if interruption is due to fortuitous event or force
majeure;
Except when interruption was caused by the Captain exclusively.
If interruption is due to disability of the vessel and passenger agrees to await the repair;
nHe is not required to pay any increased price of passage;
nBUT HIS LIVING EXPENSES DURING THE STAY FOR HIS OWN ACCOUNT. (But see MARINA MC
112)
n
n

MARINA MEMORANDUM CIRCULAR NO. 112

nIn case the vessel cannot continue or complete her voyage FOR ANY CAUSE;
nCarrier is under obligation to transport the passenger to his/her destination AT THE EXPENSE OF
THE CARRIER including FREE MEALS and LODGING before said passenger is transported to his
destination.
A passenger may opt to have his ticket refunded in full if the cause of the unfinished voyage is
due to the negligence of the carrier; or
nTo an amount that will suffice to defray transportation cost at the shortest possible route towards
his destination if the cause is fortuitous event.
n

If arrival is delayed, carrier shall provide for meals, free of charge, during mealtime.
nIf departure is delayed due to carriers negligence, carrier is also under the obligation to
provide meals, free of charge, during meal time to TICKETED PASSENGERS for the particular
voyage.
nIf departure is delayed due to fortuitous event, the carrier is under no obligation to serve free
meals to the passengers.
n

3. CARRIERS DUY TO DELIVER GOODS AT THE PLACE DESIGNATED AND TO PERSON NAME IN
BL
Art. 360 (Code of Commerce):
nThe shipper may change the consignment of goods, without necessarily changing the place of
delivery;
nBut must, at the time of ordering the change of consignee in the BL signed by the carrier;
nReturn the BL to the carrier in lieu of another BL containing the novated contract.
nExpenses of the change of consignee at the expense of the shipper.
Bar, Mercantile Law [1975]
Bar Question:

21

If a shipper, without changing the place of delivery changes the consignment of consignee of the
goods (after said goods had been delivered to the carrier), under what condition will the carrier
be required to comply with the new order of the shipper?
n

Suggested Answer:
nArt. 360 of the Code of Commerce provides that if the shipper should change the consignee of
the goods without changing their destination, the carrier shall comply with the new order provided
the shipper RETURNS TO THE CARRIER the bill of lading and a new one is issued shoving the
novation of the contract. However, all expenses for the change must be paid by the shipper.
4. CARRIER DUTY TO EXERCISE EXTRAORDINARY DILIGENCE
nArt. 1733 (NCC). Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in Arts. 1734,
1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the
passengers is further set forth in Arts. 1755 and 1756.
n

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.
n

The foregoing provisions in the Civil Code modify Arts. 363, 364 & 365 of the Code of
Commerce:
nArt. 363 on the requirement of the carrier to deliver the goods shipped in the same condition
where they were found at the time they were received; and
nArt. 364 on when damage is merely diminution in the value of the goods, carriers liability shall
be reduced to the payment of the amount constituting the difference in value determined by
experts.
n

Art. 365 on instance when goods are rendered useless for sale and consumption for the purposes
they are destined, consignee may not receive them and may demand only their value at the
current price of the day.
n

PRESUMPTION OF NEGLIGENCE
nIn case of loss of effects or cargo; or
nIn case of death or injury of passenger;
nCommon carrier is presumed to be at fault;
nUnless, it can prove that it had observed extraordinary diligence in the vigilance thereof.
BATANGAS TRANSPORT CO. v. CAGUIMBAL, ET AL.,
G.R. L-22985, Jan. 24, 1968
nIn an action based on a 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 to pay the damages
sought;
nIt is sufficient that plaintiff shows: a) there exist a contract between the passenger or the shipper
and the common carrier; and b) the loss, deterioration, injury or death took place during the
subsistence of the contract.

22

MRASOL v. THE ROBERT DOLLAR COMPANY, G.R. L-29721, Mar. 27, 1929
Facts:
nMirasol is consignee of two cases of Encyclopedia Britannica books that he ordered from New
York, shipped in good order and condition on board MS President Garfield, principal defendant
company. The books arrived in bad order and condition. There was total loss of one case and
partial loss on the other, all in all amounting to P2,080.
Held:
nDefendant having received the two boxes in good condition, its legal duty was to deliver them to
the plaintiff in the same condition in which it received them.
nAs the boxes were damaged while in transit, the burden of proof then shifted, and it devolved
upon the defendant to both allege and prove that the damage was caused by reason of some
fact which exempted it from liability.
As to how the boxes were damaged, was a matter peculiarly and exclusively within the
knowledge of the defendant.
nTo require plaintiff to prove as to when and how the damage was caused would force him to
call and rely upon the employees of the defendants ship. That is not the law.
n

The evidence for the defendant shows that the damage was largely caused by sea water, from
which it contends that it is exempt.
nDamage by sea water, standing alone and within itself, is not evidence that they were
damaged by force majeure or for a cause beyond defendants control.
nThe words perils of the sea apply to all kinds of marine casualties, such as shipwreck,
foundering, stranding, etc.
nWhere the peril is the proximate cause of the loss, the shipowner is excused. But something
fortuitous and out of the ordinary must be involved in both words peril or accident
n

DURATION OF DUTY TO EXERCISE EXTRAORDINARY DILIGENCE [Carriage of Goods]

Art. 1736, NCC:
nThe 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 the person who
has a right to receive them, without prejudice to the provisions of Art. 1738.
Art. 1737 (NCC):
nThe common carriers duty to observe extraordinary diligence over the goods remains in full
force and effect even when they are temporarily unloaded or stored in transit, unless the shipper
or owner has made use of the right of stoppage in transitu.
nNote: Right to stoppage in transitu is the right of the unpaid seller who has parted with the
possession of the goods, when the buyer is or becomes insolvent, to stop them and resume
possession while they are in transit. The unpaid seller will become entitled to the same rigths to
the goods, as if he had never parted with possession. [Art. 1530, NCC]
Art. 1738 (NCC):
nThe extraordinary liability of the common carrier continues to be operative even during the time
the goods are stored in a warehouse of the carrier at the place of destination, until the consignee

23

has been advised of the arrival of the goods and has had reasonable opportunity thereafter to
remove them or otherwise dispose of them.
ART. 1736 CONSTRUED
[Macam v. CA, G.R. 125524, Aug. 25, 199]
Facts:
nBen-Mac Enterprises shipped on board MV Nen Jiang, represented by local agent Wallem
Shipping, 3,500 boxes of watermelons valued at $5,950 and 1,611 boxed of fresh mangoes
valued at $14,273 with Pakistan Bank (Hongkong) as consignee and Great Prospect Co.,
Hongkong as Notify Party.
nIn the BL, it was stipulated that One of the Bills of Lading must be surrendered duly endorsed in
exchange for the goods or delivery order.
As per letter of credit requirement, copies of the BL and commercial invoices were submitted by
Ben-Mac to SolidBank. The latter then paid Ben-Mac the total value of the shipment.
nUpon arrival in Hongkong, the shipment was delivered directly to GPC, not to Pakistan Bank and
without the required BL having been surrendered.
n

GPC failed to pay Pakistan Bank. Pakistan Bank refused to pay Ben-Mac through Solidbank.
nSince SolidBank already pre-paid Ben-Mac the value of the shipment, it demanded payment
from Wallem but was refused. Ben-Mac was forced to refund SolidBank.
n

Held:
nWe emphasize that the extraordinary responsibility of the common carriers lasts until actual or
constructive delivery of the cargoes to the consignee or TO THE PERSON WHO HAS A RIGHT TO
RECEIVE THEM.
nPakistan Bank was indicated in the BL as consignee whereas GPC was the notify party. However,
in the export invoices GPC was clearly named as buyer/importer. Ben-Mac also referred to GPC
as such in his demand letter to Wallem.
nThis premise draws us to conclude that the delivery to GPC as buyer/importer which,
conformably with Art. 1736 had, other than the consignee, the right to receive them was proper.
DURATION OF DUTRY TO EXERCISE DILIGENCE [Carriage of Passengers]
nFor Trains: Starts from the moment the person who purchases the ticket (or token or card) from
the carrier presents himself at the proper place and in a proper manner to be transported with
bona fide intent to ride the coach. Same for Ships & Aircrafts.
nFor jeepneys/buses: Starts from the time the person steps on the platform.
WHEN CONTRACT OF CARRIAGE ENDS
nThe relation of carrier does not cease at the moment the passenger alights from the carriers
vehicle but continues until the passenger has had a reasonable time or a reasonable opportunity
to leave the carriers premises.
La Mallorca v. CA, G.R. L-20761, July 27, 1966
Facts:
nPlaintiffs, as husband and wife boarded Pambusco Bus No. 352 together with their (3) minor
daughters from San Fernando, Pampanga to Anao, Mexico, Pampanga.

24

All alighted at the designated place of unloading but Mariano, the father had to return to the
bus to get one of his bayong left under his seat.
nUnknown to him, her daughter Raquel followed him. She was ran over by the bus when it started
to run again.
n

Held:
nThere can be no controversy that as far as the father is concerned, when he returned to the bus
for his bayong which was not unloaded, the relation of passenger and carrier does not
necessarily cease where the latter, after alighting from the car, aids the carriers conductor in
removing his baggage.
The issue to be determined here is whether as to the child, who was already led by the father to
a place about 5 meters away from the bus, the liability of the carrier for her safety under the
contract of carriage also persisted.
nIn the present case, the father returned to the bus to get one of his baggages which was not
unloaded when they alighted from the bus.
nRaquel, the child that she was, must have followed the father.
n

However, although the father was still on the running board of the bus awaiting for the conductor
to hand him the bag or bayong, the bust started to run, so the even the father had to ump down
from the moving vehicle.
nIt was at this instance that the child, who must be near the bus, was run over and killed. In the
circumstances, it cannot be claimed that the carriers agent had exercised the utmost diligence
required under Art. 1755.
nThe presence of said passengers near the bus was not unreasonable and they are, therefore, to
be considered still as passengers of the carrier, entitled to the protection under their contract.
\ABOITIZ SHIPPING v. CA, G.R. 84458, Nov. 6, 1989
Facts:
nAnacleto was a passenger of MV Antonia from San Jose, Mindoro to Manila. Upon reaching Pier
4, North Harbor, he disembarked from the ship by jumping from the 3rd deck which is at level with
the pier.
nAfter 1 hour when all the passengers have already disembarked and the crane started
unloading the cargoes, Anacleto went back to the vessel after realizing that he left some of his
cargoes there.
nIt was while he was pointing to the crew the place where his cargoes were loaded that the crane
hit him. He later died. His heir sued Aboitiz for breach of contract of carriage.
n

Held:
nIn consonance with common shipping procedure as to the minimum time of 1 hr. allowed for the
passengers to disembark, it may be presumed that the victim had just gotten off the vessel when
he went to retrieve his baggage.
nYet, even if he had already disembarked an hour earlier, his presence in petitioners premises
was not without cause. The victim had to claim his baggage which was possible only one (1) hour
after the vessel arrived since it was admittedly standard procedure in the case of petitioners
vessels that the unloading operations shall start only after that time.
nConsequently, the victim Anacleto is still deemed passenger at the time of his tragic death.
DEFENSES OF COMMON CARRIERS [Art. 1734, NCC]
nFlood, storm, earthquake, lightning, or other natural disaster or calamity;

25

Act of public enemy in war, whether international or civil;

Act or omission of the shipper or owner of the goods;
nThe character of the goods or defects in the packing or in the containers; and
nOrder or act of competent public authority.
Note: The enumeration is exclusive; no other defense may be raised by the CC.
n
n

DEFENSE NO. 1: FORTUITOUS EVENT

Requisites:
nIndependent of human will;
nImpossible to foresee or if it can be foreseen, impossible to avoid;
nMust be such as to render it impossible for the obligor to fulfill the obligation in a normal
manner; and
nObligor must be free from any participation in or the aggravation of the injury [Lasam v. Smith,
No. 19495, Feb. 2, 1924]
For fortuitous event to be a valid defense:
nIt must be the PROXIMATE AND ONLY CAUSE OF THE LOSS;
nCarrier must be free from any participation in causing the damage or injury;
nIt must exercise due diligence to prevent or minimize the loss BEFORE, DURING AND AFTER the
fortuitous event. [Art. 1739, NCC]
TAN CHIONG SIAN v. INCHAUSTI,
G.R. No. 6092, March 8, 1921
Justice Moreland speaking:
nAn act of God cannot be urged for the protection of a person who has been guilty of gross
negligence in not trying to avert its results.
nOne who has accepted responsibility for pay can not weakly fold his hands and say that he was
prevented from meeting that responsibility by an act of God, when the exercise of the ordinary
care and prudence would have averted the results flowing from that act.
One who has placed the property of another, intrusted to his care, in an unseaworthy craft, upon
dangerous waters, cannot absolve himself by crying, an act of God, when every effect which a
typhoon produced upon that property could have been avoided by the exercise of common care
and prudence.
nWhen the negligence of the carrier concurs with an act of God producing a loss, the carrier is not
expempted from liability by showing that the immediate cause of the damage was the act of
God, or, as it has been expressed, when the loss is caused by the act of God, if the negligence
of the carrier mingles with it as an active and cooperative cause, he is still liable.
n

FIRE NOT A NATURAL DISASTER OR CALAMITY [Cokaliong v. UCPB Gen. Insurance, G.R. 146018,
June 25, 2003]
Facts:
nM/V Tandag sank after a crack from her auxiliary engines fuel tank caused the spurt of fuel
towards the heating exhaust manifold ignited a fire in the engine room
Held:

26

Fire is not considered a natural disaster or calamity. This must be so as it arises almost invariably
from some act of man or by human means.
n It does not fall within the category of an act of God unless caused by lighting or by other
natural disaster or calamity.
n

HIJACKING NOT AN EXEMPTING CAUSE

nA Common Carrier can be held liable for failing to prevent a hijacking by frisking passengers
and inspecting their baggages, especially when it had received prior notice of such threat.
(Fortune Express v. CA, 305 SCRA 14)
BATANGAS TRANS. v. CAGUIMBAL, 22 SCRA 171 (1967)
nProblem: A BLTB Bus going north stopped on the highway because 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 made a miscalculation and hit the bus of BLTB.
The passenger who was then alighting was thrown out and killed. The heirs of the victim sought
recovery. BLTB raised the defense of fortuitous event.
Answer: BLTB is still liable. In civil law, where a fortuitous event concurs with negligence, liability
is not extinguished. The BLTB bus was then in a stop position but since it did not stop on the
shoulder of the road at the time the passenger was alighting, the same can be considered
negligence that concurred with fortuitous event and did not operate to extinguish the liability.
n

FIRECRACKERS EXPLODING FROM PASSENGER BAGGAGE: CARRIER EXCUSED (Nocum v. LTD,

30 SCRA 69)
Facts:
nOne of the bus passengers had firecrackers inside his bag. They exploded after another
passenger smoked cigarettes causing injuries to another passenger. The injure passenger sought to
recover from the carrier.
Held:
nCarrier not liable. 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.
nThis is only true so long as the cause of the accident was not apparent and the carrier or its
employees are not guilty of negligence.
RULE ON MECHANICAL DEFECTS [Necesito v. Paras, 104 Phil. 75]
Facts:
nA Phil. Rabbit Bus was traveling fast. During the trip the driver sensed that the wheels did not
respond to the movement of the steering wheel.
nThe bus hit a rut (pothole) and it turned turtle, killing a passenger.
nThe mechanic 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 the outside.
nThe bus company proved that the defect was attributable to General Motors, manufacturer of
the bus and that the defect could not have been discovered by expert mechanics.
Held:
nAs a rule, a passenger is entitled to recover damages from a carrier for injury resulting from a
defect in an appliance purchased from a manufacturer PROVIDED IT APPEARS THAT THE DEFECT
WOULD HAVE BEEN DISCOVERED BY THE CARRIER IF IT HAD EXERCISED THE DEGREE OF CARE
WITH REGARD TO INSPECTION AND APPLICATION OF THE NECESSARY TESTS.

27

When the defect is LATENT, i.e. cannot be discovered by the application of any known tests, then
it qualifies as a fortuitous event to exempt the common carrier from liability.
n

YOBIDO v. CA, G.R. 113003, Oct. 17, 1997

Held:
nThe explosion of a new tire cannot by itself be considered a fortuitous event to exempt the
common carrier 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.
nMoreover, a common carrier 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 the accident.
PESTANO v. SUMAUYANG, 346 SCRA 870 (2000)
Held:
nThe 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 of its vehicles.
Under Arts. 2180 and 2176 of the Civil Code, owners and managers are responsible for
damages caused by their employees.
SPS. LANDINGAN v. PANTRANCO, 33 SCRA 284
nFacts: A married couple with two children were passengers in a bus going to Baguio. While
negotiating Kennon Road, the motor suddenly stopped and the bus backed down. The driver
expertly guided the bus to rest on the mountainside of the road. But because of the noise, the two
children became frightened and they jumped out of the bus and were killed.
nHeld: The bus when it stopped, was not in perfect running condition. It is the carriers duty to see
to it that the bus is always in perfect condition. Here, the defect was not latent.
TRANS-ASIA v. CA, 254 SCRA 260 (1996)
Held:
nBefore commencing the contracted voyage, the carrier undertook some repairs on one of the
vessels two engines, but even before it could finish these repairs, it allowed the vessel to leave
the port of origin on only one functioning engine, instead of two.
nMoreover, even the lone functioning engine was not in perfect condition as sometime after it had
run its course, it conked out. Plainly, the vessel was unseaworthy even before the voyage began.
For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned with
a sufficient number of competent officers and crew.
nThe failure of common carrier to maintain in seaworthy condition its vessel is clear breach of its
duty prescribed under Art. 1755 of the Civil Code, which binds the carrier to carry the
passengers safely as far as human care and foresight could provide, using the utmost diligence of
a very cautious person, with due regard for all the circumstances.
n

OTHER INVALID CAUSES

nExplosion Damage to cargo from explosion of another cargo is not ordinarily attributable to
peril of the sea or accidents of navigation particularly where it occurs after the vessel has ended
its voyage and is finally moored to unload;
nWorms & rats Whenever the ship is damaged by worms resulting in damage to cargo, the
same cannot be cited as an excuse. The same is true with respect to damage of cargo by rats

28

whether the cargo was directly damaged by the rats or by water let in through holes gnawed by
rats in the ship or her fixtures.
Water Damage: Damage by sea water is not a valid excuse where the water gains entrance
through a port which had been left open or insufficiently fastened on sailing.
nBarratry: The shipowner cannot escape liability to third persons if the cause of damage is
barratry. It is an act committed by the master or crew of the ship for some unlawful or fraudulent
purpose, contrary to their duty to the owner. Intentional fraud or breach of trust or willful violation
of law is necessary to constitute barratry. Barratry includes theft by the purser of a specie
shipped on board and fraudulently running the ship ashore.
n

OTHER CASES/BAR PROBLEMS

Problem: P shipped a box of cigarettes to a dealer in Naga City through Bicol Bus. When the
bus reached Lucena City, it developed engine trouble. The driver brought the bus to a repair shop
in Lucena where he was informed by the mechanic that an extensive repair was necessary which
would at least take two days. While the bus was in the repair shop, Typhoon Coring lashed at
Quezon Province. The cargoes inside the bus, including Mauricios cigarettes, got wet and were
totally spoiled. Mauricio sued BBC for the damage to his cargoes. (Bar 1987)
n

Answer: The bus company is liable. While a typhoon is a natural disaster, the same cannot be
considered the only cause of the loss. The engine trouble is foreseeable and could have been
detected if only the bus company exercised reasonable case. Moreover, carriers employee
should have secured the cargoes while the bus was being repaired for two days.
n

Problem: P boarded a Victory Liner bus bound for Olongapo. He chose a seat at the front near
the bus driver. P told the bus driver that he had valuable items in his bag which was placed near
his feet. Since he had not slept for 24 hours, he requested the driver to keep an eye on the bag
should he doze off during the trip. Upon arrival at his destination, the bag was nowhere found.
nAnswer: P may not hold the carrier liable. The driver could not have set his eyes on the luggage
as his attention was on the road during the trip.
n

Problem: M, a paying passenger was hit above her left eye by a stone hurled at the bus by an
unidentified bystander as he bus was speeding through the National Highway. The bus owners
personnel lost no time in bringing M to the provincial hospital where she was confined and
treated. M wants to sue the bus company for damages and seeks your advise. (Bar 1994)
nAnswer: M cannot legally hold the bus company if the stone throwing was entirely unforeseeable
and the carrier exercised utmost diligence. However, I will also inform her that the burden is on
the carrier to prove such exercise of due diligence. If she decides to file a case, all that she will
prove is that she was a passenger and she was injured while on board the bus
n

RAYNERA v. HICENTA, 306 SCRA 102 (1999)

Held:
nDrivers 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.
Bar Problem 1992
Facts:

29

Marino was a passenger on a train. Another passenger, Juancho, had taken a gallon of gasoline
placed in a plastic bag into the same coach where Mariano was riding. The gasoline ignited and
exploded causing injury to Marino who filed a civil suit for damages against the railway
company claiming that Juancho should have been subjected to inspection by its conductor.
n

The railway company disclaimed liability resulting from the explosion contending that it was
unaware of the contents of the plastic bag and invoking the right of Juancho to privacy. A) Should
the railway company be held liable for damages? B) If it were an airline company involved,
would your answer be the same? Explain your answer briefly.
n

Held:
nA) No. The railway company is not liable for damages. This is subject to the qualification that the
company should prove that it, through the exercise of extraordinary diligence, cannot detect the
presence of gasoline. It should be noted that in overland transportation, the common carrier is not
bound nor empowered to make an examination on the contents of packages or bags particularly
those handcarried by passengers.
nB) No, my answer would not be the same. If an airline company was involved, it is duty bound to
inspect each and every cargo this brought into the aircraft (R.A. 6235). Exercise of extraordinary
diligence would therefore result in the discovery of the gasoline.
DEFENSE NO. 2: PUBLIC ENEMY
nPresupposes the existence of an actual state of war, and refers to the government of a foreign
nation at war with country to which the carrier belongs.
nThieves, rioters, robbers, and insurrectionists, thought at war with social order, are not in a legal
sense classed as public enemies.
nReason for the defense: The exception concerning the acts of public enemies is understandable
because the government itself is called upon to protect its subjects from loss or from such hazard
and private citizens have no power to furnish the security and protection required.
nPublic enemy is also an exception under COGSA.
DEFENSE NOS. 3 & 4: ACT OR OMISSION OF OWNER & IMPROPER PACKING
nCOGSA also provides for similar defense, i.e. carrier shall not be liable for (1) wastage in bulk
or weight or any other loss or damage arising from inherent defect, quality or vice of goods, (2)
insufficiency of packing, (3) insufficiency or inadequacy of the marks, or (4) latent defect not
discoverable by due diligence.
nHowever, common carrier are still required to exercise due diligence to forestall or lessen the
loss notwithstanding the existence of improper packing.
SOUTHERN LINES v. CA, G.R. No. L-16629, Jan. 31, 1962
nFacts: More than a thousand sacks of rice were shipped through the vessel of petitioner Southern
Lines. There was shortage when the sacks of rice were delivered to the consignee although it was
alleged that the shortage in the shipment was due to shrinkage, leakage or spillage of the rice on
account of the bad condition of the sacks at the time it received them.
nHeld: Carrier still liable because it was aware of the condition of the sacks when it received the
goods.
VIRGENES CALVO v. UPCB GEN. INSURANCE, G.R. 148496, Mar. 19, 2002
nHeld: Art. 1734 cannot apply where the carrier accepted the goods despite such defects.

30

For this provision to apply, the rule is that if the improper packing or, in this case, the defect in
the container is known to the carrier or his employees or apparent upon ordinary observation, but
it nevertheless accepts the same without protest or exception notwithstanding such condition, the
carrier is not relieved of liability for the resulting damage.
n

BELGINA OVERSEAS CHARTERING & SHIPPING v. PHIL. FIRST INSURANCE CO., G.R. 143133,
June 5, 2002
nFacts: Carrier tried to escape liability by citing the notation metal envelopes rust stained and
slightly dented printed in the BL as evidence that the character of the goods or defect in the
packing or the containers was the proximate cause of the damage.
Held:
nIt cannot be reasonably concluded that the damage to the four coils was due to the condition
noted on the BL.
nThe aforecited exception refers to cases when goods are lost or damaged while in transit as a
result of the natural decay of perishable goods or the fermentation or evaporation of substances
liable therefor, the necessary and natural wear of goods in transport, defects in packages in
which they are shipped, or the natural propensities of animals. None of these is present.
nEven if the fact of improper packing was known to the carrier or its crew or was apparent upon
ordinary observation, it is not relieved of liability for loss or injury resulting therefrom, once it
accepts the goods notwithstanding such condition.
DEFENSE NO. 5: ORDER OF PUBLIC AUTHORITY
nRequisite: Such public authority must had power to issue the order.
GANZON v. CA & TUMAMBING, G.R. L-48757, May 30, 1988
nFacts: Tumambing contracted the service of Ganzon to haul 305 tons of scrap iron from
Mariveles, Bataan to Manila on board LCT Batman. While loading about half of the total cargo,
the elected Mayor arrived and demanded P5,000 from Tumambing. The latter refused hence was
shot and later hospitalized.
nAfter sometime, the loading resumed. But, the Acting Mayor accompanied by 3 policemen order
the captain to dump some of the scrap iron at sea and the rest were brought to by the former,
which issued a receipt in behalf of the municipality.
Held:
nThe intervention of the municipal officials was not of a character that would render impossible
the fulfillment by the carrier of its obligation.
nThe petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron.
Moreover, there is absence of sufficient proof that the issuance of the same order was attended
with such force or intimidation as to completely overpower the will of the petitioners employees.
nThe mere difficulty in the fulfillment of the obligation is not considered force majeure.
DEFENSES IN CARRIAGE OF PASSENGERS
nArt. 1759: Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the formers employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.
nThe 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.

31

Art. 1763: A common carrier is responsible for the injuries suffered by a passenger on account of
the willful acts or negligence of other passengers or of strangers, if the common carriers
employees through the exercise of the diligence of a good father of a family could have
prevented or stopped the act or omission
n

CARRIER LIABLE FOR ACTS OF ITS EMPLOYEES

nUnlike in quasi-delict, a common carrier cannot escape liability by claiming the he exercised due
diligence in the selection and supervision of the employee.
nIt is not a defense that the employee acted beyond the scope of his authority because the riding
public is not expected to inquire from time to time before they board the carrier whether or not
the driver or any other employee is authorized to drive the vehicle or that said driver is acting
within the scope of his authority and observing the existing rules and regulations required of him.
nWillful acts of the employees include theft.
YU CON v. IPIL, GR No. L-10195, Dec. 29, 1916
Held:
nIt is well and good that the shipowner be not held criminally liable for such crimes or quasicrimes; but he cannot be excused from liability for the damage and harm which, in consequence
of those acts, may be suffered by the third parties who contracted with the captain, in his double
capacity of agent and subordinate of the shipowner himself.
In maritime commerce, the shippers and passengers in making contracts with the captain do so
through the confidence they have in the shipowner who appointed him; they presume that the
owner made a most careful investigation before appointing him, and above all, they themselves
are unable to make such an investigation, and even though they should do so, they could not
obtain complete security, inasmuch as the shipowner can, whenever he sees fit, appoint another
captain instead.
nThe shipowner is in the same case with respect to the members of the crew, for, though he does
not appoint directly, he expressly or tacitly, he contributes to their appointment.
n

On the other hand, if the shipowner derives profits from the results of the choice of the captain
and the crew, when the choice turns out successful, it is also just that he should suffer the
consequences of an unsuccessful appointment, by application of the rule of natural law contained
in the Partidaz, viz., that he who enjoys the benefits derived from a thing must likewise suffer the
losses that ensue therefrom.
n

3 REASONS UNDERLYING RULE [Art. 1759, NCC]

nThe special undertaking of the carrier requires that it furnish its passenger that full measure of
protection afforded by the exercise of the high degree of care prescribed by the law, inter alia,
from violence and insults at the hands of strangers and other passengers, but all, from the acts of
the carriers own servants charged with the passengers safety;
Said liability of the carrier for the servants violation of duty to passengers, is the result of the
formers confiding in the servants hands the performance of his contract to safely transport the
passenger, delegating thereiwth the duty of protecting the passenger with the utmost care
prescribed by law; and
n

32

As between the carrier and the passenger, the former must bear the risk of wrongful acts or
negligence of the carriers employees against passengers, since it, and not the passengers, has
power to select and remove them. (Maranan v. Perez, infra.)
n

PAL v. CA, 275 SCRA 621 (1997)

Held:
nEven 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 all its stranded passengers, and there was no compelling or justifying reason
advanced for such discriminatory and prejudicial conduct.
BACHELOR EXPRESS v. CA, G.R. 85691, July 31, 1990
Held:
nThe act of passenger stabbing another passenger in the bus is considered as force majeure.
nHowever, 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.
BARITUA v. MERCADE (350 SCRA 86)
Held:
nA 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.
nIn 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 Arts. 1733
and 1755 of the Civil Code.
FORTUNE EXPRESS v. CA,
305 SCRA 14
Held:
nA 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.
Note: Compare with Nocum v. LTD, infra.
NOCUM v. LTD, G.R. L-23733, Oct. 31, 1969
nFacts: One of the bus passengers had firecrackers inside his baggage, which ignited when
another passenger smoked cigarettes, causing injuries to another passenger. The injured
passenger sought to recover damages from the carrier.
nHeld: Carrier is not liable. 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 altogether
be able to leave.
nNote: This in only true so long as the cause of the accident was not apparent and the carrier or
its employees are not guilty of negligence.
FABRE v. CA, 259 SCRA 426 (1996) [on due diligence in selection and supervision of employees]
Held:

33

For a bus company, due diligence in selection of employees is not satisfied by finding that the
applicant possessed a professional drivers license. The employer should also examine the
applicant for his qualifications, experience and record of service.
nDue 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.
n

CARRIER ALSO LIABLE FOR ACTS OF STRANGERS AND OTHER PASSENGERS

nBut subject to defense of EXERCISE BY THE CARRIER OF DUE DILIGENCE TO PREVENT OR STOP
THE ACT OR OMISSION.
nDefense is not available if the carriers driver allowed another person who is not an employee or
a regular driver to take over the task of driving the vehicle.
MARANAN v. PEREZ, 20 SCRA 413
nFacts: A taxi driver tried to hold-up his passenger, who resisted and was killed. 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.
nHeld: It may be true that the taxi driver was acting beyond the scope of his authority, but Art.
1759 of the Civil Code expressly provides that the owner is liable for negligence of the
employees even if such acts are beyond the scope of his authority.
nNote: This case repealed the doctrine in De Gillaco v. Manila Railroad, 97 Phil. 884 which
absolved the carrier for liability caused by its security guard who killed one of its passengers
while already off-duty.
MANILA RAILROAD v. BALLESTEROS, 6 SCRA 641
nFacts: A bust of the Manila Railroad reached one of the towns along its route. The bus driver
stopped the bus and went down to answer a call of nature. While the driver was outside the bus,
one of the passengers went into the drivers seat and drove off the bus. It met an accident causing
injuries to other passengers.
Held: Carrier is liable. Its driver is guilty of negligence in leaving the key on the ignition. Had he
taken the key with himself, the passenger could not have driven off the bus. The carrier is liable
for the injuries of other passengers when the carriers employees could have prevented the injuries
through the exercise of the diligence of a good father of a family.
n

RULES ON PASSENGER BAGGAGE

nArt. 1754: The provision of Articles 1733 to 1753 shall apply to the passengers baggage which
is not in his personal custody or in that of his employee. As to other baggage, the rules in Articles
1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall be applicable.
nArt. 1998: The deposit of effects made by the travelers in hotels or inns shall also be regarded
as necessary. The keepers of hotels or inns shall be responsible for them as depositaries,
PROVIDED THAT NOTICE WAS GIVEN TO THEM, or to their employees, of the effects brought by
the guests and that, on the part of the latter, they take the precautions which said hotel-keepers
or their substitutes advised relative to the care and vigilance of their effects.
Art. 1998: The deposit of effects made by the travelers in hotels or inns shall also be regarded
as necessary. The keepers of hotels or inns shall be responsible for them as depositaries,
PROVIDED THAT NOTICE WAS GIVEN TO THEM, or to their employees, of the effects brought by
n

34

the guests and that, on the part of the latter, they take the precautions which said hotel-keepers
or their substitutes advised relative to the care and vigilance of their effects.
Art. 2000: The responsibility referred to in the two preceding articles shall include the loss of, or
injury to the personal property of the guests caused by the servants or employees of the keepers
of hotels or inns as well as strangers; but not that which may proceed from any force majeure. The
fact that travelers are constrained to rely on the vigilance of the keeper of the hotels or inns shall
be considered in determining the degree of care required of him.
nArt. 2001: The act of a thief or robber, who has entered the hotel is not deemed force majeure,
unless it is done with the use of arms or through an irresistible force.
n

Art. 2002: The hotel-keeper is not liable for compensation if the loss is due to the acts of the
guests, his family, servants or visitors, or if the loss arises from the character of the things brought
into the hotel.
nArt. 2003: The hotel-keeper cannot free himself from responsibility by the posting notices to the
effect that he is not liable for the articles brought by the guest. Any stipulation between the hotelkeeper and the guest whereby the responsibility of the former as set forth in Articles 1998 to
2001 is suppressed or diminished shall be void.
n

SARKIES TOURS PHIL. v. CA, 280 SCRA 58

Held:
nWhere a common carrier accepts its passengers baggage for transportation and even had it
placed in the vehicle by its own employee, its failure to collect the freight charge is the common
carriers own lookout, and the common carrier is responsible for the consequent loss of the
baggage.
PAL v. IAC, 216 SCRA 334
nHeld:
nAlthough 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 carriers undertaking to transport the goods
from the place of embarkation to the ultimate point of destination.
nThe non-delivery of luggage during the entire length of passengers stay abroad is a breach of
carriers obligation.
OBLIGATION OF SHIPPER & PASSENGER
nThe shipper and passenger have the corresponding obligation to exercise due diligence in
avoiding damage to the goods or injury to himself.
nHowever, contributory negligence on the part of the passenger is not a defense that will excuse
the carrier from liability. It will only mitigate such liability.
nBUT IF HIS CONTRIBUTORY NEGLIGENCE IS THE SOLE AND PROXIMATE CAUSE, CARRIER IS
ABSOLVED.
WHAT IS PROXIMATE CAUSE
nProximate cause is that which, in the natural and continuous sequence, unbroken by an efficient
intervening cause, produces injury and without which the result would not have occurred. [Sabena
Belgian World Airlines v. CA, 255 SCRA 38]

35

Art. 1741: If the shipper or owner merely contributed to the loss, destruction or deterioration of
the goods, the proximate cause thereof being the negligence of the common carrier, the latter
shall be liable in damages, which however, shall be equitably reduced.
nArt. 1761: The passenger must observe the diligence of a good father of a family to avoid
injury to himself.
nArt. 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.
n

ISAAC v. AMMEN TRANSPORT, 101Phil. 1046 (On contributory negligence)

nFacts: The road on which the bus was passing was wide enough for 2 buses only. A passenger
placed his elbow outside the window railing of the bus. An oncoming bus hit the passengers
elbow, injuring it in such a manner that it had to be amputated.
nHeld: Carrier is not liable because the proximate cause of the injury was the passengers own
contributory negligence. This is a complete defense to the common carrier, and absolves it from
liability.
nNote: While contributory negligence will only serve to diminish the liability of the carrier under
Art. 1761, NCC, the same will not apply if the proximate cause of his injury is his contributory
negligence and not that of carriers negligence.
CERVANTES v. CA, GR 125138, Mar. 2, 1999
nFacts: PAL issued a round trip ticket to Petitioner which expressly provides for an expiry date of
1-year from issuance. A separate written agreement provides that the 1-year period may be
extended provided that the petitioner sends a letter to the airlines counsel asking for extension.
Petitioner failed to do the terms in the agreement.
nHeld: Petitioner cannot sue PAL for breach when he was not allowed to board. Although he was
booked for the flight through PALs agent, the latter was not authorized to change the agreement.
DOCTRINE ON AVOIDABLE CONSEQUENCES
nThe party suffering loss or injury must exercise the diligence of a good father of a family to
minimize the damages resulting from the act or omission in question. (Art. 2203, NCC)
DOCTRINE OF LAST CLEAR CHANCE INAPPLICABLE TO PASSENGER CLAIM
nThe principle of last clear chance applies in a suit between the owners and drivers of colliding
vehicles.
nIt does not arise where a passenger demands responsibility from the carrier to enforce its
contractual obligations.
nIt would be inequitable to exempt the negligent driver of the jeepney and its owner on the
ground that the other driver was likewise guilty of negligence.
DOCTINE ON ASSUMPTION OF RISK
nThat passengers must take such risks incident to the mode of travel he takes since carriers are not
insurers of the lives of their passengers.
nIn air travel, adverse weather conditions or extreme climactic changers are some of the perils
involved, the consequence of which the passenger must assume or expect. (Japan Airlines v. CA,
GR No. 118664, Aug. 7, 1998).
nBut there is no assumption of risk in case the passenger voluntarily boarded a carrier that was
overloaded.

36

YOBIDO v. CA, 281 SCRA 1 (1997)

Held:
nAs a rule, when a passenger boards a common carrier, he takes the risks incidental to the mode
of travel he has taken, since after all, a carrier is not an insurer of the safety of its passengers
and is not bound absolutely and at all e vents to carry them safely and without injury.
nHowever, when a passenger is injured or dies while traveling, the law under Art. 1755 of the
Civil Code presumes that the common carrier is negligent, and therefore the burden of proof is
upon such common carrier to prove that it has exercised the extraordinary diligence required
under the law to avoid damage or injury to the passenger.
However, when a passenger is injured or dies while traveling, the law under Art. 1755 of the
Civil Code presumes that the common carrier is negligent, and therefore the burden of proof is
upon such common carrier to prove that it has exercised the extraordinary diligence required
under the law to avoid damage or injury to the passenger.
n

CALALAS v. CA, G.R. 122039, May 31, 2000

nFacts: A student took a passenger jeepney operated by petitioner. As the jeepney was filled to
capacity of about 24 passengers, the student was given by the conductor an extension seat. The
jeepney stopped on its way to let a passenger off and the student gave way to the outgoing
passenger. Just as she was doing so, a truck bumped the rear end portion of the jeepney. She
suffered injuries as a result.
Held:
nConstruing the taking of an extension seat as an implied assumption of risk is akin to arguing that
the injuries to the many victims of the tragedies in our seas should not be compensated merely
because those passengers assumed a greater risk of drowning by boarding an overloaded ferry.
COMPANA MARITIMA v. CA & CONCEPCION, G.R. L-31379, Aug. 29, 1988
Facts:
nRespondent Concepcion loaded his construction equipment aboard MV Cebu to Cagayan de
Oro City.
nUpon arrival, one of his cargoes, a payloader fell on the pier while being unloaded and
damaged. He claimed for replacement of the unit. Petitioner denied the claim contending that
Respondent furnished it with inaccurate weight of his equipment. The excess weight caused the
crane cables to snap.
Held:
While the act of private respondent in furnishing petitioner with an inaccurate weight of the
payloader cannot successfully be used as an excuse by petitioner to avoid liability, said act
constitute a contributory circumstance to the damage which mitigates the liability of petitioner.
nWe find equitable the conclusion of the CA reducing the recoverable amount of damages by
20% or 1/5 of the value of the payloader.
n
n

CANGCO v. MANILA RAILROAD CO., G.R. 12191, Oct. 14, 1918

Facts:
nCangco was clerk of Manila Railroad with a monthly wage of P25. In going to his workplace
daily, he rode on the trains to from his town of San Mateo, Rizal.

37

One day while returning home and while the train was slowing down alighted from his coach but
one of feet came in contact with a sack of watermelon causing him to fell violently on the
platform. He sustained serious injuries.
n

Held:
The test by which to determine whether the passenger has been guilty of negligence in
attempting to alight from a moving railway train, is that of ordinary reasonable care.
nIt is to be considered whether an ordinarily prudent person, of the age, sex and condition of the
passenger, would have acted as the passenger acted under the circumstances disclosed by the
evidence.
nThis care has been defined to be, not the care which may or should be used by the prudent man
generally, but the care which a man of ordinary prudence would use under similar circumstance,
to avoid injury.
n
n

Or, if we prefer to adopt the mode of exposition used by this court in Picart v. Smith (37 Phil.
809), we may say that the test is this: Was there anything in the circumstances surrounding the
plaintiff at the time he alighted from the train which would have admonished a person of
average prudence that to get off the train under the conditions then existing was dangerous?
nIf so, the plaintiff should have desisted from alighting; and his failure so to desist was
contributory negligence.
nOur conclusion is that the conduct of the plaintiff in undertaking to alight while the train was yet
slightly under way was not characterized by imprudence and that therefore he was not guilty of
contributory negligence.
n

Plaintiff was earning P25 a month. His expectancy of life, according to the standard mortality
tables, is approximately 33-years.
nWe are of the opinion that a fair compensation for the damage suffered by him for his
permanent disability is the sum of P2,500, and that he is also entitled to recover of defendant the
additional sum of P790.25 for medical attention, etc.
n

Note: Net Earning Capacity = Life Expectancy [2/3 x 80 less the age of the plaintiff] x Gross
Annual Income less Living Expenses [computed @ 50% of Gross Annual Income]
DEL PRADO v. MANILA ELECTRIC CO., G.R. 29462, Mar. 7, 1929
Facts:
nManila Electric operated a street in Manila for conveyance of passengers. While still moving,
plaintiff ran across the street to catch the car, his approach being made from the left. The car was
of the kind having entrance and exit at either end, and the movement of plaintiff was so timed
that he arrived at the front entrance of the car at the moment when the car was passing.
nUpon approaching the car, plaintiff raised his hand as an indication to the motorman of his
desire to board. In response, the latter eased up a little, without stopping.
Upon this the plaintiff seized, with his left hand, the front perpendicular handpost, at the same
time placing his left foot upon the platform.
nHowever, before the plaintiffs position had become secure, and even before his raised right
foot had reached the platform, the motorman applied power which caused plaintiffs foot to slip.
He fell to the ground and his right foot crushed by the moving car.
n

Held:

38

Although the motorman was not bound to stop to let the plaintiff on, it was his duty to do no act
that would have the effect of increasing the plaintiffs peril while he was attempting to board the
car. The premature acceleration of the car was a breach of this duty.
nAs to contributory negligence of plaintiff, it should be treated as a mitigating circumstance.
nIt is obvious that the plaintiffs negligence in attempting to board the moving car was not the
proximate cause of the injury. The direct and proximate cause was the act of appellants
motorman in putting on the power prematurely.
n

DUTY TO PAY FREIGHT

nRates charged by vessels for hire is now deregulated (R.A. 9295).
nHowever, on overland transportation, deregulated rates are applied only to aircon buses.
nPerson to pay: The shipper or the consignee if carrier and shipper stipulates in the BL.
nTime to pay: NCC is silent but Art. 374 provides for 24-hr period to pay the freight.
CARRIERS LIEN
nIf consignee fails to pay the freight within the period prescribed, the carrier may exercise it lien
in accordance with Art. 375 of the Code of Commerce.
nArt. 375: The goods transported shall be especially bound to answer for the cost of
transportation and for the expenses and fees incurred for them during their conveyance and until
the moment of delivery.
nThis special right shall PRESCRIBED EIGHT (8) DAYS AFTER THE DELIVERY HAS BEEN MADE, and
once prescribed, the carrier shall have no other action that that corresponding to him as an
ordinary creditor.
DEMMURRAGE
nIn its strict sense, it is the compensation provided for in the contract of affreightment for the
detention of the vessel beyond the time agreed on for loading and unloading. It is essentially a
claim for damages for failure to accept delivery.
nIn its broad sense, every improper detention of a vessel may be considered demurrage.
Liability for demurrage, viewed in its strict sense, exists only when expressly stipulated in the
contract.
nIn its broader sense, damages in the nature of demurrage are recoverable for a breach of the
implied obligation to load or unload the cargo with reasonable dispatch, but only by the party to
whom the duty is owed and only against one who is a party to the shipping contract. Notice of
arrival of the vessel or conveyance, or their placement for purposes of unloading is CONDITION
PRECEDENT to the right to collect demurrage charges.
n

Chapter 3
EXTRAORDINARY DILIGENCE
RATIONALE IN THE REQUIREMENT OF UTMOST DILIGENCE
nA 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
circumstances.
nThis extraordinary diligence required of common carriers is calculated to protect the passengers
from the tragic mishaps that frequently occur in connection with rapid modern transportation.

39

This high standard of care is imperatively demanded by the preciousness of human life and by
the consideration that every person must in every way be safeguarded against all injury. [Report
of the Code Commission, pp. 35-36]
n

HOW DUTY IS COMPLIED WITH

nSource of common carriers legal liability is contract of carriage binding itself to carry the
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.
nIt is not enough to exercise ordinary diligence; what is required is extraordinary diligence.
nThere is, however no fixed definition on what extraordinary diligence means. In most cases,
exercise of extraordinary diligence are given meaning by way of illustrative examples.
EXTRAORDINARY DILIGENGE APPLICALBE TO THIRD PERSONS
nPrimarily, the duty is owed by the common carrier to its passengers and cargoes.
nBut, the duty also extends to:
- the members of the crew or complement;
- the pedestrians; and
- even to the owners and passengers of other vehicles.
KAPALARAN BUS LINES v. CORONADO, GR 85331, Aug. 25, 1989
nJudicial notice is made on the gross negligence and the appalling disregard of the physical
safety and property of other so commonly exhibited today by the drivers of passenger buses
and similar vehicles on our highways.
nIn requiring the highest possible degree of diligence from common carriers and crating a
presumption of negligence against them, the law compels them to curb the recklessness of their
drivers.
nWhile the immediate beneficiaries of the standard of extraordinary diligence are, of course the
passengers and owners of cargo carried by a common carrier, they are not the only persons that
the law seeks to benefit.
For if common carriers carefully observed the statutory standard of extraordinary diligence in
respect of their own passengers,
nThey cannot help BUT SIMULTANEOUSLY BENEFIT PEDESTRIANS AND THE OWNERS AND
PASSENGERS OF OTHER VEHICLES who are equally entitled to the safe and convenient use of our
roads and highways.
nThe law seeks to stop and prevent the slaughter and maiming of people (whether passenger or
not) and the destruction of property (whether freight or not) on our highways by buses, the very
size and power of which seem often to inflame the minds of their drivers.
n

EFFECT ON STIPULATION LOWER THAN THE REQUIRED DEGREE

On Goods:
nArt. 1744: A stipulation between the common carrier and the shipper or owner limiting the
liability of the former for the loss, destruction, or deterioration of the goods to a degree less than
extraordinary diligence shall be valid, provided it be:
1. In writing, signed by the shipper or owner;
2. Supported by a valuable consideration other than the service rendered by the
common carrier; and
3. Reasonable, just and not contrary to public policy.

40

On passengers in general:
nArt. 1757: The responsibility of a common carrier for the safety of passengers as required in
Articles 1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of
notices, by statements on tickets, or otherwise.
On gratuitous passengers:
nArt. 1758: When a passenger is carried gratuitously, a stipulation LIMITING THE COMMON
CARRIERS LIABILITY for negligence is valid, BUT NOT FOR WILLFUL ACTS OR GROSS
NEGLIGENCE.
The reduction of fare does not justify any limitation of the common carriers
liability.
LARA v. VALENCIA,
GR 9907, June 30, 1958
Facts:
nThe deceased Lara was inspector of the BFD at Davao City. Defendant Valencia was engaged
in the business of exporting logs from his timber concession in Cotabato. Lara went to Valencias
area upon instruction of his chief to classify the logs of Defendant.
nAfter six days of work, Lara, who was then eager to return home asked Valencia if he could
take him in his pick-up truck to which defendant agreed.
nLara was with the five other passengers who were with Lara at the back of the pick-up. Lara
was seated on a bag.
nWhile the pick-up was cruising along Km 96, Lara accidentally fell from the pick-up and died.
After six days of work, Lara, who was then eager to return home asked Valencia if he could
take him in his pick-up truck to which defendant agreed.
nLara was with the five other passengers who were with Lara at the back of the pick-up. Lara
was seated on a bag.
nWhile the pick-up was cruising along Km 96, Lara accidentally fell from the pick-up and died.
n

Held:
nDeceased were merely accommodation passengers who paid nothing for the service and so they
can be considered invited guests within the meaning of the law.
nThe rule is established by the weight of authority that the owner or operator of an automobile
owes the duty to an invited guest to exercise reasonable care in its operation, and not
unreasonably to expose him to danger and injury by increasing the hazard of travel.
nNote: Lara is not controlling upon common carriers since Valencia was a private carrier who
accommodated Lara.
EXTRAORDINARY DILIGENCE IN CARRIAGE BY SEA
WARRANTY OF VESSELS SEAWORTHINESS
nFirst step in complying with the required extraordinary degree of vigilance.
nSeaworthiness of vessel is impliedly warranted under the Insurance Code and the Carriage of
the Goods by the Sea Act (COGSA).
nShippers when transacting with common carriers are not expected to inquire into the vessels
seaworthiness, genuineness of its license and compliance with all maritime laws. Also true with
passengers.
nThe burden of proof on seaworthiness is with the carrier.

41

SEAWORTHINESS DEFINED
nGenerally, seaworthiness is that strength, durability and engineering skill made a part of s ships
construction and continued maintenance, together with a competent and sufficient crew, which
would withstand the vicissitudes and dangers of the of the elements which might reasonably be
expected or encountered during her voyage without loss or damage to her particular cargo.
[Delsan Transport Lines v. CA, GR 127897, Nov. 15, 2001]
STATUTORY PROVISIONS ON SEAWORTHINESS
nSection 116, Code of Commerce: A warranty of seaworthiness extends not only to the condition
of the structure of the ship itself, but requires that it be properly laden, and provided with a
competent master, a sufficient number of competent officers and seamen, and the requisite
appurtenances and equipment, such as ballasts, cables and anchors, cordage and sails, food,
water, fuel and lights, and other necessary or proper stores and implements for the voyage.
Sec. 119, Insurance Code: A ship is seaworthy for the purpose of an insurance upon the ship
may, nevertheless, by reason of being unfitted to receive the cargo, be unseaworthy for the
purpose of insurance upon the cargo.
n

Sec. 3[1] COGSA: The carrier shall be bound before and at the beginning of the voyage to
exercise due diligence to
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
(c) Make the holds, refrigerating and cooling
chambers, and all other parts
of the ship in which
goods are carried, fit and safe for their reception, carriage and
preservation.
nSec. 3[2] COGSA: The carrier shall properly and carefully load, handle, stow, carry, keep, care
for, and discharge the goods carried.
n

SUMMATION OF THE REQUIREMENT ON SEAWORTHINESS

nA vessel must have such degree of fitness which an owner who is exercising extraordinary
diligence would require his vessel to have at the commencement of the voyage, having regard to
all the probable circumstances of it.
nSeaworthiness includes fitness of the vessel itself to withstand the vicissitudes of the voyage,
fitness of the vessel to store the cargoes and accommodate passengers to be conveyed and
adequately equipped with and properly manned with sufficient and competent officers and crew.
FITNESS OF VESSEL: HOW PROVED
nIt was drydocked and inspected by the PGC before it proceeded to its destination.
nPGC cleared it as searworthy, fitted, equipped and met all the requirement for trading.
Note: A ship will not normally sink if the sea is moderate and if it is seaworthy or if the carrier
and its employees were not negligent. [Loadstar Shipping v. CA, G.R. 131621, Sept. 28, 1999]
CARGOWORTHY
nShip must not only be seaworthy. IT MUST ALSO BE CARGO WORTHY.
nTo be cargo-worthy, the ship must be an efficient storehouse for her cargo.
nCargo-worthiness means that the vessel must be sufficiently strong and equipped to carry the
particular kind of cargo which she has contracted to carry and her cargo must be so loaded that
it is safe for her to proceed on her voyage. [Lord Chorley and O.C. Siles, Shipping Law, 6th Ed., p.
120]

42

ADEQUATELY EQUPPED AND PROPERLY MANNED

nCompetency of Masters or Captains is required.
nThe rule is violated if a carrier embarked on a voyage with unlicensed captain or patron.
nIt cannot claim to have exercised extraordinary diligence by placing a person whose
navigational skill are questionable, at the helm of the ship.
nQualifications of Masters, Captains and Crew of ships are governed by the Philippine Merchant
Rules and Regulations (PMRR).
Art. 609, Code of Commerce: Captains, masters or patrons of vessels must be Filipinos, have
legal capacity to contract in accordance with this code, and proven skill, capacity, and
qualifications necessary to command and direct the vessel, as established by marine or navigation
laws, ordinances, or regulations, and must not be disqualified according to the same for the
discharge of the duties of the position
If the owner of a vessel desires to be the captain thereof, without having the legal
qualifications therefor, he shall limit himself to the financial administration of the vessel, and shall
instrust the navigation to a person possessing the qualifications required by said ordinances and
regulations.
n

OVERLOADING
nDuty to exercise due diligence also includes the duty to take passengers or cargoes that are
within the carrying capacity of the vessel.
nA carrier fails in this requirement where it allowed on 1,004 passengers when it total passenger
capacity is only 864 [Negros Navigation v. CA, G.R. 110398, Nov. 7, 1997]
REQUIREMENT OF PROPER STORAGE
nIt is not enough that vessel must be suited for the cargo it contracted. It must also be properly
stored.
nHence, where it was found out that the cause of explosion was due to the improper storage of
an acetylene cylinder which caught fire which was placed in the accommodation area near the
engine room instead at the storage, the common carrier was held to be negligent. [Phil. Home
Assurance Corp. v. CA, G.R. 106999, June 20, 1996]
LIMITED LIABILITY RULE
nThe liability of the carrier in connection with losses related to maritime contracts is confined to the
vessel, which is hypothecated for such obligations or which stands as the guaranty for their
settlement.
nNo vessel, no liability rule
NEGLIGENCE OF CAPTAIN & CREW
nIf the negligence of the captain or crew can be traced to the fact that they are incompetent and
that the ship owner was negligent in their selection, the Limited Liability Rule will not apply.
nIf simple negligence only by the captain or crew, who are otherwise competent to discharge their
duties, at the time of the accident, the rule applies.
RULES ON PASSENGER SAFETY AND COURTESY DUE HIM
nFailure to comply with MARINA rules and regulations constitutes negligence on the part of the
captain and crew and of the shipowner.

43

MARINA Memorandum Circular 112 provides that passengers have the right to be treated by
the carrier and its employees with kindness, respect, courtesy and due consideration. The are
entitled to be protected against personal misconduct, injurious language, indignities and abuses
from the carrier and its employees.
n

MEMORANDUM CIRCULAR NO. 114

Provisions on:
nEmergency exits
nHandling of Handcarried Luggage
nLifevests or Lifejackets
nWatertight doors, potholes, ramps and manholes
nWearing of proper prescribed uniform by Ships officers and crew.
nOther safety measures
DEVIATION
nArt. 359, CoC: If there is an agreement between the shipper and the carrier as to the road over
which the conveyance is to be made, the carrier may not change the route, unless it be by reason
of force majeure; and should he do so without this cause, he shall be liable for all the losses which
he goods he transports may suffer from any of other cause, beside paying the sum which may
have been stipulated for such case.
nWhen on account of said cause of force majeure, the carrier had to take another route which
produced an increase in transportation charges, he shall be reimbursed for such increase upon
formal proof thereof.
TRANSSHIPMENT
nThe act of taking cargo out of one ship and loading it in another; or
nThe 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
nThe transfer for further transportation from one ship or conveyance to another.
Notes: Improper deviation and Transshipment without consent of the shipper is violation of the
required standard of care. Improper deviation may be a valid ground to deny a marine
insurance claim; while transshipment of freight without legal excuse is a violation of the contract
of carriage.
EXTRAORDINARY DILIGENCE IN CARRIAGE BY AIR
AIRWORTHINESS
Airworthiness means that an aircraft, it engines, propellers, and other components and
accessories, are of proper design and construction, and are safe for air navigation purposes, such
design and construction being consistent with accepted engineering practice and in accordance
with aerodynamic laws and aircraft science. (R.A. 779)
n

IT MUST BE PROVIDED WITH COMPETENT AND WELL TRAINED CREW.

- Assigning a pilot inflicted with a tumor for a long time fails in the requirement.
nIT MUST FOLLOW THE DESIGNATED ROUTE.
- A plane did not take the designated route resulting to the tragic crash. The tragic crash
could have been avoided had it taken said designated route. (Abeto v. PAL, 115 SCRA 489)
nIT MUST INSPECT ALL CARGO AND/OR BAGGAGE FOR LOADING. (R.A. 6235)
n

44

Saludo v. CA, G.R. 95536, Mar. 23, 1992

Held:
nWhere a common carrier has reasonable ground to suspect that the offered goods are of a
dangerous or illegal character, the carrier has the right to know the character of such goods and
to insist on an inspection, if reasonable and practical under the circumstances, as a condition of
receiving and transporting such goods.
Northwest Airlines v. Laya, G.R. 146020, May 29 2002
Held:
nThorough inspection of the briefcase of Plaintiff as deemed justified pursuant to the directive of
the FAA of the US brought about by the tragic event that unfolded on Sept. 11, 2001.
nThe fact that Plaintiff was greatly inconvenienced by the fact that his attache case was subjected
to further inspection does not warrant imposition of liability because he was not singled out and
discriminated by the employees of the carrier.
Protection of passengers must take precedence over convenience. Nevertheless, the
implementation of the security measures must be ATTENDED BY BASIC COURTESIES.
nHence, the carrier was made liable not for implementing the security measure BUT FOR
TREATING THE
n

PLAINTIFF IN A RUDE, BRUSQUE, ARROGANT AND DOMINEERING manner that caused his
humiliation.
PAL v. CA & ZAPATOS, GR 82619, Sept. 15, 1993
Facts:
nOn Aug. 2 1976, Zapatos, together with 20 other passengers, boarded PAL flight 477 from
Cebu-Ozamis. The flight route was Cebu-Ozamis-Cotabato.
nWhile on flight, the pilot received a radio message that the Ozamis airport was closed due to
heavy rains and inclement weather and that the plane should instead proceed to Cotabato.
Upon arrival at Cotabato, PAL agent informed the passengers of their option to return to Cebu
on-board Flight 560 on the same day and take the next available flight to Ozamis City on Aug.
5, 1975. Zapatos chose the option offered but was not accommodated on the return flight to
Cebu because he was checked in as passenger no. 9 on Flight 477. He insisted to be given
priority over confirmed passengers but the station agent refused.
nHe tried to stop the departure of Flight 560 as his personal belongings, including a package
containing a camera was still on board.
n

Held:
The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard
required by law. PALs diversion of its flight due to inclement weather was a fortuitous event.
nNonetheless, such occurrence did not terminate it contract with its passengers. Being in the
business of air carriage and the sole one to operate in the country, PAL is deemed equipped to
deal with situations as in the case at bar.
n
n

What we said in one case once again must be stressed, i.e. the relation of carrier and passenger
continues until the latter has been landed at the port of destination and has left the carriers
premises.
n

45

Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the
comfort, convenience and safety of its stranded passengers until they have reached their final
destination.
n

ABETO v. PAL, GR L-28692, July 30, 1982

nFacts: Judge Abeto boarded PAL flight from Iloilo to Manila on Nov. 23, 1960. The plane did
not reach Manila. After 3 days, it was ascertained that it crashed at Mt. Baco, Mindoro. All
passengers perished.
nHeld: It is clear that the pilot did not follow the designated route for his flight between Romblon
and Manila. The weather was clear and he was supposed to cross airway Amber I over
Romblon. Instead, he made a straight flight to Manila in violation of any traffic rules.
Baliwag Transit Inc. v. CA (256 SCRA 746)
Held:
nA common carrier breaches its contract of carriage when it failed to deliver its passengers to
their destination safe and sound. 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 contract of carriage, it is presumed that the common carrier was at fault or was negligent
when a passenger dies or is injured.
nUnless 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 Arts. 1733 and
1755 of the Civil Code.
n

Chapter 4
BILL OF LADING
CONCEPT OF BL
nA bill of lading, like a passage ticket, is not necessary for the perfection of a contract of
carriage.
nArt. 354, Code of Commerce: In the absence of a bill of lading, disputes shall be determined by
the legal proofs which the parties may present in support of their respective claims, according to
the general provisions established in this Code for commercial transaction.
nNote: If involving common carrier, disputes without BL is governed by the Civil Code. In respect to
electronic commerce, it is governed by R.A. 8792 of the Electronic Commerce Act.
BILL OF LADING DEFINED
nA written acknowledgment, signed by the master of a vessel or other authorized agent of the
carrier, that he has received the described goods from the shipper, to be transported on the
expressed terms to the described place of destination, and to be delivered there to the
designated consignee or parties. [70 Am Jur 2d 924]
KINDS OF BILLS OF LADING
nNegotiable or Non-negotiable Bill of Lading
nClean Bill of Lading or Foul Bill of Lading
nOn-board Bill or Received-For-Shipment Bill of Lading
nSpent Bill of Lading

46

Through Bill of Lading

Custody Bill of Lading
nPort Bill of Lading
n
n

Negotiable or Non-negotiable Bill of Lading

nWhen delivered to the Order or to bear, negotiable.
nOtherwise, non-negotiable.
Clean Bill of Lading or Foul Bill of Lading
nWhen it does not contain any notation indicating any defect in the goods Clean BL
nOtherwise, it is Foul BL
On-board Bill or Received-For-Shipment Bill of Lading
On-board BL is one in which it is stated that the goods have been received on board the vessel
which is to carry the goods
nReceived for shipment BL is one 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.
Custody Bill of Lading
nOne which states that the goods are already received by the carrier but the vessel indicated
therein has not yet arrived at port.
Port Bill of Lading
nOne which state that the vessel indicated in the BL that will transport the goods is already in the
port.
n

NATURE OF BILL OF LADING

nIt operates both as:
1. A receipt for the goods shipped; and
2. A contract to transport and deliver the goods as stipulated therein. Being a contract, it
is the law between the parties who are bound by its terms and conditions sol longs as they are not
contrary to law, morals, good customs, public order and public policy.
nIt is also a document of title.
DOCUMENT OF TITLE
nIncludes any bill of lading, dock warrant, quedan, or warehouse receipt or order for the
delivery of goods, or any other document used in the ordinary course of business in the sale or
transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting
to authorize the possessor of the document to transfer or receive either by endorsement or by
delivery, goods represented by such document. [Art. 1636, NCC]
EFFICACY OF BL
nUpon delivery to and acceptance by the shipper.
nIt is presumed that the stipulations of the BL were known to the shipper, in the absence of fraud,
concealment or improper conduct, and he generally bound by his acceptance whether he reads
the bill or not.
A shipper who receives a BL without objection after an opportunity to inspect it, and permits the
carrier to act on it by proceeding with the shipment is presumed to have accepted it as correct
and assented to its terms.
n

47

A BL accepted without dissent raises the presumption that all the terms therein were brought to
the knowledge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is
estopped from thereafter denying that he assented to such terms.
n

BL AS CONTRACT OF ADHESION
nBLs, like tickets constitute a class of contracts of adhesion.
nConstrued liberally in favor of the passenger or shipper.
nBut, they are not ENTIRELY prohibited.
nOne who adheres to the contract is in reality free to reject it entirely.
nIf he adheres, he gives his consent.
nReceipt of the BL or ticket is tantamount to adherence to the stipulation embodied therein
Qua Chee Gan v. Law Union and Rock Insurance Co., 25 SCRA 70 [1968]
nHeld: The courts cannot ignore that nowadays, monopolies, cartels and concentration of capital
endowed with overwhelm economic power, manage to impose upon parties dealing with them
cunningly prepared agreements that the weaker party may not change one with his participation
in the agreement being reduced to the alternative to take it or leave it, labelled since Raymond
Sleilles contracts of adherence (contracts d adhesion) in contrast (of which policies of insurance
and international bill of lading are prime examples) obviously cap for greater strictness and
vigilance on the part of the court with view to protecting the weaker party from abuses and
imposition, and prevent their becoming traps of the unwary.
RULE ON PROTECTION OF THE DISADVANTAGED
nArt. 24, NCC: In all contractual property or other relations, when one of the parties is at the
disadvantage on account of his moral dependence, ignorance, indigence, mental weakness,
tender age and other handicap, the courts must be vigilant for his protection.
Servando, et al. v. Phil. Steam Navigation Co., G.R. No. L-36481-2 October 23, 1982
Held:
nWhile it may be true that petitioner had not signed the plane ticket (Exh. '12'), he is nevertheless
bound by the provisions thereof.
nSuch provisions have been held to be a part of the contract of carriage, and valid and binding
upon the passenger regardless of the latter's lack of knowledge or assent to the regulation.
It is what is known as a contract of 'adhesion', in regards which it has been said that contracts of
adhesion wherein one party imposes a ready made form of contract on the other, as the plane
ticket in the case at bar, are contracts not entirely prohibited.
nThe one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives
his consent.
Magellan Manufacturing Marketing Corp. v. CA, G.R. 95529, Aug. 22, 1991
nIssue 1: On the argument that there could have been no agreement in the transshipment even if
the BL contained such since the same is prohibited in the Letter of Credit, and that, therefore, it
had no intention to allow transshipment of the subject cargo, it was:
n

Held:
nAs between such stilted thesis of petitioner and the contents of the bill of lading evidencing the
intention of the parties, it is irremissible that the latter must prevail.
nThe terms of the contract as embodied in the bill of lading are clear and thus obviates the need
for any interpretation. The intention of the parties which is the carriage of the cargo under the
terms specified thereunder and the wordings of the bill of lading do not contradict each other.

48

The terms of the contract being conclusive upon the parties and judging from the
contemporaneous and subsequent actuations of petitioner, to wit: personally receiving and signing
the bill of lading and paying the freight charges, there is no doubt that petitioner must necessarily
be charged with full knowledge and unqualified acceptance of the terms of the bill of lading and
that it intended to be bound thereby.
n

Issue No. 2: Can a consignee refuse a bill of lading on the ground that there was overshipment
of goods than the quantity covered by the letter of credit?
nHeld: 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.
n

It is clearly settled in law that the three contracts which make up the letter of credit arrangement
are to be maintained in a state of perpetual separation.
nA 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.
n

Hence, the contract of carriage, as stipulated in the bill of lading 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.
nAny discrepancy between the amount of goods described in the commercial invoice in the
contract of sale and the amount allowed in the letter of credit will not affect the validity and
enforce-ability of the contract of carriage as embodied in the bill of lading.
n

As a 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 and to verify their accuracy vis--vis the
commercial invoice and the letter of credit.
n

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, and the
bill of lading simply states the contents of the container either as advised by the shipper or
prefaced by the phrase said to contain.
nThe matter of quantity, description and conditions of the cargo inside the container is the sole
responsibility of the shipper.
n

PAROLE EVIDENCE RULE

nSec. 9, Rule 130, Rules of Court: When the terms of an agreement have been reduced to writing,
it is considered as containing all the terms agreed upon and there can be, between the parties
and their successors in interest, no evidence of such terms other than the contents of the written
agreement.
nBL is covered by the parole evidence rule.
EXCEPTIONS TO PAROLE EVIDENCE RULE
nHowever, a party may present evidence to modify, explain or add to the terms of the written
agreement if he puts in issue in his pleading:

49

a) An intrinsic ambiguity, mistake or imperfection in the written agreement;

b) The failure of the written agreement to express the true intent and agreement of the
parties thereto;
c) The validity of the written agreement; or
d) The existence of other terms agreed to by the parties or their successors in interest after
the execution of the written agreement.
The term agreement includes wills.
SUBSTANTIVE PROVISIONS ON BILL OF LADING
nArt. 353, Code of Commerce: The legal evidence of the contract between the shipper and the
carrier shall be the bills of lading, by the contents of which the disputes which may arise
regarding their execution and performance shall be decided, no exceptions being admissible
other the those of falsity and material error in the drafting.
After the contract has been complied with, the bill of lading which the carrier has issued shall be
returned to him, and by virtue of the exchange of this title with the thing transported, the
respective obligations and actions shall be considered cancelled, unless in the same act the claim
which the parties may wish to reserve be reduced to writing, with the exception of that provided
for in Article 366
nIn case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by
the carrier, because of its loss or of any other cause, he must give the latter a receipt for the
goods delivered, this receipt producing the same effects as the return of the bill of lading.
n

Art. 709, Code of Commerce: A bill of lading drawn up in accordance with the provisions of this
title shall be proof as between all those interested in the cargo and between the latter and the
insurers, proof to the contrary being reserved for the latter.
nArt. 710, Code of Commerce: If the bills of lading are contradictory, and no change or erasure
can be observed in any of them, those possessed by the shipper or consignee signed by the
captain shall be proof against the captain or ship agent in favor of the consignee or shipper; and
those possessed by the captain or ship agent signed by the shipper shall be proof against the
shipper or consignee in favor of the captain or ship agent.
n

Sec. 3[4] & [5], COGSA, C.A. No. 65:

[4] Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods
as therein described in accordance with paragraphs 3(a), (b), and (c), of this section.
n[5] The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of
the shipment of the marks, number, quantity, and weight, as furnished by him; and the shipper
shall indemnify the carrier against all loss, damages, and expenses arising or resulting from
inaccuracies in such particulars. The right of the carrier to such indemnity shall in no way limit his
responsibility and liability under the contract of carriage to any person other than the shipper.
n
n

MATTERS TO BE ENTERED IN A BL OR AIRWAY BILL

For BL (Art. 706, Code of Commerce):
nName, registry and tonnage of the vessel
nName of captain and his domicile [not anymore applicable as of present]
nPort of loading and unloading
nName of shipper
nName of consignee

50

n
n

Quantity, quality, number of packages and marks of the merchandise; and

Freight and primage

For Airwaybill (Art. 3[1], Warsaw Convention on Air Transport:

nPlace and date of issue
nPlace of departure and destination;
nAgreed stopping places, provided the carrier may reserve the right to alter the stopping places
in case of necessity, and that if he exercises that right, the alteration shall not have the effect of
depriving the transportation of its international character;
nName and address of the carrier or carriers; and
nStatement that the transportation is subject to the rules relating to liability in this convention.
KINDS OF STIPULATIONS IN A BILL OF LADING
nFirst kind: One exempting the carrier from any and all liability for loss or damage occasioned
by its own negligence VOID;
nSecond kind: One providing for an unqualified limitation of such liability to an agreed valuation
VOID; and
nThird kind: One limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of freight VALID.
[H.E. Heacock Co. v. Macondray & Co., G.R. 16598l, Oct. 3, 1991]
LIABILITY OF CARRIER UNDER COGSA
nIf goods are to be shipped from a foreign port to the a Philippine, COGSA is applicable
suppletority to the Civil Code.
nLiability of the carrier is US$500 per package, in the absence of a shippers declaration of a
higher value in the BL.
nThe above condition is deemed part of the BL even if not expressly stated.
MEANING OF PACKAGE
nIf goods are shipped in cartons Each carton is considered a package even if they are stored in
container vans.
nIf what ordinarily considered as packages are shipped in a container supplied by the carrier
and the number of such unit is disclosed in the BL Each of those units (not the container)
constitutes the package referred to in COGSA.
Belgian Overseas Chartering v. Phil. First Insurance Co., G.R. 143133, June 5, 2002
nFacts: Steel sheets numbering 242 coils were shipped on board a vessel of Petitioner in
Germany to Manila. The coils were shipped inside the container vans provided by the carrier. The
LC covering the shipment state the per metric ton price of the coils. Upon arrival, it was found out
that 4 coils were damaged.
nHeld: Each coil is considered one package. The liability of the carrier should not be based on the
price declared in the Letter of Credit.
WARSAW CONVENTION ON AIR TRANSPORT
nLiability to passenger P250,000 francs (passenger & carrier may agree to a higher limit of
liability
nLiability to baggage and cargo P250 francs per kg (unless the passenger or consignor has
made, at the time when the package was handed over to the carrier, a special declaration of
interest in delivery at destination and has paid a sup- plementary sum not exceeding the

51

declared sum, unless he proves that sum is greater than the actual value to the consignor at
delivery.
In case of loss, damage or delay of part of registered baggage or cargo, or of any object
contained in the waybill The weight shall be taken into consideration in determining the amount
and carriers liability is limited to the TOTAL WEIGHT OF THE PACKAGE/S
nHowever, when the loss, damage or delay of a part of the registered baggage or cargo, or of
an object contained therein, affects the value of other packages covered by the same baggage
check of the same airway bill, the TOTAL WIEHT OF SUCH PACKAGE/S shall also be taken into
consideration in determining the limit of liability.
n

Liability to hand carried items 5,000 francs per passenger

The above limitations are without prejudice to the local courts award in accordance to its own
law, in addition, the whole or part of the court cost and other expenses of litigation incurred by
plaintiff.
n
n

Not applicable if the amount of damages awarded, excluding court costs and other expenses
of litigation, does not exceed the sum which the carrier has offered in writing to plaintiff within 6
months from the date of occurrence causing the damage or before commencement of the action, if
that is later.
nIf damage is caused by willful misconduct or by such default on the part of the carrier: Carrier
cannot invoke the provisions in Warsaw Convention on limited liability.
n

HAGUE PROTOCOL AMENDMENT TO WARSA CONVENTION ON AIR TRANSPORT

nRemoved the provision that exculpates the airline completely if it took all necessary steps to
avoid the damage.
nThe protocol declares that the stated limits of liability are not applicable if it is proved that the
damage resulted from an act or omission of the carrier, its servants or agents, done with intent to
cause damage or recklessly and with knowledge that damage would probably result.
Note: Montreal Agreement of 1966 allows a passenger to recover unlimited damages upon
proof of willful misconduct.
LIABILITY UNDER COGSA
nIf no value is state Maximum: US$500.
nIf value is stated Rule on Qualified Liability.
Qualified Liability Rule:
nA carrier may fix a maximum liability in the event the shipper does not declare any value or a
valude 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.
CASES INVOLVING BILLS OF LADING
Maersk Line v. CA, 222 SCRA 108
Held:
nBill of lading, although contracts of adhesion, are not prohibited and the terms thereof binding,
since the other party is free to reject it, and yet has accepted the terms thereof. But the terms of
the bill of lading which create an absurd situation as having the effect of practically leaving the

52

date of arrival of the shipment to the sole determination and will of the carrier cannot be
enforced.
Telengtan Bros. v. CA, 236 SCRA 617
Held:
nA bill of lading is both 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.
Saludo, Jr. v. CA, 207 SCRA 498
Held:
nA bill of lading is a written acknowledgment 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.
nAcceptance thereof without dissent raises the presumption that all the terms therein were brought
to the knowledge of the shipper and agreed to by him and estops him thereafter from denying
the same.
United States Lines v. Commissioner of Customs, 151 SCRA 189
nHeld:
nThe containerization system was devised to facilitate the expeditious and economical loading,
carriage and unloading of cargoes.
nUnder that system, the shipper loads his cargoes in a specially designed container, seals the
container and delivers it to the carrier for transportation.
nThe 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.
Everett Steamship v. CA, 287 SCRA 496
Held:
nA stipulation printed in BL limiting common carriers liability for loss or destruction of a cargo to a
certain sum, unless shipper or owner declare a greater value is sanctioned by law, particularly
Arts. 1749 and 1750 of the Civil Code, provided such stipulation must be reasonable and just
under the circumstances and has been freely and fairly agreed upon.
nThe printing of such limiting stipulation in a small print on the BL does not make the BL 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 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.
nIn this case, since the shipper is engaged in 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.
nThe shipper could have known, or should know the stipulations in the BL and there it should have
declared a higher valuation of the goods shipped.
n

Valenzuela Hardwood v. CA, 274 SCRA 642

Held:
nA stipulation in a charter party that the owners shall not be responsible for loss, split, shortlanding, breakages and any kind of damage to the cargo, is NOT VOID as being contrary to
public policy, when it is clear from the arrangement that the carrier merely acted as private
carrier under the terms of the charter party.

53

In a contract of private carriage, the parties may validly stipulate the 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.
n

PAL v. CA, 255 SCRA 48 on the period provided in Way bill

Held:
nWhere the failure to file the formal claim within the prescriptive period contemplated in the air
waybill was largely due to the fault of carriers representatives, the condition was deemed
fulfilled considering the collective action of the carriers 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 of the filing of a formal claim
Chapter 5
PRESCRIPTIVE PERIODS IN CLAIMS
FILING OF CLAIM IN INTER-ISLAND COMMERCE (Art. 366, Code of Commerce)
If goods arrived in damaged condition:
nApparent Must file a claim immediately (oral or written)
nNot apparent Must file a claim within 24 hours from deliver
FILING OF ACTION IN INTERISLAND TRADE
Period to file action if claim is filed but CARRIER REFUSES TO PAY:
n6 years if no BL
n10 years if there is BL
nNote: Filing of the claim under Art. 366, CoC is CONDITION PRECEDENT for recovery. If no
claim is filed, there will be no recovery, even if an action therefor is meritorious since the claim is
part of the cause of action
FILING OF CLAIMS IN OVERSEAS TRADE
nIf damage is APPARENT CLAIM SHOULD BE FILED IMMEDIATELY.
nIf damage is NOT APPARENT CLAIM SHOULD BE FILED WITHIN 3 DAYS.
FILING OF ACTION IN OVERSEAS TRADE
1 year from the time vessel departs from port without making delivery; or
1 year from the date the damaged cargo is delivered to arrastre.
Note: the 1 year period applies also to collision cases.
nIf mis-delivered: 10 years; If claim is based on delay: 10 years.
Note: Filing of claim is NOT A CONDITION PRECEDENT in the filing of action.
n
n

Rizal Surety v. Macondray, 22 SCRA 902

nFacts: A vessel arrived in Manila on Oct. 25. It left Manila on Oct. 31. The BL showed that the
cargo was aboard the vessel, but it was never delivered. The shipper brought an action against
the carrier for non-delivery.
nHeld: Since there was no tally sheet AND NO DELIVERY, the 1- year 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. Oct. 31 when the vessel departed from port.
Union Carbide v. Manila Railrod, 77 SCRA 359

54

Held:
nIn the case when the vessel docked at the pier, where the cargo has been unloaded and
delivered to the arrastre, the 1-year period begins to run from the date of delivery to the
arrastre operator.
Ang v. American SS Agencies, 19 SCRA 631
nHeld:
nWhere 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.
US Insurance v. Cia. Maritima, 21 SCRA 998
Facts:
nCargo was loaded in New York for Davao City. Since most of the cargo was for Manila, the
carrier unloaded all the cargo, including that for Davao City, in 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.
Held:
nThe 1-year period provided in COGSA shall still apply since the contract of carriage is from
New Yor 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.
n

Filipino Merchants Ins. Co. v. Alejandro, 145 SCRA 42

Held:
nThe insurer of the goods is also bound by the 1-year prescriptive period under the Carriage of
Goods by Sea Act.
Dole Philippines v. Maritime Co., 148 SCRA 118
Held:
nThe written extrajudicial demand by creditor DOES NOT TOLL the running of the 1-year
prescriptive period under COGSA since an action must be filed within the period.
Mitsui O.S.K. Lines v. CA, 287 SCRA 366
Facts:
nCarrier undertook loading. However, while in Taiwan, 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 unpaid balance from the carrier which opposes the same since the
loss or damage to goods shipped under Sec. 3(6) of the Carriage of the Goods by Sea Act has
been barred by the lapse of 1-year period.
Held:
nIndeed, what is in issue here is not the liability of carrier of its handling of goods as provided
under Sec. 3(6) of COGSA, but its liability under its contract of carriage with shipper as covered
by the laws of more general application.
nSince the concept of loss or damage involves he deterioration of goods DUE TO DELAY in their
transportation, the claims of shipper DO NOT CONSTITUTE LOSS OR DAMAGE within the
meaning of COGSA which requires the suit to be brought within 1-year from the time the cause of
action accrued.
nThe 1-year prescriptive period under COGSA is inapplicable. What is applicable is Art. 1144
of the Civil Code providing for a 10-year prescriptive period.

55

Mayer Steel Pipe Corp. v. CA, 274 SCRA 432

Facts:
nThe shipper has insured the merchandise against all risks with South Sea Surety. During the
voyage, the merchandise were damaged. Insurer opposed claim on the ground, inter alia, that it
was filed more than one (1) year from discovery of the damage to the merchandise and
therefore barred by the provisions under COGSA.
Held:
nThe provision applies only to carriers liability which is extinguished if no suit is brought within
one year.
nThe liability of the insurer is not extinguished because the insurers liability is based not on the
contract of carriage but on the contract of insurance.
nCOGSA governs relationship between carrier and shipper, the consignee and/or the insurer on
the other hand and defines the obligations of the carrier under the contract of carriage.
nIt does not, however, affect the relationship between shipper and insurer which is governed by
Insurance Code.
MEANING OF DAMAGES
nThe pecuniary compensation, recompense, or satisfaction for an injury sustained; or
n The pecuniary consequences which the law imposes for the breach of some duty or violation of
some rights.
DAMAGES RECOVERABLE
nActual Damages (dano emergente)
nUnrealized Profits (lucro cesante)
nMoral Damages
nNominal Damage
nTemperate or Moderate Damages
nLiquated Damages
nExemplary or Corrective Damages
nOther damages
ACTUAL & COMPENSATORY DAMAGES
nArt. 2205, NCC: Damages may be recovered:
(1) For loss or impairment of earning capacity in cases of temporary or permanent
personal injury;
(2) For injury to the plaintiffs business standing or commercial credit.
nAmount of damages in case of death: P100,000 per passenger for overland; P200,000 for
marine transportation.
LOSS OF EARNING CAPACITY UNDER ART. 2206
Formula:
nNet Earning Capacity = Life Expectancy [2/3 x 80 age at death] x Gross Annual Income less
Necessary Living Expenses [fixed at 50% of the gross income in the absence of proof]
MORAL DAMAGES (Art. 2219, Civil Code)
Include
nPhysical suffering,

56

Mental anguish,
Fright,
nSerious anxiety,
nBesmirched reputation,
nWounded feelings,
nMoral shock,
nSocial humiliation, and
nSimilar injury
n
n

PRINCIPLES INVOLVING AWARD OF MORAL DAMAGES

nAs a general rule, no moral damages may be awarded where the breach of contract is NOT
MALICIOUS.
nMoral damages may be awarded if the contractual negligence is considered gross negligence.
nThough incapable for pecuniary estimation, moral damages may be recovered if they are the
proximate result of the defendants wrongful act or omission.
nThe award of moral damages is designed to compensate the claimant for actual injury and is not
meant to enrigh the complainant at the expense of the defendant.
CASES WHEN MORAL DAMAGES MAY BE AWARDED (Arts. 2219 & 2220, NCC)
nCriminal offense resulting in physical injuries;
nQuasi-delicts causing physical injuries
nSeduction, abduction, rape, or other lascivious acts
nAdultery or concubinage
nIllegal or arbitrary detention or arrest
nIllegal search
nLibel, slander or any other form of defamation
nMalicious prosecution
nActs mentioned in Art. 309 [disrespect to the dead, or wrongful interference with a funeral]
nActs and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 [on human
relations]
In culpa contractual, moral damages may be awarded:
nWhere the mishap resulted in the death of the passenger. (Art. 1764 in relation to Art. 2206)
nWhen the carrier was guilty of fraud or bad faith, even if death did not result. (Art. 2220;
Sabena Belgian World Airlines v. CA, 171 SCRA 620)
nNote: If the cause of action is culpa aquiliana where the passenger suffered physical injuries,
there is no more need to prove that the carrier acted fraudulent or in bad faith (Art. 2210[2],
Civil Code)
Lopez v. Pan Am, 16 SCRA 431 (1966)
Facts:
nVP Lopez with his wife, daughter and son-in-law had tickets for 1st class bound for SF. When
they arrived in Tokyo, the planes crew found out that the 1st class tickets had been overold, and
Lopez and his family were compelled to take the economy seats.
nWhen the plane arrived at SF, Filipino official and the Filipino community with a band waited for
Lopez to appear from the 1st class section. It caused him humiliation.
n
n

Held:
Pan-Am should have informed Lopez of the possible downgrading to prevent his humiliation

57

The court award Lopez P300,000 in moral damages and P150,000 in attorneys fees.
The substantial amount of damages was awarded in view of the importance of the person of the
passenger
n
n

Zulueta v. Pan-Am (1972)

nFacts: Zulueta was a passenger on a Pan-Am flight with his wife and children from SF to Manila.
On stopover at Wake Island, the passengers were told that the plane would leave in 30 minutes.
After 30 mins. Zulueta failed to show up, the crew had to look for him. When he was found, the
plane captain called him a brown monkey. Bitter exchanged followed. The captain then order
the crew to unload Zuluetas baggage and he was left behind.
nHeld: Zulueta is entitled to moral damages of P500,000 and Attorneys fees of P50,000
Ong Yui v. CA, 91 SCRA 223
nHeld:
nIn repealing the Shewaran Doctrine, the SC ruled that the qualified liabilityappearing on the
ticket is binding even if the passenger did not sign it.
ARRASTRE
nIn its generic term, it refers to a contract for the unloading of goods from a vessel.
nIn maritime law, arrastre applies only to overseas trade.
nWhen a person brings in cargo from abroad, he cannot unload and deliver the cargo by himself.
This is done through the arrastre operator, which will be obligated to deliver the cargo to the
importer.
Firemens Fund v. Cia. General de Tabacos, 34 SCRA 392 (1970)
Held:
nThe Arrastre operator, for the privilege of those undertaking signs a Management Contract with
the Philippine Government. But among the stipulations in the MC are provisions that adversely
affect the importer.
nThe management contract contains stipulations pour autrui and there is stamped across the
Delivery Permit that the importer received the goods subject to the management contract, then he
shall be bound by the same.
PARTIES IN ARRASTRE CONTRACT
nThe Government (RP)
nThe Arrastre Operator being awarded the privilege of operating an arrastre service
nThird party beneficiary, who is the shipper or person being serviced by the arrastre.
4 STIPULATIONS IN THE REVISED MANAGEMENT CONTRACT AFFECTING THE IMPORTER OR
SHIPPER
nFormal claim against arrastre:
- Within 30 days from date of final entry with the Bureau of Customs supported by
invoices and other shipping documents. (A condition precedent)
nAction on claim by arrastre: 60 days from receipt. (A condition precedent)
If claim is refused: Action to be filed within 1 years.
If claim is not acted upon: The 1 year period begins to run from the date of the expiry of the
60-day period.
nQualified liability of arrastre: P2,000 per package unless higher value is declared.
n
n

58

NATURE OF LIABILITY OF ARRASTRE & CARRIER: Solidary

Metro Port Services v. IAC, 213 SCRA 103 (1992)
nHeld: 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 is complied with
when the consignee filed a provisional claim within the 30-day period.
nAs 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.
nIt 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 BL are attached.
Firemens Fund v. Tabacalers, 34 SCRA 392
Held:
nThe adverse stipulations of the Revised Management Contract will affect the importer only if the
delivery permit is stamped: subject to RMC.
nWhere there is none, the importer cannot be bound.
n

DEGREE OF DILIGENCE REQUIRED IN ARRASTRE

nIn 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, i.e. EXTRAORDINARY
DILIGENCE.
nBeing custodian of the goods discharged from a vessel, an arrastre operators duty is to take
good care of the goods and to turn them over to the party entitled to their possession. [Summa
Insurance v. CA, 253 SCRA 175]
BURDEN OF PROOF IN ARRASTRE CLAIMS
nIn a claim for loss filed by a consignee, the burden of proof to show compliance with the
obligation to deliver the goods to the appropriate party devolves upon the arrastre operator.
nThe reason is because the safekeeping of the goods rest within its knowledge. Hence, it must
prove that the losses were not due to its negligence or that of its employee. [ICTSI v. Prudential
Guarantee & Assurance Co., Inc., 320 SCRA 244]
SHIPPERS LOAD & COUNT SHIPMENT
nWhen consigned goods are shipped under shippers load and count, the shipper is solely
responsible for the containers load as the carrier would then be oblivious of the contents of the
shipment.
nProtection against pilferage of the shipment are then the consignees lookout.
nThe arrastre operator is, like any ordinary depositary, duty-bound to take good care of the
goods received from the vessel and to turn the same over to the party entitled to their possession,
subject to such qualification as may have validly been imposed in the contract between the
parties.
nThe

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 shippers load
and count, and is expected to deliver to the consignee only the container received from the
carrier.
COMMERCIAL TERMS WHEN CARRIER INTERVENES
nFOB (Free on Board) Delivery to the vessel is delivery to the buyer. Carrier becomes the
AGENT OF THE BUYER.

59

FAS (Free Alongside Ship) The seller pays all charges and bears the risk until the goods are
placed alongside overseas vessel and within the reach of its loading tackle. The same
presumption as FOB.
n

CIF (Cost, Insurance & Freight) The quotation price quotation on CIF presumes that the seller
shall pay the cost of rating and packaging, insurance and the freightage. Carrier is deemed the
agent of the seller and ownership is retained by him throughout the trip. It passes to the buyer
only upon reaching the port of destination and the cargo is discharged and delivered to the
buyer. Insurable interest is with the SELLER. Taxes are not yet due since the sale is not yet deemed
perfected until the cargo reaches the port of destination.
n

PART II
MARITIME LAW
Chapter 6
GENERAL CONCEPTS
MARITIME LAW
nThe system of laws which particularly relates to the affairs and business of the sea, to ships, their
crews and navigation, and to marine conveyance of persons and property.
Includes:
nBook II, Code of Commerce (Maritime Commerce
n Act No. 2616 (The Salvage Law)
nC.A. No. 65 (Carriage of Goods by Sea Act)
nP.D. 1521 (Ship Mortgage Decree of 1978)
nR.A. 9295 (The Domestic Shipping Act of 2004)
nOther special laws relating to maritime commerce
ORIGINS OF SHIPPING
nMans first use of the sea started 3,000 years ago Fishing developed into highly organized
activity.
nAt that time, ships were used to carry large and heavy piece of cargo which neither man nor
beast of burden can carry.
nIn one account, the Queen of Ancient Egypt move her stone obelisks weighing 700 tons through
the entire length of Egypt on the Nile River.
nEgyptians were credited in revolutionizing shipping when they invented the SAIL.
But it is the ROMANS who conceived the basic principle of marine transport on economic
dimension of shipping when they found out that carting a large quantity of grain to the empires
frontier 75 miles away would cost more than to ship it by sea.
n

CODE OF HAMURRABI
nIn 2000 BC, Babylonian Ruler Hamurrabi codified the following maritime laws on:
- Marine Collisions
- Bottomry
- Reimbursement for Leased Watercraft
DEVELOPMENT OF UNIVERSAL MARITIME LAW

60

Phoenicians Sea Law

Code of Rhodes, which regulated Greek Commerce for a very long time
nRoman Maritime Law
n
n

RHODIAN - ROMAN MARITIME LAW

n1st Section (MARE) Deals with the sea and concerns of public law of the sea. Mare liberium did
not exist yet.
n2nd Section (NAVIS) Deals with the ship and enunciates the classification of watercrafts into
freighter or passenger vessels and seagoing or inland crafts.
n3rd Section (MERX) Deals with cargo and the admiralty principles as known today.
n4th Section (OBLIGACIONES) - Deals with the responsibilities of ship owners and masters.
n5th Section (ACTIONS) Deals with dispute settlement arising from shipping transactions.
EVOLUTION OF MODERN LAW ON MERCHANT SHIPPING
n1896: Comite Maritime Internationale (CMI) organized for the purposed of unification of
merchant marine rules.
nConference Diplomatique De Droit Maritime (Brussels) - 16 International Conventions and
protocols approved, i.e. collision at sea, salvage, bill of lading, carriage of goods by sea, etc.
UN AGENCIES IN MARITME LAW
nInternational Maritime Organization (IMO) established the Technical Regulation of Shipping.
nUnited Nations Conference on Trade and Development (UNCTAD) established the Economic
Regulations of Shipping.
nInternational Labor Organization (ILO) established the International Merchant Labor
Regulations Standards.
nUN Conferences Established UNCLOS (1982), Geneva Conventions on the Law of the Sea
(1958/1960)
REAL AND HYPOTHECARY NATURE MARITIME LAW
nThat which distinguishes the maritime from the civil law and even from the mercantile law in
general is the REAL AND HYPOTHECARY nature of the former, and the many securities of a real
nature that maritime customs from time immemorial, the laws, the codes, and the later
jurisprudence, have provided for the protection of the various and conflicting interest which are
ventured and risked in maritime expeditions. [Phil. Shipping Co. v. Vergara, G.R. No. 16000, June
1, 1906]
MEANING OF REAL AND HYPOTHECARY NATURE
nThe liability of the carrier in connection with losses related to maritime contracts is confined to the
vessel, which is hypothecated for such obligations or which stands as the guaranty for their
settlement.
nNO VESSEL, NO LIABILITY RULE.
SUMMARY OF THE NATURE OF MARINE TRANSACTIONS
nREAL A vessel is essentially a personal property because it is movable. But the Supreme Court
characterized maritime transactions as having a real nature insofar as these transactions are
similar to transactions over real property with respect to effectivity against third persons which
are effected through registration. Registration of vessels now lodged at MARINA.
nHYPOTHECARY The liability of the owner of the vessels is limited to the vessel itself. If he
vessel sinks, generally the liability of the owner is extinguished, although he may have other
properties

61

EVIDENCE OF REAL NATURE OF MARITIME LAW

nLimitation of the liability of the agents to the actual value of the vessel and the freight money;
and
nRight to retain the cargo and the embargo and detention of vessel even in cases where the
ordinary civil law would not allow more than a personal action against the debtor or person
liable. [Luzon Stevodoring v. CA, 156 SCRA 169]
Aboitiz Shipping v. General Accident Fire Ins., 217 SCRA 359
nHeld:
nThe rights of vessel owner or agent under the Limited Liability Rule are akin to those of the rights
of shareholders to limited liability under our Corporation Law.
nIn both insolvency of a corporation and the sinking of a vessel, the claimants or creditors are
limited in their recovery to the remaining value of accessible assets.
Monarch Insurance v. CA,
333 SCRA 71
nThe Limited Liability Rule in Maritime Law has not been rendered obsolete by the advances in
modern technology which have considerably lessen the risks involved in maritime trade, and the
courts continue to apply the said rule in appropriate cases.
ICTSI v. PRUDENTIAL GUARANTEE, 320 SCRA 244
nHeld:
nAs both nature of the function and the place of their performance, an arrastre operators service
are clearly not maritime in character.
nThe legal relationship between an arrastre operator and a consignee is akin to that between a
warehouseman and a depositor.
PROVISIONS ON LIMITED LIABILITY RULE
nArt. 587, CoC: The ship agent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of the goods which he loaded
on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her
equipment and the freight it may have earned during the voyage.
nArt. 590: The co-owners of the vessel shall be civilly liable in the proportion of their contribution
to the common fund for the results of the acts of the captain, referred to in Art. 587.
Each co-owner may exempt himself from this liability by the abandonment, before
a notary, of that part of the vessel belonging to him
nArt.

643 (Ibid): If the vessel and her cargo should be totally lost, by reason of capture or wreck,
all rights shall be extinguished, both as regards the crew to demand any wages whatsoever, and
as regards the ship agent to recover the advances made.
nIf a portion of the vessel or of the cargo, or both, should be saved, the crew engaged on wages,
including the captain shall retain their rights on the salvage, so far as they go, on the remainder
of the vessel as well as on the amount of freightage of the cargo saved;
But sailors who are engaged on shares shall not have any right whatsoever on the salvage of the
hull, but only on the portion of the freightage saved. If they should have worked to recover the
remainder of the shipwrecked vessel they shall be given from the amount of the salvage an
n

62

award in proportion of the efforts made and to the risks encountered in order to accomplish the
salvage.
Art. 837 (Ibid): The civil liability incurred by the shipowners in the cases prescribed in this section,
shall be understood as limited to the value of the vessel with all her appurtenances and freight.
nNotes: Art. 837 applies to collision cases only.
n

EXCEPTIONS
nWhere the injury or death to a passenger is due either to the fault of the ship owner or to the
CONCURRING NEGLIGENCE OF THE SHIP OWNER AND THE CAPTAIN.
nWhere the vessel is insured.
nIn workmens compensation claims.
nWhere vessel is partially lost.
nLiability on repairs made prior to the loss of the vessel.
nForeclosure of mortgage on the ship
SHIPOWNERS FAULT
The well-entrenched rule in our jurisprudence is that a ship owner may be held liable for injuries
to passengers notwithstanding the exclusively real and hypothecary nature of Maritime Law, if
fault can be attributed to the ship owner. [Negros Navigation v. CA, 281 SCRA 534]
n

CONCURRENT NEGLIGENCE OF SHIPOWNER & CAPTAIN

nAlthough the ship agent is liable for the negligent act of the captain in the care of goods loaded
on the vessel, this liability can be limited through abandonment of the vessel, its equipment and
freightage as provided in Art. 387.
nNonetheless, there are exceptional circumstances wherein the ship agent could still be held
answerable despite the abandonment as where loss or injury was due to fault OF SHIPOWNER
AND CAPTAIN.
Manila Steamship v. Abdulhman, 100 Phil. 32
Facts:
nAbdulhaman bought a submarine chaser of WWII vintage, which he converted into a passenger
ship. The chaser, being at fault collided with a new steel vessel of Manila Steamship and it sank.
Manila Steamship sued to recover damanges as Adbulhaman had other properties.
nThe latter put up the defense that his liability was extinguished by the loss of the chaser.
nIt was proven that the chaser, being of a certain tonnage, should have been commanded by one
having qualifications of captain and not a mere patron.
Held:
nAbdulhaman is still liable. The hypothecary nature will not apply when the ship owner is
personally at fault due to:
- Lack of proper equipment; or
- Lack of proper technical training of the officers and crew.
PARTIAL LOSS
nIn the event the vessel is not entirely lost, the hypothecary nature of the maritime transaction
under Art. 837 of the Code of Commerce will not apply, unless the shipowner or agent abandons
the vessel. [Luzon Stevedoring v. CA, 156 SCRA 169]
REPAIRS ON VESSEL

63

The limited liability rule in maritime law does not apply in case where the liability was for
repairs on the vessel that was completed before her loss. [Government of P.I. v. Insular Maritime
Co.. 45 Phil. 805]
n

LOSS COVERED BY INSURANCE

nWhere vessel is at fault sinks but is insure, the insurance takes the place of such vessel.
nThe liability subsists but only to the extent of the insurance proceeds.
nThe excess is still subject to the hypothecary rule. [Pedro Vazquez v. CA, 138 SCRA 553]
Abueg v. San Diego, 77 Phil. 32
Facts:
nA vessel of San Diego, a shipping operator, sank and one crew member died. When the heirs of
the deceased sought compensation under the Workmens Compensation Law, San Diego put up
the defense of the hypothecary nature of maritime transactions to avoid liability.
Held:
nSan Diego is still liable. Workmens compensation is an exception to the hypothecary nature of
maritime transactions in view of two reason, to wit:
(1) The Code of Commerce was promulgated in 1880 while the Workmens
Compensation Law was enacted in 1925. In case of conflict, the latter prevails.
(2) Provisions on hypothecary nature of maritime transactions contained in the
Code of Commerce are general provisions while that in Workmens Compensation Law are
specific. In case of conflict, specific provisions of law prevail.
Loadstar Shipping v. CA,
315 SCRA 339
Held:
nFailure of 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 of the Civil Code.
nThe doctrine of limited liability will not apply.
ABANDONMENT OF VESSEL
nAbandonment of the vessel, its appurtenances and freightage is an indispensable requirement
before the shipowner can enjoy the benefits o the limited liability principle.
nIn case of collision, abandonment of the vessel is necessary in order to limit the liability of the
shipowner or the agent to the value of the vessel, its appurtenances and freightage earned in the
voyage.
nOnly instance abandonment is dispensed with is when the vessel was entirely lost. [Phil. Shipping
Co. v. Garcia, 6 Phil. 281
Protest
nA written statement by the master of a vessel or any authorized officer, attested by a proper
officer or a notary, to the effect that damages has been suffered by the ship.
nProtest is required under the Code of Commerce in the following cases:
1. Arrival under stress
2. Shipwrecked
3. Gone through a hurricane or the captain believes that the cargo has suffered damage
or average
4. Maritime collisions

64

Admiralty Jurisdiction
nRTC or MTc, depending on the amount of the demand or claim.
nAmount determines jurisdiction of the court.
nThe proceeding is in rem.
Chapter 7
Vessels
Ship or vessel
nShip or Vessel - means any kind, class or type of craft or artificial contrivance capable of
floating in water, designed to be used, or capable of being used, as a means of floating in water
transport in the domestic trade for the carriage of passengers or cargo, or both, utilizing its own
motive power or that of another. [R.A. 9295]
Prescriptive Period on Vessels
nAcquisitive prescription: Good faith 4 years; bad faith 8 years. Prescription doesnt run in
favor the captain since he holds the position that of a trustee. [Art. 573]
nRight of pre-emption and legal redemption available to co-owners to be exercised within 30days from sale of the vessel. [Art. 575]
Rules on Co-ownership of Vessel
nCo-ownership of vessel gives rise to a partnership ipso jure. No agreement is needed before a
partnership is created. {Note: This is one instance of a partnership coming into existence by mere
operation of law. Another instance when there is commingling of similar good of fungible nature.}
nMajority may perform acts of administration but acts of ownership require the concurrence of all
the co-owners.
nMajority is determined in accordance to the following: 1 vote given to the co-owner who
contributed the least capital, 2 votes to the one who gave double, et sequitur.
Importance of the Definition
nThe word vessel (Spanish: buque or nave) was not intended to include all ships, craft or floating
structures of every kind without limitation, and the provisions of that section should not be held to
include minor craft engaged only in river and bay traffic.
nThe word nave, which is used inter-changeably with buque means a SHIP, A VESSEL WITH
DECKS AND SAILS. A deck is not a feature of the smallest types of watercraft.
nSuch type of watercraft is not contemplated in Art. 835 requiring protest in case of collision.
[Lopez v.Dureolo, 52 Phil. 229]
It is therefore clear that a passenger on a boat like the Jison, in the case before us, is not
required to make protest as a condition precedent to his right of action for the injury suffered by
him in the collision described in the complaint. Art. 835 does not apply.
nNevertheless, under Article 836, it is provided that want of protest cannot prejudice a person not
in a condition to make known his wisher.
nAn individual who has suffered a compound fracture of the femur and received other physical
injuries sufficient to keep him in a hospital for many months, cannot be supposed to have been in a
condition to make protest within 24-hours of such occurrence.
Peculiar nature of vessels (Philippine Refining Co. v. Jarque, G.R. 41506, Mar. 25, 1935)
nVessels are considered personal property under civil law. Similarly under the common law,
vessels are personal property although referred to as a peculiar kind of personal property.
n

65

Since the term personal property includes vessels, they are subject to mortgage agreeably to the
provisions of the Chattel Mortgage Law (Act No. 1508, Sec. 2).
n

The only difference between a chattel mortgage of a vessel and of other personalty is that it is
not now necessary for a chattel mortgage of a vessel to be noted in the register of deeds, but it is
essential that a record of documents affecting title to a vessel be entered in the record of the
Collector of Customs (now with MARINA by virtue of M.C. 90) at the port of entry (now at the port
of registry, in case of coastwise vessel).
nOtherwise, a mortgage on a vessel is generally like other chattel mortgages as to its requisites
and validity.
n

Mortgage of Ship (P.D. 1521)

nSec. 3. Mortgage of Vessel of Domestic Ownership; records
(a) No mortgage is valid in respect to such vessel against any person other than the
mortgagor, his heir or assign, and a person with actual notice thereof unless recorded with the
PCG (now MARINA)
nSec. 4. Preferred Mortgages: Mortgage is preferred based on the date of recording if:
- It is recorded with PCG (MARINA)
- An affidavit in good faith is filed together with the record of mortgage.
- No waiver of preferred status.
Suit in Admiralty
(Sec. 10. P.D. 1521)
nPreferred mortgage constitutes as a lien upon the vessel. In case of default, the mortgage lien
may be enforced by SUIT IN REMAINING ADMIRALTY, wherein the vessel itself may be made a
party defendant and be arrested in accordance with Sec. 11.
nOriginal jurisdiction: CFI (now depending on the amount of the claim)
nRequirement of notice by publication and actual notice to:
- the master or other ranking officer, or caretaker of the vessel; and
- Any person who has recorded a notice of claim of an un-discharged lien upon the vessel.
Arrest of Vessels
[Sec. 11, P.D. 1521]
nUpon filing of petition for judicial foreclosure of a Preferred Ship Mortgage or immediately
thereafter,
nApplicant may apply ex-parte for an order for the arrest of the mortgaged vessel.
nJudge to immediately issue arrest order, if it is made to appear by affidavit of the applicant, or
of some other person who personally know the facts that a default in the mortgage has occurred
and that applicant files a bond executed to the adverse party in an amount to be fixed by the
judge, not exceeding the applicants claim, conditioned that the latter will pay all the costs which
may be adjudged to the adverse part and all damages sustained.
Procedure in discharge of arrest
(Sec. 12, P.D. 1521)
nFile counter-bond in an amount double of the claim; or
nApply for order on the ground of improper or irregular issuance of order.
Extrajudicial Foreclosure of Vessel (Sec. 14, P.D. 1521)
nApplicable provisions in Chattel Mortgage Law govern.

66

For purpose of taking possession of the vessel, the foreclosing creditor to secure from RTC Judge
of the province where the vessel may be our or where the creditor or debtor resides, an order for
the arrest or seizure of the vessel.
nUpon issuance of the order, the sheriff to immediately take possession of the vessel for the
purpose of foreclosure and sale.
n

Foreign Ship Mortgage

(Sec. 15, P.D. 1521)
nPreferred mortgage in foreign ship includes those duly recorded by virtue of Sec. 4 (supra) and:
nPreferred mortgage lien in foreign ship is subordinate to maritime liens for repairs, supplies
towage, use of drydock or marine railway, or other necessaries performed or supplied in the
Philippines.
How proceeds of sale disposed
(Sec. 17, P.D. 1521)
nPreferred mortgaged lien takes priority over all claims against the vessel. Exceptions:
1. Expenses and fees allowed and costs taxed by the court and taxes due to the government.
2. Crews wages.
3. General average.
4. Salvage, including contract salvage.
5. Maritime liens arising prior in time to the recording of the preferred mortgage.
6. Damages arising out of tort.
7. Preferred mortgaged registered prior in time.
If proceeds of the sale is not sufficient to pay all creditors included in one number or grade, the
residue shall be divided among them pro rata.
nAll credits not paid, whether fully or partially shall subsist as ordinary credits enforceable by
personal action against the debtor.
Suit in Personam in Admiralty upon Default (Sec. 18. P.D. 1521)
nAllows the creditor to bring suit in personam in admiralty against the mortgagor for the amount
of the outstanding mortgage indebtedness even if secured by the vessel.
nIf the debt is also secured by other realty or personalty, the creditor may proceed upon the
same.
Maritime Lien for Necessaries
(Sec. 21, P.D. 1521)
nRepairs, supplies, towage, use of drydock or marine railway, or other necessaries were furnished
to the vessel.
nThe work is done on orders of the ship owner or person authorized by the owner.
nSuch credit must be alleged or proved that it was given to the vessel.
nEnforceable by suit in rem.
MARINA M.C. 100 (Guidelines on Annotation/Cancellation of Mortgage)
nDocumentary requirements:
nLetter of Intent & Duly accomplished application form;
nDuly notarized mortgage contract;
nProof of payment of documentary stamp tax with the BIR; and
nOriginal copy of CO and CVR.
Note: The annotation of mortgage to be reflected at the back of the CVR and CO.
Other applicable MARINA regulations on vessels
n

67

M.C. No. 48 Measure to control overcrowding/ overloading and scalping of tickets in the
interisland vessels.
nM.C. No. 72 Guidelines on the Implementation of at least 10-minute film on safety features of
each specific passenger/passenger-cargo vessels as amended by M.C. No. 136.
nM.C. No. 83 Guideline on the issuance of endorsement certificates in accordance with the
STCW (Standards for Training, Certification and Watchkeeping) 1978 Convention.
nM.C. No. 89 Implementing guidelines for vessel safety regulations as amended by 89-B.
n

M.C. No. 114 Preventive Safety Measure and other concerns

M.C. No. 123 Wearing of lifejackets during boarding and/or prior to departure by all
passenger vessels with open deck accommodation.
nM.C. No. 135 Rules on the implementation of voice tape on the safety features of a vessel.
nM.C. No. 143 Rules and regulations to implement the International Safety Management (ISM)
Code in Domestic Shipping ( M.C. No. 159 for NSM).
n
n

Republic Act 9295

The Domestic Shipping Development Act of 2004
State policies on shipping
(Sec. 2)
n(a) promote Filipino ownership of vessels operated under Philippine flag;
n(b) attract private capital to invest in the shipping industry by creating a healthy and competitive
investment and operating environment;
n(c) provide necessary assistance and incentives for the continued growth of the Philippine
domestic merchant marine fleet;
(d) encourage the improvement and upgrading of the existing domestic merchant marine fleet
and Filipino crew to meet international standard;
n(e) ensure the continued viability of domestic shipping operations; and
n(f) encourage the development of a viable shipbuilding and ship repair industry to support the
expansion and modernization of the Philippine domestic merchant marine fleet and its strict
adherence to safety standards which will ensure the seaworthiness of all sea-borne structures.
Important terms in R.A. 9295 & IRR
nDomestic Shipping - means the transport of passengers or cargo, or both, by ships duly
registered and licensed under Philippine law to engage in trade and commerce between
Philippine ports and within Philippine territorial or internal waters, for hire or compensation, with
general or limited clientele, whether permanent, occasional or incidental, with or without fixed
routes, and done for contractual or commercial purposes.
n Domestic Trade - means the sale, barter or exchange of goods, materials or products within the
Philippines.
n

Domestic Ship Operator" or "Domestic Ship Owner" - means a citizen of the Philippines, or a
commercial partnership wholly owned by Filipinos, or a corporation at least sixty percent (60%)
of the capital of which is owned by Filipinos, which is duly authorized by the Maritime Industry
Authority (MARINA) to engage in the business or domestic shipping.
nShipper - means any person, partnership or corporation who shall procure for itself the services
of a domestic ship operator for the carriage of its cargo in the domestic trade upon payment of
proper compensation.
n

68

Certificate of Public Convenience - means the license or authority issued by MARINA to a

domestic ship operator to engage in domestic shipping.
nCargo Handling Equipments - means any machinery gear or equipment used by the ship
operator or a duly authorized and licensed port operator to service or handle cargo, on board
the vessel, at the pier, or in the terminal or container yard such as, but not limited to, cranes,
forklifts, top lift, stacker, tractor heads, containers, pallet boards, and the like, including all spare
parts, replacement parts, appurtenances, accessories, articles, supplies, and material thereof.
n

Shipbuilding - means the design, construction, launching and outfitting of all types of ships and
watercraft;
nShip repair - means the overhaul, refurbishment, renovating, improvement, or alternation of the
hull, machineries, equipment, outfits and components of all types of ships;
nShipyard - means the shipbuilding or repair facilities which have the capability to lift vessels
above the waterline in order to effect ship work vessels, appendages, structure, machinery and
equipment.
Investment incentives to domestic shipping industry (Sec. 4)
n(a) Exemption from value-added tax on the importation and local purchase of passenger and/or
cargo vessels of one hundred fifty (150) tons and above, including engine and spare parts of
said vessels.
nVessels to be imported must comply with the age limit requirement, at the time of acquisition
counted from the date of the vessels original commissioning, as follows: 1) For passenger and/or
cargo vessels, the age limit is fifteen (15) years old, 2) For tankers, the age limit is ten (10) years
old, and 3) For high-speed passenger craft, the age limit is five (5) years old;
n

(b) Exemption from value-added tax on the importation of life-saving equipment, safety and
rescue equipment and communication and navigational safety equipment, steel plates, and other
metal plates including marine-grade aluminum plates, used for transport operations.
n

CONDITIONS IN THE GRANT OF (a) & (b):

nNot manufactured domestically in sufficient quantity, of comparable quality and at reasonable
prices;
nDirectly imported by a MARINA-registered domestic shipping operator;
Reasonably-needed and will be used exclusively by the registered domestic shipping operators
in its transport operations;
n Approval of a MARINA was obtained prior to the importation of said articles;
nValid up to ten (10) years from effectivity.
Deregulation of the Domestic Shipping Industry (Sec. 8)
nDomestic ship operators authorized to establish their own domestic shipping rates provided that
effective competition is fostered and public interest is served.
nMARINA shall monitor all shipping operations and exercise regulatory intervention where it is
established, after due process that public interest needs to be protected and safeguarded.
Safety Standards
(Sec. 9)
nAll vessels shall at all times be in seaworthy condition, properly equipped with adequate lifesaving, communication, safety and other equipment, operated and maintained in accordance with
the standards set by MARINA, and manned by duly licensed and competent vessel crew.
nThe MARINA given the power to inspect vessels and all equipment on board vessels to ensure
compliance with safety standards.
n

69

Jurisdiction of MARINA
(Sec. 10)
nRegister vessels;
nIssue certificates of public convenience, or any extensions or amendments thereto, authorizing the
operation of all kinds, classes and types of vessels in domestic shipping: Provided, That no such
certificate shall be valid for a period of more than twenty-five (25) years;
nModify, suspend or revoke at any time, upon notice and hearing, any certificate, license or
accreditation it may have issued to any domestic ship operator;
nEstablish and prescribe routes, zones of areas of operations of domestic ship operators;
Require any domestic ship operator to provide shipping services to any coastal area, island or
region in the country where such services are necessary for the development of the area, to meet
emergency sealift requirements, or when public interest so requires;
nSet safety standards for vessels in accordance with applicable conventions and regulations;
n

Require all domestic ship operators to comply with operational and safety standards for vessels
set by applicable conventions and regulations, maintain its vessels in safe and serviceable
condition, meet the standards of safety of life at sea and safe manning requirements, and furnish
safe, adequate, efficient, reliable and proper service at all times;
nInspect all vessels to ensure and enforce compliance with safety standards and other regulations;
n

Ensure that all domestic ship operators shall have the financial capacity to provide and sustain
safe, reliable, efficient and economic passenger or cargo service, or both;
nDetermine the impact which any new service shall have to the locality it will serve;
nAdopt and enforce such rules and regulations which will ensure compliance by every domestic
ship operator with required safety standards and other rules and regulations on vessels safety;
n

Adopt such rules and regulations which ensure the reasonable stability of passengers and freight
rates and, if necessary, to intervene in order to protect public interest;
nHear and adjudicate any compliant made in writing involving any violation of this law or the
rules and regulations of the Authority;
nImpose such fines and penalties on, including the revocation of licenses of, any domestic ship
operator who shall fail to maintain its vessels in safe and serviceable condition, or who shall
violate or fail to comply with safety regulations;
n

Investigate any complaint made in writing against any domestic ship operator, or any shipper, or
any group of shippers regarding any matters involving violations of the provisions of this Act;
nUpon notice and hearing, impose such fines, suspend or revoke certificates of public convenience
or other license issued, or otherwise penalize any ship operator, shipper or group of shippers
found violating the provisions of this Act; and
n

Issue such rules and regulations necessary to implement the provisions of this Act: Provided, That
such rules and regulations cannot change or in any way amend or be contrary to the intent and
purposes of this Act.
Prohibited Acts and Practices of Domestic Ship Operators (Sec. 16)
q Operate without a valid certificate of public convenience, accreditation or other form of
authority required by this Act;
n

70

Refuse to accept or carry any passenger or cargo without just cause;

Fail to maintain its vessels in safe and serviceable condition, or violate safety rules and
regulations;
q Fail to obtain or maintain adequate insurance coverage;
q Fail to meet or maintain safe manning requirements; and
q Such other acts which the MARINA shall determine, after due notice and hearings, to be
detrimental or prejudicial to the safety, stability and integrity of domestic shipping.
q
q

CPC Issuance (Sec. 2, Rule IV, IRR of R.A. 9295 on Deregulation)

nPower of MARINA to issue CPC or any amendments/extensions/renewals.
Requirements:
nEconomic and beneficial effect which the proposed service shall have to the port, province or
region which it proposes to serve; and
n Financial capacity of the domestic shipowner/operator to provide and sustain safe, reliable,
adequate, efficient and economical service in accordance with the standards set by government
regulations.
Amendment to CPC
(Sec. 3, Rule IV IRR)
nPermanent Addition or Deletion of a route/port/link; or,
nPermanent Addition/ Reduction/ Replacement of Ship/Fleet or Change in Ships Name; or,
nPermanent Addition/ Reduction/ Replacement of Ship/Fleet or Change in Ships Name; or,
nChange in name of the entity/corporation/partnership/cooperative.
Validity of CPC
(Sec. 5, Rule IV IRR)
Qualification Requirements
(Sec. 6, Rule IV, IRR)
nMust be a MARINA-registered shipowner/operator per MARINA MC 79/79-A or their
subsequent amendments.
nMust be financially capable to provide and sustain safe, reliable, adequate, efficient and
economical service in undertaking the proposed shipping service.
Formula on Financial Capability: Capitalization = (Equity fixed assets net of long-term
liabilities) + total depreciation
n Must provide a service that has economic and beneficial effect on the port, province or region it
proposes to serve.
Jurisdictional Requirements
(Sec. 8, Rule IV, IRR)
nAffidavit of publication with the newspaper clipping;
nCopy of the whole newspaper where the Order was published;
nPhotographs showing proof of the required posting of Order.
Safety Standards
(Sec. 1, Rule VI, IRR)
nAll ships shall, at all times, be in seaworthy condition as to their hull and machinery
nProperly outfitted with adequate navigational aids and equipment, firefighting, life-saving,
communication, and other safety appliances/equipment.
nOperated and maintained in accordance with prescribed standards, and manned by duly
licensed and competent ship crew.

71

Rates
(Sec. 1, Rule VIII, IRR)
nDomestic shipowners/operators are authorized to establish/fix their own domestic shipping
rates, passenger or cargo rates or both.
nLimitation: Effective competition is fostered and public interest is served.
nEffectivity: 7 calendar days from the date of publication.
Conditions in Fixing Rates
(Sec. 2, Rule VIII, IRR)
nShipowners/operators with Entity/Company CPC to submit under oath with the MARINA their
Notice for the adoption of initial/ subsequent upward or downward adjustment of deregulated
rates in a prescribed form.
nThe notice shall indicate, among others, the name of covered ship(s), authorized route(s)/link(s),
rate(s) per route/link and the grounds for the adjustment.
Publication Requirement of
Adjusted Rates
nThe notice shall be published in any of the five (5) major newspapers of national circulation, if
the route(s)/area(s) of operation to be served is national and/or inter-regional in scope.
nIf the route(s)/area(s) to be served is local or intra-regional in scope, publication in a newspaper
of local circulation is sufficient.
nAnd, posting of the notice in in all conspicuous places at the affected port(s), vessel(s), company
premises, passenger terminals and ticketing office(s).
Instances Warranting MARINA Intervention (Sec. 4, Rule VIII, IRR)
nMonopoly of a route/link, lack of effective competition in a route/link, and practices which
constitute combinations in restraint of trade.
n Any complaint against the rates charged and/or services rendered by the
shipowners/operators provided sufficient basis/justification is submitted.
nAny adverse findings/recommendations as a result of monitoring activities undertaken by the
MARINA.
nOther analogous instances.
Compulsory Insurance Coverage (Sec.1, Rule IX, IRR)
n(1) Not less than Php 200,000.00 per manifested passenger;
n(2) Adequate insurance coverage for cargo, in an amount to be computed in accordance with
existing laws, rules and regulations, and the total amount of such coverage shall be equivalent to
the total cargo capacity being offered by the vessel.
n (3) If a domestic shipowner/operator should offer both passenger and cargo service, then the
total insurance coverage shall be in the total sum equivalent to that stipulated in paragraphs (1.1)
and (1.2) of this Section.
Amount of Insurance If Operating more than (1) ship
nThe amount equivalent to the total authorized number of passengers, or total cargo capacity, or
both, of the largest operating ship.
nBut must not exceed the value of such ship.

72

Prohibited Acts
(Sec. 1, Rule XII, IRR)
nOperating without a valid certificate of public convenience, accreditation or other form of
authority.
nRefusal to accept or carry any passenger or cargo without just cause, except for tramp
operations.
nFailure to maintain the vessels in safe and serviceable condition, or violation of the safety rules
and regulations.
nFailure to obtain or maintain adequate insurance coverage.
nFailure to meet or maintain safe manning requirements.
Failure to submit the required Quarterly Report and an audited Annual Report of Operations
and Finances, attaching the copy of the Official Receipt (OR) of Quarterly and Monthly Common
Carriers Tax Payments to the
n

Bureau of Internal Revenue.

Other detrimental or prejudicial to the safety, stability and integrity of domestic shipping.
nThose prohibited acts defined in existing MARINA Circulars.
n
n

Powers of MARINA
(Rule XIV, IRR)
nPower to Investigate
nPower to Hear and Adjudicate
nPower to Issue Summons
Rules on Appeals to MARINA Regional Offices CPC Decisions (Rule XV, IRR)
nOrder, ruling, decision or resolution rendered by MARINA Regional Office relating to CPC
application
nMR 15 days from receipt;
nIf denied, appeal to Administrator 15 days from receipt.
nIf denied by MARINA Administrator:
- ADMINISTRATIVE APPEAL to the MARINA Board within 15 days from receipt; or
- Special Civil Action on Certiorari with CA within 30 days from receipt.
All other Decisions
nMR 15 days from receipt;
nIf denied, appeal to MARINA Administrator 15 days from receipt.
nIf denied by MARINA Administrator: ADMINISTRATIVE APPEAL to the MARINA Board within 15
days from receipt.
Perfection of Appeal
nFile a Notice of Appeal with the MARINA Administrator and the concerned CO/MRO
Director/OIC.
nCopy to be served upon the adverse party.
nWithin 15 days from receipt of the appealed from decision, etc.
nPayment of Docket Fee of P1,000.
Temporary Take-Over of Operations (Sec. 1, Rule IX, IRR)
nIn times of national emergency;
nWhen the public interest so requires;

73

Under reasonable terms prescribed by the Flag state;

Flag state may temporarily take over or direct the operations of any vessel engaged in
domestic trade and commerce or prescribe its rates or routes of operation.
n Immediately upon the cessation of the emergency, the State shall immediately reinstate to the
domestic shipowner/operator the operation of the ship under the same terms and conditions
existing prior to the occurrence of the emergency.
n
n

Chapter 8
Persons Who Take Part In Maritime Commerce
Ship owner and Ship agent
nShip owner the person primarily liable for damages sustained in the operation of vessel.
nShip agent the person entrusted with provisioning of the vessel, or who represents her in the
port in which she happens to be.
nBoth are civilly liable for the acts of the captain and for the obligations contracted by the him to
repair, equip, and provision the vessel. [Art. 586, Code of Commerce]
Domestic Shipowner/operator
nA citizen of the Philippines, or a commercial partnership wholly owned by Filipinos, or a
corporation at least sixty percent (60%) of the capital of which is owned by Filipinos, which is
duly accredited by the MARINA under Memorandum Circular No. 79/79-A or their subsequent
amendments to engage in the business of domestic shipping, which may include cooperative or
association duly registered with relevant government agency. [IRR, R.A. 9295]
Captain and Masters
nCaptain those who govern vessels that navigate the high seas or ships of large dimensions and
importance, although they may be engaged in coastwise trade.
nMasters those who command smaller ships engaged exclusively in the coastwise trade.
Note: For purposes of maritime commerce, both have the same meaning, i.e. they command ships.
Powers & Functions of Captains (Masters)
nNature of his position: confidential and managerial.
n3 distinct roles he performs:
(1) As general agent. If he is also a co-owner, his agency becomes one coupled with
interest. He may not be dismissed if he is a co-owner or the partnership agreement stipulates as a
condition as ship captain [see Art. 602 & 606 -607];
(2) As commander and technical director of the vessel; and
(3) As representative of the country under whose flag he navigates.
Vessel Pilot
nA person duly qualified, and licensed, to conduct a vessel into or out of ports, or in certain
waters.
nIn a broad sense, the term pilot includes:
- Those whose duty it is to guide vessels into or out of ports, or in particular waters; and
- Those entrusted with navigation of vessels on the high seas.
nCompulsory pilotage is enforced in the Port of Manila, Port of Cebu, Port of Tacloban, among
others.
Pro Hac Vice Nature of Position of Pilot

74

Under English and American authorities, generally speaking, the pilot supersedes the master for
the time being in the command and navigation of the ship, and his order must be obeyed in all
matters connected with her navigation.
nHe becomes master pro hac vice and should give all directions as to speed, course, stopping and
reversing, anchoring, towing and the like.
nAnd when a licensed pilot is employed in a place where pilotage is compulsory, it is his duty to
insist on having effective control of the vessel or to decline as pilot. [Far Eastern Shp., v. CA, G.R.
No. 130068, Oct. 1, 1998]
Occasions When Master May Interfere or Even Displace Pilot
nWhen Pilot is obviously incompetent or intoxicated;
nIn cases of danger which pilot does not foresee;
nIn all cases of great necessity.
nTo advise or offer suggestions to the pilot considering that he is still in command of the vessel,
except so far as her navigation is concerned.
nTo see that there is sufficient watch on deck and that the men are attentive to their duties, etc.
nFailure on the part of the Master to comply with above duties makes him personally liable for
resulting damage cause. [Ibid]
n

Liability of Pilot
nRule: a pilot is personally liable for damages caused by his own negligence or default to the
owners of the vessel and to third parties for damages sustained in a collision.
nNegligence of Pilot is known as MARITIME TORT
nAs held In Far Eastern Shipping:
nIn the United States, the owners of a vessel are not personally liable for the negligent acts of a
compulsory pilot, but by admiralty law, the fault or negligence of a compulsory pilot is imputable
to the vessel and it may be held liable therefor in rem.
Where, however, by the provisions of the statute the pilot is compulsory only in the sense that his
fee must be paid, and is not in compulsory charge of the vessel, there is no exemption from
liability.
nEven though the pilot is compulsory, if his negligence was not the sole cause of the injury, but the
negligence of the master or crew contributed thereto, the owners are liable.
nBut the liability in rem does not release the pilot from the consequences of his own negligence.
The rationale for this rule is that the master is not entirely absolved of responsibility with respect
to navigation when a compulsory pilot is in charge.
n

Other Officers and Crew

nDeck Officer an officer qualified in accordance with the provision of the International
Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW)
1978, as amended, Chapter II.
nChief Engineer a senior licensed marine engine officer responsible for the mechanical
propulsion and the operation and maintenance of the mechanical and electrical installations of the
ship.
nEngineer Officer an officer qualified in accordance with the provision of (STCW) 1978, as
amended, Chapter III.
Radio Officer a person holding an appropriate certificate issued and recognized by the
MARINA under the provisions of the Radio regulations.
nRatings a member of the ships crew other than the master or an officer.
n

75

Major Patron (MAP) a marine deck officer duly registered and certificated to act as officer or
master of vessel of not more than 500 GT navigating in the major coastwise trade routes within
the territorial limits of the Philippines.
n

Minor Patron (MIP) a marine deck officer duly registered and certificated to act as officer or
master of vessel of not more than 250 GT navigating within a specified body of water in the
minor coastwise trade route in the Philippines.
nMarine Diesel Mechanic (MDM) a person authorized by MARINA to operate and maintain the
ships diesel engines or the qualification/license to act as such.
n

Supercargoes administrative officers of the ship with duties to keep an account and record of
their transaction. Powers and duties of the captain with regard to that part of the administration
shall cease when thee is a supercargo.
nSupernumerary - a person who is not a regular member of the crew but performing functions
appropriate to the certificate possessed.
n

Chapter 9
Charter Party
Definition of a Charter Party
nA written contract whereby the ship owner or the ship agent leases the vessel to transport
passengers or cargo for a fixed price. [Art. 652, Code of Commerce]
nA contact by which an entire ship or some principal part thereof, is left by the owner to another
person for a specified time or use. [Caltex Philippines, Inc. v. Sulpicio Lines, Inc., 315 SCRA 709]
National Union Fire Insurance v. Stolt-Nielsen Phil., 184 SCRA 682
Held:
nWhere BL has been issued covering goods shipped aboard a vessel under a charter party, and
charterer remains the holder of the BL, it operates as a receipt for the goods, and as document of
title passing the property of the goods, but not as varying the contract between the charterer and
ship owner.
nThe BL becomes merely a receipt and not the contract of carriage in a charter of the entire
vessel.
Ouano vs. CA, 211 SCRA 740
Held:
nEven if a charter party has a condition against sub-chartering, and the vessel was in fact subchartered without knowledge on the part of the sub-charterer of the prohibition, no cause of
action arises in favor of the owner of the vessel against the sub-charterer.
nNeither does such owner have any lien against the cargo of sub-charterer.
nCarrier has a lien on the goods only while he retains possession of the goods
Obligation of the Charterer
nCharterer, before transporting its cargo, is of no obligation to ensure that the vessel it chartered
complied with all legal requirements. The duty rests upon the common carrier as it is the one
engaged in public service. [Caltex v. Sulpicio Lines, infra]
Important Terms Used in Charter Party
nPrimage the bonus to be paid to the captain after a successful voyage.
nDemurrage A penal clause intended to compensate the owner of the vessel for its non-use.
nLay days The period when the vessel will be delayed in port for loading and unloading.

76

Deadfreight The portion of the cargo under a charter not loaded. It is also used as the amount
recoverable by the ship owner from the charterer for that portion of the ships capacity that the
latter failed to occupy despite the stipulation in the charter party.
n

Cases on Demurrage
nIn its strict sense, demurrage is the compensation provided for in the contract of affreightment for
the detention of the vessel beyond the lay time or that period of time agreed on for loading and
unloading of cargo and is given to compensate the ship owner for the non-use of the vessel.
[National Steel v. CA, 283 SCRA 45]
nDemurrage is the sum fixed in a charter party as remuneration to the ship owner for the
detention of his vessel beyond the number of days allowed by the charter party for loading or
unloading or for sailing. [NFA v. CA, 311 SCRA 700]
NFA v. CA, 311 SCRA 700
nThe shipper or charter is liable for the payment of demurrage claims when he exceeds the
period of loading or unloading as agreed upon or the agreed lay days. The period for such may
or may not be stipulated in the contract. A charter party may either provide for a fixed lay days
or contain general or indefinite words such as customary quick dispatch or as fast as the steamer
can load.
nCustomary quick dispatch implies that loading and unloading of the cargo should be within a
reasonable period of time. Due diligence should be exercised according to the customs and
usages of the port or ports of call.
The circumstances obtaining at the time of loading and unloading are to be taken into account.
When the provision is for demurrage/dispatch: NONE it will be deemed a waiver of the right
to claim demurrages.
nDelay in loading or unloading, to be deemed as demurrage, runs against the charterer as soon
as the vessel is detained for an unreasonable length of time from the arrival of the vessel because
no available berthing space was provided for the vessel due to the negligence of the charterer or
by reason of the circumstances caused by the fault of the chartere.
n
n

Keng Hua Paper Products v. CA, 286 SCRA 257

Held:
nA claim for demurrage by carrier involves an obligation NOT ARISING from a loan or
forbearance of money. The applicable interest rate is 6% P.A. pursuant to Art. 2209, NCC.
nWhen the BL does not specify the demurrage amount, and the total amount claimed by the
carrier increased as the days went by, the total amount demanded cannot be deemed to have
been established with reasonable certainty until the trial court rendered its judgment. Hence, the
6% is to be computed from the date of the trial courts decision imposing demurrage charges
against the consignee.
Kinds of Charter Party
nContract of Affreightment one whereby the owner of the vessel leases a part or all of its space
to haul goods for others. It is a contract for special services to be rendered by the ship owner. The
ship owner RETAINS the possession, command and navigation of the ship, the charterer merely
having use of the space in the vessel in return for his payment.
nBare-boat or Demise Charter where the shipowner turns over possession of his vessel to the
charterer, with the latter undertaking to provide the crew, victuals, supplies and fuel during the
term of the charter. Charterer is owner PRO HAC VICE.

77

Two Classes of Contract of Affreightment

nVoyage Charter The vessel is leased to the chartered for a single voyage only;
nTime Charter The vessel is leased for a fixed period of time.
Substantive Provisions Relating to Charter Party
nIf charterers cargo is not sufficient to fill up 3/5 of the capacity of the vessel, carrier has the
right to unload the cargo and put it on a smaller vessel at the expense of the charterer. If cargo
exceeds 3/5 of the cpacity, the carrier cannot exercise the right. [Arts. 670 & 671, CoC]
nIf vessel has been chartered in whole by one party, the owner cannot receive the cargo of any
other person as the charter party becomes an exclusive contract. [Art. 672]
nThe owner of the vessel is liable to the charterer for damages in case the captain unduly delays
the voyage. [Art. 673]
If charterer brings more than that agreed upon, the carrier may accept the increase in cargo
and demand increase of freightate provided the vessel is not overloaded. [Art. 674]
nIf vessel has been chartered to load cargo in another port and upon arrival in that port there is
no cargo delivered, the captain has two options:
a) Look for other cargo; or
b) After expiry of lay days there is still no cargo, the captain should file a marine protest
and return to home port in full ballast. The charterer should pay freightage in full. [Art. 675]
n

No right to freightage if charterer can prove that the vessel is not in condition to navigate. [Art.
676]
nCharter may sub-charter where there is no express prohibition. [Art. 679]
nCharterer who cannot fill the vessel is liable for full freightage. [Art. 680]
nCharterer is liable for damages if loaded cargo subjects the vessel to forfeiture or confiscation.
Under Art. 356, carrier can open the packages of shipper to find out whether they contain items
which may subject the vessel to forfeiture. [Art. 681]
n

If merchandise should have been shipped for purpose of illicit commerce, and were taken on
board with knowledge of the person from whom the vessel was chartered or of the captain, the
captain is jointly liable with the ship owner for all the losses which may cause the other shippers.
[Art. 682]
nWhere the vessel is in need of repairs, chartere must wait until vessel is repaired. [Art. 683]
nBefore beginning of the trip, charterer may unload the cargo by paying of the freightage.
[Art. 685 in relation to Art. 688]
n

Charterer is under obligation to pay the freightage after the discharge of the cargo. [Art. 686]
Charterer and shippers cannot abandon the cargo unless it consist of liquids and leaks out due
to inherent defect of the cargo and with not more than remaining in the container. [Art. 687]
Other rules affecting charter party and cargo
nIf merchandise sold to make necessary repairs, charterer shall still pay for the freightage. [Art.
659]
nIf merchandise is jettisoned, lost at sea or seized by pirates, no obligation to pay freightage.
Considered as general average. [Arts. 660 & 661]
nMerchandise damaged due to inherent defect: pay full freightage. [Art. 663]
n
n

78

Where payment is based on weight and the cargo increases in weight during the voyage, the
charterer must pay the increase. [Art. 664]
nCargo carried is subject to retaining lien by the ship owner. Retaining lien while in possession;
Carriers lien subsists up to 30 days from date of release of cargo. [Arts. 665 - 667]
n

Valid Rescission By Charterer of Charter Party (Arts. 688 690, CoC)

nBefore loading by paying of the freightage agreed upon. The consent of ship owner is NOT
NECESSARY. Mere notice to him is sufficient. {Note: This is the 1st distinction between charter party
and in ordinary lease. In lease, none of the parties may unilaterally cancel the contract without
paying the full consideration plus damages};
nWhen the vessel is not up to the capacity agreed upon or the flag under which she sails differs
from that agreed upon. No obligation to pay the freightage.
nWhen the vessel is not place at the disposal of the charterer. No obligation to pay the
freightage.
When the vessel returns due to pirates or to bad weather and charterer decides to unload. He
must pay the full freightage.
nWhen the vessel returns for repairs. If repairs take less than 30 days, charterer must pay in full
the freightage; if it exceeds 30 days, he must pay that portion of the freightage proportionate to
the distance covered.
Total Rescission by the Ship owner (Art. 689)
nWhen the charterer fails to load the vessel and lay days have expired. In this case, charterer is
under obligation to pay of the freightage.
nWhen the owner sells the vessel and the new owner, despite knowledge of the charter party,
decides to load the vessel with his own cargo. There is no obligation on the part of the ship owner
to compensate the charterer. But if the new owner has no cargo to load, he must respect the
charter party. {Note: This is the 2nd distinction between charter party and in ordinary lease. In
ordinary lease contract, if the buyer of the object of lease was aware of the lease, he must
respect the contract.}
Total Rescission Due to Fortuitous Event (Art. 690)
nWar
nBlockade
nProhibition to receive cargo
nEmbargo of vessel by a Government
nInability of vessel to navigate due to no fault of the captain or ship agent.
n

Chapter 10
Bottomry & Respondentia
Concepts of Bottomry & Respondentia
nBottomry: A maritime contract whereby the owner of a ship borrows for the use, equipment or
repair of the vessel, for a definite term, and pledges the ship (or the keel or bottom of the ship
pars pro toto) as security, with the stipulation that if the ship is lost during the voyage or during
the limited time on account of the perils enumerated, the lender shall lose his money.
nRespondentia: A maritime contract where it is the goods, or some part thereof, are hypothecated
as security for a loan, the repayment of which is dependent upon maritime risks.
Distinguished from Simple Loan

79

Firstly, in bottomry & respondentia, rate of interest is not subject to the Usury Law on account of
the extraordinary risks involved while in simple loan, the rate of interest must not exceed the
ceiling fixed by the Usury Law (note: read now as unconscionable).
nSecondly, in the former, there must necessarily be a marine risk, the existence of which must be
duly established while there is no need for such risk under the latter.
nThirdly, in the former, it must be executed in accordance with form and manner required in the
Code of Commerce while in the latter, the formal requisites on contract apply.
n

Fourthly, loan on bottomry or respondentia must be recorded in the registry of vessels in order to
bind third persons while no such registration is required in simple loan.
nLastly, in the former, preference is extended to the last lender if there are several lenders upon
the theory that were it not for the last lender, then the prior lenders would not have benefited
from the preservation of the security. Whereas in the latter, the first lender, as a general rule,
enjoys preference over subsequent ones. [Art. 730, CoC]
n

Characteristics/Common Elements of Bottomry & Respondentia

nExposure of security to marine peril. [Art. 732]
nObligation of debtor conditioned only upon the safe arrival of the security at the point of
destination.
Who May Contract Bottomry or Respondentia
nBottomry: General rule only the owner. If owner is absent the captain. [Art. 728]
nRespondentia: only the owner of the cargo.
Hypothecary Nature of Bottomry & Respondentia (Art. 731)
General Rule:
nThe loss of the security, i.e. vessel in bottomry or cargo in respondentia, extinguishes the
obligation.
Exceptions:
nDue to inherent defect (cargo);
nDue to barratry on the part of the captain, i.e. malfeasance;
nDue to fault or malice of borrower;
nVessel was engaged in contraband; and
nCargo loaded different from that agreed upon.
Other Relevant Provisions on Bottomry & Respondentia
nNo bottomry on the salaries of the crew. [Art. 725]
nIf loan given in excess of security through overvaluation by borrower, the excess must be
returned with legal interest. [Art. 726]
nWhen respondentia loan is not all utilized for the cargo, the excess must be returned. [Art. 727]
nIf the security in bottomry or respondentia is not subject to a marine peril, it becomes an
ordinary loan. [Art. 729]
Lenders of bottomry and respondentia must contribute to the general average once jettison has
made possible the safe arrival of the security. [Art. 732]
nExposure to marine peril takes place from the time the anchors are a weighed at the port of
departure until anchors are dropped at the port of destination. [Art. 733]
nIn case of shipwreck and there is salvage, loan will depend on the repayment on what may be
salvaged. [Art. 734]
n

80

The concurrence of bottomry loan with insurance, the insurable interest of the owner of the vessel
is the value of the vessel less the loan in bottomry, in reference to Sec. 101 of the Insurance Code.
[Art. 735]
nFailure to pay the premium on time of bottomry or respondentia loans gives rise to liablility for
legal interest (delay ex re). [Art. 736]
n

Chapter 11
Averages
Average Defined
nAny damage deliberately caused, or any expense deliberately incurred due to a marine peril
and because of which the vessel and/or cargo is saved.
nArt. 806: All extraordinary or accidental expenses which may be incurred during the voyage in
order to preserve the vessel, the cargo, or both.
nExcludes: Petty and ordinary expenses incident to navigation, e.g., pilotage, lighterage, towage,
anchorage, inspection, health, quarantine, lazaretto [i.e., quarantine station for maritime travellers]
, and other so-called port expenses, costs of barges and unloading until the merchandise is place
in the wharf, and any other usual expenses in navigation.
Kinds of Average
nParticular (or Simple) Average All the damages and expenses caused to the vessel or to her
cargo which have NOT INURED TO THE COMMON BENEFIT AND PROFIT of all the persons
interested in the vessel and her cargo. The damages sustained shall be borne by the owner of the
vessel or the goods only. [Art. 809]
nGeneral Average All the damages and expenses which are DELIBERATELY caused in order to
save the vessel, its cargo or both, AT THE SAME TIME, from REAL AND KNOW RISKS. [Art. 811]
Examples of Particular Average
(Art. 809)
nLosses suffered by the cargo from the time of its embarkation until it is unloaded, either on
account of inherent defect of the goods or by reason of an accident of the sea or force majeure,
and the expenses incurred to avoid and repair the same.
nLosses and expenses suffered by the vessel in its hull, rigging, arms, and equipment, for the same
causes and reasons, from the time it puts to sea from the port of departure until it anchors and
lands in the port of destination.
nLosses suffered by the merchandise LOADED ON DECK, except in coastwise navigation, if the
marine ordinances allow it.
The wages and victuals of the crew when the vessel is detained or embargoed by legitimate
order or force majeure, it the charter has been contracted for a fixed sum for the voyage.
nThe necessary expenses on arrival at a port, in order to make repairs or secure provisions.
nThe lowest value of the goods sold by the captain in arrivals under stress for the payment of
provisions and in order to save the crew, or to meet any other need of the vessel, against which
the proper amount shall be charged.
n

The victuals and wages of the crew while the vessel is in quarantine.
The loss inflicted upon the vessel or cargo by reason of an impact or collision with another, if it is
accidental and unavoidable. If the accident should occur through the fault or negligence of the
captain, the latter shall be liable for all the losses caused.
n
n

81

Any loss suffered by the cargo through the fault, negligence, or barratry of the captain or of the
crew, without prejudice to the right of th owner to recover the corresponding indemnity from the
captain, the vessel, and the freightage.
n

Requisites of General Average

nThere must be common danger;
nThat for the common safety, part of the vessel or of the cargo or both is sacrificed
DELIBERATELY;
nThat from the expenses or damages caused follows the successful saving of the vessel and
cargo; and
nThat the expenses or damages should have been incurred or inflicted after taking proper legal
steps and authority
Procedure in General Average
nBefore the loss is caused or the expenses incurred, the captain must call a meeting with the chief
mate and other officers and any cargo owner who may be on board;
nThey shall decide by voting on a resolution of the captain. If majority disagrees with the captain,
the latter shall have the final decision;
nThe minutes must be entered in the deck log book, signed by all the persons present and stating
in detail all the goods jettisoned and the injuries caused to those kept on board;
nCopy of the minutes to be filed within 24 hours after arrival at first port of entry.
Examples of General Average
nThe goods or cash invested in the redemption of the vessel or of the cargo captured by enemies,
privateers, or pirates, and the provisions, wages, and expenses of the vessel detained during the
time the settlement or redemption is being made.
nThe goods jettisoned to lighten the vessel, whether they belong to the cargo, to the vessel, or to
the crew, and the damage suffered through said act by the goods which are kept on board.
nThe cables and masts which are cut or rendered useless, the anchors and the chains which are
abandoned, in order to save the cargo, the vessel or both.
The expenses of removing or transferring a portion of the cargo in order to lighten the vessel
and place it in condition to enter a port or roadstead, and the damage resulting therefrom to the
goods removed or transferred.
nThe damage suffered by the goods of the cargo by the opening made in the vessel in order to
drain it and prevent its sinking.
nThe expenses caused in order to float a vessel intentionally stranded for the purpose of saving
it.
nThe damage caused to the vessel which had to be opened, scuttled or broken in order to save
the cargo.
n

The expenses for the treatment and subsistence of the members of the crew who may have been
wounded or crippled in defending or saving the vessel.
nThe wages of any member of the crew held as hostage by enemies, privateers, or pirates, and
the necessary expenses which he may incur in his imprisonment, until he is returned to the vessel or
to his domicile, should he prefer it.
n

82

The wages and victuals of the crew of a vessel chartered by the month, during the time that it is
embargoed or detained by force majeure or by order of the government, or in order to repair
the damage caused for the common benefit.
nThe depreciation resulting in the value of the goods sold at arrival under stress in order to repair
the vessel by reason of gross average.
nThe expenses of the liquidation of the average.
Who Will Contribute for the General Average
nThose who benefited from the sacrifice: the ship owner and owners of the cargoes that were
saved.
nContribution may also be imposed on the insurers of the vessel or cargoes that were saved as
well as lenders on bottomry or respondentia.
n

Who Are Entitled To The General Average

nAll the owners whose goods were sacrificed pro rata.
Exceptions:
nGoods carried on deck unless the law or customs of the place allow such stowage.
nGoods that are not recorded in the books or records of the vessel.
nFuel for the vessel if there is more than sufficient fuel for the voyage.
American Home Assurance v. CA,
208 SCRA 343
Held:
nA particular average presupposes that the loss or damage is due to an inherent defect of the
goods, an accident of the sea, or a force majuere or the negligence of the crew of the carrier
governed by the Code of Commerce.
nThe claims for damages due to the negligence of the common carrier are governed by the Civil
Code provisions on common carriers.
Magsaysay Inc. vs. Agan,
96 Phil. 504
nFacts: An interisland vessel of petitioner sailed from Manila to Aparri. The vessel entered the
Aparri river where she stopped to load and unload. Overnight, a sand bar formed at the mouth
of the river. On her way out, the vessel hit the sand bar and got stuck. A tug boat was sent by the
owner to town the vessel. In Manila, the captain demanded from Agan and other cargo owners to
reimburse him for the expenses of hiring the tugboat.
nHeld: Particular average only. The cargo was not benefited since it was not perishable nor the
cargo owner in a hurry. Even assuming it was general average, the captain did not call the
meeting.
Philippine Home Assurance v. CA, 257 SCRA 468
Facts:
nA vessel, with cargo on board, caught fire due to a small flame coming from the acetylene
cylinder which were stored in the accommodation area near the engine room and which exploded
despite efforts to extinguish the fire. The vessel was subsequently towed to port with the expenses
of having the cargo transshipped to port of destination was charged to the consignees. Petitioner
sought recovery as subrogee.

83

Held: The consignee of the cargo cannot be made to share with the carrier for additional freight
and salvage charges.
nFire cannot be considered a natural disaster or calamity since it almost always arises from some
act of man. It cannot be an act of God unless caused by a lightning or a natural disaster or
casualty not attributable to human agency.
nWhile the facts of the case may technically fall within the purview of general average, the
formalities prescribed were not complied with. Consequently, the carriers claim for contribution
from the consignees cannot be enforced.
n

Jettison of Cargo
nCargo on deck shall be first to be jettisoned followed by those from the lower deck then those of
bigger bulk but of smaller value. [Art. 815]
nCargo jettisoned, to be entitled to reimbursement for general average, must be covered by a
bill of lading. [Art. 816]
nExpenses to lighten a vessel by the transfer of goods to other vessels is general average. Also
when there is fire on port and there is need to sink the vessel to save the goods. [Arts. 817 &
818]
Liquidation of Average
nWhether general or particular average, the person benefited by the damage or expense
incurred must contribute his proportionate share, to be determined by the amount of damages or
expenses incurred and apportioned among the those benefited in proportion to the value of their
property save.
nIn particular average, it is implied that there is only one interest involved and the proportion
pertains to him 100%.
The York-Antwerp Rules
nAllow deck cargo on coastwise shipping but prohibits it on overseas trade.
nHence, a deck cargo stowed on deck, with consent of the shipper in an overseas trade must
always contribute to general average. But if it is the one jettisoned, it will not be entitled to
reimbursement.
nOn the other, a deck cargo stowed on deck in a coastwise trade with consent of the shipper
while also must contribute to general average is likewise entitle to reimbursement if jettisoned.
Chapter 12
Collisions
Collision & Allision
nCollision occurs when both vessels are on motion.
nAllision happens when one of the vessels is stationary.
nRule on Collision: The guilty vessel shall pay for the damage caused by the collision. Exception: If
guilty vessel sinks due to the hypothecary nature of maritime transactions. Exception to exception:
When there is negligence of ship owner [see Abdulhaman case]
Five Cases Covered by Collision/ Allision
nOne vessel is at fault Vessel at fault is liable for the damage caused to the innocent vessel as
well as to the damage suffered by the owners of cargo of both vessels.
nBoth vessels at fault Each vessel must bear its own loss, but the shippers of both vessels may go
against the ship owners, being solidarily liable to them.
nVessel at fault is unknown Same rule when both vessels are at fault.

84

n
n

Third vessel at fault Same rule as when one vessel is at fault.

Fortuitous Event No liability; res perit domino.

Three stages in Collision

nWhen the 2 vessels approach each other.
nWhen the vessel are so near each other that contact is imminent.
nActual contact or collision.
Note: The foregoing rule was laid down in Urrutia v. Baco River Plantation, 26 Phil. 623 to apply
the doctrine of last clear chance. But this ruling was abandoned in Williams v. Yangco, 27 Phil. 68
(infra)
Williams v. Yangco,
27 Phil. 68 (1914)
Held:
nThe doctrine of last clear chance is inapplicable for marine collision since the rule of liability in
this jurisdiction for maritime accidents such as that now under consideration is clearly, definitely,
and unequivocally laid down in Art. 827 of the Code of Commerce.
nUnder the rule, the evidence disclosing that both vessels were at fault gives neither of the owners
an action against the other for the loss or injury sustained by their respective vessel.
Villacarlos v. Everett Steamship,
4 CA Reports 961
Facts:
nA fishing vessel of Philippine registry collided with a vessel from Europe. The foreign vessel was
at fault but its owner was beyond the jurisdiction of the courts. The owner, however, had a
shipping agent in the Philippines who, nonetheless denied liability.
Held:
nThe agent is liable in the absence of the ship owner. The shipping agent or naviero acts as owner
in the absence of the ship owner.
Code of Commerce uses the word buque in reference to collision of vessel, i.e.a draft with deck.
A fishing vessel here had no deck, hence, not a buque so that Art. 835 on marine protest does not
apply.
nFailure of the captain of the fishing vessel to file marine protest does not bar recovery.
Duty of the Overtaking or Crossing Vessel (Sulpicio Lines v. CA, 305 SCRA 478)
nUnder Rule 24-C of the Regulations for Preventing Collision at Sea, the duty of overtaking or
crossing vessel to keep out of the way subsists even if the overtaking vessel cannot determine with
certainty whether she is at forward or aft more than two points from the vessel being overtaken.
nIn case of collision, it would be beyond cavil that the overtaking vessel must assume responsibility
as she was in a better position to avoid the collision.
nShe should have blown its horn or given signs to warn the other vessel that she was overtaking
her.
When moving vessel strikes stationary object (Far Eastern Shipping v. CA, 297 SCRA 30)
n

Held:
nAmerican evidentiary rule provided for a presumption of fault against a moving vessel that
strikes a stationary object, such as a dock or navigational aid.
nIn admiralty, this presumption does more than merely require the ship to go forward and
produce some evidence on the presumptive matter. The moving vessel must show that it was

85

without fault or that the collision (allision) was occasioned by the fault of the stationary object or
was the result of inevitable accident.
Chapter 13
Arrival Under Stress & Shipwrecks
Steps To Be Taken In Determination Of Propriety Of Arrival Under Stress
nCaptain to determine during voyage if there is well-founded fear of seizure, privateers or other
valid grounds.
nHe then assembles all the officers.
nHe summons the persons interested in the cargo who are present and who may attend. They
have no right to vote.
nOfficers to be determined and agree if there is well-founded reason after examining the
circumstances. The captain has the deciding vote.
nAgreement to be drafted and minutes to be signed and entered in the deck log book. Also
objections.
Instances of Arribada
nLack of provision or fuel
nPirates
nInability to navigate.
Note: If the lack of fuel or provision is not due to lack of foresight, or the fear of pirates is wellfounded or the inability to navigate is not attributable to fault of captain or crew, then these
arrivals under stress becomes particular average of the vessel. Shippers must wait.
No damage needs to be paid to the shippers. But if due to bad faith, the damages must
be paid to shippers for delay and the vessel bears the loss.
Improper Arribada
nIf lack of provisions should rise from the failure to take the necessary provisions for the voyage
according to usage and customs, or if they should have been rendered useless or lost through bad
stowage or negligence in their care.
nIf the risk of enemies, privateers, or pirates should not have been well-known, manifest, and
based on positive and provable facts.
nIf the defect of the vessel should have arisen from the fact that it was not repaired, rigged
equipped, and prepared in a manner suitable for the voyage, or from some erroneous order of
the captain.
When malice, negligence, want of foresight, or lack of skill on the part of the captain exists in
the act causing the damage.
nExpenses. [Art. 820, Code of Commerce]
n

Shipwreck (Agrounding)
nThe demolition or shattering of a vessel caused by her driving ashore or on rocks and shoals in
the midseas, or by the violence of winds and waves in tempests.
Rules on Shipwrecks (Arts. 840-845)
nLosses/deterioration due to shipwreck or stranding to the account of the owners & ship owner.
nIf caused by malice, negligence, or lack of skill of the captain or because vessel put to sea was
insufficiently repaired and equipped: Shippers can demand indemnity from the captain.
nThe goods saved from the wreck to be specially bound for the payment of the expenses of the
respective salvage.
nIf several vessels sail under convoy, and any of them should be wrecked, the cargo saved will be
distributed among the rest in proportion to the amount which each one is able to take.

86

If any captain should refuse, without sufficient cause, to receive what may correspond to him, the
captain of the wrecked vessel to enter a marine protest against him.
nIf it is not possible to transfer to the other vessels the entire cargo of the vessel wrecked, the
goods of the highest value and smallest volume to be saved first. Designation to be made by the
captain with concurrence of his officers.
nThe captain taking on-board the goods saved from the wreck to continue his course to the port of
destination and upon arrival he should deposit the goods for disposal to their owners.
n

In case the captain changes his course, and if he can unload them at the port of which they were
consigned, he may make said port if the shippers or supercargoes present and the officers and
passengers of the vessel consent thereto. But he is not required to do so even if he has the consent
during time of war or when the port is difficult and dangerous to make.
nThe owners of the cargo to defray all the expenses of this arrival and the payment of the
freightage.
nIf cannot be, proceed to judicial sale complying with the formalities and on publicity.
n

Chapter 14
Salvage
Definition and Philosophy of Salvage
nSalvage is a service which one person renders to the owner of a ship or goods, by his own labor,
preserving the goods or the ship which the owner or those entrusted with the care of them have
either abandoned in distress at sea, or are unable to protect and secure.
nSalvage Law provides for the compulsory reward to those who brave the perils of the sea to
save the cargo or vessel in order to encourage such services. Whether the owner of the property
save likes it or not, he must give a reward. The maximum amount is 50% of the value of the
property save.
Kinds of Salvage Services
nVoluntary compensation is dependent on the success.
nUnder contract for a per diem or per horam wage, payable at all event.
nUnder contract for compensation payable only in case of success.
Requisites For Salvage Reward
nValid object of salvage.
nSuch object must be exposed to marine peril.
nMust be rendered voluntarily.
nMust be successful.
Derelict
nA vessel or cargo badly damaged and abandoned by the crew to the mercy of the sea.
nMere abandonment does not make such vessel or cargo res nullius.
nProper procedure must be followed by the salvors to be entitled of the reward.
Procedure In Derelict
nIf vessel is abandoned, salvor must tow her to the nearest port where it will be delivered to the
municipal treasurer or collector of customs who will advertise the fact of salvage.

87

If owner of salvaged vessel or cargo appears, he may take possession of vessel or cargo and
pay the reward amount not exceeding 50% of the value of the vessel.
nReward is determined by considering:
- the value of the property save; zeal employed; danger posed to the salvors; number of
persons who took part; services render; and expenses incurred.
n

If no claim for the vessel is made within 3 months after publication, the municipal treasurer to sell
the property salvaged at public auction. The reward and expenses will be deducted from the
proceeds. The balance to be deposited with the treasury.
nIf no one claims for the balance after 3 years, will go to the salvors and the other half to the
government.
nIf one vessel saves another:
- to the ship owner of the saving vessel.
- to the captain
- to the crew
n

Honorio Barrios v. Go Thong & Co.,

G.R. L-17192, March 30, 1963
nFacts: Go Thong is the owner of a vessel plying the route from Mindanao to Cebu. The engine of
his vessel conked out while she was in the middle of the sea. The captain radioed the owner and
was advised that a sister ship was on its way to tow the vessel. The sea at the time was calm. The
radio message was picked up by another vessel which thereafter proceeded to the stranded
vessel of Go Thong. The captain agreed that the vessel be towed. The owner of the towing vessel
knew the owner of the stranded vessel. He waived charges of towing. But the captain and the
crew the responding vessel complained of their respective shares in the reward.
Issue: Was there salavage or towage?
Held: There was no salvage because there was no marine peril at the time. There was no danger
for the stranded ship. The sea was calm and a sister ship was nearby. Hence, no reward is due.
Also, there is no need for compensation for the towage because of the waiver of the towing
vessel.
n
n

Chapter 15
COGSA
History of COGSA
nOriginally passed by Congess of the US on April 16, 1936 as Public Act No. 521.
nAdopted by the Phil Commonwealth on October 22, 1936 as Commonwealth Act No. 65.
nWhen the New Civil Code took effect on August 30, 1950, it became the primary law on
carriage of goods by sea.
nArt. 1753, NCC: The law of the country to which the goods are to be transported shall govern
the liability of the common carrier for their loss, destruction or deterioration.
nCOGSA remains suppletory law for international trade
Chapter 16
Public Service Laws
Meaning and Concept of Public Utility

88

A business or service engaged in regularly supplying the public with some commodity or service
of public consequence such as electricity, gas, water, transportation, telephone or telegraph
service. [National Power Corporation v. Court of Appeals, G.R. No. 112702, September 26, 1997]
nIn a very real sense, a public utility is engaged in public service-- providing basic commodities
and services indispensable to the interest of the general public. [Republic v. Meralco, G.R. No.
141314, April 9, 2003]
n

When, therefore, one devotes his property to a use in which the public has an interest, he, in
effect grants to the public an interest in that use, and must submit to the control by the public for
the common good, to the extent of the interest he has thus created. [Kilusang Mayo Uno Labor
Center v. Hon. Jesus B. Garcia Jr., G.R. No. 115381, December 23, 1994 citing Pantranco v. Public
Service Commission, 70 Phil.221]
Constitutional Provisions
nPublic utilities must be owned by Filipino citizen or 60% owned by Filipino citizens. [Art. XII,
Sec. 11]
nMass media must 100% Filipino.
nGovernment take-over: In times of national emergency, when the public interest so requires, the
State may, during the emergency and under reasonable terms, temporarily take over or direct
the operation of any privately owned public utility or business affected with public interests. [Art.
XII, Sec. 17]
n

Operation of vital industries: The State, may, in the interest of national welfare or defense,
establish and operate vital industries and upon payment of just compensation, transfer to public
ownership utilities and other private enterprises to be operated by the government. [Art. XII, Sec.
18]
nProhibition against monopolies: The State shall regulate or prohibit monopolies when the public
interest so requires; no combination in restraint of trade or unfair competition shall be allowed.
[Art. XII, Sec. 19]
Public Service
nIncludes every person who may own, operate, manage, or control in the Philippines for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, railroad, street railway, fraction
railway, subway motor vehicle, steamboat, or steamship line ferries, and water craft, shipyard,
ice plant, electric light, heat and power or any other public utility. [Sec. 13(b), Act. 146]
n

PAL V. CAB, 270 SCRA 538

nHeld: The terms convenience and necessity if used together is a statute, are usually held not to
be separable, but are construed together. Both words modify each other and must be construed
together. The word necessity is so connected, not as an additional requirement but to modify and
qualify what might otherwise be taken as the strict significance of the word necessity.
nPublic convenience and necessity exists when the proposed facility will meet a reasonable want
of the public and supply a need which the existing facilities do not adequately afford.
It does not mean or require an actual physical necessity or an indispensable thing.
nThe use of the word necessity, in conjunction with public convenience in a certificate of
authorization to a public service entity to operate, does not in any way modify the nature of such
certification, or the requirements for the issuance of the same.
nIt is the law which determines the requisite for the issuance of such certification, and not the title
indicating the certificates.
n

89

Public Utilities
nPublic utilities are privately owned and operated businesses whose services are essential to the
general public. They are enterprises which specially cater to the needs of the public and conduce
to their comfort and convenience. As such, public utility services are impressed with public interest
and concern. The same is true with respect to the business of common carrier which holds such a
peculiar relation to the public interest that there is superinduced upon it the right of public
regulation when private properties are affected with public interest, hence, they cease to be juris
privati only.
When, therefore, one devotes his property to a use in which the public has an interest, he, in
effect grants to the public an interest in that use, and must submit to the control by the public for
the common good, to the extent of the interest he has thus created. [Kilusang Mayo Uno Labor
Center v. Hon. Jesus B. Garcia Jr., G.R. No. 115381, December 23, 1994 citing Pantranco v. Public
Service Commission, 70 Phil.221]
Difference Between Operation of a Public Utility and Ownership of Facilities
nWhile the Constitution in no uncertain terms requires a franchise for the operation of a public
utility, it does not require a franchise before one can own the facilities needed to operate a
public utility so long as it does not operate them to serve the public.
nIn law, there is clear distinction between the operation of a public utility and the ownership of
the facilities and equipment used to serve the public. [Ibid]
n

Telecommunications
Radio Industry
Broadcasting
Broadcast is an undertaking the object of which is to transmit over-the-air commercial radio or
television messages for reception of a broad audience in a geographic area.
Cable Television Operations (E.O. 436, Sept. 9, 1997)
nClassified as mass media
n

Essential components:
nReception facilities which extract the broadcast signal from the air, or microwave transmission.
nInput equipment, which converts and amplifies the signal received; and
nDistribution system, which consists of feeder or trunk lines originating from the input equipment;
smaller distribution cables which carry the signal to the immediate vicinity of the subscriber; and
drop lines which carry the signal into the subscribers premises.
Electronic Commerce Act
Internet and Value Added-Services
nElectronic Mail (Email)
nBulletin Board System (BBS)
nWorld Wide Web (www)
,Mass Media
Electric Power Industry Reform Act of 2001 (R.A. 9136)
Build-Operate-Transfer Law (R.A. 6957, as amended by R.A. 7718)
BOT Schemes
nBuild-Operate-and-Transfer (BOT

90

nBuild-and-Transfer

(BT)
(BOO)
nBuild-Lease-Transfer (BLT
nBuild-Transfer-and-Operate (BTO)
nContract-Add-and-Operate (CAO)
nDevelop-Operate-and-Transfer (DOT)
nRehabilitate-Operate-and-Transfer (ROT)
nRehabilitate-Own-and-Operate (ROO)
End of Subject
nBuild-Own-Operate

91