1. JOSE MENDOZA v. PHILIPPINE AIR LINES, INC.

Facts: Jose Mendoza, owner of the Cita Theater located in the City of Naga, Camarines Sur, decided to exhibit a film on the annual
fiesta holiday of city of naga to take advantage of the great number of people attending the fiesta. He entered into an agreement with
LVN Pictures Inc., a movie producer in Manila, for him to show during the town fiesta the Tagalog film entitled "Himala ng Birhen" or
Miracle of the Virgin. Pursuant to this agreement, PAL was to deliver a can containing the film "Himala ng Birhen" consigned to the
Cita Theater. Mendoza had completed all arrangements for the exhibition of the film. The plane arrived, but for reasons not explained,
this can of film was not unloaded at Pili Air Port and it was brought back to Manila. Mendoza received it and exhibited the film but he
had missed his opportunity to realize a large profit as he expected for the people after the fiesta had already left for their towns.
Mendoza brought this action against the PAL. After trial, the lower court found that because of his failure to exhibit the film "Himala ng
Birhen" during the town fiesta, Mendoza suffered damages or rather failed to earn profits in the amount of P3,000.00, but finding the
PAL not liable for said damages, dismissed the complaint.
Issue: Whether PAL is liable for the said damages?
Ruling: No.
The defendant company can not be held liable for damages where it could not have forseen the damages that would be suffered by
the plaintiff upon failure to deliver the can of film for reason that the plans of the plaintiff to exhibit that film during the town fiesta and
his preparation, specially the announcement of said exhibition by poster and advertisement in the newspapers were not called to the
defendants attention.
Sunday Common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to
prompt delivery, unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific
contract entered into by the parties.
Syllabus:
1. CARRIER; AVIATION; CONTRACT OF TRANSPORTATION BY AIR, COMMERCIAL. A contract of transportation by air may be
regarded as commercial. The reason is that the transportation company is a common carrier; besides, air transportation is clearly
similar or analogous to land and water transportation. The obvious reason for its non-inclusion in the Code of Commerce was that at
the time of its promulgation transportation by air on a commercial basis was not yet known.
2. ID.; ID.; CARRIER BY AIRCRAFT. The principles which govern carriers by other means, such as by railroad or motor bus,
govern carriers by aircraft. (64 Am. Jur. 33).
3. ID.; DAMAGES; UNFORSEEN DAMAGES. The defendant company can not be held liable for damages where it could not have
forseen the damages that would be suffered by the plaintiff upon failure to deliver the can of film for reason that the plans of the
plaintiff to exhibit that film during the town fiesta and his preparation, specially the announcement of said exhibition by poster and
advertisement in the newspapers were not called to the defendants attention.
4. ID.; RIGHT TO PROMPT DELIVERY. Sunday Common carriers are not obligated by law to carry and to deliver merchandise, and
persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation. Said rights
and obligations are created by a specific contract entered into by the parties.
5. ID.; SHIPPING; WHEN CONSIGNEE BECOMES PARTY TO THE CONTRACT. The right of the shipper to countermand the
shipment terminates when the consignee or legitimate holder of the bill of lading appears with such bill of lading before the carrier and
makes himself a party to the contract. Prior to that time, the consignee is stranger to the contract.
6. ID.; CONTRACT; CONSIGNER BECOMES A PARTY TO THE CONTRACT. Where the contract of carriage between the
consignor and the defendant carrier contains the stipulations of delivery to the consignee, the latters demand for the delivery of the
can of film to him at the provincial airport may be regarded as a notice of his acceptance of the stipulation of the delivery to him
contained in the fulfillment of the contract of carriage and delivery. In this case he also made himself a party to the contract, or at least
has come to court to enforce it. His cause of action must necessarily be founded on its breach.
7. ID.; DAMAGES; PROMPT DELIVERY. Where failure to exhibit films on a certain day would spell substantial damages or
considerable loss of profits, including waste of efforts on preparations and expense incurred in advertisements, exhibitors, for their
security, may either get hold of the films well ahead of the time of exhibition in order to make allowances for any hitch in the delivery,
or else enter into a special contract or make a suitable arrangement with the common carrier for the prompt delivery of the films,
calling the attention of the carrier to the circumstances surrounding the case and the approximate amount of damages to be suffered
in case of delay.
2. CESAR L. ISAAC v. A. L. AMMEN TRANSPORTATION CO., INC. [G.R. No. L-9671. August 23, 1957.]

Facts: Plaintiff boarded defendants bus as paying passenger from Albay. The bus collided with a pick-up truck which was coming
from the opposite direction trying to swerve from a pile of gravel. As a result, his left arm was completely severed. Plaintiff chose to
hold defendant liable on it contractual obligation. Plaintiff brought this action for damages which the lower court dismissed, holding
the driver of the pick-up car negligence and no that of the bus. Appeal.
Issue 1: Whether the common carrier is liable?
Ruling: No. The bus was running at a moderate speed. The river of the bus upon seeing the speeding pick-up truck swerved the bus
to the very extreme right of the road. Said driver couldnt move the bus farther without endangering the safety of his passenger.
Notwithstanding all these efforts, the rear left side was hit.
If the carriers employee is confronted with a sudden emergency, he is not held to the same degree of care he would otherwise be
required in the absent of such emergency. One who is placed in such a predicament cannot exercise such coolness or accuracy of
judgment as is required of him under ordinary circumstances and he cannot therefore be expected to observe the same judgment,
care and precaution as in the latter. For this reason, authorities abound where failure to observe the same degree of care that as
ordinary prudent man would exercise under ordinary circumstances when confronted with a sudden emergency was held to be
warranted and a justification to exempt the carrier from liability.
Issue 2: Whether appellant guilty of contributory negligence?
Ruling: Yes. A circumstance which militates against the stand of appellant is the fact borne out by the evidence that when he boarded
the bus in question, he seated himself on the left side thereof resting his left arm on the window sill but with his left elbow outside the
window, this being his position in the bus when the collision took place. It is for this reason that the collision resulted in the severance
of said left arm from the body of appellant thus doing him a great damage. It is therefore apparent that appellant is guilty of
contributory negligence.
It is a prevailing rule that it is negligence per se for a passenger to protrude any part of his body and that no recovery can be had for
an injury.
Syllabus:
1. PUBLIC UTILITIES; PRINCIPLES GOVERNING LIABILITY OF COMMON CARRIER. The following are the principles governing
the liability of a common carrier: (1) the liability of a carrier is contractual and arises upon breach of its obligation. There is a breach if
it fails to exert extraordinary diligence according to all the circumstances of each case; (2) a carrier is obliged to carry its passenger
with the utmost diligence of a very cautious person, having due regard for all circumstances; (3) a carrier is presumed to be at fault or
to have acted negligently in case of death of, or injury to, passengers, it being its duty to prove that it exercised extraordinary
diligence; and (4) the carrier is not an insurer against all risks of travel.
2. ID.; ID.; CONTRIBUTORY NEGLIGENCE OF PASSENGER MILITATES AGAINST HIS CLAIM; CASE AT BAR. A circumstance
which militates against the stand of appellant is the fact borne out by the evidence that when he boarded the bus in question, he
seated himself on the left side thereof resting his left arm on the window sill but with his left elbow outside the window, this being his
position in the bus when the collision took place. It is for this reason that the collision resulted in the severance of said left arm from
the body of appellant thus doing him a great damage. It is therefore apparent that appellant is guilty of contributory negligence.
3. SALUD VILLANUEVA VDA. DE BATACLAN and the minors NORMA, LUZVIMINDA, ELENITA, OSCAR and ALFREDO
BATACLAN, represented by their Natural guardian, SALUD VILLANUEVA VDA. DE BATACLAN v. MARIANO MEDINA [G.R.
No. L-10126. October 22, 1957.]
Facts: The bus of Medina Trans. Left Cavite for Pasay with 18 passengers. At about 2 a.m., the front tires bust and the vehicle began
to zig-zag until it fell into a canal on the right side of the road and turned turtle. Some passengers managed to get out the bus. Four
were trapped including Bataclan. Later, ten men came to help, one of them carrying a lighted torch, evidently fueled with petroleum. A
fire started, burning the bus and the four passengers. It would appear that as the bus overturned, gasoline began to leak. Deceaseds
widow brought action for damages. CFI awarded damage. Both parties appealed.
Issue: Whether the proximate cause of the death of Bataclan et al was their burning by reason of the torches which ignited the
gasoline?
Ruling: No. The court held that the proximate cause was the overturning of the bus, for this reason that when the bus was
overturned, the leaking of the gasoline was not unnatural nor unexpected. Also, the coming of the men with torch was to be expected
and was a natural sequence of the overturning of the bus. Moreover, the driver and conductor who were there could have warned the
mean of the gasoline leak, which can even be smelled. They were negligent under the NCC provisions.
Syllabus:

1. DAMAGES; CARRIERS LIABILITY; WORDS AND PHRASES; PROXIMATE CAUSE DEFINED. "The proximate legal cause is
that the acting first and producing the injury, either immediately or by setting other events in motion., all constituting a natural and
continuous chain of events, each having a close causal connection with its immediate predecessor, the final event in the chain
immediately affecting the injury as a natural and probable result of the cause which first acted, under such circumstances that the
person responsible for the first event should, as ordinarily prudent and intelligent person, have reasonable ground to expect at the
moment of his act or default that an injury to some person might be probably result therefrom."
virtua1aw
library
2. ID.; ID.; OVERTURNING OF BUS; PROXIMATE CAUSE OF DEATH. When a vehicle turned not only on its side but completely
on its back, the leaking of the gasoline from the tank was not unnatural or unexpected; that the coming of the men with the lighted
torch was in response to the call for help, made not only by the passengers, but most probably by the driver and the conductor
themselves, and that because it was very dark (about 2:30 in the morning), the rescuers had to carry a light with them; and coming as
they did from a rural area where the lanterns and flashlights were not available, they had to use a torch the most handy and available;
and what was more natural, that said rescuers should innocently approached the overtuned vehicle to extend the aid and effect the
rescue requested from them. Held: That the proximate cause of the death of B was overturning of the vehicle thru the negligence of
defendant and his agent.
3. ID.; ID.; CARRIERS NEGLIGENCE; BURNING OF THE BUS. The burning of the bus wherein some of the passengers were
trapped can also be attributed to the negligence of the carrier, through the driver and conductor who were on the road walking back
and forth. They should and must have known that in the position in which the overtuned bus was, gasoline could and must have
leaked from the gasoline tank and soaked the area in and around the bus, this aside from the fact that gasoline when spilled,
especially over a large area, can be smelt and detected even from a distance, Held: That the failure of the driver and the conductor to
have cautioned or taken steps to warn the rescuers not to bring the lighted torch too near the bus, constitute negligence on the part of
the agents of the carrier under the provisions of the Civil Code, particularly, Article 1733, 1759 and 1763 thereof.
4. HOME INSURANCE COMPANY v. AMERICAN STEAMSHIP AGENCIES, INC., and LUZON STEVEDORING
CORPORATION, Defendants, AMERICAN STEAMSHIP AGENCIES, INC. [G.R. No. L-25599. April 4, 1968.]
Facts: A Peruvian firm shipped fishmeal through the SS Crowborough consigned to the San Miguel Brewery and insured by the
Home Insurance Co. The Cargo arrived with shortages. SMB demanded and Home Insurance Co. paid Php 14,000.xx in settlement
for SMBs claim. Home Insurance Co. filed for recovery of Php 14,000.xx from Luzon Stevedoring and American Steamship Agencies.
CFI absolved Luzon but ordered American to reimburse the said amount to HIC, declaring that Art. 587 of Code of Commerce makes
the ship agent civilly liable for damages in favor of third persons due to conduct of carriers captain and that the stipulation in the
charter party exempting owner from liability is against public policy under Art. 1744 of NCC. American appealed.
Issue: Whether the stipulation in the charter party of the owners non-liability is valid so as to absolve the American
Steamship Agencies from liability for loss?
Ruling: Yes. Where the charter party contract shows that altho possession and control of the ship were not entirely transferred to the
charterer, the vessel was chartered to its full and complete capacity and the charterer had the option to go north or south or viceversa, loading, stowing and discharging at its risk and expense, said contract is one of affreightment rather than a demise. As such, in
the absence of stipulation, the liability of the shipowner for acts or negligence of its captain and crew would remain.
The Civil Code provisions on common carriers, taken from Anglo-American law, should, following American jurisprudence on the
matter, not be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the
owner from liability for loss due to the negligence of its agent would be void only if the strict public policy governing common carriers
is applied. Such policy has no force where the public at large is not involved, as in the case of a ship totally chartered for the use of a
single party.
5. PEDRO R. DAVILA and PRECIOSA C. TIRO v. PHILIPPINE AIR LINES [G.R. No. L-28512. February 28, 1973.]
Facts: The case arose from the tragic crash of a passenger plane of the defendant which took the lives of all its crew and
passengers. The plane took off from the Manduriao Airport, Iloilo, on its way to Manila, with 33 people on board, including the planes
complement. It did not reach its destination, but crashed at Mt. Baco, Mindoro, one hour and fifteen minutes after take-off. A massive
search was undertaken by the defendant and by other parties as soon as it was realized that the planes arrival in Manila was
overdue. The plaintiffs, parents of Pedro T. Davila, Jr., who was one of the passengers, had no definite news of what had happened
to their son, getting what information they could only from conflicting newspaper reports, until they a letter of condolence from the
defendants president Andres Soriano, informing them that their son had died in the crash.
Issue 1: Whether the defendant is liable for violation of its contract of carriage?
Ruling: Yes. What is undisputed therefore is that the pilot did not follow the route prescribed for his flight, at least between Romblon
and Manila. Since up to that point over Romblon, where he was supposed to intersect airway "Amber I," the weather was clear, the

most reasonable conclusion is that his failure to do so was intentional, and that he probably wanted to fly on a straight line to Manila.
It was a violation of air-traffic rules to which, under the circumstances, the accident may be directly attributable.
In any case, absent a satisfactory explanation on the part of the defendant as to how and why the accident occurred, the presumption
is that it was at fault, under Article 1756 of the Civil Code.
Issue 2: Whether the trial court fixed the correct indemnity?
Ruling: No.
INDEMNITY FOR DEATH. Pursuant to current jurisprudence on indemnity for death, the amount therefor should be in the amount
of P12,000.00.
LIABILITY FOR LOSS OF EARNING CAPACITY. According to Article 2206, paragraph (1), of the Civil Code, "the defendant shall
be liable for the loss of the earning capacity of the deceased and indemnity shall be paid to the heirs of the latter." This article, while
referring to "damages for death caused by crime or quasi-delict," is expressly made applicable by Article 1764 "to the death of a
passenger caused by the breach of contract by a common carrier.
AMOUNT AWARDED IN INSTANT CASE. Considering that the deceased was getting his gross income of P15,000 a year from
three different sources, namely, from managing a radio station, from law practice and from farming, the expenses incidental to the
generation of such income were necessarily more than if he had only one source. Together with his living expenses, a deduction of
P600.00 a month, or P7,200.00 a year, seems to Us reasonable, leaving , a net yearly income of P7,800.00. This amount, multiplied
by 25 years, or P195,000.00, is the amount which should be awarded to the plaintiffs in this particular respect.
LIABILITY FOR ACTUAL LOSSES IN INSTANT CASE. The lower courts award for actual losses sustained by the deceased,
which consist of "Rolex Watch P600.00, pistol P300.00, Burial Expenses P600.00, and cost of cemetery lot and mausoleum
P3,500.00" was affirmed by this Court.
LIABILITY FOR MORAL DAMAGES IN INSTANT CASE. Under Article 2206, in relation to Article 1764, of the Civil Code, the
parents of the deceased are entitled to moral damages for their mental anguish. The trial court awarded P10,000.00 in this concept,
and We find no justification to change the award, considering the long period of uncertainty and suffering the plaintiffs underwent from
November 23, when the plane crash occurred, to December 19, when they received a letter from the defendants president confirming
the death of their son, and again to the following December 29, when his body was finally recovered and taken back to them.
NO LIABILITY FOR EXEMPLARY DAMAGES IN INSTANT CASE. With respect to the award of P10,000 as exemplary damages,
It is Our opinion that the same should be eliminated. According to Article 2232 of the Civil Code, in contracts and quasi-contracts the
court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. The
failure of the defendant here to exercise extraordinary diligence, as required by law, does not amount to anyone of the circumstances
contemplated in the said provision.
LIABILITY FOR ATTORNEYS FEES. The trial court has awarded attorneys fees of P10,000.00. We do not find this award
groundless or the amount thereof unreasonable.
The total of the different items above enumerated is P232,000.00. The judgment of the court a quo is therefore modified accordingly
and the defendant is ordered to pay the said amount to the plaintiffs, with legal interest thereon from the finality of this judgment.
6. G.R. No. L-65773-74 April 30, 1987
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
BRITISH OVERSEAS AIRWAYS CORPORATION and COURT OF TAX APPEALS, respondents.
FACTS: BOAC is a 100% British Government-owned corporation organized and existing under the laws of the United Kingdom It is
engaged in the international airline business and is a member-signatory of the Interline Air Transport Association (IATA). As such it
operates air transportation service and sells transportation tickets over the routes of the other airline members. During the periods
covered by the disputed assessments, it is admitted that BOAC had no landing rights for traffic purposes in the Philippines, and was
not granted a Certificate of public convenience and necessity to operate in the Philippines by the Civil Aeronautics Board (CAB),
except for a nine-month period, partly in 1961 and partly in 1962, when it was granted a temporary landing permit by the CAB.
Consequently, it did not carry passengers and/or cargo to or from the Philippines, although during the period covered by the
assessments, it maintained a general sales agent in the Philippines Wamer Barnes and Company, Ltd., and later Qantas Airways
which was responsible for selling BOAC tickets covering passengers and cargoes.

ISSUE: WON the revenue derived by private respondent British Overseas Airways Corporation (BOAC) from sales of tickets in the
Philippines for air transportation, while having no landing rights here, constitute income of BOAC from Philippine sources, and,
accordingly, taxable.
HELD:YES. For the source of income to be considered as coming from the Philippines, it is sufficient that the income is derived from
activity within the Philippines. In BOAC's case, the sale of tickets in the Philippines is the activity that produces the income. The
tickets exchanged hands here and payments for fares were also made here in Philippine currency. The site of the source of payments
is the Philippines. The flow of wealth proceeded from, and occurred within, Philippine territory, enjoying the protection accorded by
the Philippine government. In consideration of such protection, the flow of wealth should share the burden of supporting the
government.
A transportation ticket is not a mere piece of paper. When issued by a common carrier, it constitutes the contract between the ticketholder and the carrier. It gives rise to the obligation of the purchaser of the ticket to pay the fare and the corresponding obligation of
the carrier to transport the passenger upon the terms and conditions set forth thereon. The ordinary ticket issued to members of the
traveling public in general embraces within its terms all the elements to constitute it a valid contract, binding upon the parties entering
into the relationship. 9
True, Section 37(a) of the Tax Code, which enumerates items of gross income from sources within the Philippines, namely: (1)
interest, (21) dividends, (3) service, (4) rentals and royalties, (5) sale of real property, and (6) sale of personal property, does not
mention income from the sale of tickets for international transportation. However, that does not render it less an income from sources
within the Philippines. Section 37, by its language, does not intend the enumeration to be exclusive. It merely directs that the types of
income listed therein be treated as income from sources within the Philippines. A cursory reading of the section will show that it does
not state that it is an all-inclusive enumeration, and that no other kind of income may be so considered. "
The absence of flight operations to and from the Philippines is not determinative of the source of income or the site of income
taxation. Admittedly, BOAC was an off-line international airline at the time pertinent to this case. The test of taxability is the "source";
and the source of an income is that activity ... which produced the income. Unquestionably, the passage documentations in these
cases were sold in the Philippines and the revenue therefrom was derived from an activity regularly pursued within the Philippines.
business And even if the BOAC tickets sold covered the "transport of passengers and cargo to and from foreign cities", it cannot alter
the fact that income from the sale of tickets was derived from the Philippines. The word "source" conveys one essential idea, that of
origin, and the origin of the income herein is the Philippines.
7. G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA,
FACTS: Respondent Ernesto Cendana was a junk dealer. He buys scrap materials and brings those that he gathered to Manila for
resale using 2 six-wheeler trucks. On the return trip to Pangasinan, respondent would load his vehicle with cargo which various
merchants wanted delivered, charging fee lower than the commercial rates. Sometime in November 1970, petitioner Pedro de
Guzman contracted with respondent for the delivery of 750 cartons of Liberty Milk. On December 1, 1970, respondent loaded the
cargo. Only 150 boxes were delivered to petitioner because the truck carrying the boxes was hijacked along the way. Petitioner
commenced an action claiming the value of the lost merchandise. Petitioner argues that respondent, being a common carrier, is
bound to exercise extraordinary diligence, which it failed to do. Private respondent denied that he was a common carrier, and so he
could not be held liable for force majeure. The trial court ruled against the respondent, but such was reversed by the Court of
Appeals.
ISSUE:1 Whether or not private respondent is a common carrier?2 Whether private respondent is liable for the loss of the goods?
HELD:1.Article 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity. Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general
population. It appears to the Court that private respondent is properly characterized as a common carrier even though he merely
"back-hauled" goods for other merchants from Manila to Pangasinan, although such backhauling was done on a periodic or
occasional rather than regular or scheduled manner, and even though private respondent's principal occupation was not the carriage
of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee

frequently fell below commercial freight rates is not relevant here. A certificate of public convenience is not a requisite for the incurring
of liability under the Civil Code provisions governing common carriers.
2 Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods
which they carry, "unless the same is due to any of the following causes only:
a. Flood, storm, earthquake, lightning, or other natural disaster or calamity;
b. Act of the public enemy in war, whether international or civil;
c. Act or omission of the shipper or owner of the goods;
d. The character of the goods or defects in the packing or in the containers; and
e. Order or act of competent public authority."
The hijacking of the carrier's truck - does not fall within any of the five (5) categories of exempting causes listed in Article 1734.
Private respondent as common carrier is presumed to have been at fault or to have acted negligently. This presumption, however,
may be overthrown by proof of extraordinary diligence on the part of private respondent. We believe and so hold that the limits of the
duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery
which is attended by "grave or irresistible threat, violence or force." we hold that the occurrence of the loss must reasonably be
regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that
even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for
acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of
extraordinary diligence.
Under Art.1745(6), a common carrier is held responsible even for acts of strangers like thieves or robbers except where such thieves
or robbers acted with grave or irresistible threat, violence or force.

8. G.R. No. 52159 December 22, 1989

JOSE PILAPIL, petitioner,
vs.
HON. COURT OF APPEALS and ALATCO TRANSPORTATION COMPANY, INC., respondents.

FACTS: Petitioner Pilapil, on board respondents bus was hit above his eye by a stone hurled by an unidentified bystander.
Respondents personnel lost no time in bringing him to a hospital, but eventually petitioner partially lost his left eyes vision and
sustained a permanent scar.
Thus, Petitioner lodged an action for recovery of damages before the Court of First Instance of Camarines Sur which the latter
granted. On appeal, the Court of Appeals reversed said decision.
ISSUE: Whether or not common carrier is liable?
HELD :NO.In consideration of the right granted to it by the public to engage in the business of transporting passengers and goods, a
common carrier does not give its consent to become an insurer of any and all risks to passengers and goods. It merely undertakes to
perform certain duties to the public as the law imposes, and holds itself liable for any breach thereof.
While the law requires the highest degree of diligence from common carriers in the safe transport of their passengers and creates a
presumption of negligence against them, it does not, however, make the carrier an insurer of the absolute safety of its passengers.
Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful acts or negligence of other
passengers or of strangers, if the common carrier's employees through the exercise of the diligence of a good father of a family could
have prevented or stopped the act or omission.
Clearly under the above provision, a tort committed by a stranger which causes injury to a passenger does not accord the latter a
cause of action against the carrier. The negligence for which a common carrier is held responsible is the negligent omission by the

carrier's employees to prevent the tort from being committed when the same could have been foreseen and prevented by them.
Further, under the same provision, it is to be noted that when the violation of the contract is due to the willful acts of strangers, as in
the instant case, the degree of care essential to be exercised by the common carrier for the protection of its passenger is only that of
a good father of a family.
9. . G.R. No. 89757 August 6, 1990
ABOITIZ SHIPPING CORPORATION, petitioner,
vs.
COURT OF APPEALS AND GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD.,respondents.
FACTS:On October 28, 1980, the vessel M/V "P. Aboitiz" took on board in Hongkong for shipment to Manila some cargo consisting of
one (1) twenty (20)-footer container holding 271 rolls of goods for apparel covered by Bill of Lading No. 515-M and one (1) forty (40)footer container holding four hundred forty- seven (447) rolls, ten (10) bulk and ninety-five (95) cartons of goods for apparel covered
by Bill of Lading No. 505-M. The total value, including invoice value, freightage, customs duties, taxes and similar imports amounts to
US$39,885.85 for the first shipment while that of the second shipment amounts to US$94,190.55. Both shipments were consigned to
the Philippine Apparel, Inc. and insured with the General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC for short). The
vessel is owned and operated by Aboitiz Shipping Corporation (Aboitiz for short).
On October 31, 1980 on its way to Manila the vessel sunk and it was declared lost with all its cargoes. GAFLAC paid the
consignee the amounts US$39,885.85 or P319,086.80 and US$94,190.55 or P753,524.40 for the lost cargo. As GAFLAC was
subrogated to all the rights, interests and actions of the consignee against Aboitiz, it filed an action for damages against Aboitiz in the
Regional Trial Court of Manila alleging that the loss was due to the fault and negligence of Aboitiz and the master and crew of its
vessel in that they did not observe the extraordinary diligence required by law as regards common carriers.
ISSUE:WON the liability of the petitioner should be fixed at US$500.00 per package/container, as stipulated in the bill of lading and
not at the actual value of the cargo
HELD:Yes. While it is true that in the bill of lading there is such stipulation that the liability of the carrier is US$500.00 per
package/container/customary freight, there is an exception, that is, when the nature and value of such goods have been declared by
the shipper before shipment and inserted in the bill of lading.
In this case the description of the nature and the value of the goods shipped are declared and reflected in the bills of lading.
Thus, it is the basis of the liability of the carrier as the actual value of the loss. Moreover, it is absurd to interpret "container," as
provided in the bill of lading to be valued at US$500.00 each, to refer to the container which is the modern substitute for the hold of
the vessel. The package/container contemplated by the law to limit the liability of the carrier should be sensibly related to the unit in
which the shipper packed the goods and described them, not a large metal object, functionally a part of the ship, in which the carrier
used them to be contained. Such "container" must be given the same meaning and classification as a "package" and "customary
freight unit."
Generally speaking a stipulation, limiting the common carrier's liability to the value of the goods appearing in the bill of
lading, unless the shipper or owner declares a greater value, is valid. (Civil Code, Art. 1749). Such stipulation, however, must be
reasonable and just under the circumstances and must have been fairly and freely agreed upon.
10. G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
FACTS: Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE) entered into a hauling contract with Jibfair
Shipping Agency Corporation whereby the former bound itself to haul the latters 2,000 m/tons of soya bean meal from Magallanes
Drive,Del Pan,Manila to the warehouse of Purefoods Corp. in Laguna. To carry out its obligation, CIPTRADE through Rodolfo,
subcontracted with Estrella Bascos (petitioner) to transport and to deliver 400 sacks of soya bean meal worth P156,404 from the
Manila Port Area to Calamba at the rate of P50 per metric ton. Petitioner failed to deliver the said cargo. As a consequence of that
failure, Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with the contract which stated:
1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non delivery or damages
to the cargo during transport at market value,xxx
CIPTRADE demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a complaint for sum of
money and damages with writ of preliminary attachment for breach of a contract of carriage. The trial court granted the writ of
preliminary attachment.

In her answer, petitioner interposed the following defenses: that there was no contract of carriage since CIPTRADE leased her cargo
truck to load the cargo from Manila to Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000 for loading the cargo;
that the truck carrying the cargo wa hijacked along Canonigo St.Paco,Manila on the night of Oct,21,1988; that the hijacking was
immediately reported to CIPTRADE and that the petitioner and the police exerted all efforts to locate the hijacked properties; that
after preliminary investigation , an information for robbery and carnapping were filed against Jose Opriano,et al., and that hijacking,
being a force majeur, exculpated petitioner from any liability to CIPTRADE.
ISSUES: 1.WON petitioner a common carrier;: 2.WON the hijacking referred to a force majeure?
HELD:1.Yes. Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or firm, or association engaged in
the business of carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to
the public." The test to determine a common carrier is "whether the given undertaking is a part of the business engaged in by the
carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted." . . .
The holding of the Court in De Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of the Civil Code, it held thus:
"The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguished between a carrier offering its
services to the "general public," i.e., the general community or population, and one who offers services or solicits business only from
a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions."
2. NO. Grave and irresistible force must be proved in case of hijacking. The presumption of negligence was raised against
petitioner. It was petitioner's burden to overcome it. Thus, contrary to her assertion, private respondent need not introduce
any evidence to prove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
In De Guzman vs. Court of Appeals, the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt
with under the provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate
the carrier from liability arising from hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible threat,
violence, or force. This is in accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any of the following or similar
stipulations shall be considered unreasonable, unjust and contrary to public policy . . . (6) That the common carrier's liability for acts
committed by thieves, or of robbers who do not act with grave or irresistible threat, violences or force, is dispensed with or
diminished"; In the same case, the Supreme Court also held that: "Under Article 1745 (6) above, a common carrier is held
responsible and will not be allowed to divest or to diminish such responsibility even for acts of strangers like thieves or robbers,
except where such thieves or robbers in fact acted "with grave of irresistible threat, violence of force," We believe and so hold that the
limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of
a robbery which is attended by "grave or irresistible threat, violence or force."
11. Eastern Shipping Lines, Inc. vs. Court of Appeals and Mercantile Insurance Company, Inc.
Facts:
Two fiber drums of riboflavin were shipped from Yokohama, Japan for delivery vessel "SS EASTERN COMET" owned by
defendant Eastern Shipping Lines. Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto the custody
of defendant Metro Port Service, Inc. The latter excepted to one drum, said to be in bad order, which damage was unknown to
plaintiff. Allied Brokerage Corporation received the shipment from defendant Metro Port Service, Inc., one drum opened and without
seal. Allied Brokerage Corporation made deliveries of the shipment to the consignee's warehouse. The latter excepted to one drum
which contained spillages, while the rest of the contents was adulterated/fake. Plaintiff contended that due to the losses/damage
sustained by said drum, the consignee suffered losses totaling P19,032.95, due to the fault and negligence of defendants. Claims
were presented against defendants who failed and refused to pay the same. As a consequence of the losses sustained, plaintiff was
compelled to pay the consignee P19,032.95 under the aforestated marine insurance policy, so that it became subrogated to all the
rights of action of said consignee against defendants.
As for defendant Eastern Shipping it alleged that the shipment was discharged in good order from the vessel unto the
custody of Metro Port Service so that any damage/losses incurred after the shipment was incurred after the shipment was turned
over to the latter, is no longer its liability; Metroport averred that although subject shipment was discharged unto its custody, portion of
the same was already in bad order; Allied Brokerage alleged that plaintiff has no cause of action against it, not having negligent or at
fault for the shipment was already in damage and bad order condition when received by it, but nonetheless, it still exercised extra
ordinary care and diligence in the handling/delivery of the cargo to consignee in the same condition shipment was received by it.
Issue:
Whether or not a claim for damage sustained on a shipment of goods can be a solidary, or joint and several, liability of the
common carrier, the arrastre operator and the customs broker

Ruling:
The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman
(Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The relationship between the consignee and the common carrier is similar to
that of the consignee and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty
of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such
responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with the obligation to
deliver the goods in good condition to the consignee.
We do not, of course, imply by the above pronouncement that the arrastre operator and the customs broker are themselves
always and necessarily liable solidarily with the carrier, or vice-versa, nor that attendant facts in a given case may not vary the rule.
The instant petition has been brought solely by Eastern Shipping Lines, which, being the carrier and not having been able to rebut the
presumption of fault, is, in any event, to be held liable in this particular case. A factual finding of both the court a quo and the appellate
court, we take note, is that "there is sufficient evidence that the shipment sustained damage while in the successive possession of
appellants" (the herein petitioner among them). Accordingly, the liability imposed on Eastern Shipping Lines, Inc., the sole petitioner in
this case, is inevitable regardless of whether there are others solidarily liable with it.
12. Japan Airlines vs. Court of Appeals
Facts:
Miranda boarded JAL flight No. JL 001 in San Francisco, California bound for Manila. Likewise, on the same day private
respondents Agana, and Francisco left Los Angeles, California for Manila via JAL flight No. JL 061. As an incentive for travelling on
the said airline, both flights were to make an overnight stopover at Narita, Japan, at the airlines' expense, thereafter proceeding to
Manila the following day. Upon arrival at Narita, Japan private respondents were billeted at Hotel Nikko Narita for the night. The next
day, private respondents, on the final leg of their journey, went to the airport to take their flight to Manila. However, due to the Mt.
Pinatubo eruption, unrelenting ashfall blanketed Ninoy Aquino International Airport (NAIA), rendering it inaccessible to airline traffic.
Hence, private respondents' trip to Manila was cancelled indefinitely.
To accommodate the needs of its stranded passengers, JAL rebooked all the Manila-bound passengers on flight No. 741
and also paid for the hotel expenses for their unexpected overnight stay. However, the delay lasted from June 16-June 22, 1991 due
to NAIAs indefinite closure. At this point, JAL informed the private respondents that it would no longer defray their hotel and
accommodation expense during their stay in Narita. Private respondents commenced an action for damages against JAL. To support
their claim, private respondents asserted that JAL failed to live up to its duty to provide care and comfort to its stranded passengers
when it refused to pay for their hotel and accommodation expenses from June 16 to 21, 1991 at Narita, Japan. In other words, they
insisted that JAL was obligated to shoulder their expenses as long as they were still stranded in Narita. On the other hand, JAL
denied this allegation and averred that airline passengers have no vested right to these amenities in case a flight is cancelled due to
"force majeure."
Issue:
Whether or not JAL, as a common carrier has the obligation to shoulder the hotel and meal expenses of its stranded
passengers until they have reached their final destination, even if the delay were caused by "force majeure"
Ruling:
Failure on the part of the common carrier to live up to the exacting standards of care and diligence renders it liable for any
damages that may be sustained by its passengers. However, this is not to say that common carriers are absolutely responsible for all
injuries or damages even if the same were caused by a fortuitous event. To rule otherwise would render the defense of "force
majeure," as an exception from any liability, illusory and ineffective. Accordingly, there is no question that when a party is unable to
fulfill his obligation because of "force majeure," the general rule is that he cannot be held liable for damages for nonperformance. Corollarily, when JAL was prevented from resuming its flight to Manila due to the effects of Mt. Pinatubo eruption,
whatever losses or damages in the form of hotel and meal expenses the stranded passengers incurred, cannot be charged to JAL.
Yet it is undeniable that JAL assumed the hotel expenses of respondents for their unexpected overnight stay on June 15, 1991.
We are not oblivious to the fact that the cancellation of JAL flights to Manila from June 15 to June 21, 1991 caused
considerable disruption in passenger booking and reservation. In fact, it would be unreasonable to expect, considering NAIA's
closure, that JAL flight operations would be normal on the days affected. Nevertheless, this does not excuse JAL from its obligation to
make the necessary arrangements to transport private respondents on its first available flight to Manila. After all, it had a contract to
transport private respondents from the United States to Manila as their final destination.

13. Baliwag Transit, Inc. vs. Court of Appeals

Facts:
Leticia Garcia, and her 5-year old son, Allan Garcia, boarded Baliwag Transit Bus 2036 bound for Cabanatuan City driven by
Jaime Santiago. They took the seat behind the driver. At about 7:30 p.m., in Malimba, Gapan, Nueva Ecija, the bus passengers saw
a cargo truck, owned by A & J Trading, parked at the shoulder of the national highway. Its left rear portion jutted to the outer lane, as
the shoulder of the road was too narrow to accommodate the whole truck. A kerosene lamp appeared at the edge of the road
obviously to serve as a warning device. The truck driver, and his helper were then replacing a flat tire. Bus driver Santiago was driving
at an inordinately fast speed and failed to notice the truck and the kerosene lamp at the edge of the road. Santiagos passengers
urged him to slow down but he paid them no heed. Santiago even carried animated conversations with his co-employees while
driving. When the danger of collision became imminent, the bus passengers shouted Babangga tayo!. Santiago stepped on the
brake, but it was too late. His bus rammed into the stalled cargo truck killing him instantly and the trucks helper, and injury to several
others among them herein respondents. Thus, a suit was filed against Baliwag Transit, Inc., A & J Trading and Julio Recontique for
damages in the RTC of Bulacan.
Issue:
Whether or not Baliwag Transit, Inc. can be held liable for damages
Ruling:
Yes. As a common carrier, Baliwag breached its contract of carriage when it failed to deliver its passengers, Leticia and Allan
Garcia 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. 11 In a contract
of carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the
presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common carrier.
This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence as prescribed in
Articles 1733 and 1755 of the Civil Code.
The records are bereft of any proof to show that Baliwag exercised extra ordinary diligence. On the contrary, the evidence
demonstrates its driver's recklessness. Leticia Garcia testified that the bus was running at a very high speed despite the drizzle and
the darkness of the highway. The passengers pleaded for its driver to slow down, but their plea was ignored. Leticia also revealed
that the driver was smelling of liquor. She could smell him as she was seated right behind the driver. Another passenger, Felix Cruz
testified that immediately before the collision, the bus driver was conversing with a co-employee. All these prove the bus driver's
wanton disregard for the physical safety of his passengers, which makes Baliwag as a common carrier liable for damages.
14. Everett Steamship Corporation vs. Court of Appeals
Facts:
Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13 and MARCO
C/No. 14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi,
Japan. The crates were shipped from Nagoya, Japan to Manila on board "ADELFAEVERETTE," a vessel owned by petitioner's
principal, Everett Orient Lines. The said crates were covered by Bill of Lading No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. This was
confirmed and admitted by petitioner in its letter of January 13, 1992 addressed to private respondent, which thereafter made a
formal claim upon petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred
(Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November 14, 1991. However, petitioner 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. Private respondent rejected the offer and thereafter instituted a suit for collection against petitioner.
Issue:
Whether or not the petitioner is only liable for the amount stated in the Bill of Lading

Ruling:
The bill of lading in question confirms petitioner's contention. To defeat the carrier's limited liability, the aforecited Clause 18
of the bill of lading requires that the shipper should have declared in writing a higher valuation of its goods before receipt thereof by

10

the carrier and insert the said declaration in the bill of lading, with extra freight paid. These requirements in the bill of lading were
never complied with by the shipper, hence, the liability of the carrier under the limited liability clause stands. The commercial Invoice
No. MTM-941 does not in itself sufficiently and convincingly show that petitioner has knowledge of the value of the cargo as
contended by private respondent. No other evidence was proffered by private respondent to support is contention. Thus, we are
convinced that petitioner should be liable for the full value of the lost cargo. In fine, the liability of petitioner for the loss of the cargo is
limited to One Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading.
15. Caltex (Philippines) Inc. vs. Sulpicio Lines, Inc.
Facts:
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00 p.m., enroute to Masbate, loaded with
8,800 barrels of petroleum products shipped by petitioner Caltex. During that particular voyage, the MT Vector carried on board
gasoline and other oil products owned by Caltex by virtue of a charter contract between them. On December 20, 1987, at about 6:30
a.m., the passenger ship MV Doa Paz left the port of Tacloban headed for Manila with a complement of 59 crew members including
the master and his officers, and passengers totaling 1,493 as indicated in the Coast Guard Clearance. The MV Doa Paz is a
passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. plying the route of Manila/ Tacloban/ Catbalogan/ Manila/
Catbalogan/ Tacloban/ Manila, making trips twice a week.
The two vessels collided in the open sea within the vicinity of Dumali Point between Marinduque and Oriental Mindoro. All
the crewmembers of MV Doa Paz died, while the two survivors from MT Vector claimed that they were sleeping at the time of the
incident. The MV Doa Paz carried an estimated 4,000 passengers; many indeed, were not in the passenger manifest. Only 24
survived the tragedy after having been rescued from the burning waters by vessels that responded to distress calls. The board of
marine inquiry after investigation found that the MT Vector, its registered operator Francisco Soriano, and its owner and actual
operator Vector Shipping Corporation, were at fault and responsible for its collision with MV Doa Paz.
Caezal's wife and mother respectively, filed with the Regional Trial Court, Branch 8, Manila, a complaint for "Damages
Arising from Breach of Contract of Carriage" against Sulpicio Lines, Inc. Sulpicio, in turn, filed a third party complaint against Soriano,
Vector Shipping Corporation and Caltex (Philippines), Inc. Sulpicio alleged that Caltex chartered MT Vector with gross and evident
bad faith knowing fully well that MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to safe navigation; as a
result, it rammed against MV Doa Paz in the open sea setting MT Vector's highly flammable cargo ablaze.
Issue:
Whether or not Caltex as a voyage charterer of a sea vessel is liable for damages from the collision between the chartered
vessel and a passenger ship
Ruling:
No. The relationship between the parties in this case is governed by special laws. Because of the implied warranty of
seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire into the vessel's
seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold them
liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in general is
concerned. By the same token, we cannot expect passengers to inquire every time they board a common carrier, whether the carrier
possesses the necessary papers or that all the carrier's employees are qualified. Such a practice would be an absurdity in a business
where time is always of the essence. Considering the nature of transportation business, passengers and shippers alike customarily
presume that common carriers possess all the legal requisites in its operation. Thus, the nature of the obligation of Caltex demands
ordinary diligence like any other shipper in shipping his cargoes.
Caltex and Vector Shipping Corporation had been doing business since 1985, or for about two years before the tragic
incident occurred in 1987. Past services rendered showed no reason for Caltex to observe a higher degree of diligence. Clearly, as a
mere voyage charterer, Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was
convinced of its seaworthiness. All things considered, we find no legal basis to hold petitioner liable for damages.
Calalas V. C.A.
Facts: At 10 o'clock in the morning of August 23, 1989, private respondent Eliza Jujeurche G. Sunga, then a college freshman
majoring in Physical Education at the Siliman University, took a passenger jeepney owned and operated by petitioner Vicente

11

Calalas. As the jeepney was filled to capacity of about 24 passengers, Sunga was given by the conductor an "extension seat," a
wooden stool at the back of the door at the rear end of the vehicle.
On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a passenger off. As she was seated at the rear of the
vehicle, Sunga gave way to the outgoing passenger. Just as she was doing so, an Isuzu truck driven by Iglecerio Verena and owned
by Francisco Salva bumped the left rear portion of the jeepney. As a result, Sunga was injured.
Sunga filed a complaint for damages against Calalas, alleging violation of the contract of carriage by the former in failing to exercise
the diligence required of him as a common carrier. Calalas, on the other hand, filed a third-party complaint against Francisco Salva,
the owner of the Isuzu truck.
Hence, this petition. Petitioner contends that the that the negligence of Verena was the proximate cause of the accident negates his
liability and that to rule otherwise would be to make the common carrier an insurer of the safety of its passengers. He contends that
the bumping of the jeepney by the truck owned by Salva was a caso fortuito.
Issue:

whether petitioner is liable on his contract of carriage?

Held: Yes. The breach of contract or culpa contractual is premised upon the negligence in the performance of a contractual
obligation. It is immaterial that the proximate cause of the collision between the jeepney and the truck was the negligence of the truck
driver. The doctrine of proximate cause is applicable only in actions for quasi-delict, not in actions involving breach of contract.
The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the
obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties
themselves who create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as contracts
of carriage are concerned, some aspects regulated by the Civil Code are those respecting the diligence required of common carriers
with regard to the safety of passengers as well as the presumption of negligence in cases of death or injury to passengers.
The fact that Sunga was seated in an "extension seat" placed her in a peril greater than that to which the other passengers were
exposed. Therefore, not only was petitioner unable to overcome the presumption of negligence imposed on him for the injury
sustained by Sunga, but also, the evidence shows he was actually negligent in transporting passengers.
Virgines Calvo (TRANSORIENT) V. UCPB General Insurance
Facts: Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc. (TCTSI), a sole proprietorship
customs broker. At the time material to this case, petitioner entered into a contract with San Miguel Corporation (SMC) for the transfer
of 114 reels of semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in Manila to SMC's warehouse at the
Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in Manila on board "M/V Hayakawa Maru" and, after
24 hours, were unloaded from the vessel to the custody of the arrastre operator, Manila Port Services, Inc. From July 23 to July 25,
1990, petitioner, pursuant to her contract with SMC, withdrew the cargo from the arrastre operator and delivered it to SMC's
warehouse in Ermita, Manila. On July 25, 1990, the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the
semi-chemical fluting paper were "wet/stained/torn" and 3 reels of kraft liner board were likewise torn. The damage was placed at
P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract for the aforementioned amount. In turn, respondent, as
subrogee of SMC, brought suit against petitioner in the RTC.
Defendant by reason of the nature of [her] business should have devised ways and means in order to prevent the damage to the
cargoes which it is under obligation to take custody of and to forthwith deliver to the consignee. Defendant did not present any
evidence on what precaution [she] performed to prevent [the] said incident, hence the presumption is that the moment the defendant
accepts the cargo [she] shall perform such extraordinary diligence because of the nature of the cargo.
The contention of the petitioner that she is not a common carrier but a private carrier because, as a customs broker and
warehouseman, she does not indiscriminately hold her services out to the public but only offers the same to select parties with whom
she may contract in the conduct of her business.
Issue:

Whether the petitioner is liable?

Held: Yes. "Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public."

12

The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and
one who does such carrying only as an ancillary activity . . . Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general
population. We think that Article 1732 deliberately refrained from making such distinctions.
There is greater reason for holding petitioner to be a common carrier because the transportation of goods is an integral part of her
business. To uphold petitioner's contention would be to deprive those with whom she contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry goods for her customers, as already noted, is part and parcel of petitioner's
business.
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow
the required precaution for avoiding damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their
nature requires."
Hence, for failure of petitioner to prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is
exempt from liability, the presumption of negligence as provided under Art. 1735 holds.
FGU Insurance Corporation V. G.P. Sarmiento
Facts: G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of Condura S.D. white
refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles, from the plant site of Concepcion Industries, Inc., along South
Superhighway in Alabang, Metro Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing along
McArthur highway, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value of the covered cargoes
in the sum of P204,450.00. FGU, in turn, being the subrogee of the rights and interests of Concepcion Industries, Inc., sought
reimbursement of the amount it had paid to the latter from GPS. Since the trucking company failed to heed the claim, FGU filed a
complaint for damages and breach of contract of carriage against GPS and its driver Lambert Eroles with the Regional Trial Court,
Branch 66, of Makati City. In its answer, respondents asserted that GPS was the exclusive hauler only of Concepcion Industries, Inc.,
since 1988, and it was not so engaged in business as a common carrier. Respondents further claimed that the cause of damage was
purely accidental. GPS contended that they are not a common carrier and not liable for any damages sustained by the cargoes.
Issue:

whether GPS is liable?

Held: Yes. The true test of a common carrier is the carriage of passengers or goods, providing space for those who opt to avail
themselves of its transportation service for a fee. Given accepted standards, GPS scarcely falls within the term "common carrier."
GPS still 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.11 The law, recognizing
the obligatory force of contracts,12 will not permit a party to be set free from liability for any kind of misperformance of the contractual
undertaking or a contravention of the tenor thereof. 13 A breach upon the contract confers upon the injured party a valid cause for
recovering that which may have been lost or suffered. 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 his "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 his
"restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party. 14 Indeed,
agreements can accomplish little, either for their makers or for society, unless they are made the basis for action.15 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 obligation16 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.

13

Respondent trucking corporation recognizes the existence of a contract of carriage between it and petitioners assured, and admits
that the cargoes it has assumed to deliver have been lost or damaged while in its custody. In such a situation, a default on, or failure
of compliance with, the obligation 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.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself be ordered to pay petitioner.
The driver, not being a party to the contract of carriage between petitioners principal and defendant, may not be held liable under the
agreement. A contract can only bind the parties who have entered into it or their successors who have assumed their personality or
their juridical position, such contract can neither favor nor prejudice a third person. 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.
DSR-SENATOR LINES AND C.F. SHARP AND COMPANY, INC., petitioners,
V.
FEDERAL PHOENIX ASSURANCE CO., INC., respondent.
Facts: Berde Plants, Inc. (Berde Plants) delivered 632 units of artificial trees to C.F. Sharp and Company, Inc. (C.F. Sharp), the
General Ship Agent of DSR-Senator Lines, a foreign shipping corporation, for transportation and delivery to the consignee, Al-Mohr
International Group, in Riyadh, Saudi Arabia. C.F. Sharp issued International Bill of Lading for the cargo with an invoice value of
$34,579.60. Under the Bill of Lading, the port of discharge for the cargo was at the Khor Fakkan port and the port of delivery was
Riyadh, Saudi Arabia, via Port Dammam. The cargo was loaded in M/S "Arabian Senator."
Federal Phoenix Assurance Company, Inc. (Federal Phoenix Assurance) insured the cargo against all risks in the amount of
P941,429.61.
On June 7, 1993, M/S "Arabian Senator" left the Manila South Harbor for Saudi Arabia with the cargo on board. When the vessel
arrived in Khor Fakkan Port, the cargo was reloaded on board DSR-Senator Lines feeder vessel, M/V "Kapitan Sakharov," bound for
Port Dammam, Saudi Arabia. However, while in transit, the vessel and all its cargo caught fire.
On July 5, 1993, DSR-Senator Lines informed Berde Plants that M/V "Kapitan Sakharov" with its cargo was gutted by fire and sank
on or about July 4, 1993. On December 16, 1993, C.F. Sharp issued a certification to that effect.
Consequently, Federal Phoenix Assurance paid Berde Plants P941,429.61 corresponding to the amount of insurance for the cargo. In
turn Berde Plants executed in its favor a "Subrogation Receipt" dated January 17, 1994.
On February 8, 1994, Federal Phoenix Assurance sent a letter to C.F. Sharp demanding payment of P941,429.61 on the basis of the
Subrogation Receipt. C.F. Sharp denied any liability on the ground that such liability was extinguished when the vessel carrying the
cargo was gutted by fire.
Issue:

Whether C.F. Sharp is liable?

Held:

Yes. We find the petition bereft of merit.

Article 1734 of the Civil Code provides:

"Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of
the following causes only:
(1)Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority."

14

Fire is not one of those enumerated under the above provision which exempts a carrier from liability for loss or destruction of the
cargo.
Even if fire were to be considered a natural disaster within the purview of Article 1734, it is required under Article 1739 of the same
Code that the natural disaster must have been the proximate and only cause of the loss, and that the carrier has exercised due
diligence to prevent or minimize the loss before, during or after the occurrence of the disaster.
We have held that a common carriers duty to observe the requisite diligence in the shipment of goods lasts from the time the articles
are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to or
until the lapse of a reasonable time for their acceptance by the person entitled to receive them. When the goods shipped either are
lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not
be an express finding of negligence to hold it liable.
Common carriers are obliged to observe extraordinary diligence in the vigilance over the goods transported by them. Accordingly,
they are presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very
few instances when the presumption of negligence does not attach and these instances are enumerated in Article 1734. In those
cases where the presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome
the presumption.12
Respondent Federal Phoenix Assurance raised the presumption of negligence against petitioners. However, they failed to overcome
it by sufficient proof of extraordinary diligence.
PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner,
V.
PKS SHIPPING COMPANY, respondent.
Facts: Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS Shipping Company (PKS Shipping)
for the shipment to Tacloban City of seventy-five thousand (75,000) bags of cement worth Three Million Three Hundred Seventy-Five
Thousand Pesos (P3,375,000.00). DUMC insured the goods for its full value with petitioner Philippine American General Insurance
Company (Philamgen). The goods were loaded aboard the dumb barge Limar I belonging to PKS Shipping. On the evening of 22
December 1988, about nine oclock, while Limar I was being towed by respondents tugboat, MT Iron Eagle, the barge sank a couple
of miles off the coast of Dumagasa Point, in Zamboanga del Sur, bringing down with it the entire cargo of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen promptly made payment; it then sought
reimbursement from PKS Shipping of the sum paid to DUMC but the shipping company refused to pay, prompting Philamgen to file
suit against PKS Shipping with the Makati RTC.
PKS Shipping contended that it was a common carrier at the time it undertook to transport the bags of cement was wanting because
the peculiar method of the shipping companys carrying goods for others was not generally held out as a business but as a casual
occupation.
Philamgen contends that The fact that respondent has a limited clientele, petitioner argues, does not militate against respondents
being a common carrier and that the only way by which such carrier can be held exempt for the loss of the cargo would be if the loss
were caused by natural disaster or calamity.
Issue: whether it is a private carrier or a common carrier and, in either case, to the other question of whether or not it has observed
the proper diligence (ordinary, if a private carrier, or extraordinary, if a common carrier) required of it given the circumstances?
Held: A "common or public carrier" and a "private or special carrier" lies in the character of the business, such that if the
undertaking is an isolated transaction, not a part of the business or occupation, and the carrier does not hold itself out to carry the
goods for the general public or to a limited clientele, although involving the carriage of goods for a fee, the person or corporation
providing such service could very well be just a private carrier. A typical case is that of a charter party which includes both the vessel
and its crew, such as in a bareboat or demise, where the charterer obtains the use and service of all or some part of a ship for a
period of time or a voyage or voyages and gets the control of the vessel and its crew. Contrary to the conclusion made by the
appellate court, its factual findings indicate that PKS Shipping has engaged itself in the business of carrying goods for others,
although for a limited clientele, undertaking to carry such goods for a fee. The regularity of its activities in this 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 patrons of the carrier. Such restrictive interpretation would make it easy for a common carrier to escape
liability by the simple expedient of entering into those distinct agreements with clients.

15

Addressing now the issue of whether or not PKS Shipping has exercised the proper diligence demanded of common carriers, Article
1733 of the Civil Code requires common carriers to observe extraordinary diligence in the vigilance over the goods they carry. In case
of loss, destruction or deterioration of goods, common carriers are presumed to have been at fault or to have acted negligently, and
the burden of proving otherwise rests on them. 7 The provisions of Article 1733, notwithstanding, common carriers are exempt from
liability for loss, destruction, or deterioration of the goods due to any of the following causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers; and
(5) Order or act of competent public authority.
The appellate court ruled, gathered from the testimonies and sworn marine protests of the respective vessel masters of Limar I and
MT Iron Eagle, that there was no way by which the barges or the tugboats crew could have prevented the sinking of Limar I. The
vessel was suddenly tossed by waves of extraordinary height of six (6) to eight (8) feet and buffeted by strong winds of 1.5 knots
resulting in the entry of water into the barges hatches. The official Certificate of Inspection of the barge issued by the Philippine
Coastguard and the Coastwise Load Line Certificate would attest to the seaworthiness of Limar I and should strengthen the factual
findings of the appellate court.
CENTRAL SHIPPING COMPANY, INC. VS. INSURANCE COMPANY OF NORTH AMERICA
G.R. NO. 150751. SEPTEMBER 20, 2004
FACTS:
On July 25, 1990 at Puerto Princesa, Palawan, Central Shipping Company received on board its vessel, the M/V Central Bohol, 376
pieces [of] Philippine Apitong Round Logs and undertook to transport said shipment to Manila for delivery to Alaska Lumber Co., Inc.
The cargo was insured for P3,000,000.00 against total loss under Insurance Company of North Americas Marine Cargo Policy No.
MCPB- 00170. The vessel completely sank. Due to the sinking of the vessel, the cargo was totally lost. The consignee, Alaska
Lumber Co. Inc., presented a claim for the value of the shipment to Central Shipping but the latter failed and refused to settle the
claim, hence Insurance company, being the insurer, paid said claim and now seeks to be subrogated to all the rights and actions of
the consignee as against Central Shipping. Central Shipping raised as its main defense that the proximate and only cause of the
sinking of its vessel and the loss of its cargo was a natural disaster, a tropical storm which neither Central Shipping nor the captain of
its vessel could have foreseen.
ISSUE: Whether or not the carrier is liable for the loss of the cargo?
RULING: YES.
A common carrier is presumed to be at fault or negligent. It shall be liable for the loss, destruction or deterioration of its cargo, unless
it can prove that the sole and proximate cause of such event is one of the causes enumerated in Article 1734 of the Civil Code, or that
it exercised extraordinary diligence to prevent or minimize the loss. In the present case, the weather condition encountered by
petitioners vessel was not a storm or a natural disaster comprehended in the law. Given the known weather condition prevailing
during the voyage, the manner of stowage employed by the carrier was insufficient to secure the cargo from the rolling action of the
sea. The carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now disclaim any liability for the
loss.
Established is the fact that between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26, 1990, M/V Central Bohol encountered a
southwestern monsoon in the course of its voyage. Having made such factual representation in its Note of Marine Protest, petitioner
cannot now be allowed to retreat and claim that the southwestern monsoon was a storm. Normally expected on sea voyages,
however, were such monsoons, during which strong winds were not unusual.
According to PAGASA, a storm has a wind force of 48 to 55 knots, equivalent to 55 to 63 miles per hour or 10 to 11 in the Beaufort
Scale. The second mate of the vessel stated that the wind was blowing around force 7 to 8 on the Beaufort Scale. Consequently, the
strong winds accompanying the southwestern monsoon could not be classified as a storm. Such winds are the ordinary vicissitudes
of a sea voyage.
Also, even if it were a storm, it was not the proximate and only cause of the loss. The loss of the vessel was caused not only by the
southwestern monsoon, but also by the shifting of the logs in the hold. Such shifting could been due only to improper stowage.
The doctrine of limited liability under Article 587 of the Code of Commerce is not applicable to the present case. This rule does not
apply to situations in which the loss or the injury is due to the concurrent negligence of the shipowner and the captain.

16

A.F. SANCHEZ BROKERAGE INC. VS. CA

G.R. NO. 147079. DECEMBER 21, 2004
FACTS:
AF Sanchez is engaged in a broker business wherein its main job is to calculate customs duty, fees and charges as well as storage
fees for the cargoes. Part also of the services being given by AF Sanchez is the delivery of the shipment to the consignee upon the
instruction of the shipper.
Wyeth-Suaco Laboratories Inc.(Wyett) engaged the services of AF Sanchez where the latter delivered the shipment to Hizon
Laboratories upon instruction of Wyett. Upon inspection, it was found out that at least 44 cartons containing contraceptives were in
bad condition. Wyett claimed insurance from FGU Insurance Corporation. FGU exercising its right of subrogation claims damages
against AF Sanchez who delivered the damaged goods. AF Sanchez contended that it is not a common carrier but a brokerage firm.
ISSUE: Whether or not the FGU Insurance is liable for the delivery of the damaged goods?
RULING: YES.
SC held that Art 1732 of the Civil Code in defining common carrier does not distinguish whether the activity is undertaken as a
principal activity or merely as an ancillary activity. In this case, while it is true that AF Sanchez is principally engaged as a broker, it
cannot be denied from the evidence presented that part of the services it offers to its customers is the delivery of the goods to their
respective consignees.
AF Sanchez claimed that the proximate cause of the damage is improper packing. Under the CC, improper packing of the goods is
an exonerating circumstance. But in this case, the SC held that though the goods were improperly packed, since AF Sanchez knew of
the condition and yet it accepted the shipment without protest or reservation, the defense is deemed waived.
It was established that Sanchez Brokerage received the cargoes from the PSI warehouse in good order and condition and that upon
delivery by petitioner some of the cargoes were found to be in bad order as noted in the Delivery Receipt and as indicated in the
Survey and Destruction Report.
While paragraph no. 4 of Article 1734 of the Civil Code exempts a common carrier from liability if the loss or damage is due to the
character of the goods or defects in the packaging or in the containers, the rule is that if the improper packaging is known to the
carrier or his employees or is apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for the resulting damage. If the claim of Sanchez Brokerage that some of
the cartons were already damaged upon delivery to it were true, then it should naturally have received the cargo under protest or with
reservation duly noted on the receipt issued by PSI but it made no such protest or reservation
JAPAN AIRLINES VS. MICHAEL ASUNCION
G.R. NO. 161730. JANUARY 28, 2005
FACTS:
The respondent left Manila on board an aircraft being operated by the petitioner. Part of the itinerary of the respondent is a stop-over
in Narita where they will have an overnight stay in Narita Hotel. However, the laws of Japan require them to apply for a shore pass
wherein they have to be interviewed by immigration officials of Japan. During the interview, the immigration officials denied their
application for shore pass because there appears to be errors in the travel documents. His height recorded in the documents appears
to be taller than his actual height. Therefore, the petitioners were not allowed to stay in Narita Hotel but rather spent their nights
uncomfortably at the airport.
As a result, petitioners sued the airlines claiming that they did not exercise extra-ordinary diligence required in the contract of
carriage. They contend that JAL should have appraised them of the requirement needed to obtain a shore pass.
ISSUE: Whether or not petitioner is liable?
RULING: NO.
Under Article 1755 of the Civil Code, a common carrier such as JAL is bound to carry its passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. When an airline
issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage arises. The passenger has
every right to expect that he be transported on that flight and on that date and it becomes the carriers obligation to carry him and his
luggage safely to the agreed destination. If the passenger is not so transported or if in the process of transporting he dies or is
injured, the carrier may be held liable for a breach of contract of carriage.

17

We find that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty to inspect whether its
passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of every entry in
these documents. JAL could not vouch for the authenticity of a passport and the correctness of the entries therein. The power to
admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This is not within the ambit of
the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be faulted for the denial of respondents
shore pass applications.
SC held that JAL is not liable and did not breach its contract of carriage with the petitioners. While it may be true that JAL are required
to appraise their clients with all the necessary travel documents to obtain a shore pass, this duty does not extend to verification as to
whether or not the information/entries in these travel documents are correct.
AGAPITA DIAZ VS. CA
G.R. NO. 149749 JULY 25, 2006
FACTS:
Petitioner Agapita Diaz operated a common carrier, a Tamaraw FX taxi plying the route of Cagayan de Oro City to any point in Region
10. On July 20, 1996, petitioners taxi, driven by one Arman Retes, was moving at an excessive speed when it rammed into the rear
portion of a Hino cargo truck owned by private respondent Teodoro Lantoria and driven by private respondent Rogelio Francisco. As
a result, nine passengers of the taxi died including Sherly Moneo. The heirs of Sherly Moneo filed with the Regional Trial Court of
Malaybalay City, Branch 10, an action for breach of contract of carriage and damagesagainst petitioner and her driver, Arman Retes.
ISSUE: Whether or not the petitioner is liable for breach of contract?
RULING: YES.
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. In a contract of carriage, it is presumed that the common
carrier is at fault or is negligent when a passenger dies or is injured. In fact, there is even no need for the court to make an express
finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that
the carrier exercised extraordinary diligence.
In the case at bar, petitioner, as common carrier, failed to establish sufficient evidence to rebut the presumption of negligence. The
findings of the trial court, as affirmed by the Court of Appeals, showed that the accident which led to the death of Sherly Moneo was
caused by the reckless speed and gross negligence of petitioners driver who demonstrated no regard for the safety of his
passengers. It was thus correct to hold petitioner guilty of breach of the contract of carriage.
CEBU SALVAGE CORPORATION VS. PHILIPPINE HOME ASSURANCE CORPORATION
G.R. No. 150403
January 25, 2007
FACTS:
On November 12, 1984, CSC & Maria Christina Chemicals Industries, Inc., (MCCII) entered into a voyage charter wherein CSC was
to load 800-1,100 metric tons of silica quartz on board the M/T Espiritu Santo at Ayungon, Negros Occidental for transport to and
discharge at Tagoloan, Misamis Oriental to consigned Ferrochrome Phils., Inc. Pursuant to the contract, on December 23, 1984,
CSC received & loaded 1,100 metric tons of silica quartz on board the M/T Espiritu Santo which left Ayungon for Tagoloan the next
day.
However, the shipment never reached its destination because the M/T Espiritu Santo sank in the afternoon of December 24, 1984 off
the beach of Opol, Misamis Oriental, resulting in the total loss of the cargo.
MCCII filed a claim for the loss of the shipment with its insurer, PHAC. PHAC paid the claim in the amount of P211,500 and was
surrogated to MCCIIs rights. It thereafter filed a case in the RTC against CSC for reimbursement of the amount it paid MCCII.
However, CSC claims no liability insisting that the agreement was merely a contract of hire wherein MCCII hired the vessel from its
owner, ALS Timber Enterprises. Not being the owner of the M/T Espiritu Santo, petitioner did not have control over the vessel, its
master & crew. Thus, it could not allegedly be held liable for the loss of the shipment caused by the sinking of a ship it didnt own.
ISSUES:
1. Whether there is a contract of carriage between CSC and MCCII.
2. Whether CSC is a common carrier despite not being the owner of the vessel it used.
3. Whether the bill of lading should prevail over the voyage charter as the contract of carriage
between the parties.
4. Whether MCCII should be held liable for its own loss
5. Whether a carrier that enters into a contract of carriage is not liable to the
charterer/shipper if it does not own the vessel it chooses to use.

18

RULING:
1. Yes. The cargo was loaded on board the vessel; loss/non-delivery of the cargo was proven; and petitioner failed to prove that it
exercised extraordinary diligence to prevent such loss or that it was due to some casualty or force majeure. The voyage charter here
being a contract of affreightment, the carrier was answerable for the loss of the goods received for transportation.
2. CSC was the one which contracted with MCCII for the transport of the cargo. It had control over what vessel it would use. All
throughout its dealings with MCCII, it represented itself as a common carrier. The fact that it did not own the vessel it decided to use
to consummate the contract of carriage did not negate its character & duties as a common carrier. The MCCII could not be
reasonably expected to inquire about the ownership of the vessels which petitioner carrier offered to utilize. It is very difficult & often
impossible for the general public to enforce its rights of action under a contract of carriage if it should be required to know who the
actual owner of the vehicle is. In this case, the voyage charter itself denominated the petitioner as the owner/operator of the vessel.
3. No. The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had been received for transportation.
It was not signed by MCCII, as in fact it was simply signed by the supercargo of ALS. This is consistent with the fact that MCCII did
not contract directly with ALS. While it is true that a bill of lading may serve as the contract of carriage between the parties, it cannot
prevail over the express provision of the voyage charter that MCCII and petitioner executed.
4. No. It deserves scant consideration that the voyage charter stipulated that cargo insurance was for the charterers account. This
meant that the charterer would take care of having the goods insured. It could not exculpate the carrier from liability for the breach of
its contract of carriage. The law prohibits it and condemns it as unjust & contrary to public policy.
5. The idea proposed by CSC is preposterous & dangerous. MCCII never dealt with ALS and yet petitioner insists that MCCII should
sue ALS for reimbursement for its loss. Certainly, to permit a common carrier to escape its responsibility for the goods it agreed to
transport (by expedient of alleging non-ownership of the vessel it employed) would radically derogate from the carriers duty of
extraordinary diligence. It would also open the door to collusion between the carrier & the supposed owner and to the possible
shifting of liability from the carrier to one without any financial capability to answer for the resulting damages.
26-27 - PHILIPPINE CHARTER INSURANCE CORPORATION, VS NEPTUNE ORIENT LINES/OVERSEAS AGENCY SERVICES,
INC.,
Facts :
L.T. Garments Manufacturing Corp. Ltd. shipped from Hong Kong three sets of warp yarn on returnable beams aboard respondent
Neptune Orient Lines vessel, M/V Baltimar Orion, for transport and delivery to Fukuyama Manufacturing Corporation. The said
cargoes were loaded in Container in good condition under Bill of Lading No. HKG-0396180. Fukuyama insured the shipment against
all risks with petitioner Philippine Charter Insurance Corporation (PCIC) under Marine Cargo Policy. During the course of the voyage,
the container with the cargoes fell overboard and was lost. Fukuyama sought payment from its insurer, PCIC, for the insured value of
the cargoes in the amount of P228,085, which claim was fully satisfied by PCIC. Fukuyama issued a Subrogation Receipt to
petitioner PCIC for the latter to be subrogated in its right to recover its losses from respondents. PCIC demanded from respondents
reimbursement of the entire amount it paid to Fukuyama, but respondents refused payment. Hence, PCIC filed a complaint for
damages. They alleged that during the voyage, the vessel encountered strong winds and heavy seas making the vessel pitch and
roll, which caused the subject container with the cargoes to fall overboard. Respondents contended that the occurrence was a
fortuitous event which exempted them from any liability, and that their liability, if any, should not exceed US$500 or the limit of liability
in the bill of lading, whichever is lower.
Issue: W/N Overseas Agencys liability is determined by the Bill of Lading?
Ruling:
Yes, The bill of lading submitted in evidence by petitioner did not show that the shipper in Hong Kong declared the actual value of the
goods as insured by Fukuyama before shipment and that the said value was inserted in the Bill of Lading, and so no additional
charges were paid. Hence, the stipulation in the bill of lading that the carriers liability shall not exceed US$500 per package applies.
Such stipulation in the bill of lading limiting respondents liability for the loss of the subject cargoes is allowed under Art. 1749 of the
Civil Code, and Sec. 4, paragraph (5) of the COGSA.
28 - MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. vs PHOENIX ASSURANCE VELASCO, JR. COMPANY OF NEW
YORK/ LEONARDO DE CASTRO,** and MCGEE & CO., INC.,

Facts: (Del Monte) contracted (Mindanao Terminal), a stevedoring company, to load and stow a shipment of 146,288 cartons of fresh
green Philippine bananas and 15,202 cartons of fresh pineapples belonging to (Del Monte Produce) into the cargo hold of the vessel

19

M/V Mistrau. The vessel was docked at the port of Davao City and the goods were to be transported by it to the port of Inchon, Korea
in favor of consignee Taegu Industries, Inc. Del Monte Produce insured the shipment under an open cargo policy with private
respondents. Mindanao Terminal loaded and stowed the cargoes aboard, the vessel set sail from the port of Davao City and arrived
at the port of Inchon, Korea. It was then discovered upon discharge that some of the cargo was in bad condition. The Marine Cargo
Damage Surveyor of Incok Loss and Average Adjuster of Korea, through its representative (Byeong), surveyed the extent of the
damage of the shipment. In a survey report, it was stated that 16,069 cartons of the banana shipment and 2,185 cartons of the
pineapple shipment were so damaged that they no longer had commercial value. Del Monte Produce filed a claim under the open
cargo policy for the damages to its shipment. A check for the recommended amount was sent to Del Monte Produce; the latter then
issued a subrogation receipt to Phoenix and McGee. Phoenix and McGee instituted an action for damages against Mindanao
Terminal in the (RTC) of Davao City. Mindanao Terminal won and on petition the CA reversed it.
Issue: whether Mindanao Terminal is liable for damages?
Ruling:
No, In the present case, Mindanao Terminal, as a stevedore, was only charged with the loading and stowing of the cargoes from the
pier to the ships cargo hold; it was never the custodian of the shipment of Del Monte Produce. A stevedore is not a common carrier
for it does not transport goods or passengers; it is not akin to a warehouseman for it does not store goods for profit. The loading and
stowing of cargoes would not have a far reaching public ramification as that of a common carrier and a warehouseman; the public is
adequately protected by our laws on contract and on quasi-delict. The public policy considerations in legally imposing upon a
common carrier or a warehouseman a higher degree of diligence is not present in a stevedoring outfit which mainly provides labor in
loading and stowing of cargoes for its clients.
29 REGIONAL CONTAINER LINES (RCL) OF SINGAPORE and EDSA SHIPPING AGENCY, vs THE NETHERLANDS
INSURANCE CO. (PHILIPPINES), INC.,
Facts:
405 cartons of Epoxy Molding Compound were consigned to be shipped from Singapore to Manila for (Temic). (U-Freight
Singapore), a forwarding agent based in Singapore, contracted the services of (Pacific Eagle) to transport the subject cargo. The
cargo was packed, stored, and sealed by Pacific Eagle in its Refrigerated Container. As the cargo was highly perishable, the inside of
the container had to be kept at a temperature of 0 Celsius. Pacific Eagle then loaded the refrigerated container on board the M/V Piya
Bhum, a vessel owned by RCL, with which Pacific Eagle had a slot charter agreement. RCL duly issued its own Bill of Lading in favor
of Pacific Eagle. To insure the cargo against loss and damage, Netherlands Insurance issued a Marine Open Policy in favor of Temic
to cover all losses/damages to the shipment. emic received the shipment. It found the cargo completely damaged. Temic filed a claim
for cargo loss against Netherlands Insurance, with supporting claims documents. The Netherlands Insurance paid Temic the sum of
P1,036,497.00 under the terms of the Marine Open Policy. Temic then executed a loss and subrogation receipt in favor of
Netherlands Insurance. The defendants all disclaimed liability for the damage caused to the cargo, citing several reasons why
Netherland Insurances claims must be rejected.
Issue: W/N defendants are liable for the damages?
Ruling:
In the present case, RCL and EDSA Shipping failed to prove that they did exercise that degree of diligence required by law over the
goods they transported. Indeed, there is sufficient evidence showing that the fluctuation of the temperature in the refrigerated
container van, as recorded in the temperature chart, occurred after the cargo had been discharged from the vessel and was already
under the custody of the arrastre operator, ICTSI. This evidence, however, does not disprove that the condenser fan which caused
the fluctuation of the temperature in the refrigerated container was not damaged while the cargo was being unloaded from the ship. It
is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier;[11] RCL
and EDSA Shipping failed to dispute this.
RCL and EDSA Shipping could have offered evidence before the trial court to show that the damage to the condenser fan did not
occur: (1) while the cargo was in transit; (2) while they were in the act of discharging it from the vessel; or (3) while they were
delivering it actually or constructively to the consignee. They could have presented proof to show that they exercised extraordinary
care and diligence in the handling of the goods, but they opted to file a demurrer to evidence. As the order granting their demurrer
was reversed on appeal, the CA correctly ruled that they are deemed to have waived their right to present evidence,[12] and the
presumption of negligence must stand.
It is for this reason as well that we find RCL and EDSA Shippings claim that the loss or damage to the cargo was caused by a defect
in the packing or in the containers. To exculpate itself from liability for the loss/damage to the cargo under any of the causes, the
common carrier is burdened to prove any of the causes in Article 1734 of the Civil Code claimed by it by a preponderance of
evidence. If the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier is negligent.[13] RCL and
EDSA Shipping, however, failed to satisfy this standard of evidence and in fact offered no evidence at all on this point; a reversal of a
dismissal based on a demurrer to evidence bars the defendant from presenting evidence supporting its allegations.

20

30 SULPICIO LINES, INC., vs DOMINGO E. CURSO, LUCIA E. CURSO, MELECIO E. CURSO, SEGUNDO E. CURSO,
VIRGILIO E. CURSO, DIOSDADA E. CURSO, and CECILIA E. CURSO,
Facts:
Dr. Curso boarded at the port of Manila the MV Doa Marilyn, an inter-island vessel owned and operated by petitioner Sulpicio Lines,
Inc., bound for Tacloban City. Unfortunately, the MV Doa Marilyn sank while at sea due to the inclement sea and weather conditions
brought about by Typhoon Unsang. The body of Dr. Curso was not recovered, along with hundreds of other passengers of the ill-fated
vessel. At the time of his death, Dr. Curso was 48 years old, and employed as a resident physician at the Naval District Hospital in
Naval, Biliran. He had a basic monthly salary of P3,940.00. The respondents, allegedly the surviving brothers and sisters of Dr.
Curso, sued the petitioner in the RTC in Naval, Biliran to claim damages based on breach of contract of carriage by sea, averring that
the petitioner had acted negligently in transporting Dr. Curso and the other passengers. They stated, among others, that their parents
had predeceased Dr. Curso, who died single and without issue; and that, as such, they were Dr. Cursos surviving heirs and
successors in interest entitled to recover moral and other damages. The petitioner denied liability, insisting that the sinking of the
vessel was due to force majeure. RTC dismissed the complaint upon its finding that the sinking of the vessel was due to force
majeure. On Appeal it was reverse and awarded death indemnity, loss of earning capacity and Moral Damages and Cost of the suits.
Hence, this appeal, in which the petitioner insists that the CA committed grievous errors in holding that the respondents were entitled
to moral damages as the brothers and sisters of the late Dr. Curso.
Issue: W/N Brothers and Sisters are entitled to Moral Damages?
Ruling:
As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract, unless there is
fraud or bad faith. As an exception, moral damages may be awarded in case of breach of contract of carriage that results in the death
of a passenger, in accordance with Article 1764, in relation to Article 2206 (3), of the Civil Code,
The foregoing legal provisions set forth the persons entitled to moral damages. The omission from Article 2206 (3) of the brothers and
sisters of the deceased passenger reveals the legislative intent to exclude them from the recovery of moral damages for mental
anguish by reason of the death of the deceased. Inclusio unius est exclusio alterius. The solemn power and duty of the courts to
interpret and apply the law do not include the power to correct the law by reading into it what is not written therein. Thus, the CA erred
in awarding moral damages to the respondents.

21