Arteche Transpo Digests

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Transportation*for*Atty.*Abano*by*Jason*Arteche*
Bascos vs. CA
Facts
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a
hauling contract with Jibfair Shipping Agency Corporation whereby the former bound itself to haul
the latter's soya bean meal. To carry out its obligation, CIPTRADE, through Rodolfo Cipriano,
subcontracted with Estrellita Bascos (petitioner) to transport and to deliver 400 sacks of soya bean
meal. 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.
In her answer, petitioner interposed the following defenses:
1. that there was no contract of carriage since CIPTRADE leased her cargo truck to load the
cargo from Manila Port Area to Laguna;
2. that the truck carrying the cargo was hijacked; that the hijacking was immediately reported to
CIPTRADE and that 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 majeure, exculpated
petitioner from any liability to CIPTRADE.
Issue
Whether or not petitioner is a common carrier.
Held
Common carrier.
The Court of Appeals, in holding that petitioner was a common carrier, found that she admitted in her
answer that she did business under the name A.M. Bascos Trucking and that said admission dispensed
with the presentation by private respondent, Rodolfo Cipriano, of proofs that petitioner was a
common carrier. Moreover, both courts appreciated the following pieces of evidence as indicators that
petitioner was a common carrier:
1. the fact that the truck driver of petitioner, Maximo Sanglay, received the cargo consisting of
400 bags of soya bean meal as evidenced by a cargo receipt signed by Maximo Sanglay;
2. the fact that the truck helper, Juanito Morden, was also an employee of petitioner; and the fact
that control of the cargo was placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was a common carrier, she
alleged in this petition that the contract between her and Rodolfo A. Cipriano, representing
CIPTRADE, was lease of the truck. She cited as evidence certain affidavits which referred to the
contract as "lease". These affidavits were made by Jesus Bascos and by petitioner herself. She further
averred that Jesus Bascos confirmed in his testimony his statement that the contract was a lease
contract. She also stated that: she was not catering to the general public. Thus, in her answer to the
amended complaint, she said that she does business under the same style of A.M. Bascos Trucking,
offering her trucks for lease to those who have cargo to move, not to the general public but to a few
customers only in view of the fact that it is only a small business.
We agree with the respondent Court in its finding that petitioner is a common carrier.
In this case, petitioner herself has made the admission that she was in the trucking business, offering
her trucks to those with cargo to move. Judicial admissions are conclusive and no evidence is required
to prove the same.
But petitioner argues that there was only a contract of lease because they offer their services only to a
select group of people and because the private respondents, plaintiffs in the lower court, did not object
to the presentation of affidavits by petitioner where the transaction was referred to as a lease contract.
Feel*free*to*use*and*share*this*digest*with*anyone*who*needs*it*
Dont*ask*me*anymore,*Ill*just*say*Yes*! *
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Regarding the first contention, the holding of the Court in De Guzman vs. Court of Appeals is
instructive.
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 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.
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FGU Insurance vs. Sarmiento1

Facts
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver thirty (30) units of Condura S.D.
white refrigerators aboard one of its Isuzu truck from the plant site of Concepcion Industries, Inc. to
the Central Luzon Appliances in Dagupan City. While the truck was traversing the road 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. 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.
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.
Issue
Whether or not GPS is a common carrier.
Held
Not a common carrier.
GPS, being an exclusive contractor and hauler of Concepcion Industries, Inc., rendering or offering its
services to no other individual or entity, cannot be considered a common carrier. 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 hire or compensation, offering their services to
the public, whether to the public in general or to a limited clientele in particular, but never on an
exclusive basis. 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."
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1!Offering!services!to!1!customer!exclusively,!even!if!on!a!regular!basis,!doesnt!make!one!a!common!
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Schmitz vs. Transport Venture

Facts
SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board M/V Alexander
Saveliev steel sheets in coil. The cargoes, which were to be discharged at the port of Manila in favor
of the consignee, Little Giant Steel Pipe Corporation (Little Giant), were insured against all risks with
Industrial Insurance Company Ltd. (Industrial Insurance).
The vessel arrived at the port of Manila. Schmitz Transport engaged the services of TVI to send a
barge and tugboat at shipside. TVIs tugboat Lailani towed the barge Erika V to shipside. The
tugboat, after positioning the barge alongside the vessel, left and returned to the port terminal.
Arrastre operator Ocean Terminal Services Inc. commenced to unload 37 of the 545 coils from the
vessel unto the barge.
The weather condition had become inclement due to an approaching storm, the unloading unto the
barge of the 37 coils was accomplished. No tugboat pulled the barge back to the pier, however. Due to
strong waves, the crew of the barge abandoned it and transferred to the vessel. The barge pitched and
rolled with the waves and eventually capsized, washing the 37 coils into the sea. Earnest efforts on the
part of both the consignee Little Giant and Industrial Insurance to recover the lost cargoes proved
futile.
Little Giant thus filed a formal claim against Industrial Insurance. Industrial Insurance later filed a
complaint against Schmitz Transport, TVI, and Black Sea through its representative Inchcape (the
defendants) for the recovery of the amount it paid to Little Giant plus adjustment fees, attorneys fees,
and litigation expenses. Industrial Insurance faulted the defendants for undertaking the unloading of
the cargoes while typhoon signal No. 1 was raised in Metro Manila.
Issue
Held
Common carrier.
Petitioner undertook to transport the cargoes from the shipside of M/V Alexander Saveliev to the
consignees warehouse at Cainta, Rizal. As the appellate court put it, as long as a person or
corporation holds [itself] to the public for the purpose of transporting goods as [a] business, [it] is
already considered a common carrier regardless if [it] owns the vehicle to be used or has to hire one.
That petitioner is a common carrier, the testimony of its own Vice-President and General Manager
Noel Aro that part of the services it offers to its clients as a brokerage firm includes the transportation
of cargoes reflects so.
It is settled that under a given set of facts, a customs broker may be regarded as a common carrier.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the transportation of goods
is an integral part of a customs broker, the customs broker is also a common carrier. For to declare
otherwise would be to deprive those with whom [it] contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel
of petitioners business.
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Crisostomo vs. CA
Facts
Petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and Tours
International, Inc. to arrange and facilitate her booking, ticketing and accommodation in a tour
dubbed Jewels of Europe.
Pursuant to said contract, Menor, respondents ticketing manager and petitioners niece, delivered
petitioners travel documents and plane tickets. Petitioner, in turn, gave Menor the full payment for
the package tour. Menor then told her to be at the Ninoy Aquino International Airport (NAIA) on
Saturday.
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take
the flight for the first leg of her journey from Manila to Hongkong. To petitioners dismay, she
discovered that the flight she was supposed to take had already departed the previous day. She
learned that her plane ticket was for the flight scheduled on June 14, 1991. She thus called up Menor
to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British Pageant. For this
tour package, petitioner was asked anew to pay more, which she did, and commenced the trip.
Upon petitioners return from Europe, she demanded from respondent reimbursement representing the
difference between the sum she paid for Jewels of Europe and the amount she owed respondent for
the British Pageant tour. Despite several demands, respondent company refused to reimburse the
amount, contending that the same was non-refundable. Petitioner was thus constrained to file a
complaint against respondent for breach of contract of carriage and damages.
Issue
Whether or not respondent is a common carrier.
Held
Not a common carrier.
Respondent is not an entity engaged in the business of transporting either passengers or goods and is
therefore, neither a private nor a common carrier. Respondent did not undertake to transport petitioner
from one place to another since its covenant with its customers is simply to make travel arrangements
in their behalf. Respondents services as a travel agency include procuring tickets and facilitating
travel permits or visas as well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of respondent company, this
does not mean that the latter ipso facto is a common carrier. At most, respondent acted merely as an
agent of the airline, with whom petitioner ultimately contracted for her carriage to Europe.
Respondents obligation to petitioner in this regard was simply to see to it that petitioner was properly
booked with the airline for the appointed date and time. Her transport to the place of destination,
meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with respondent is the latters service of arranging and
facilitating petitioners booking, ticketing and accommodation in the package tour. In contrast, the
object of a contract of carriage is the transportation of passengers or goods. It is in this sense that the
contract between the parties in this case was an ordinary one for services and not one of carriage.
Petitioners submission is premised on a wrong assumption.
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Occidental Transport vs. CA

Facts
The case began with the collision of a Ford Fiera and a passenger bus. As a result of this, the Ford
Fiera was thrown into the canal on the right side of the road. Its driver was killed. Trencio Almedilla,
the owner of the Fiera which was registered under Sevilla Line, and Alberto Pingkian were likewise
in the Fiera and suffered various injuries as a result of the incident. Neither the driver nor the
passengers of the bus stopped to assist the victims, but rather the bus proceeded towards Sapang
Dalaga.
The owner of the Carina passenger bus, Occidental Land Transportation Company filed a case for
damages against Sevilla Line and/or William Sevilla, the registered owner of the Ford Fiera before the
Court of First Instance, Branch III, Oroquieta City.
Trencio Almedilla and Alberto Pingkian also filed a civil suit for damages against Occidental Land
Transportation Company, Inc. and the driver of the Carina bus. This case was docketed before the
Regional Trial Court of Zamboanga del Norte, Branch VI, Dipolog City.
Issue
Whether or not damages should be awarded to Trencio.
Held
Awarded.
Petitioner alleges that the Ford Fiera did not belong to Trencio Almedilla, but to its registered owner
Sevilla Lines, and therefore the grant of damages for its repair was improperly awarded to private
respondent Almedilla. This factual matter has already been decided upon in the trial court.
The fact that the Fiera was owned by Almedilla though registered with Sevilla Line, will not alter the
conclusion arrived at by the lower court. The party who stands to benefit or suffer from the decision is
admittedly private respondent Almedilla and not Sevilla Lines. William Sevilla admitted that the real
owner of the vehicle was Trencio Almedilla, in the case for damages by Occidental Land
Transportation against Sevilla Lines and/or William Sevilla. Having thus been settled in the lower
court, petitioner is now no longer in any position to question the ownership of the Fiera or the award
of damages to private respondent Almedilla.
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Equitable vs. Suyon

Facts
A Fuso Road Tractor driven by Raul Tutor rammed into the house cum store of Myrna Tamayo. A
portion of the house was destroyed and causing death/injuries to the respondents. Tutor was charged
with and later convicted of reckless imprudence resulting in multiple homicide and multiple physical
injuries.
Upon verification with the Land Transportation Office, respondents were furnished a copy of Official
Receipt and Certificate of Registration showing that the registered owner of the tractor was Equitable
Leasing Corporation/leased to Edwin Lim. Respondents filed against Raul Tutor, Ecatine
Corporation (Ecatine) and Equitable Leasing Corporation (Equitable) a Complaint for damages.
Petitioner alleged that the vehicle had already been sold to Ecatine and that the former was no longer
in possession and control thereof at the time of the incident. It also claimed that Tutor was an
employee, not of Equitable, but of Ecatine.
Issue
Whether or not petitioner is liable for damages to respondents.
Held
Liable.
Petitioner contends that it should not be held liable for the damages sustained by respondents that
arose from the negligence of the driver of the Fuso Road Tractor, which it had already sold to Ecatine
at the time of the accident. Not having employed Raul Tutor, the driver of the vehicle, it could not
have controlled or supervised him.
We are not persuaded.
In the instant case, respondents -- having failed to recover anything in the criminal case -- elected to
file a separate civil action for damages, based on quasi delict under Article 2176 of the Civil Code.
The evidence is clear that the deaths and the injuries suffered by respondents and their kins were due
to the fault of the driver of the Fuso tractor.
The Lease Agreement between petitioner and Edwin Lim stipulated that it is the intention of the
parties to enter into a FINANCE LEASE AGREEMENT. Under such scheme, ownership of the
subject tractor was to be registered in the name of petitioner, until the value of the vehicle has been
fully paid by Edwin Lim. Further, in the Lease Schedule, the monthly rental for the tractor was
stipulated, and the term of the Lease was scheduled to expire on December 4, 1992. After a few
months, Lim completed the payments to cover the full price of the tractor. Thus, on December 9, 1992,
a Deed of Sale over the tractor was executed by petitioner in favor of Ecatine represented by Edwin
Lim. However, the Deed was not registered with the LTO.
We hold petitioner liable for the deaths and the injuries complained of, because it was the registered
owner of the tractor at the time of the accident. The Court has consistently ruled that, regardless of
sales made of a motor vehicle, the registered owner is the lawful operator insofar as the public and
third persons are concerned; consequently, it is directly and primarily responsible for the
consequences of its operation. In contemplation of law, the owner/operator of record is the employer
of the driver, the actual operator and employer being considered as merely its agent. The same
principle applies even if the registered owner of any vehicle does not use it for public service.
Since Equitable remained the registered owner of the tractor, it could not escape primary liability for
the deaths and the injuries arising from the negligence of the driver.
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The finance-lease agreement between Equitable on the one hand and Lim or Ecatine on the other has
already been superseded by the sale. In any event, it does not bind third persons.
Further, petitioners insistence on FGU Insurance Corp. v. Court of Appeals is misplaced. First, in
FGU Insurance, the registered vehicle owner, which was engaged in a rent-a-car business, rented out
the car. In this case, the registered owner of the truck, which is engaged in the business of financing
motor vehicle acquisitions, has actually sold the truck to Ecatine, which in turn employed Tutor.
Second, in FGU Insurance, the registered owner of the vehicle was not held responsible for the
negligent acts of the person who rented one of its cars, because Article 2180 of the Civil Code was not
applicable. We held that no vinculum juris as employer and employee existed between the owner and
the driver. In this case, the registered owner of the tractor is considered under the law to be the
employer of the driver, while the actual operator is deemed to be its agent. Thus, Equitable, the
registered owner of the tractor, is -- for purposes of the law on quasi delict -- the employer of Raul
Tutor, the driver of the tractor. Ecatine, Tutors actual employer, is deemed as merely an agent of
Equitable.
True, the LTO Certificate of Registration, dated 5/31/91, qualifies the name of the registered owner
as EQUITABLE LEASING CORPORATION/Leased to Edwin Lim. But the lease agreement
between Equitable and Lim has been overtaken by the Deed of Sale on December 9, 1992, between
petitioner and Ecatine. While this Deed does not affect respondents in this quasi delict suit, it
definitely binds petitioner because, unlike them, it is a party to it.
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Delsan Transport vs. CA

Facts
The facts show that Caltex Philippines (Caltex for brevity) entered into a contract of affreightment
with the petitioner, Delsan Transport Lines, Inc., for a period of one year whereby the said common
carrier agreed to transport Caltexs industrial fuel oil from the Batangas-Bataan Refinery to different
parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun, 2 industrial
fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was
insured with the private respondent, American Home Assurance Corporation.
MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank taking with it
the entire cargo of fuel oil. Subsequently, private respondent paid Caltex the sum representing the
insured value of the lost cargo. Exercising its right of subrogation, the private respondent demanded
of the petitioner the same amount it paid to Caltex.
Due to its failure to collect from the petitioner despite prior demand, private respondent filed a
complaint for collection of a sum of money.
Issue
Whether or not petitioner is liable for damages.
Held
Liable.
The payment made by the private respondent for the insured value of the lost cargo operates as waiver
of its (private respondent) right to enforce the term of the implied warranty against Caltex under the
marine insurance policy. However, the same cannot be validly interpreted as an automatic admission
of the vessels seaworthiness by the private respondent as to foreclose recourse against the petitioner
for any liability under its contractual obligation as a common carrier.
Additionally, the exoneration of MT Maysuns officers and crew by the Board of Marine Inquiry
merely concerns their respective administrative liabilities. It does not in any way operate to absolve
the petitioner common carrier from its civil liability arising from its failure to observe extraordinary
diligence in the vigilance over the goods it was transporting and for the negligent acts or omissions of
its employees, the determination of which properly belongs to the courts.
In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex, petitioner
attributes the sinking of MT Maysun to fortuitous event or force majeure. From the testimonies of
Jaime Jarabe and Francisco Berina, captain and chief mate, respectively of the ill-fated vessel, it
appears that a sudden and unexpected change of weather condition occurred, a squall (unos)
carrying strong winds and big waves repeatedly buffeted MT Maysun causing it to tilt, take in water
and eventually sink with its cargo.
This tale of strong winds and big waves by the said officers of the petitioner however, was effectively
rebutted and belied by the weather report from PAGASA. The government report showed there was
no squall or bad weather or extremely poor sea condition in the vicinity when the said vessel sank.
Thus, as the appellate court correctly ruled, petitioners vessel, MT Maysun, sank with its entire cargo
for the reason that it was not seaworthy.
Neither may petitioner escape liability by presenting in evidence certificates that tend to show that at
the time of dry-docking and inspection by the Philippine Coast Guard, the vessel MT Maysun, was fit
for voyage. These pieces of evidence do not necessarily take into account the actual condition of the
vessel at the time of the commencement of the voyage.
The certificates issued do not negate the presumption of unseaworthiness triggered by an unexplained
sinking. Seaworthiness relates to a vessels actual condition. Neither the granting of classification or
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the issuance of certificates establishes seaworthiness. Authorities are clear that diligence in securing
certificates of seaworthiness does not satisfy the vessel owners obligation. Also securing the approval
of the shipper of the cargo, or his surveyor, of the condition of the vessel or her stowage does not
establish due diligence if the vessel was in fact unseaworthy, for the cargo owner has no obligation in
relation to seaworthiness.
In the case at bar, petitioner is liable for the insured value of the lost cargo of industrial fuel oil
belonging to Caltex for its failure to rebut the presumption of fault or negligence as common carrier
occasioned by the unexplained sinking of its vessel, MT Maysun, while in transit.
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Philamgen vs. PKS Shipping

Facts
Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS Shipping
Company (PKS Shipping) for the shipment to Tacloban City of bags of cement. 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. While Limar I
was being towed by respondents tugboat, MT Iron Eagle, the barge sank a couple of miles off the
coast 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.
Petitioner avers that typhoon "APIANG" has not entered the Philippine area of responsibility and that,
even if it did, respondent would not be exempt from liability because its employees, particularly the
tugmaster, have failed to exercise due diligence to prevent or minimize the loss.
Issue
Whether or not respondent is not liable for damages.
Held
Not liable.
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 and buffeted by strong winds 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.
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Lorenzo Shipping vs. BJ Mathel

Facts
Lorenzo Shipping Corp. is a domestic corporation engaged in coastwise shipping. It used to own the
cargo vessel M/V Dadiangas Express. BJ Marthel International, Inc. is an importer and distributor of
different brands of engines and spare parts.
BJ Marthel supplied Lorenzo Shipping with parts for the latters marine engines. Respondent sent
Lorenzo Shipping a quotation of prices of spare parts. The quotation also stated that delivery of the
parts would be within 2 months after receipt of firm order. Lorenzo Shipping subsequently issued to
BJ Marthel a purchase order for the procurement of one set of cylinder liner to be used for M/V
Dadiangas Express. A second purchase order was issued. Both purchase orders did not state the date
of the cylinders delivery.
BJ Marthel delivered the cylinder liners at petitioners warehouse 6 months after the date on the
quotation, instead of the 2 months stated. Petitioner failed to pay for the cylinder liners. Hence, BJ
Marthel sent a demand letter. Instead of heeding the demand for the full payment, Lorenzo Shipping
offered to pay less claiming that the cylinders were delivered late and due to the scrapping of the M/V
Dadiangas Express, they had to sell the cylinder liners in Singapore.
Due to the failure of the parties to settle, respondent filed an action for sum of money and damages
before the RTC. Lorenzo Shipping, on the other hand, claims that time was of the essence in the
delivery of the cylinder liners and that the delivery was late as respondent committed to deliver the
items within 2 months after receipt of firm order.
Issue
Whether or not there was late delivery of the subjects of the contract of sale to justify petitioner to
disregard the terms of the contract considering that time was of the essence thereof.
Held
No late delivery.
Petitioner insists that although its purchase orders did not specify the dates when the cylinder liners
were supposed to be delivered, nevertheless, respondent should abide by the term of delivery
appearing on the quotation it submitted to petitioner. Petitioner theorizes that the quotation embodied
the offer from respondent while the purchase order represented its (petitioner's) acceptance of the
proposed terms of the contract of sale.
We cannot subscribe to the position of petitioner that the documents, by themselves, embody the
terms of the sale of the cylinder liners. One can easily glean the significant differences in the terms as
stated in the formal quotation and Purchase Order 1 with regard to the due date of the down payment
for the first cylinder liner and the date of its delivery as well as Purchase Order 2 with respect to the
date of delivery of the second cylinder liner.
While the quotation provided by respondent evidently stated that the cylinder liners were supposed to
be delivered within two months from receipt of the firm order of petitioner and that the 25% down
payment was due upon the cylinder liners' delivery, the purchase orders prepared by petitioner clearly
omitted these significant items. The petitioner's Purchase Order 1 made no mention at all of the due
dates of delivery of the first cylinder liner and of the payment of 25% down payment. Its Purchase
Order 2 likewise did not indicate the due date of delivery of the second cylinder liner.
Notably, petitioner was the one who caused the preparation of Purchase Orders 1 and No. 2 yet it
utterly failed to adduce any justification as to why said documents contained terms which are at
variance with those stated in the quotation provided by respondent. The only plausible reason for such
failure on the part of petitioner is that the parties had, in fact, renegotiated the proposed terms of the
contract of sale.
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In such cases, the delivery must be made within a reasonable time. The law implies that if no time is
fixed, delivery shall be made within a reasonable time, in the absence of anything to show that an
immediate delivery intended.
We, therefore, hold that in the subject contracts, time was not of the essence. The delivery of the
cylinder liners on 20 April 1990 was made within a reasonable period of time considering that
respondent had to place the order for the cylinder liners with its principal in Japan and that the latter
was, at that time, beset by heavy volume of work.
14*
Coastwise Ligherage vs. CA

Facts
Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of Negros to
Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using the latter's dumb barges.
The barges were towed in tandem by the tugboat MT Marica, which is likewise owned by Coastwise.
Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise 9", struck an
unknown sunken object. As a consequence, the molasses at the cargo tanks were contaminated and
rendered unfit for the use it was intended. This prompted the consignee, Pag-asa Sales, Inc. to reject
the shipment of molasses as a total loss.
Thereafter, Pag-asa Sales, Inc. filed a formal claim with the insurer of its lost cargo, herein private
respondent, Philippine General Insurance Company (PhilGen, for short) and against the carrier, herein
petitioner, Coastwise Lighterage. Coastwise Lighterage denied the claim and it was PhilGen which
paid the consignee, Pag-asa Sales, Inc., the amount of P700,000.00, representing the value of the
damaged cargo of molasses.
In turn, PhilGen then filed an action against Coastwise Lighterage seeking to recover the amount
which it paid to Pag-asa Sales, Inc. for the latter's lost cargo.
Issue
Held
Common carrier.
On the first issue, petitioner contends that the RTC and the Court of Appeals erred in finding that it
was a common carrier. It stresses the fact that it contracted with Pag-asa Sales, Inc. to transport the
shipment of molasses as a "charter agreement". It then proceeds to cite the case of Home Insurance
Company vs. American Steamship Agencies, Inc. wherein this Court held: ". . . a common carrier
undertaking to carry a special cargo or chartered to a special person only becomes a private carrier."
Petitioner's reliance on the aforementioned case is misplaced. In its entirety, the conclusions of the
court are as follows:
Accordingly, the charter party contract is one of affreightment over the whole vessel, rather than a demise. As
such, the liability of the shipowner for acts or negligence of its captain and crew, would remain in the absence
of stipulation.
The distinction between the two kinds of charter parties (i.e. bareboat or demise and contract of
affreightment) is more clearly set out in the case of Puromines, Inc. vs. Court of Appeals, wherein we
ruled:
Under the demise or bareboat charter of the vessel, the charterer will generally be regarded as the owner for
the voyage or service stipulated. To create a demise, the owner of a vessel must completely and exclusively
relinquish possession, command and navigation thereof to the charterer, anything short of such a complete
transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all.
On the other hand a contract of affreightment is one in which the owner of the vessel leases part or all of its
space to haul goods for others. It is a contract for special service to be rendered by the owner of the vessel and
under such contract the general owner retains the possession, command and navigation of the ship, the
charterer or freighter merely having use of the space in the vessel in return for his payment of the charter
hire. . . . .
. . . . An owner who retains possession of the ship though the hold is the property of the charterer, remains
liable as carrier and must answer for any breach of duty as to the care, loading and unloading of the cargo. . . .
15*
Although a charter party may transform a common carrier into a private one, the same however is not
true in a contract of affreightment on account of the aforementioned distinctions between the two.
Petitioner admits that the contract it entered into with the consignee was one of affreightment. We
agree. Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one
point to another, but the possession, command and navigation of the vessels remained with petitioner
Coastwise Lighterage.
Next, the law and jurisprudence on common carriers both hold that the mere proof of delivery of
goods in good order to a carrier and the subsequent arrival of the same goods at the place of
destination in bad order makes for a prima facie case against the carrier. It follows then that the
presumption of negligence that attaches to common carriers, once the goods it transports are lost,
destroyed or deteriorated, applies to the petitioner. This presumption, which is overcome only by
proof of the exercise of extraordinary diligence, remained unrebutted in this case.
Petitioner's assertion is belied by the evidence on record where it appeared that far from having
rendered service with the greatest skill and utmost foresight, and being free from fault, the carrier was
culpably remiss in the observance of its duties. Jesus R. Constantino, the patron of the vessel
"Coastwise 9" admitted that he was not licensed.
Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an unlicensed patron violates
this rule. It cannot safely claim to have exercised extraordinary diligence, by placing a person whose
navigational skills are questionable, at the helm of the vessel which eventually met the fateful
accident. It may also logically, follow that a person without license to navigate, lacks not just the skill
to do so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally
authorized ones. Had the patron been licensed, he could be presumed to have both the skill and the
knowledge that would have prevented the vessel's hitting the sunken derelict ship that lay on their way
to Pier 18.
As a common carrier, petitioner is liable for breach of the contract of carriage, having failed to
overcome the presumption of negligence with the loss and destruction of goods it transported, by
proof of its exercise of extraordinary diligence.
16*
Maersk Lines vs. CA

Facts
Respondent Efren Castillo of Ethegal Laboratories ordered from Eli Lilly. Inc. of Puerto Rico empty
gelatin capsules. Through a Memorandum of Shipment, the shipper Eli Lilly, Inc. of Puerto Rico
advised private respondent as consignee that the empty gelatin capsules were already shipped on
board MV "Anders Maerskline." In said Memorandum, shipper Eli Lilly, Inc. specified the date of
arrival to be April 3, 1977.
For reasons unknown, said cargo of capsules were misshipped and diverted to Richmond, Virginia,
USA and then transported back Oakland, Califorilia. The goods finally arrived in the Philippines two
(2) months from the date specified in the memorandum. As a consequence, private respondent as
consignee refused to take delivery of the goods on account of its failure to arrive on time.
Private respondent alleging gross negligence and undue delay in the delivery of the goods, filed an
action before the court a quo for rescission of contract with damages against petitioner and Eli Lilly,
Inc. as defendants.
Denying that it committed breach of contract, petitioner alleged in its that answer that the subject
shipment was transported in accordance with the provisions of the covering bill of lading2 and that its
liability under the law on transportation of good attaches only in case of loss, destruction or
deterioration of the goods as provided for in Article 1734 of Civil Code.
Issue
Whether or not the petitioner is not liable for delay.
Held
Liable for delay.
Nonetheless, petitioner maintains that it cannot be held for damages for the alleged delay in the
delivery since it acted in good faith and there was no special contract under which the carrier
undertook to deliver the shipment on or before a specific date.
On the other hand, private respondent claims that during the period before the specified date of arrival
of the goods, he had made several commitments and contract of adhesion. Therefore, petitioner can be
held liable for the damages suffered by private respondent for the cancellation of the contracts he
entered into.
It is not disputed that the bill of lading, in fine print, is a contract of adhesion. Generally, contracts of
adhesion are considered void since almost all the provisions of these types of contracts are prepared
and drafted only by one party, usually the carrier. Nonetheless, settled is the rule that bills of lading
are contracts not entirely prohibited. One who adheres to the contract is in reality free to reject it in its
entirety; if he adheres, he gives his consent.
It is a long standing jurisprudential rule that a bill of lading operates both as a receipt and as contract
to transport and deliver the same as therein stipulated. It is presumed that the stipulations of the bill
were, in the absence of fraud, concealment or improper conduct, known to the shipper, and he is
generally bound by his acceptance whether he reads the bill or not.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
2!(1)! The! Carrier! does! not! undertake! that! the! goods! shall! arive! at! the! port! of! discharge! or! the! place! of!
delivery!at!any!particular!time!or!to!meet!any!particular!market!or!use!and!save!as!is!provided!in!clause!4!
the! Carrier! shall! in! no! circumstances! be! liable! for! any! direct,! indirect! or! consequential! loss! or! damage!
caused!by!delay.!If!the!Carrier!should!nevertheless!be!held!legally!liable!for!any!such!direct!or!indirect!or!
consequential!loss!or!damage!caused!by!delay,!such!liability!shall!in!no!event!exceed!the!freight!paid!for!
the!transport!covered!by!this!Bill!of!Lading.!
17*
However, the aforequoted ruling applies only if such contracts will not create an absurd situation as in
the case at bar. The questioned provision in the subject bill of lading has the effect of practically
leaving the date of arrival of the subject shipment on the sole determination and will of the carrier.
While it is true that common carriers are not obligated by law to carry and to deliver merchandise, and
persons are not vested with the right to prompt delivery, unless such common carriers previously
assume the obligation to deliver at a given date or time, delivery of shipment or cargo should at least
be made within a reasonable time.
The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract,
a carrier is not an insurer against delay in transportation of goods. When a common carrier undertakes
to convey goods, the law implies a contract that they shall be delivered at destination within a
reasonable time, in the absence, of any agreement as to the time of delivery. But where a carrier has
made an express contract to transport and deliver properly within a specified time, it is bound to fulfill
its contract and is liable for any delay, no matter from what cause it may have arisen.
An examination of the subject bill of lading shows that the subject shipment was estimated to arrive in
Manila on April 3, 1977. While there was no special contract entered into by the parties indicating the
date of arrival of the subject shipment, petitioner nevertheless, was very well aware of the specific
date when the goods were expected to arrive as indicated in the bill of lading itself. In this regard,
there arises no need to execute another contract for the purpose as it would be a mere superfluity.
In the case before us, we find that a delay in the delivery of the goods spanning a period of two (2)
months and seven (7) days falls was beyond the realm of reasonableness.
18*
FGU Insurance vs. CA

Facts
Evidence shows that Anco Enterprises Company (ANCO) owned the M/T ANCO tugboat and the
D/B Lucio barge which were operated as common carriers. Since the D/B Lucio had no engine of its
own, it could not maneuver by itself and had to be towed by a tugboat for it to move from one place to
another.
San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio, for
towage by M/T ANCO, cases of Pale Pilsen and Cerveza Negra. The D/B Lucio was towed by the
M/T ANCO all the way from Mandaue City to San Jose, Antique. The vessels arrived at San Jose,
Antique. The tugboat M/T ANCO left the barge immediately after reaching San Jose, Antique.
When the barge and tugboat arrived at San Jose, Antique, the clouds over the area were dark and the
waves were already big. The arrastre workers unloading the cargoes of SMC on board the D/B Lucio
began to complain about their difficulty in unloading the cargoes. SMCs District Sales Supervisor
requested ANCOs representative to transfer the barge to a safer place because the vessel might not be
able to withstand the big waves.
ANCOs representative did not heed the request because he was confident that the barge could
withstand the waves. This, notwithstanding the fact that at that time, only the M/T ANCO was left at
the wharf of San Jose, Antique, as all other vessels already left the wharf to seek shelter. With the
waves growing bigger and bigger, only some cases of beer were discharged into the custody of the
arrastre operator.
Later, the crew of D/B Lucio abandoned the vessel because the barges rope attached to the wharf was
cut off by the big waves. At around midnight, the barge run aground and was broken and the cargoes
of beer in the barge were swept away.
As a result, ANCO failed to deliver to SMCs consignee all the cases of Pale Pilsen and Cerveza
Negra. As a consequence of the incident, SMC filed a complaint for Breach of Contract of Carriage
and Damages against ANCO.
Issue
Whether or not ANCO was negligent.
Held
ANCO was negligent.
ANCOs representatives failed to exercise the extraordinary degree of diligence required by the law to
exculpate them from liability for the loss of the cargoes.
First, ANCO admitted that they failed to deliver to the designated consignee the cases of Pale Pilsen
and cases of Cerveza Negra.
Second, it is borne out in the testimony of the witnesses on record that the barge D/B Lucio had no
engine of its own and could not maneuver by itself. Yet, the patron of ANCOs tugboat M/T ANCO
left it to fend for itself notwithstanding the fact that as the two vessels arrived at the port of San Jose,
Antique, signs of the impending storm were already manifest.
Petitioners Estate of Ang Gui and Co To, in their Memorandum, asserted that the contention of
respondents SMC and FGU that the crewmembers of D/B Lucio should have left port at the onset of
the typhoon is like advising the fish to jump from the frying pan into the fire and an advice that
borders on madness.
19*
The argument does not persuade. The records show that the D/B Lucio was the only vessel left at San
Jose, Antique, during the time in question. The other vessels were transferred and temporarily moved
to Malandong, 5 kilometers from wharf where the barge remained. Clearly, the transferred vessels
were definitely safer in Malandong than at the port of San Jose, Antique, at that particular time, a fact
which petitioners failed to dispute.
ANCOs arguments boil down to the claim that the loss of the cargoes was caused by the typhoon
Sisang, a fortuitous event (caso fortuito), and there was no fault or negligence on their part. In fact,
ANCO claims that their crewmembers exercised due diligence to prevent or minimize the loss of the
cargoes but their efforts proved no match to the forces unleashed by the typhoon which, in petitioners
own words was, by any yardstick, a natural calamity, a fortuitous event, an act of God, the
consequences of which petitioners could not be held liable for.
In this case, the calamity which caused the loss of the cargoes was not unforeseen nor was it
unavoidable. In fact, the other vessels in the port of San Jose, Antique, managed to transfer to another
place, a circumstance which prompted SMCs District Sales Supervisor to request that the D/B Lucio
be likewise transferred, but to no avail. The D/B Lucio had no engine and could not maneuver by
itself. Even if ANCOs representatives wanted to transfer it, they no longer had any means to do so as
the tugboat M/T ANCO had already departed, leaving the barge to its own devices. The captain of the
tugboat should have had the foresight not to leave the barge alone considering the pending storm.
While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural disaster, ANCO
could not escape liability to respondent SMC. The records clearly show the failure of petitioners
representatives to exercise the extraordinary degree of diligence mandated by law. To be exempted
from responsibility, the natural disaster should have been the proximate and only cause of the loss.
There must have been no contributory negligence on the part of the common carrier.
Therefore, as correctly pointed out by the appellate court, there was blatant negligence on the part of
M/T ANCOs crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy of the
storm without the assistance of the tugboat, and again in failing to heed the request of SMCs
representatives to have the barge transferred to a safer place, as was done by the other vessels in the
port; thus, making said blatant negligence the proximate cause of the loss of the cargoes.
20*
DRS-Senator vs. Federal

Facts
Berde Plants, Inc. (Berde Plants) delivered 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.
The cargo was loaded in M/S Arabian Senator.
Federal Phoenix Assurance Company, Inc. (Federal Phoenix Assurance) insured the cargo against all
risks.
The 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.
DSR-Senator Lines informed Berde Plants that M/V Kapitan Sakharov with its cargo was gutted by
fire and sank. Consequently, Federal Phoenix Assurance paid Berde Plants P941,429.61
corresponding to the amount of insurance for the cargo.
Federal Phoenix Assurance sent a letter to C.F. Sharp demanding payment. C.F. Sharp denied any
liability on the ground that such liability was extinguished when the vessel carrying the cargo was
gutted by fire.
Thus, Federal Phoenix Assurance filed a complaint for damages against DSR-Senator Lines and C.F.
Sharp.
Issue
Whether or not C.F. Sharp is liable for damages.
Held
Liable.
Fire is not one of those enumerated under Art. 1734 which exempts a carrier from liability for loss or
destruction of the cargo.
In Eastern Shipping Lines, Inc. vs. Intermediate Appellate Court, we ruled that since the peril of fire
is not comprehended within the exceptions in Article 1734, then the common carrier shall be
presumed to have been at fault or to have acted negligently, unless it proves that it has observed the
extraordinary diligence required by law.
Even if fire were to be considered a natural disaster within the purview of 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
21*
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.
Respondent Federal Phoenix Assurance raised the presumption of negligence against petitioners.
However, they failed to overcome it by sufficient proof of extraordinary diligence
22*
Central Shipping vs. Ins

Facts
Petitioner 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 shipment was insured. Upon completion of loading of the cargo, the vessel left Palawan and
commenced the voyage to Manila. While enroute to Manila, the vessel listed about 10 degrees
starboardside, due to the shifting of logs in the hold.
After the listing of the vessel had increased to 15 degrees, the ship captain ordered his men to
abandon ship and the vessel completely sank. Due to the sinking of the vessel, the cargo was totally
lost.
Respondent alleged that the total loss of the shipment was caused by the fault and negligence of the
[petitioner] and its captain and as direct consequence thereof the consignee suffered damage.
The consignee, Alaska Lumber Co. Inc., presented a claim for the value of the shipment to the
[petitioner] but the latter failed and refused to settle the claim, hence [respondent], being the insurer,
paid said claim and now seeks to be subrogated to all the rights and actions of the consignee as
against the petitioner.
Petitioner, while admitting the sinking of the vessel, interposed the defense that the vessel was fully
manned, fully equipped and in all respects seaworthy; that all the logs were properly loaded and
secured; that the vessels master exercised due diligence to prevent or minimize the loss before,
during and after the occurrence of the storm.
It 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 [petitioner] nor the captain of its
vessel could have foreseen.
Issue
Held
Liable.
In the present case, petitioner disclaims responsibility for the loss of the cargo by claiming the
occurrence of a storm under Article 1734(1). It attributes the sinking of its vessel solely to the
weather condition.
Established is the fact that the M/V Central Bohol encountered a southwestern monsoon in the course
of its voyage. Having made such factual representation, petitioner cannot now be allowed to retreat
and claim that the southwestern monsoon was a storm.
Normally expected on sea voyages were such monsoons, during which strong winds were not
unusual. It would not be sufficient to categorize the weather condition at the time as a storm within
the absolutory causes enumerated in the law. Significantly, no typhoon was observed within the
Philippine area of responsibility during that period. The strong winds accompanying the southwestern
monsoon could not be classified as a storm. Such winds are the ordinary vicissitudes of a sea
voyage.
Even if the weather encountered by the ship is to be deemed a natural disaster under Article 1739 of
the Civil Code, petitioner failed to show that such natural disaster or calamity was the proximate and
only cause of the loss. Human agency must be entirely excluded from the cause of injury or loss. The
defense of fortuitous event or natural disaster cannot be successfully made when the injury could have
been avoided by human precaution.
23*
However, 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 vessel
felt the strain because the logs in the bodega shifted and there were already seawater that seeped
inside. Had the logs not shifted, the ship could have survived and reached at least the port of El
Nido.
Being clearly prone to shifting, the round logs should not have been stowed with nothing to hold them
securely in place. Each pile of logs should have been lashed together by cable wire, and the wire
fastened to the side of the hold. Considering the strong force of the wind and the roll of the waves, the
loose arrangement of the logs did not rule out the possibility of their shifting. By force of gravity,
those on top of the pile would naturally roll towards the bottom of the ship.
The evidence indicated that strong southwest monsoons were common occurrences during the month
of July. Thus, the officers and crew of M/V Central Bohol should have reasonably anticipated heavy
rains, strong winds and rough seas. They should then have taken extra precaution in stowing the logs
in the hold, in consonance with their duty of observing extraordinary diligence in safeguarding the
goods. But the carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it
cannot now escape responsibility for the loss.
24*
Cruz vs. Sun Holidays

Facts
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint against Sun Holidays, Inc.
(respondent) with the Regional Trial Court (RTC) for damages arising from the death of their son
Ruelito C. Cruz (Ruelito) who perished with his wife on board the boat M/B Coco Beach III that
capsized.
As it was still windy, Matute (a scuba instructor) and 25 other Resort guests including petitioners son
and his wife trekked to the other side of the Coco Beach mountain that was sheltered from the wind
where they boarded M/B Coco Beach III, which was to ferry them. Shortly after the boat sailed, it
started to rain. As it moved farther away from Puerto Galera and into the open seas, the rain and wind
got stronger, causing the boat to tilt from side to side and the captain to step forward to the front,
leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after the other,
M/B Coco Beach III capsized putting all passengers underwater. The passengers, who had put on their
life jackets, struggled to get out of the boat. Upon seeing the captain, Matute and the other passengers
who reached the surface asked him what they could do to save the people who were still trapped
under the boat. The captain replied Iligtas niyo na lang ang sarili niyo (Just save yourselves). Help
came after about 45 minutes when two boats passed by the capsized M/B Coco Beach III. Eight
passengers, including petitioners son and his wife, died during the incident.
At the time of Ruelitos death, he was 28 years old and employed as a contractual worker for Mitsui
Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900.
Petitioner demanded indemnification from respondent for the death of their son in the amount of at
least P4,000,000. Replying, respondent denied any responsibility for the incident which it considered
to be a fortuitous event. It nevertheless offered, as an act of commiseration, the amount of P10,000 to
petitioners upon their signing of a waiver. As petitioners declined respondents offer, they filed the
Complaint, as earlier reflected, alleging that respondent, as a common carrier, was guilty of
negligence in allowing M/B Coco Beach III to sail notwithstanding storm warning bulletins issued by
PAGASA as early as 5:00 a.m.
The RTC and CA ruled in favor of Sun Holidays. On appeal to the SC, Sun Holidays was held liable.
Issue
Whether or not respondent is negligent.
Held
Negligent.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone
warnings for shipping advising of tropical depressions in Northern Luzon which would also affect the
province of Mindoro. By the testimony of Dr. Frisco Nilo, supervising weather specialist of PAGASA,
squalls are to be expected under such weather condition.
A very cautious person exercising the utmost diligence would thus not brave such stormy weather and
put other peoples lives at risk. The extraordinary diligence required of common carriers demands that
they take care of the goods or lives entrusted to their hands as if they were their own. This respondent
failed to do.
Respondents insistence that the incident was caused by a fortuitous event does not impress either.
The elements of a "fortuitous event" are:
(a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply
with their obligations, must have been independent of human will;
25*
(b) the event that constituted the caso fortuito must have been impossible to foresee or, if
foreseeable, impossible to avoid;
(c) the occurrence must have been such as to render it impossible for the debtors to fulfill their
obligation in a normal manner; and
(d) the obligor must have been free from any participation in the aggravation of the resulting
injury to the creditor.
To fully free a common carrier from any liability, the fortuitous event must have been the proximate
and only cause of the loss. And it should have exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the fortuitous event.
Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned
M/B Coco Beach III. As reflected above, however, the occurrence of squalls was expected under the
weather condition. Moreover, evidence shows that M/B Coco Beach III suffered engine trouble before
it capsized and sank. The incident was, therefore, not completely free from human intervention.
26*
PAL vs. CA
Facts
Respondent Co accompanied by his wife and son, arrived at the Manila International Airport aboard
defendant airline's PAL Flight from San Francisco, California, U.S.A. Soon after his embarking (sic),
plaintiff proceeded to the baggage retrieval area to claim his checks in his possession. Plaintiff found
eight of his luggage, but despite diligent search, he failed to locate his ninth luggage.
He then immediately notified defendant company. The printed form known as a Property Irregularity
Report was filled out acknowledging one of the plaintiff's luggages to be missing and signed after
asking respondent himself to sign the same document. In accordance with this procedure in cases of
this nature, PAL asked plaintiff to surrender the nine claim checks corresponding to the nine luggages,
i.e., including the one that was missing.
The incontestable evidence further shows that plaintiff lost luggage was a Samsonite suitcase
measuring about 62 inches in length, worth about US$200.00 and containing various personal effects
purchased by plaintiff and his wife during their stay in the United States and similar other items sent
by their friends abroad to be given as presents to relatives in the Philippines. Plaintiff's invoices
evidencing their purchases show their missing personal effects to be worth US$1,243.01, in addition
to the presents entrusted to them by their friends which plaintiffs testified to be worth about
US$500.00 to US$600.00.
Plaintiff on several occasions unrelentingly called at defendant's office in order to pursue his
complaint about his missing luggage but no avail. Thus, plaintiff wrote a demand letter to defendant
company. PAL never found plaintiff's missing luggage or paid its corresponding value. Consequently,
on May 3, 1985, respondent filed his present complaint against said petitioner.
Issue
Whether or not the Warsaw Convention on limits of liability should be disregarded.
Held
Disregarded.
In Alitalia vs. IAC, the Warsaw Convention limiting the carrier's liability was applied because of a
simple loss of baggage without any improper conduct on the part of the officials or employees of the
airline, or other special injury sustained by the passengers. The petitioner therein did not declare a
higher value for his luggage, much less did he pay an additional transportation charge.
Petitioner contends that under the Warsaw Convention, its liability, if any, cannot exceed US $20.00
based on weight as private respondent Co did not declare the contents of his baggage nor pay
traditional charges before the flight.
We find no merit in that contention.
The liability of the common carrier for the loss, destruction or deterioration of goods transported from
a foreign country to the Philippines is governed primarily by the New Civil Code. In all matters not
regulated by said Code, the rights and obligations of common carriers shall be governed by the Code
of Commerce and by Special Laws.
Since the passenger's destination in this case was the Philippines, Philippine law governs the liability
of the carrier for the loss of the passenger's luggage.
In this case, the petitioner failed to overcome, not only the presumption, but more importantly, the
private respondent's evidence, proving that the carrier's negligence was the proximate cause of the
loss of his baggage. Furthermore, petitioner acted in bad faith in faking a retrieval receipt to bail itself
out of having to pay Co's claim.
27*
The Court of Appeals therefore did not err in disregarding the limits of liability under the Warsaw
Convention.
As stated in the Cathay Pacific case, although the Warsaw Convention has the force and effect of law
in this country, being a treaty commitment assumed by the Philippine government, said convention
does not operate as an exclusive enumeration of the instances for declaring a carrier liable for breach
of contract of carriage or as an absolute limit of the extent of that liability. The Warsaw Convention
declares the carrier liable in the enumerated cases and under certain limitations. However, it must not
be construed to preclude the operation of the Civil Code and pertinent laws. It does not regulate, much
less exempt, the carrier from liability for damages for violating the rights of its passengers under the
contract of carriage, especially if willful misconduct on the part of the carriers employees is found or
established.
28*
Transasia Shipping vs. CA

Facts
Respondent, a public attorney, bought a ticket from petitioner for the voyage of M/V Asia Thailand
vessel to Cagayan de Oro City from Cebu City on November 12, 1991.
Plaintiff boarded the M/V Asia Thailand vessel. At that instance, plaintiff noticed that some repair
works [sic] were being undertaken on the engine of the vessel. The vessel departed with only one (1)
engine running.
After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor thereat.
After half an hour of stillness, some passengers demanded that they should be allowed to return to
Cebu City for they were no longer willing to continue their voyage to, Cagayan de Oro City. The
captain acceeded [sic] to their request and thus the vessel headed back to Cebu City.
At Cebu City, plaintiff together with the other passengers who requested to be brought back to Cebu
City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. Plaintiff,
the next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of
defendant.
On account of this failure of defendant to transport him to the place of destination on November 12,
1991, plaintiff filed before the trial court a complaint for damages against defendant.
Issue
Whether or not a common carrier is liable for damages to a passenger who disembarked from the
vessel upon its return to the port of origin, after it suffered engine trouble and had to stop at sea,
having commenced the contracted voyage on one engine.
Held
Not liable.
Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder head
of one of the vessel's engines. But even before it could finish these repairs, it allowed the vessel to
leave the port of origin on only one functioning engine, instead of two. Moreover, even the lone
functioning engine was not in perfect condition as sometime after it had run its course, it conked out.
This caused the vessel to stop and remain a drift at sea, thus in order to prevent the ship from
capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even before the voyage began.
The Court of Appeals did not grant the private respondent actual or compensatory damages, reasoning
that no delay was incurred since there was no demand, as required by Article 1169 of the Civil Code.
This article, however, finds no application in this case because, as found by the respondent Court,
there was in fact no delay in the commencement of the contracted voyage. If any delay was incurred,
it was after the commencement of such voyage, more specifically, when the voyage was subsequently
interrupted when the vessel had to stop near Kawit Island after the only functioning engine conked out.
As to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent.
However, as correctly pointed out by the petitioner, Article 698 of the Code of Commerce specifically
provides for such a situation. It reads:
In case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare in
proportion to the distance covered, without right to recover for losses and damages if the interruption is due to
fortuitous event or force majeure, but with a right to indemnity if the interruption should have been caused by
the captain exclusively. If the interruption should be caused by the disability of the vessel and a passenger
should agree to await the repairs, he may not be required to pay any increased price of passage, but his living
expenses during the stay shall be for his own account.
This article applies suppletorily pursuant to Article 1766 of the Civil Code.
29*
Of course, this does not suffice for a resolution of the case at bench for, as earlier stated, the cause of
the delay or interruption was the petitioner's failure to observe extraordinary diligence. Article 698
must then be read together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the
Civil Code.
So read, it means that the petitioner is liable for any pecuniary loss or loss of profits which the private
respondent may have suffered by reason thereof. For the private respondent, such would be the loss of
income if unable to report to his office on the day he was supposed to arrive were it not for the delay.
This, however, assumes that he stayed on the vessel and was with it when it thereafter resumed its
voyage; but he did not. As he and some passengers resolved not to complete the voyage, the vessel
had to return to its port of origin and allow them to disembark. The private respondent then took the
petitioner's other vessel the following day, using the ticket he had purchased for the previous day's
voyage.
Any further delay then in the private respondent's arrival at the port of destination was caused by his
decision to disembark. Had he remained on the first vessel, he would have reached his destination at
noon of 13 November 1991, thus been able to report to his office in the afternoon. He, therefore,
would have lost only the salary for half of a day. But actual or compensatory damages must be proved,
which the private respondent failed to do. There is no convincing evidence that he did not receive his
salary for 13 November 1991 nor that his absence was not excused.
30*
Calalas vs. CA
Facts
Private respondent Eliza Jujeurche G. Sunga took a passenger jeepney owned and operated by
petitioner Vicente 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.
Along the way, 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.
The lower court took cognizance of another case filed by Calalas against Salva and Verena, for quasidelict, in which Salva and his driver Verena were held jointly liable to Calalas for the damage to his
jeepney.
Issue
Whether or not the decision in the civil case finding Salva and his driver liable for damage to
petitioner is binding on Sunga.
Held
The decision isnt binding.
The argument that Sunga is bound by the ruling in Civil Case finding the driver and the owner of the
truck liable for quasi-delict ignores the fact that she was never a party to that case and, therefore, the
principle of res judicata does not apply.
Nor are the issues in Civil Case and in the present case the same. The issue in Civil Case was whether
Salva and his driver Verena were liable for quasi-delict for the damage caused to petitioners jeepney.
On the other hand, the issue in this case is whether petitioner is liable on his contract of carriage.
There is, thus, no basis for the contention that the ruling in Civil Case finding Salva and his driver
Verena liable for the damage to petitioners jeepney, should be binding on Sunga. 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.3 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, law itself creates the obligation. 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.
Now, did the driver of jeepney carry Sunga "safely as far as human care and foresight could provide,
using the utmost diligence of very cautious persons, with due regard for all the circumstances? We
do not think so. Several factors militate against petitioners contention.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
3!Statement!not!absolute,!see!Bataclan!vs.!Medina!
31*
First, as found by the Court of Appeals, the jeepney was not properly parked, its rear portion being
exposed about two meters from the broad shoulders of the highway, and facing the middle of the
highway in a diagonal angle.
Second, it is undisputed that petitioners driver took in more passengers than the allowed seating
capacity of the jeepney.
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.
We find it hard to give serious thought to petitioners contention that Sungas taking an "extension
seat" amounted to an implied assumption of risk. It is akin to arguing that the injuries to the many
victims of the tragedies in our seas should not be compensated merely because those passengers
assumed a greater risk of drowning by boarding an overloaded ferry. This is also true of petitioners
contention that the jeepney being bumped while it was improperly parked constitutes caso fortuito. A
caso fortuito is an event which could not be foreseen, or which, though foreseen, was inevitable. This
requires that the following requirements be present:
1. The cause of the breach is independent of the debtors will;
2. The event is unforeseeable or unavoidable;
3. The event is such as to render it impossible for the debtor to fulfill his obligation in a normal
manner, and
4. The debtor did not take part in causing the injury to the creditor.
Petitioner should have foreseen the danger of parking his jeepney with its body protruding two meters
into the highway.
32*
Japan Airlines vs. CA

Facts
Private respondents boarded JAL flight in San Francisco, California bound for Manila. As an
incentive for travelling on the said airline, the flight was to make an overnight stopover at Narita,
Japan, at the airlines expense, thereafter proceeding to Manila the following day.
On June 14, 1991, 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 due to depart on June 16, 1991 and also paid for the hotel expenses for their
unexpected overnight stay. On June 16, 1991, much to the dismay of the private respondents, their
long anticipated flight to Manila was again cancelled 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.
Since NAIA was only reopened to airline traffic on June 22, 1991, private respondents were forced to
pay for their accommodations and meal expenses from their personal funds from June 16 to June 21,
1991. Their unexpected stay in Narita ended on June 22, 1991 when they arrived in Manila on board
JL flight No. 741.
Obviously, still reeling from the experience, 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. 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.
Held
No obligation.
While we sympathize with the private respondents plight, we are unable to accept this contention.
Common carriers are not 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.
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 non-performance. 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.
Indeed, to hold JAL, in the absence of bad faith or negligence, liable for the amenities of its stranded
passengers by reason of a fortuitous event is too much of a burden to assume. Furthermore, it has been
held that airline passengers must take such risks incident to the mode of travel. In this regard, adverse
weather conditions or extreme climatic changes are some of the perils involved in air travel, the
33*
consequences of which the passenger must assume or expect. After all, common carriers are not the
insurer of all risks.
Paradoxically, the Court of Appeals, despite the presence of force majeure, still ruled against JAL
relying in our decision in PAL v. Court of Appeals. The reliance is misplaced. The factual
background of the PAL case is different from the instant petition. In that case there was indeed a
fortuitous event resulting in the diversion of the PAL flight. However, the unforeseen diversion was
worsened when private respondents (passenger) was left at the airport and could not even hitch a ride
in a Ford Fiera loaded with PAL personnel, not to mention the apparent apathy of the PAL station
manager as to the predicament of the stranded passengers. In light of these circumstances, we held
that if the fortuitous event was accompanied by neglect and malfeasance by the carriers employees,
an action for damages against the carrier is permissible. Unfortunately, for private respondents, none
of these conditions are present in the instant petition.
We are not prepared, however, to completely absolve petitioner JAL from any liability. While JAL
was no longer required to defray private respondents living expenses during their stay in Narita on
account of the fortuitous event, JAL had the duty to make the necessary arrangements to transport
private respondents on the first available connecting flight to Manila. Petitioner JAL reneged on its
obligation to look after the comfort and convenience of its passengers when it declassified private
respondents from transit passengers to new passengers as a result of which private respondents
were obliged to make the necessary arrangements themselves for the next flight to Manila.
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. 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. Consequently, the award of nominal damages is
in order.
34*
Aboitiz Shipping vs. CA

Facts
Anacleto Viana boarded the vessel M/V Antonia, owned by petitioner, at the port at San Jose,
Occidental Mindoro, bound for Manila, having purchased a ticket. Said vessel arrived at Pier 4, North
Harbor, Manila, and the passengers therein disembarked, a gangplank having been provided
connecting the side of the vessel to the pier. Instead of using said gangplank Anacleto Viana
disembarked on the third deck which was on the level with the pier. After said vessel had landed, the
Pioneer Stevedoring Corporation took over the exclusive control of the cargoes loaded on said vessel.
The crane owned by the third party petitioner and operated by its crane operator Alejo Figueroa was
placed alongside the vessel and one (1) hour after the passengers of said vessel had disembarked, it
started operation by unloading the cargoes from said vessel. While the crane was being operated,
Anacleto Viana who had already disembarked from said vessel obviously remembering that some of
his cargoes were still loaded in the vessel, went back to the vessel, and it was while he was pointing to
the crew of the said vessel to the place where his cargoes were loaded that the crane hit him, pinning
him between the side of the vessel and the crane.
Private respondents Vianas filed a complaint for damages against petitioner corporation (Aboitiz, for
brevity) for breach of contract of carriage.
In its answer. Aboitiz denied responsibility contending that at the time of the accident, the vessel was
completely under the control of respondent Pioneer Stevedoring Corporation (Pioneer, for short) as
the exclusive stevedoring contractor of Aboitiz, which handled the unloading of cargoes from the
vessel of Aboitiz. It is also averred that since the crane operator was not an employee of Aboitiz, the
latter cannot be held liable under the fellow-servant rule.
Issue
Whether or not Aboitiz is liable.
Held
Liable.
Petitioner contends that since one (1) hour had already elapsed from the time Anacleto Viana
disembarked from the vessel and that he was given more than ample opportunity to unload his cargoes
prior to the operation of the crane, his presence on the vessel was no longer reasonable and he
consequently ceased to be a passenger. Corollarily, it insists that the doctrine in La Mallorca vs. Court
of Appeals, et al. is not applicable to the case at bar.
The rule is that the relation of carrier and passenger continues until the passenger has been landed at
the port of destination and has left the vessel owner's dock or premises. Once created, the relationship
will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted
from the carrier's conveyance or had a reasonable opportunity to leave the carrier's premises. All
persons who remain on the premises a reasonable time after leaving the conveyance are to be deemed
passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined
from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his
departure. The carrier-passenger relationship is not terminated merely by the fact that the person
transported has been carried to his destination if, for example, such person remains in the carrier's
premises to claim his baggage.
It is apparent from the foregoing that what prompted the Court to rule as it did in said case is the fact
of the passenger's reasonable presence within the carrier's premises. That reasonableness of time
should be made to depend on the attending circumstances of the case, such as the kind of common
carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a
consideration of the time element per se without taking into account such other factors. It is thus of no
moment whether in the cited case of La Mallorca there was no appreciable interregnum for the
35*
passenger therein to leave the carrier's premises whereas in the case at bar, an interval of one (1) hour
had elapsed before the victim met the accident. The primary factor to be considered is the existence of
a reasonable cause as will justify the presence of the victim on or near the petitioner's vessel. We
believe there exists such a justifiable cause.
It is of common knowledge that, by the very nature of petitioner's business as a shipper, the
passengers of vessels are allotted a longer period of time to disembark from the ship than other
common carriers such as a passenger bus. With respect to the bulk of cargoes and the number of
passengers it can load, such vessels are capable of accommodating a bigger volume of both as
compared to the capacity of a regular commuter bus. Consequently, a ship passenger will need at least
an hour as is the usual practice, to disembark from the vessel and claim his baggage whereas a bus
passenger can easily get off the bus and retrieve his luggage in a very short period of time. Verily,
petitioner cannot categorically claim, through the bare expedient of comparing the period of time
entailed in getting the passenger's cargoes, that the ruling in La Mallorca is inapplicable to the case at
bar. On the contrary, if we are to apply the doctrine enunciated therein to the instant petition, we
cannot in reason doubt that the victim Anacleto Viana was still a passenger at the time of the incident.
When the accident occurred, the victim was in the act of unloading his cargoes, which he had every
right to do, from petitioner's vessel. As earlier stated, a carrier is duty bound not only to bring its
passengers safely to their destination but also to afford them a reasonable time to claim their baggage.
It is not definitely shown that one (1) hour prior to the incident, the victim had already disembarked
from the vessel. Petitioner failed to prove this. What is clear to us is that at the time the victim was
taking his cargoes, the vessel had already docked an hour earlier. In consonance with common
shipping procedure as to the minimum time of one (1) hour allowed for the passengers to disembark,
it may be presumed that the victim had just gotten off the vessel when he went to retrieve his baggage.
Yet, even if he had already disembarked an hour earlier, his presence in petitioner's premises was not
without cause. The victim had to claim his baggage which was possible only one (1) hour after the
vessel arrived since it was admittedly standard procedure in the case of petitioner's vessels that the
unloading operations shall start only after that time. Consequently, under the foregoing circumstances,
the victim Anacleto Viana is still deemed a passenger of said carrier at the time of his tragic death.
36*
Pestano vs. Sumayang

Facts
At around 2:00 o'clock on the afternoon, Ananias Sumayang was riding a motorcycle along the
national highway. Riding with him was his friend. As they came upon a junction where the highway
connected with the road leading to Tabagon, they were hit by a passenger bus driven by Petitioner
Gregorio Pestao and owned by Petitioner Metro Cebu Autobus Corporation, which had tried to
overtake them, sending the motorcycle and its passengers hurtling upon the pavement. Both Ananias
Sumayang and Manuel Romagos were rushed to the hospital in Sogod, where Sumayang was
pronounced dead on arrival. Romagos was transferred to the Cebu Doctors' Hospital, but he
succumbed to his injuries the day after.
Apart from the institution of criminal charges against Gregorio Pestao, Respondents Teotimo and
Paz Sumayang, as heirs of Ananias Sumayang, filed this civil action for damages against Gregorio
Pestao, as driver of the passenger bus that rammed the deceased's motorcycle, Metro Cebu, as owner
and operator of the said bus, and Perla Compania de Seguros, as insurer of Metro Cebu.
Respondents rely mainly on testimonies. One witness declared that he saw the incident while he was
sitting on a bench beside the highway; that both vehicles came from the North; that as the motorcycle
approached the junction to Tabagon, the driver Ananias Sumayang signalled with his left arm to
indicate that he was taking the Tabagon Road; that the motorcycle did turn left but as it did so, it was
bumped by an overspeeding bus; that the force of the impact threw Ananias Sumayang and his
companion Manuel Romagos about 14 meters away. The motorcycle, Neis continued, was badly
damaged as it was dragged by the bus.
The lower court found Petitioner Pestao to have been negligent in driving the passenger bus that hit
the deceased. It was shown that Pestao negligently attempted to overtake the motorcycle at a
dangerous speed as they were coming upon a junction in the road, and as the motorcycle was about to
turn left towards Tabagon.
Issue
Whether or not the bus company is liable.
Held
Liable.
Petitioners contend that Pestao was not under any obligation to slow down when he overtook the
motorcycle, because the deceased had given way to him upon hearing the bus horn. Seeing that the
left side of the road was clearly visible and free of oncoming traffic, Pestao accelerated his speed to
pass the motorcycle. Having given way to the bus, the motorcycle driver should have slowed down
until he had been overtaken.
They further contend that the motorcycle was not in the middle of the road nearest to the junction as
found by the trial and the appellate courts, but was on the inner lane. This explains why the damage
on the bus were all on the right side - the right end of the bumper and the right portion of the radiator
grill were bent and dented. Hence, they insist that it was the victim who was negligent.
We disagree.
The CA agreed with the trial court that the vehicular collision was caused by Pestao's negligence
when he attempted to overtake the motorcycle. As a professional driver operating a public transport
bus, he should have anticipated that overtaking at a junction was a perilous maneuver and should thus
have exercised extreme caution.
Petitioners aver that the CA was wrong in attributing the accident to a faulty speedometer and in
implying that the accident could have been avoided had this instrument been properly functioning.
37*
This contention has no factual basis. Under Articles 2180 and 2176 of the Civil Code, owners and
managers are responsible for damages caused by their employees. When an injury is caused by the
negligence of a servant or an employee, the master or employer is presumed to be negligent either in
the selection or in the supervision of that employee. This presumption may be overcome only by
satisfactorily showing that the employer exercised the care and the diligence of a good father of a
family in the selection and the supervision of its employee.
The CA said that allowing Pestao to ply his route with a defective speedometer showed laxity on the
part of Metro Cebu in the operation of its business and in the supervision of its employees. The
negligence alluded to here is in its supervision over its driver, not in that which directly caused the
accident. The fact that Pestao was able to use a bus with a faulty speedometer shows that Metro
Cebu was remiss in the supervision of its employees and in the proper care of its vehicles. It had thus
failed to conduct its business with the diligence required by law.
38*
Juntilla vs. Fontanar

Facts
Plaintiff was a passenger of the public utility jeepney on the course of the trip from Danao City to
Cebu City. The jeepney was driven by defendant Berfol Camoro. It was registered under the franchise
of defendant Clemente Fontanar but was actually owned by defendant Fernando Banzon.
When the jeepney reached Mandaue City, the right rear tire exploded causing the vehicle to turn turtle.
In the process, the plaintiff who was sitting at the front seat was thrown out of the vehicle. Upon
landing on the ground, the plaintiff momentarily lost consciousness. When he came to his senses, he
found that he had a lacerated wound on his right palm. Aside from this, he suffered injuries on his left
arm, right thigh and on his back.
Because of his shock and injuries, he went back to Danao City but on the way, he discovered that his
"Omega" wrist watch was lost. Upon his arrival in Danao City, he immediately entered the Danao
City Hospital to attend to his injuries, and also requested his father-in-law to proceed immediately to
the place of the accident and look for the watch. In spite of the efforts of his father-in-law, the wrist
watch could no longer be found.
Petitioner Roberto Juntilla filed Civil Case for breach of contract with damages. The respondents filed
their answer, alleging inter alia that the accident that caused losses to the petitioner was beyond the
control of the respondents taking into account that the tire that exploded was newly bought and was
only slightly used at the time it blew up.
Issue
Whether or not respondents are liable.
Held
Liable.
The right rear tire of the passenger jeepney in which the petitioner was riding blew up causing the
vehicle to fall on its side. The petitioner questions the conclusion of the respondent court drawn from
this finding of fact.
The Court of First Instance of Cebu erred when it absolved the carrier from any liability upon a
finding that the tire blow out is a fortuitous event.
In the case at bar, there are specific acts of negligence on the part of the respondents. The records
show that the passenger jeepney turned turtle and jumped into a ditch immediately after its right rear
tire exploded. The evidence shows that the passenger jeepney was running at a very fast speed before
the accident. We agree with the observation of the petitioner that a public utility jeep running at a
regular and safe speed will not jump into a ditch when its right rear tire blows up. There is also
evidence to show that the passenger jeepney was overloaded at the time of the accident. The petitioner
stated that there were three (3) passengers in the front seat and fourteen (14) passengers in the rear.
While it may be true that the tire that blew-up was still good because the grooves of the tire were still
visible, this fact alone does not make the explosion of the tire a fortuitous event. No evidence was
presented to show that the accident was due to adverse road conditions or that precautions were taken
by the jeepney driver to compensate for any conditions liable to cause accidents. The sudden blowingup, therefore, could have been caused by too much air pressure injected into the tire coupled by the
fact that the jeepney was overloaded and speeding at the time of the accident.
In the case at bar, the cause of the unforeseen and unexpected occurrence was not independent of the
human will. The accident was caused either through the negligence of the driver or because of
mechanical defects in the tire. Common carriers should teach their drivers not to overload their
39*
vehicles, not to exceed safe and legal speed limits, and to know the correct measures to take when a
tire blows up thus insuring the safety of passengers at all times.
It is sufficient to reiterate that the source of a common carrier's legal liability is the contract of
carriage, and by entering into the said contract, it binds itself to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of a very cautious person, with a
due regard for all the circumstances. The records show that this obligation was not met by the
respondents.
40*
Ong Yiu vs. CA

Facts
Petitioner was a fare paying passenger of respondent Philippine Air Lines, Inc. (PAL), on board Flight
from Mactan Cebu, bound for Butuan City. He was scheduled to attend the trial of a Civil Case there.
As a passenger, he checked in one piece of luggage, a blue "maleta." Upon arrival, petitioner claimed
his luggage but it could not be found. PAL Manila wired PAL Cebu advising that the luggage had
been over carried to Manila and that it would be forwarded to Cebu of the same day. Instructions were
also given that the luggage be immediately forwarded to Butuan City on the first available flight.
In the meantime, petitioner was worried about the missing luggage because it contained vital
documents needed for trial the next day. Petitioner wired PAL Cebu demanding the delivery of his
baggage before noon the next day, otherwise, he would hold PAL liable for damages, and stating that
PAL's gross negligence had caused him undue inconvenience, worry, anxiety and extreme
embarrassment. This telegram was received by the Cebu PAL supervisor but the latter felt no need to
wire petitioner that his luggage had already been forwarded on the assumption that by the time the
message reached Butuan City, the luggage would have arrived.
Early in the morning of the next day, petitioner went to the Bancasi Airport to inquire about his
luggage. He did not wait, however, for the morning flight which carried the missing luggage. The
porter clerk paged petitioner, but the latter had already left. A certain Emilio Dagorro a driver of a
"colorum" car, who also used to drive for petitioner, volunteered to take the luggage to petitioner. As
the porter clerk knew Dagorro to be the same driver used by petitioner whenever the latter was in
Butuan City, he took the luggage and placed it on the counter. Dagorro examined the lock, pressed it,
and it opened. Dagorro then delivered the "maleta" to petitioner, with the information that the lock
was open. Upon inspection, petitioner found that a folder containing certain exhibits, transcripts and
private documents in the Civil Case were missing, aside from two gift items for his parents-in-law.
Petitioner refused to accept the luggage. Dagorro returned it to the porter clerk, who sealed it and
forwarded the same to PAL Cebu.
Meanwhile, petitioner asked for postponement of the hearing of his Civil Case due to loss of his
documents. Petitioner returned to Cebu City and demanded from PAL that his luggage be produced
intact, and that he be compensated, otherwise, he would be left with no alternative but to file suit.
PAL went to petitioner's office to deliver the "maleta".
Petitioner filed a Complaint against PAL for damages for breach of contract of transportation.
Issue
Whether or not PALs liability can be limited only to P100.
Held
Can be limited.
There is no dispute that PAL incurred in delay in the delivery of petitioner's luggage. However, PAL
had not acted in bad faith. It was the duty of PAL to look for petitioner's luggage which had been
miscarried. PAL exerted due diligence in complying with such duty. Neither was the failure of PAL
Cebu to reply to petitioner's rush telegram indicative of bad faith. There was no bad faith in the
assumption made by said supervisor that the plane carrying the bag would arrive at Butuan earlier
than a reply telegram. Had petitioner waited or caused someone to wait at the Bancasi airport for the
arrival of the morning flight, he would have been able to retrieve his luggage sooner.
Petitioner further contends that respondent Court committed grave error when it limited PAL's
carriage liability to the amount of P100.00 as stipulated at the back of the ticket. The pertinent
Condition of Carriage printed at the back of the plane ticket reads:
41*
8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damaged baggage of the passenger is
LIMITED TO P100.00 for each ticket unless a passenger declares a higher valuation in excess of P100.00, but
not in excess, however, of a total valuation of P1,000.00 and additional charges are paid pursuant to Carrier's
tariffs.
There is no dispute that petitioner did not declare any higher value for his luggage, much less did he
pay any additional transportation charge. But petitioner argues that there is nothing in the evidence to
show that he had actually entered into a contract with PAL limiting the latter's liability for loss or
delay of the baggage of its passengers, and that Article 1750 of the Civil Code has not been complied
with.
While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the
provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid
and binding upon the passenger regardless of the latter's lack of knowledge or assent to the
regulation". A contract limiting liability upon an agreed valuation does not offend against the policy
of the law forbidding one from contracting against his own negligence.
Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot
be permitted a recovery in excess of P100.00. Besides, passengers are advised not to place valuable
items inside their baggage but "to avail of our V-cargo service ." It is likewise to be noted that there is
nothing in the evidence to show the actual value of the goods allegedly lost by petitioner.
42*
Savellano vs. Northeast

Facts
Petitioners departed from San Francisco, USA on board Northwest Airlines (NW) Flight bound for
Manila, Philippines using the NW round-trip tickets. However, NW Flights pilot made an emergency
landing in Seattle after announcing that a fire had started in one of the planes engines. Petitioners and
the other passengers proceeded to Gate 8 of the Seattle Airport where they were instructed to go home
to Manila the next day, using the same boarding passes with the same seating arrangements
Respondents shuttle bus thereafter brought all passengers to the Seattle Red Lion Hotel where they
were billeted by, and at the expense of respondent. The next day, when petitioners reached the Seattle
Airport, respondents ground stewardess belatedly advised them that instead of flying to Manila they
would have to board NW Flight 94, a DC-10 plane, bound for Los Angeles for a connecting flight to
Manila. When Petitioner Savellano insisted theirs was a direct flight to Manila, the female ground
stewardess just told them to hurry up as they were the last passengers to board.
In Los Angeles, petitioners and the other passengers became confused for while there was a sort of a
board which announced a Seoul-Bangkok flight, none was posted for a Manila flight. It was only
after they complained to the NW personnel that the latter finally changed the board to include Manila.
Before boarding NW Flight 23 for Manila via Seoul, petitioners encountered another problem. Their
three small handcarried items which were not padlocked as they were merely closed by zippers were
not allowed to be placed inside the passengers baggage compartments of the plane by an arrogant
NW ground stewardess. When petitioners claimed their luggage at the baggage carousel, they
discovered that the would-have-been handcarried items which were not allowed to be placed inside
the passengers baggage compartment had been ransacked and the contents thereof stolen.
Petitioners through counsel demanded from respondent the amount of P3,000,000.00 as damages for
what they claimed to be the humiliation and inconvenience they suffered in the hands of its personnel.
Respondent did not accede to the demand, however, impelling petitioners to file a case for damages.
Issue
Whether or not petitioners can claim damages for the lost items in their baggage.
Held
Cant claim.
The itinerary was not followed when the aircraft used for the first segment of the journey developed
engine trouble. Petitioners stress that they are questioning, not the cancellation of the original itinerary,
but its substitution, which they allegedly had not contracted for or agreed to.
Condition 9 in the agreement states that a
x x x [c]arrier may without notice substitute alternate carriers or aircraft, and may alter or omit stopping
places shown on the ticket in case of necessity. x x x.
The basis of the Complaint was the way respondent allegedly treated petitioners like puppets that
could be shuttled to Manila via Los Angeles and Seoul without their consent. Undeniably, it did not
take the time to explain how it would be meeting its contractual obligation to transport them to their
final destination. Its employees merely hustled the confused petitioners into boarding one plane after
another without giving the latter a choice from other courses of action that were available. It
unilaterally decided on the most expedient way for them to reach their final destination.
Passengers Consent
After an examination of the conditions printed on the airline ticket, we find nothing there authorizing
Northwest to decide unilaterally, after the distressed flight landed in Seattle, what other stopping
places petitioners should take and when they should fly. Nothing there permits shuttling passengers -without so much as a by your-leave -- to stopping places that they have not been previously notified
43*
of, much less agreed to or been prepared for. Substituting aircrafts or carriers without notice is
entirely different from changing stopping places or connecting cities without notice.
Proof of Necessity of Alteration
Furthermore, the change in petitioners flight itinerary does not fall under the situation covered by the
phrase may alter or omit stopping places shown on the ticket in case of necessity. The airplane
engine trouble that developed during the flight bound for Tokyo from San Francisco definitely
merited the necessity of landing the plane at some place for repair -- in this case, Seattle -- but not
that of shuttling petitioners to other connecting points thereafter without their consent.
Northwest failed to show a case of necessity for changing the stopping place from Tokyo to Los
Angeles and Seoul. It is a fact that some of the passengers on the distressed flight continued on to the
Tokyo (Narita) connecting place. No explanation whatsoever was given to petitioners as to why they
were not similarly allowed to do so. In the absence of evidence as to the actual situation, the Court is
hard pressed to determine if there was a case of necessity sanctioning the alteration of the Tokyo
stopping place in the case of petitioners. Thus, we hold that in the absence of a demonstrated
necessity thereof and their rerouting to Los Angeles and Seoul as stopping places without their
consent, respondent committed a breach of the contract of carriage.
A claim for the alleged lost items from the baggage of petitioners cannot prosper, because they failed
to give timely notice of the loss to respondent. The Conditions printed on the airline ticket plainly
read:
2.
Carriage hereunder is subject to the rules and limitations relating to liability established by the
Warsaw Convention unless such carriage is not International carriage as defined by that Convention.
xxx
xxx
xxx
7.
Checked baggage will be delivered to bearer of the baggage check. In case of damage to baggage
moving in international transportation complaint must be made in writing to carrier forthwith after discovery of
damage, and at the latest, within 7 days from receipt; in case of delay, complaint must be made within 21 days
from date the baggage was delivered. x x x.
The pertinent provisions of the Rules Relating to International Carriage by Air (Warsaw Convention)
state:
Article 26
1. Receipt by the person entitled to delivery of luggage or goods without complaint is prima facie evidence that
the same have been delivered in good condition and in accordance with the document of carriage.
2. In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of
the damage, and, at the latest, within three days from the date of receipt in the case of luggage and seven days
from date of receipt in the case of goods. In the case of delay the complaint must be made at the latest within
fourteen days from the date on which the luggage or goods have been placed at his disposal.
3. Every complaint must be made in writing upon the document of carriage or by separate notice in writing
dispatched within the times aforesaid.
4. Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud
on his part.
After allegedly finding that their luggage had been ransacked, petitioners never lodged a complaint
with any Northwest airport personnel. Neither did they mention the alleged loss of their valuables in
their demand letter. Hence, in accordance with the parties contract of carriage, no claim can be heard
or admitted against respondent with respect to alleged damage to or loss of petitioners baggage.
44*
Yobido vs. CA
Facts
Sps. Tito and Leny Tumboy and their minor children boarded at Mangagoy, Surigao del Sur, a
Yobido Liner bus bound for Davao City. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur,
the left front tire of the bus exploded. The bus fell into a ravine around three (3) feet from the road
and struck a tree. The incident resulted in the death of 28-year-old Tito Tumboy and physical injuries
to other passengers.
A complaint for breach of contract of carriage, damages and attorneys fees was filed by Leny and her
children against Alberta Yobido, the owner of the bus, and Cresencio Yobido, its driver, before the
Regional Trial Court of Davao City. When the defendants therein filed their answer to the complaint,
they raised the affirmative defense of caso fortuito.
According to Leny Tumboy, the winding road the bus traversed was not cemented and was wet due to
the rain; it was rough with crushed rocks. The bus which was full of passengers had cargoes on top.
Since it was running fast, she cautioned the driver to slow down but he merely stared at her through
the mirror.
For their part, the defendants tried to establish that the accident was due to a fortuitous event.
Abundio Salce, who was the bus conductor when the incident happened, testified that the 42-seater
bus was not full as there were only 32 passengers, such that he himself managed to get a seat. He
added that the bus was running at a speed of 60 to 50 and that it was going slow because of the
zigzag road. He affirmed that the left front tire that exploded was a brand new tire that he mounted
on the bus only five (5) days before the incident. The tire was branded Goodyear.
Issue
Whether or not the explosion of a newly installed tire of a passenger vehicle is a fortuitous event that
exempts the carrier from liability for the death of a passenger.
Held
Doesnt exempt.
When a passenger is injured or dies while travelling, the law presumes that the common carrier is
negligent. In culpa contractual, once a passenger dies or is injured, the carrier is presumed to have
been at fault or to have acted negligently. This disputable presumption may only be overcome by
evidence that the carrier had observed extraordinary diligence or that the death or injury of the
passenger was due to a fortuitous event. Consequently, the court need not make an express finding of
fault or negligence on the part of the carrier to hold it responsible for damages sought by the
passenger.
Petitioners contention that they should be exempt from liability because the tire blowout was no
more than a fortuitous event that could not have been foreseen, must fail. Under the circumstances of
this case, the explosion of the new tire may not be considered a fortuitous event. There are human
factors involved in the situation. The fact that the tire was new did not imply that it was entirely free
from manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact that
the tire bought and used in the vehicle is of a brand name noted for quality, resulting in the conclusion
that it could not explode within five days use. Be that as it may, it is settled that an accident caused
either by defects in the automobile or through the negligence of its driver is not a caso fortuito that
would exempt the carrier from liability for damages.
Moreover, a common carrier may not be absolved from liability in case of force majeure or fortuitous
event alone. The common carrier must still prove that it was not negligent in causing the death or
injury resulting from an accident.
45*
It is interesting to note that petitioners proved through the bus conductor, Salce, that the bus was
running at 60-50 kilometers per hour only or within the prescribed lawful speed limit. However,
they failed to rebut the testimony of Leny Tumboy that the bus was running so fast that she cautioned
the driver to slow down. These contradictory facts must, therefore, be resolved in favor of liability in
view of the presumption of negligence of the carrier in the law. Coupled with this is the established
condition of the road rough, winding and wet due to the rain. It was incumbent upon the defense to
establish that it took precautionary measures considering partially dangerous condition of the road.
As stated above, proof that the tire was new and of good quality is not sufficient proof that it was not
negligent. Petitioners should have shown that it undertook extraordinary diligence in the care of its
carrier, such as conducting daily routinary check-ups of the vehicles parts.
Having failed to discharge its duty to overthrow the presumption of negligence with clear and
convincing evidence, petitioners are hereby held liable for damages.
46*
Bayasen vs. CA
Facts
On the morning of August 15, 1963, Saturnino Bayasen, the Rural Health Physician in Sagada,
Mountain Province, went to barrio Ambasing to visit a patient. Two nurses from the Saint Theodore's
Hospital in Sagada, viz., Elena Awichen and Dolores Balcita, rode with him in the jeep assigned for
the use of the Rural Health Unit as they had requested for a ride to Ambasing. Later, at Ambasing, the
girls, who wanted to gather flowers, again asked if they could ride with him up to a certain place on
the way to barrio Suyo which he intended to visit anyway. Dr. Bayasen again allowed them to ride,
Elena sitting herself between him and Dolores. On the way, at barrio Langtiw, the jeep went over a
precipice About 8 feet below the road, it was blocked by a pine tree. The three were thrown out of the
jeep. Elena was found lying in a creek further below. Among other injuries, she suffered a skull
fracture which caused her death.
Issue
Whether or not petitioner was negligent.
Held
Not negligent.
A careful examination of 'the evidence introduced by the prosecution shows no "legally sufficient"
proof that the accused was negligent in driving his jeep. The star witness of the prosecution, Dolores
Balcita who was one of the passengers in the jeep, testified that the accused-petitioner, Saturnino
Bayasen was driving his jeep moderately just before the accident and categorically stated that she did
not know what caused the jeep to fall into the precipice.
It is clear from the last part of the Testimony of the witness, Dolores Balcita, that there was no
conversation between the passengers in the jeep that could have distracted the attention of the accused
while driving the jeep. As to the condition of the jeep itself, the same witness testified that she "did
not notice anything wrong" with it from the time they drove. Regarding the road, she said that it was
fair enough to drive on, but that it was moist or wet, and the weather was fair, too. As to whether the
accused-petitioner was under the influence of liquor at the time of the accident, she testified that he
was not.
The petitioner testified that before reaching the portion of the road where the jeep fell he noticed that
the rear wheel skidded, while driving from 8 to 10 kilometers per hour; that as a precautionary
measure, he directed the jeep towards the side of the mountain, along the side of the mountain, but not
touching the mountain; that while doing so, the late Elena Awichen suddenly held the steering wheel
and he felt that her foot stepped on his right foot which was pressed then on the accelerator; and that
immediately after, the jeep suddenly swerved to the right and went off.
From the foregoing testimony of Dolores Balcita, it is apparent that she "did not see" what Elena
Awichen suddenly did, and she "did not feel any movement from (her) side". Furthermore , the
statement of Dolores Balcita that the accused was driving at moderate speed and not "an unreasonable
speed' is bolstered by the testimony of Pablo Lizardo who found the jeep at second gear when he
examined it not long after the incident. Such fact shows that the accused-petitioner could not have
been driving the jeep at a fast rate of speed. It is obvious that the proximate cause of the tragedy was
the skidding of the rear wheels of the jeep and not the "unreasonable speed" of the petitioner because
there is no evidence on record to prove or support the finding that the petitioner was driving a at "an
unreasonable speed.
It is a well known physical fact that cars may skid on greasy or slippery roads, as in the instant case,
without fault on account of the manner of handling the car. Skidding means partial or complete loss of
control of the car under circumstances not necessarily implying negligence. It may occur without fault.
No negligence as a matter of law can, therefore, be charged to the petitioner. In fact, the moment he
felt that the rear wheels of the jeep skidded, he promptly drove it to the left hand side of the road,
47*
parallel to the slope of the mountain, because as he said, he wanted to play safe and avoid the
embankment.
Under the particular circumstances of the instant case, the petitioner- driver who skidded could not be
regarded as negligent, the skidding being an unforeseen event, so that the petitioner had a valid excuse
for his departure from his regular course. The negligence of the petitioner not having been sufficiently
established, his guilt of the crime charged has not been proven beyond reasonable doubt. He is,
therefore, entitled to acquittal.
48*
Fortune Express vs. CA

Facts
Petitioner is a bus company in northern Mindanao. Private respondent Paulie Caorong is the widow of
Atty. Caorong, while private respondents Yasser King, Rose Heinni, and Prince Alexander are their
minor children.
A bus of petitioner figured in an accident with a jeepney resulting in the death of several passengers
of the jeepney. The investigation found that the owner of the jeepney was a Maranao and that certain
Maranaos were planning to take revenge on the petitioner by burning some of its buses. The police
informed the operations manager of petitioner, its main office in Cagayan de Oro City. Bravo assured
him that the necessary precautions to insure the safety of lives and property would be taken.
Later, three armed Maranaos who pretended to be passengers, seized a bus of petitioner. Among the
passengers of the bus was Atty. Caorong. The leader of the Maranaos ordered the driver to stop the
bus on the side of the highway. Mananggolo then shot the driver on the arm, which caused him to
slump on the steering wheel. The one of the companions of Mananggolo started pouring gasoline
inside the bus, as the other held the passenger at bay with a handgun. Mananggolo then ordered the
passenger to get off the bus. The passengers, including Atty. Caorong, stepped out of the bus and
went behind the bushes in a field some distance from the highway.
However, Atty. Caorong returned to the bus to retrieve something from the overhead rack. at that time,
one of the armed men was pouring gasoline on the head of the driver. Cabatuan, who had meantime
regained consciousness, heard Atty. Caorong pleading with the armed men to spare the driver as he
was innocent of any wrong doing and was only trying to make a living. The armed men were,
however, adamant as they repeated the warning that they were going to burn the bus along with its
driver. During this exchange between Atty. Caorong and the assailants, Cabatuan climbed out of the
left window of the bus and crawled to the canal on the opposite side of the highway. He heard shots
from inside the bus. Larry de la Cruz, one of the passengers, saw that Atty. Caorong was hit. Then the
bus was set on fire. Some of the passengers were able to pull Atty. Caorong out of the burning bus
and rush him to the Mercy Community Hospital in Iligan City, but he died while undergoing
operation.
The private respondents brought this suit for breach of contract of carriage.
Issue
Held
Negligent.
First. Petitioner's Breach of the Contract of Carriage.
Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning
to take revenge on the petitioner by burning some of its buses and the assurance of petitioner's
operation manager, Diosdado Bravo, that the necessary precautions would be taken, petitioner did
nothing to protect the safety of its passengers.
Had petitioner and its employees been vigilant they would not have failed to see that the malefactors
had a large quantity of gasoline with them. Under the circumstances, simple precautionary measures
to protect the safety of passengers, such as frisking passengers and inspecting their baggages,
preferably with non-intrusive gadgets such as metal detectors, before allowing them on board could
have been employed without violating the passenger's constitutional rights.
49*
From the foregoing, it is evident that petitioner's employees failed to prevent the attack on one of
petitioner's buses because they did not exercise the diligence of a good father of a family. Hence,
petitioner should be held liable for the death of Atty. Caorong.
Second. Seizure of Petitioner's Bus not a Case of Force Majeure
The petitioner contends that the seizure of its bus by the armed assailants was a fortuitous event for
which it could not be held liable.
Despite the report of PC agent Generalao that the Maranaos were going to attack its buses, petitioner
took no steps to safeguard the lives and properties of its passengers. The seizure of the bus of the
petitioner was foreseeable and, therefore, was not a fortuitous event which would exempt petitioner
from liabilty.
In the present case, this factor of unforeseeability (the second requisite for an event to be considered
force majeure) is lacking. As already stated, despite the report of PC agent Generalao that the
Maranaos were planning to burn some of petitioner's buses and the assurance of petitioner's operation
manager (Diosdado Bravo) that the necessary precautions would be taken, nothing was really done by
petitioner to protect the safety of passengers.
Third. Deceased not Guilty of Contributory Negligence
The petitioner contends that Atty. Caorong was guilty of contributory negligence in returning to the
bus to retrieve something. But Atty. Caorong did not act recklessly. It should be pointed out that the
intended targets of the violence were petitioners and its employees, not its passengers. The assailant's
motive was to retaliate for the loss of life of two Maranaos as a result of the collision between
petitioner's bus and the jeepney in which the two Maranaos were riding. Mananggolo, the leader of
the group which had hijacked the bus, ordered the passengers to get off the bus as they intended to
burn it and its driver. The armed men actually allowed Atty. Caorong to retrieve something from the
bus. What apparently angered them was his attempt to help the driver of the bus by pleading for his
life. He was playing the role of the good Samaritan. Certainly, this act cannot considered an act of
negligence, let alone recklessness.
50*
Singson vs. CA
Facts
CARLOS SINGSON and his cousin bought from Cathay Pacific Airways, Ltd. (CATHAY), two (2)
open-dated, identically routed, round trip plane tickets for the purpose of spending their vacation in
the United States. Each ticket consisted of six (6) flight coupons corresponding to this itinerary. The
procedure was that at the start of each leg of the trip a flight coupon corresponding to the particular
sector of the travel would be removed from the ticket booklet so that at the end of the trip no more
coupon would be left in the ticket booklet.
CARLOS SINGSON and his cousin left Manila on board CATHAY's Flight. They arrived safely in
Los Angeles and after staying there for about three (3) weeks they decided to return to the Philippines.
On 30 June 1988 they arranged for their return flight at CATHAY's Los Angeles Office and chose a
Friday, for their departure. While Tiongson easily got a booking for the flight, SINGSON was not as
lucky. It was discovered that his ticket booklet did not have flight coupon no. 5 corresponding to the
San Francisco-Hongkong leg of the trip. Instead, what was in his ticket was flight coupon no. 3
San Francisco to Los Angeles which was supposed to have been used and removed from the ticket
booklet.
SINGSON commenced an action for damages against CATHAY. He claimed that he insisted on
CATHAY's confirmation of his return flight reservation because of very important and urgent
business engagements in the Philippines. But CATHAY allegedly shrugged off his protestations and
arrogantly directed him to go to San Francisco himself and do some investigations on the matter or
purchase a new ticket subject to refund if it turned out that the missing coupon was still unused or
subsisting. He remonstrated that it was the airline's agent/representative who must have committed the
mistake of tearing off the wrong flight coupon; that he did not have enough money to buy new tickets;
and, CATHAY could conclude the investigation in a matter of minutes because of its facilities.
CATHAY, allegedly in scornful insolence, simply dismissed him like an impertinent "brown pest."
Thus he and his cousin, who deferred his own flight to accompany him, were forced to leave for San
Francisco on the night of 1 July 1988 to verify the missing ticket.
CATHAY denied these allegations and averred that since petitioner was holding an "open-dated"
ticket, which meant that he was not booked on a specific flight on a particular date, there was no
contract of carriage yet existing such that CATHAY's refusal to immediately book him could not be
construed as breach of contract of carriage. Moreover, the coupon had been missing for almost a
month hence CATHAY must first verify its status, i.e., whether the ticket was still valid and
outstanding, before it could issue a replacement ticket to petitioner. CATHAY denied having required
SINGSON to make a trip back to San Francisco; on the other hand, it was the latter who informed
CATHAY that he was making a side trip to San Francisco. Hence, CATHAY advised him that the
response of Hongkong would be copied in San Francisco so that he could conveniently verify thereat
should he wish to.
Issue
Whether or not Cathay was negligent.
Held
Negligent.
CATHAY undoubtedly committed a breach of contract when it refused to confirm petitioner's flight
reservation back to the Philippines on account of his missing flight coupon. The round trip ticket
issued by the carrier to the passenger was in itself a complete written contract by and between the
carrier and the passenger.
Interestingly, it appears that CATHAY was responsible for the loss of the ticket. One of two (2)
things may be surmised from the circumstances of this case: first, US Air (CATHAY's agent) had
mistakenly detached the San Francisco-Hongkong flight coupon thinking that it was the San
51*
Francisco-Los Angeles portion; or, second, petitioner's booklet of tickets did not from issuance
include a San Francisco-Hongkong flight coupon. In either case, the loss of the coupon was attributed
to the negligence of CATHAY's agents and was the proximate cause of the non-confirmation of
petitioner's return flight.
In the instant case, the following circumstances attended the breach of contract by CATHAY, to wit:
First, the ticket coupon corresponding to the San Francisco-Hongkong flight was missing either due
to the negligence of CATHAY's agents; second, petitioner and his cousin presented their respective
ticket booklets bearing identical itineraries to prove that there had been a mistake in removing the
coupons of petitioner. third, petitioner was directed by CATHAY to go to its San Francisco office and
make the necessary verification concerning the lost coupon himself. This, notwithstanding the fact
that CATHAY was responsible for the loss of the ticket and had all the necessary equipment, e.g.,
computers, fax and telex machines and telephones which could facilitate the verification right there at
its Los Angeles Office.
CATHAY's allegation that it never required petitioner to go to San Francisco is unpersuasive.
Petitioner categorically testified that a lady employee of CATHAY in Los Angeles "insisted that we
take the matter (up) with their office in San Francisco." fourth, private respondent endeavored to show
that it undertook the verification of the lost coupon by sending a telex to its Hongkong Office. It
likewise tried to justify the five (5) days delay in completing the verification process, claiming that it
was due to the time difference between Hongkong and Los Angeles and the coinciding non-working
days in the United States.
But far from helping private respondent's cause, the foregoing testimony only betrayed another act of
negligence committed by its employees in Hongkong. In spite of the fact that they had access to all
records and facilities that would enable them to verify in a matter of minutes, it strangely took them
more than twenty-four (24) hours to complete the verification process and to send their reply to Los
Angeles. The inevitable conclusion is that CATHAY's Hongkong personnel never acted promptly and
timely on the request for verification.
Anent the accusation that private respondent's personnel were rude and arrogant, petitioner failed to
adduce sufficient evidence to substantiate his claim. Nonetheless, such fact will not in any manner
affect the disposition of this case. Private respondent's mistake in removing the wrong coupon was
compounded by several other independent acts of negligence above-enumerated. Taken together, they
indubitably signify more than ordinary inadvertence or inattention and thus constitute a radical
departure from the extraordinary standard of care required of common carriers. Put differently, these
circumstances reflect the carrier's utter lack of care and sensitivity to the needs of its passengers,
clearly constitutive of gross negligence, recklessness and wanton disregard of the rights of the latter,
acts evidently indistinguishable or no different from fraud, malice and bad faith. As the rule now
stands, where in breaching the contract of carriage the defendant airline is shown to have acted
fraudulently, with malice or in bad faith, the award of moral and exemplary damages, in addition to
actual damages, is proper.
52*
Smith Bell vs. Borja

Facts
Smith Bell, herein petitioner, filed a written request with the Bureau of Customs for the attendance of
the latters inspection team on vessel M/T King Family which was due to arrive at the port of Manila.
Said vessel contained 750 metric tons of alkyl benzene and methyl methacrylate monomer. On the
same day, Supervising Customs Inspector Manuel Ma. D. Nalgan instructed Respondent Catalino
Borja to board said vessel and perform his duties as inspector upon the vessels arrival until its
departure.
While M/T King Family was unloading chemicals unto two (2) barges ITTC 101 and CLC-1002
owned by Respondent ITTC, a sudden explosion occurred setting the vessels afire. Upon hearing the
explosion, Borja, who was at that time inside the cabin preparing reports, ran outside to check what
happened. Again, another explosion was heard.
Seeing the fire and fearing for his life, Borja hurriedly jumped over board to save himself. However,
the water was likewise on fire due mainly to the spilled chemicals. Despite the tremendous heat, Borja
swam his way for one (1) hour until he was rescued by the people living in the squatters area and sent
to San Juan De Dios Hospital.
After weeks of intensive care at the hospital, his attending physician diagnosed Borja to be
permanently disabled due to the incident. Borja made demands against Smith Bell and ITTC for the
damages caused by the explosion. However, both denied liabilities and attributed to each other
negligence.
Issue
Held
Negligent.
Petitioner avers that both lower courts labored under a misapprehension of the facts. It claims that the
documents adduced in the RTC conclusively revealed that the explosion that caused the fire on M/T
King Family had originated from the barge ITTC-101, a conclusion based on three grounds.
First, the Survey Report showed that no part of M/T King Family sustained any sharp or violent
damage that would otherwise be observed if indeed an explosion had occurred on it. On the other
hand, the fact that the vessel sustained cracks on its shell plating was noted in two Survey Reports and
during the underwater inspection on the sunken barge ITTC-101.
Second, external fire damage on the hull of M/T King Family indicated that the fire had started from
outside the vessel and from ITTC-101. The port side of the vessel to which the ITTC barge was tied
was completely gutted by fire, while the starboard side to which the barge CLC-1002 was tied
sustained only slight fire damage.
Third, testimonial evidence proved that the explosion came from the barge of the ITTC and not from
its vessel.
We are not persuaded. Both the RTC and the CA ruled that the fire and the explosion had originated
from petitioners vessel. Said the trial court:
The attempts of Petitioner Smith Bell to shift the blame on x x x ITTC were all for naught. First, the testimony
of its alleged eyewitness was stricken off the record for his failure to appear for cross-examination. Second, the
documents offered to prove that the fire originated from barge ITTC-101 were all denied admission by the court
53*
for being, in effect, hearsay. x x x Thus, there is nothing in the record to support petitioners contention that the
fire and explosion originated from barge ITTC-101.
Petitioners vessel was carrying chemical cargo. While knowing that their vessel was carrying
dangerous inflammable chemicals, its officers and crew failed to take all the necessary precautions to
prevent an accident. Petitioner was, therefore, negligent. Knowing fully well that it was carrying
dangerous chemicals, petitioner was negligent in not taking all the necessary precautions in
transporting the cargo.
As a result of the fire and the explosion during the unloading of the chemicals from petitioners vessel,
Respondent Borja suffered damage: and injuries. Hence, the owner or the person in possession and
control of a vessel and the vessel are liable for all natural and proximate damage caused to persons
and property by reason of negligent management or navigation.
54*
Air France vs. Gillego

Facts
Respondent Bonifacio H. Gillego was invited to participate as one of the keynote speakers at the 89th
Inter-Parliamentary Conference Symposium on Parliament Guardian of Human Rights to be held in
Budapest, Hungary and Tokyo, Japan.
Respondent left Manila on board petitioner Air Frances aircraft bound for Paris, France. While
waiting at the De Gaulle International Airport for his connecting flight to Budapest, respondent
learned that petitioner had another aircraft bound for Budapest with an earlier departure time than his
scheduled flight. He then went to petitioners counter at the airport and made arrangements for the
change in his booking. He was given a corresponding ticket and boarding and also a new baggage
claim stub for his checked-in luggage.
However, upon arriving in Budapest, respondent was unable to locate his luggage at the claiming
section. He sought assistance from petitioners counter at the airport where petitioners representative
verified from their computer that he had indeed a checked-in luggage. He was advised to just wait for
his luggage at his hotel and that petitioners representatives would take charge of delivering the same
to him that same day. But said luggage was never delivered by petitioners representatives despite
follow-up inquiries by respondent.
Upon his return to the Philippines, respondents lawyer immediately wrote petitioners Station
Manager complaining about the lost luggage and the resulting damages he suffered while in Budapest.
Respondent claimed that his single luggage contained his personal effects such as clothes, toiletries,
medicines for his hypertension, and the speeches he had prepared, including the notes and reference
materials he needed for the conference. He was thus left with only his travel documents, pocket
money and the clothes he was wearing. Because petitioners representatives in Budapest failed to
deliver his luggage despite their assurances and his repeated follow-ups, respondent was forced to
shop for personal items including new clothes and his medicines. Aside from these unnecessary
expenditures of about $1,000, respondent had to prepare another speech, in which he had difficulty
due to lack of data and information. Petitioner, however, continued to ignore respondents repeated
follow-ups regarding his lost luggage.
Respondent filed a complaint for damages against the petitioner alleging that by reason of its
negligence and breach of obligation to transport and deliver his luggage, respondent suffered
inconvenience, serious anxiety, physical suffering and sleepless nights. It was further alleged that due
to the physical, mental and emotional strain resulting from the loss of his luggage, aggravated by the
fact that he failed to take his regular medication, respondent had to be taken to a medical clinic in
Tokyo, Japan for emergency treatment.
Issue
Held
Liable.
In awarding moral damages for breach of contract of carriage, the breach must be wanton and
deliberately injurious or the one responsible acted fraudulently or with malice or bad faith. Where in
breaching the contract of carriage the airline is not shown to have acted fraudulently or in bad faith,
liability for damages is limited to the natural and probable consequences of the breach of the
obligation which the parties had foreseen or could have reasonably foreseen. In such a case the
liability does not include moral and exemplary damages.
After a careful review, we find that petitioner is liable for moral damages.
55*
We hold that the trial and appellate courts did not err in finding that petitioner acted in bad faith in
repeatedly ignoring respondents follow-up calls. The alleged entries in the PIR (Property Irregularity
Report) deserve scant consideration, as these have not been properly identified or authenticated by the
airline station representative in Budapest who initiated and inputed the said entries. Furthermore, this
Court cannot accept the convenient excuse given by petitioner that respondent should be faulted in
allegedly not giving his hotel address and telephone number. It is difficult to believe that respondent,
who had just lost his single luggage containing all his necessities for his stay in a foreign land and his
reference materials for a speaking engagement, would not give an information so vital such as his
hotel address and contact number to the airline counter where he had promptly and frantically filed his
complaint. And even assuming arguendo that his Philippine address and contact number were the
only details respondent had provided for the PIR, still there was no explanation as to why petitioner
never communicated with respondents concerning his lost baggage long after respondent had already
returned to the Philippines. While the missing luggage was eventually recovered, it was returned to
respondent only after the trial of this case.
Furthermore, the alleged copy of the PIR confirmed that the only action taken by the petitioner to
locate respondents luggage were telex searches. There was not even any attempt to explain the reason
for the loss of respondents luggage. Clearly, petitioner did not give the attention and care due to its
passenger whose baggage was not transported and delivered to him at his travel destination and
scheduled time. Inattention to and lack of care for the interest of its passengers who are entitled to its
utmost consideration, particularly as to their convenience, amount to bad faith which entitles the
passenger to an award of moral damages.
While respondent failed to cite any act of discourtesy, discrimination or rudeness by petitioners
employees, this did not make his loss and moral suffering insignificant and less deserving of
compensation. In repeatedly ignoring respondents inquiries, petitioners employees exhibited an
indifferent attitude without due regard for the inconvenience and anxiety he experienced after
realizing that his luggage was missing. Petitioner was thus guilty of bad faith in breaching its contract
of carriage with the respondent, which entitles the latter to the award of moral damages.
However, we agree with petitioner that the sum of P1,000,000.00 awarded by the trial court is
excessive and not proportionate to the loss or suffering inflicted on the passenger under the
circumstances.
Where as in this case the air carrier failed to act timely on the passengers predicament caused by its
employees mistake and more than ordinary inadvertence or inattention, and the passenger failed to
show any act of arrogance, discourtesy or rudeness committed by the air carriers employees, the
amounts of P200,000.00, P50,000.00 and P30,000.00 as moral damages, exemplary damages and
attorneys fees would be sufficient and justified.
56*
Transasia Shipping vs. CA

Facts
Respondent, a public attorney, bought a ticket from petitioner for the voyage of M/V Asia Thailand
vessel to Cagayan de Oro City from Cebu City on November 12, 1991.
Plaintiff boarded the M/V Asia Thailand vessel. At that instance, plaintiff noticed that some repair
works [sic] were being undertaken on the engine of the vessel. The vessel departed with only one (1)
engine running.
After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its anchor thereat.
After half an hour of stillness, some passengers demanded that they should be allowed to return to
Cebu City for they were no longer willing to continue their voyage to, Cagayan de Oro City. The
captain acceeded [sic] to their request and thus the vessel headed back to Cebu City.
At Cebu City, plaintiff together with the other passengers who requested to be brought back to Cebu
City, were allowed to disembark. Thereafter, the vessel proceeded to Cagayan de Oro City. Plaintiff,
the next day, boarded the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of
defendant.
On account of this failure of defendant to transport him to the place of destination on November 12,
1991, plaintiff filed before the trial court a complaint for damages against defendant.
Issue
Whether or not a common carrier is liable for damages to a passenger who disembarked from the
vessel upon its return to the port of origin, after it suffered engine trouble and had to stop at sea,
having commenced the contracted voyage on one engine.
Held
Not liable.
Before commencing the contracted voyage, the petitioner undertook some repairs on the cylinder head
of one of the vessel's engines. But even before it could finish these repairs, it allowed the vessel to
leave the port of origin on only one functioning engine, instead of two. Moreover, even the lone
functioning engine was not in perfect condition as sometime after it had run its course, it conked out.
This caused the vessel to stop and remain a drift at sea, thus in order to prevent the ship from
capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even before the voyage began.
The Court of Appeals did not grant the private respondent actual or compensatory damages, reasoning
that no delay was incurred since there was no demand, as required by Article 1169 of the Civil Code.
This article, however, finds no application in this case because, as found by the respondent Court,
there was in fact no delay in the commencement of the contracted voyage. If any delay was incurred,
it was after the commencement of such voyage, more specifically, when the voyage was subsequently
interrupted when the vessel had to stop near Kawit Island after the only functioning engine conked out.
As to the rights and duties of the parties strictly arising out of such delay, the Civil Code is silent.
However, as correctly pointed out by the petitioner, Article 698 of the Code of Commerce specifically
provides for such a situation. It reads:
In case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare
in proportion to the distance covered, without right to recover for losses and damages if the
interruption is due to fortuitous event or force majeure, but with a right to indemnity if the
interruption should have been caused by the captain exclusively. If the interruption should be caused
by the disability of the vessel and a passenger should agree to await the repairs, he may not be
required to pay any increased price of passage, but his living expenses during the stay shall be for his
own account.
57*
This article applies suppletorily pursuant to Article 1766 of the Civil Code.
Of course, this does not suffice for a resolution of the case at bench for, as earlier stated, the cause of
the delay or interruption was the petitioner's failure to observe extraordinary diligence. Article 698
must then be read together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the
Civil Code.
So read, it means that the petitioner is liable for any pecuniary loss or loss of profits which the private
respondent may have suffered by reason thereof. For the private respondent, such would be the loss of
income if unable to report to his office on the day he was supposed to arrive were it not for the delay.
This, however, assumes that he stayed on the vessel and was with it when it thereafter resumed its
voyage; but he did not. As he and some passengers resolved not to complete the voyage, the vessel
had to return to its port of origin and allow them to disembark. The private respondent then took the
petitioner's other vessel the following day, using the ticket he had purchased for the previous day's
voyage.
Any further delay then in the private respondent's arrival at the port of destination was caused by his
decision to disembark. Had he remained on the first vessel, he would have reached his destination at
noon of 13 November 1991, thus been able to report to his office in the afternoon. He, therefore,
would have lost only the salary for half of a day. But actual or compensatory damages must be proved,
which the private respondent failed to do. There is no convincing evidence that he did not receive his
salary for 13 November 1991 nor that his absence was not excused.
58*
Campagnie vs. Hamburg-Amerika
59*
PhilCharter vs. Chemoli

Facts
Samkyung Chemical Company, Ltd., shipped liquid chemical DIOCTYL PHTHALATE (DOP) on
board MT TACHIBANA to the Philippines. The consignee was Plastic Group Phils., Inc. (PGP) in
Manila. PGP insured the cargo with herein petitioner Philippine Charter Insurance Corporation
against all risks.
The ocean tanker MT TACHIBANA unloaded the cargo to Tanker Barge LB-1011 of respondent
Chemoil Lighterage Corporation, which shall transport the same to Del Pan Bridge in Pasig
River. Tanker Barge LB-1011 would unload the cargo to tanker trucks, also owned by the respondent,
and haul it by land to PGPs storage tanks in Calamba, Laguna.
Upon inspection by PGP, the samples taken from the shipment showed discoloration from yellowish
to amber, demonstrating that it was damaged, as DOP is colorless and water clear. PGP then sent a
letter to the petitioner where it formally made an insurance claim for the loss it sustained due to the
contamination.
The petitioner requested an independent insurance adjuster, the GIT Insurance Adjusters, Inc. (GIT),
to conduct a Quantity and Condition Survey of the shipment. GIT issued a Report, part of which
states:
As unloading progressed, it was observed on February 14, 1991 that DOP samples taken were discolored from
yellowish to amber. Inspection of cargo tanks showed manhole covers of ballast tanks ceilings loosely secured.
Furthermore, it was noted that the rubber gaskets of the manhole covers of the ballast tanks re-acted to the
chemical causing shrinkage thus, loosening the covers and cargo ingress to the rusty ballast tanks
Petitioner paid PG. An action for damages was instituted by the petitioner-insurer against respondentcarrier. Respondent admitted it undertook to transport the consignees shipment from MT
TACHIBANA to the Del Pan Bridge, Pasig River, where it was transferred to its tanker trucks for
hauling to PGPs storage tanks in Calamba, Laguna. The respondent alleged that before the DOP was
loaded into its barge (LB-1011), the surveyor/representative of PGP, Adjustment Standard
Corporation, inspected it and found the same clean, dry, and fit for loading. The entire loading and
unloading of the shipment were also done under the control and supervision of PGPs
surveyor/representative. It was also mentioned by the respondent that the contract between it and PGP
expressly stipulated that it shall be free from any and all claims arising from contamination, loss of
cargo or part thereof; that the consignee accepted the cargo without any protest or notice; and that the
cargo shall be insured by its owner sans recourse against all risks. As subrogee, the petitioner was
bound by this stipulation. As carrier, no fault and negligence can be attributed against respondent as
it exercised extraordinary diligence in handling the cargo.
Issue
Whether or not notice of claim was filed within the required period.
Held
Filed out of time.
Article 366 of the Code of Commerce has profound application in the case at bar. This provision of
law imparts:
Art. 366. Within twenty-four hours following the receipt of the merchandise a claim may be made against the
carrier on account of damage or average found upon opening the packages, provided that the indications of the
damage or average giving rise to the claim cannot be ascertained from the exterior of said packages, in which
case said claim shall only be admitted at the time of the receipt of the packages.
After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim
whatsoever shall be admitted against the carrier with regard to the condition in which the goods transported
were delivered.
60*
As to the first issue, the petitioner contends that the notice of contamination was given by Alfredo
Chan, an employee of PGP, to Ms. Encarnacion Abastillas, Vice President for Administration and
Operations of the respondent, at the time of the delivery of the cargo, and therefore, within the
required period. This was done by telephone.
The respondent, however, claims that the supposed notice given by PGP over the telephone was
denied by Ms. Abastillas. Between the testimonies of Alfredo Chan and Encarnacion Abastillas, the
latters testimony is purportedly more credible because it would be quite unbelievable and contrary to
business practice for Alfredo Chan to merely make a verbal notice of claim that involves millions of
pesos.
Both courts held that, indeed, a telephone call was made by Alfredo Chan to Encarnacion Abastillas,
informing the latter of the contamination. However, nothing in the trial courts decision stated that the
notice of claim was relayed or filed with the respondent-carrier immediately or within a period of
twenty-four hours from the time the goods were received.
The allegation of the petitioner that not only the Vice President of the respondent was informed, but
also its drivers, as testified by Alfredo Chan, during the time that the delivery was actually being
made, cannot be given great weight as no driver was presented to the witness stand to prove this. The
witness Alfredo Chan had no personal knowledge that the drivers of the respondent were informed of
the contamination.
The requirement that a notice of claim should be filed within the period stated by Article 366 of the
Code of Commerce is not an empty or worthless proviso. The filing of a claim with the carrier within
the time limitation therefore actually constitutes a condition precedent to the accrual of a right of
action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and
prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can
accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it
does not constitute a limitation of action.
The second paragraph of Article 366 of the Code of Commerce is also edifying. It is not only when
the period to make a claim has elapsed that no claim whatsoever shall be admitted, as no claim may
similarly be admitted after the transportation charges have been paid.
In this case, there is no question that the transportation charges have been paid, as admitted by the
petitioner, and the corresponding official receipt duly issued. But the petitioner is of the view that the
payment for services does not invalidate its claim. It contends that under the second paragraph of
Article 366 of the Code of Commerce, it is clear that if notice or protest has been made prior to
payment of services, claim against the bad order condition of the cargo is allowed.
We do not believe so. As discussed at length above, there is no evidence to confirm that the notice of
claim was filed within the period provided for under Article 366 of the Code of
Commerce. Petitioners contention proceeds from a false presupposition that the notice of claim was
timely filed.
61*
Filipro vs. manila Railroad

Facts
Plaintiff Filipro, Inc. originally filed an action to recover the value of imported goods discharged at
the port of Manila, into the custody of the defendants as operators of the arrastre service in that port,
and not delivered or delivered in bad order and condition, to the plaintiff as consignee of the goods.
It appears that on different dates, seven shipments of goods consigned to the plaintiff were discharged
at Manila Port into the Manila Port Service's custody.
The last package of the first shipment was discharged from the vessel on July 27, 1962. On August 1, 1962,
plaintiff filed a provisional claim and a formal claim on August 27, 1962.
The last package of the second shipment was discharged on August 9, 1962. Plaintiff filed a provisional claim
on August 16, 1962 and a formal claim on September 4, 1962.
The last package of the third shipment was discharged on September 2, 1962. Plaintiff filed a provisional claim
on September 12, 1962 and a formal claim on October 18, 1962.
The last package of the fourth shipment was discharged on September 5, 1962. Plaintiff filed a provisional
claim on September 12, 1962 and a formal claim on January 3, 1963.
The last package of the fifth shipment was discharged on September 9, 1962. Plaintiff filed a provisional claim
on September 17, 1962 and formal claims on October 26 and December 18,1962.
The last package of the sixth shipment was discharged on September 9, 1962. Plaintiff filed a provisional claim
on October 10, 1962 and a formal claim on October 26, 1962.
Since no action was taken by the defendants on the provisional and formal claims made by the
plaintiff. Thus on September 14, 1963, the plaintiff-appellee filed suit.
Issue
Whether or not the action was filed on time.
Held
On time.
Appellants argue that the action is time-barred because it was brought one (1) year after the date of
last discharge of the goods from the carrying vessel, contrary to paragraph 15 of the Management
Contract between the defendants, which is admittedly binding upon the plaintiff. The pertinent part in
paragraph 15 of the said contract provides:
15. ...in any event the CONTRACTOR (arrastre operator) shall be relieved and released of any and all liability
for loss, damage, misdelivery and/or non-delivery of goods, unless suit in the court of proper jurisdiction is
brought within ... one (1) year from the date of discharge of the goods or from the date when the claim for the
value of such goods has been rejected or denied by the CONTRACTOR within fifteen (15) days from the date of
discharge of the last package from the carrying vessel.
In order to hold the arrastre operator liable for goods lost or damaged, the claimant should, pursuant to the
foregoing provision, take two (2) steps namely: 1] he must file with the operator a claim for the value of said
goods "within fifteen (15) days from the date of discharge of the last package from the carrying vessel" [Atlantic
Mutual Insurance vs. Manila Port Service, L-16789, October 31, 1962; Insurance Company of North America
vs. Manila Port Service, L-17331, November 29, 1961]; and 2] suit should be brought in the court of proper
jurisdiction "within one (1) year from the date of discharge of the goods or from the date when the claim for the
value of such goods has been rejected or denied.
Defendants-appellants contend that the period for filing the plaintiff's complaint should be computed
solely from the date of discharge of the goods from the carrying vessel inasmuch as the claims made
by the plaintiff have not been expressly rejected or denied by them. Since the complaint was filed one
(1) year after the date of the last discharge of the goods, appellants maintain that it should be deemed
barred.
The contention of defendants-appellants is without merit for it overlooks the fact that plaintiff has,
under the management contract, two (2) periods within which to file its action, namely: [a] one (1)
62*
year from the date of discharge of the goods, and [b] one (1) year from the rejection or denial of its
claim for the value thereof. Obviously, defendants cannot, by not acting on plaintiff's claims, one way
or another, deprive the plaintiff of one of these alternatives. Such would be the result, were we to
accept defendants' contention.
Considering however, that no action, implied or express, was taken by the defendants-appellants on
plaintiff's claims, how then shall the one (1) year prescriptive period be computed?
The right of the plaintiff to sue the defendants might be questionable in the absence of any act or
omission clearly indicating the rejection or denial of said claims by the defendants. Hence, it has been
repeatedly held that, in case of inaction on the part of the arrastre operator, he shall be deemed to have
rejected or denied the importer's claim upon the expiration of one (1) year from the date when the last
package was discharged and that the period within which to file suit shall then begin to run.
Since the arrastre operator did not act on the provisional and formal claims of the plaintiff he shall be
deemed to have denied the importer's claim upon the expiration of one (1) year from the date when
the last package was discharged from the carrying vessel. Since the complaint was filed on September
14, 1963 the same should be considered to have been seasonably filed.
On the second assignment of error, appellants contend that inasmuch as the 15-day period had expired
before the filing of the formal claims in connection with each one of these seven (7) shipments,
plaintiff should be deemed barred from recovering the corresponding indemnity. This is predicated
upon the theory that the provisional claims which were filed within the 15-day period requirement of
the Management Contract, are not claims "for the value" of the goods lost, damaged or not delivered
to the plaintiff.
Such theory is manifestly untenable for (1) it assumes that the claim must state the value of said goods,
which paragraph 15 does not require; and (2) a provisional claim may be sufficient even if the value
of the goods involved were not stated therein, provided it describes said goods sufficiently to permit
its Identification by the operator and the determination by the latter of the facts relevant thereto, such
as the name of the carrying vessel, its date of arrival, the corresponding bill of lading or other
shipping documents in which the value of the goods is set forth, etc., "while the facts are still fresh in
the minds of the persons who took part in the transaction and while the pertinent documents are still
available.
Thus, in Domestic Insurance Company vs. Manila Railroad Company (L-24066, August 30, 1967),
the Supreme Court declared that "... The circumstance that the provisional claim did not specify the
value of the loss" does not detract from the fact that said claim "still substantially fulfills the
requirements of the contract aforementioned and is not a defense against the claim of the consignee
for recovery after it shall have ascertained later its actual loss or damaged ... .
63*
Phil Charter vs. Chemoil

Facts
Samkyung Chemical Company, Ltd., shipped liquid chemical DIOCTYL PHTHALATE (DOP) on
board MT TACHIBANA to the Philippines. The consignee was Plastic Group Phils., Inc. (PGP) in
Manila. PGP insured the cargo with herein petitioner Philippine Charter Insurance Corporation
against all risks.
The ocean tanker MT TACHIBANA unloaded the cargo to Tanker Barge LB-1011 of respondent
Chemoil Lighterage Corporation, which shall transport the same to Del Pan Bridge in Pasig
River. Tanker Barge LB-1011 would unload the cargo to tanker trucks, also owned by the respondent,
and haul it by land to PGPs storage tanks in Calamba, Laguna.
Upon inspection by PGP, the samples taken from the shipment showed discoloration from yellowish
to amber, demonstrating that it was damaged, as DOP is colorless and water clear. PGP then sent a
letter to the petitioner where it formally made an insurance claim for the loss it sustained due to the
contamination.
The petitioner requested an independent insurance adjuster, the GIT Insurance Adjusters, Inc. (GIT),
to conduct a Quantity and Condition Survey of the shipment. GIT issued a Report, part of which
states:
As unloading progressed, it was observed on February 14, 1991 that DOP samples taken were
discolored from yellowish to amber. Inspection of cargo tanks showed manhole covers of ballast
tanks ceilings loosely secured. Furthermore, it was noted that the rubber gaskets of the manhole
covers of the ballast tanks re-acted to the chemical causing shrinkage thus, loosening the covers and
cargo ingress to the rusty ballast tanks
Petitioner paid PG. An action for damages was instituted by the petitioner-insurer against respondentcarrier. Respondent admitted it undertook to transport the consignees shipment from MT
TACHIBANA to the Del Pan Bridge, Pasig River, where it was transferred to its tanker trucks for
hauling to PGPs storage tanks in Calamba, Laguna. The respondent alleged that before the DOP was
loaded into its barge (LB-1011), the surveyor/representative of PGP, Adjustment Standard
Corporation, inspected it and found the same clean, dry, and fit for loading. The entire loading and
unloading of the shipment were also done under the control and supervision of PGPs
surveyor/representative. It was also mentioned by the respondent that the contract between it and PGP
expressly stipulated that it shall be free from any and all claims arising from contamination, loss of
cargo or part thereof; that the consignee accepted the cargo without any protest or notice; and that the
cargo shall be insured by its owner sans recourse against all risks. As subrogee, the petitioner was
bound by this stipulation. As carrier, no fault and negligence can be attributed against respondent as
it exercised extraordinary diligence in handling the cargo.
Issue
Whether or not notice of claim was filed within the required period.
Held
Filed out of time.
Article 366 of the Code of Commerce has profound application in the case at bar. This provision of
law imparts:
Art. 366. Within twenty-four hours following the receipt of the merchandise a claim may be made
against the carrier on account of damage or average found upon opening the packages, provided that
the indications of the damage or average giving rise to the claim cannot be ascertained from the
exterior of said packages, in which case said claim shall only be admitted at the time of the receipt of
the packages.
64*
After the periods mentioned have elapsed, or after the transportation charges have been paid, no
claim whatsoever shall be admitted against the carrier with regard to the condition in which the
goods transported were delivered.
As to the first issue, the petitioner contends that the notice of contamination was given by Alfredo
Chan, an employee of PGP, to Ms. Encarnacion Abastillas, Vice President for Administration and
Operations of the respondent, at the time of the delivery of the cargo, and therefore, within the
required period. This was done by telephone.
The respondent, however, claims that the supposed notice given by PGP over the telephone was
denied by Ms. Abastillas. Between the testimonies of Alfredo Chan and Encarnacion Abastillas, the
latters testimony is purportedly more credible because it would be quite unbelievable and contrary to
business practice for Alfredo Chan to merely make a verbal notice of claim that involves millions of
pesos.
Both courts held that, indeed, a telephone call was made by Alfredo Chan to Encarnacion Abastillas,
informing the latter of the contamination. However, nothing in the trial courts decision stated that the
notice of claim was relayed or filed with the respondent-carrier immediately or within a period of
twenty-four hours from the time the goods were received.
The allegation of the petitioner that not only the Vice President of the respondent was informed, but
also its drivers, as testified by Alfredo Chan, during the time that the delivery was actually being
made, cannot be given great weight as no driver was presented to the witness stand to prove this. The
witness Alfredo Chan had no personal knowledge that the drivers of the respondent were informed of
the contamination.
The requirement that a notice of claim should be filed within the period stated by Article 366 of the
Code of Commerce is not an empty or worthless proviso. The filing of a claim with the carrier within
the time limitation therefore actually constitutes a condition precedent to the accrual of a right of
action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and
prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can
accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it
does not constitute a limitation of action.
The second paragraph of Article 366 of the Code of Commerce is also edifying. It is not only when
the period to make a claim has elapsed that no claim whatsoever shall be admitted, as no claim may
similarly be admitted after the transportation charges have been paid.
In this case, there is no question that the transportation charges have been paid, as admitted by the
petitioner, and the corresponding official receipt duly issued. But the petitioner is of the view that the
payment for services does not invalidate its claim. It contends that under the second paragraph of
Article 366 of the Code of Commerce, it is clear that if notice or protest has been made prior to
payment of services, claim against the bad order condition of the cargo is allowed.
We do not believe so. As discussed at length above, there is no evidence to confirm that the notice of
claim was filed within the period provided for under Article 366 of the Code of
Commerce. Petitioners contention proceeds from a false presupposition that the notice of claim was
timely filed.
65*
Aboitiz Shipping vs. Insurance Company

Facts
MSAS Cargo International Limited and/or Associated and/or Subsidiary Companies (MSAS)
procured a marine insurance policy from respondent ICNA UK Limited of London. The insurance
was for a transshipment of certain wooden work tools and workbenches purchased for the consignee
Science Teaching Improvement Project (STIP).
The cargo was shipped from Hamburg, Germany and arrived at Manila where the container van was
again off-loaded. The cargo was received by petitioner Aboitiz Shipping Corporation (Aboitiz). The
container van was stripped and transferred to another crate/container van without any notation on the
condition of the cargo. The container van was loaded on board petitioners vessel, MV Super
Concarrier I. The vessel left Manila en route to Cebu City.
The shipment arrived in Cebu City and discharged onto a receiving apron of the Cebu International
Port. Petitioners checker noted that the crates were slightly broken or cracked at the bottom.
The cargo was withdrawn by the representative of the consignee and delivered to Don Bosco
Technical High School. On August 13, 1993, Mayo B. Perez, then Claims Head of petitioner,
received a telephone call from Willig informing him that the cargo sustained water damage. Perez,
upon receiving the call, immediately went to the bonded warehouse and checked the condition of the
container and other cargoes stuffed in the same container. He found that the container van and other
cargoes stuffed there were completely dry and showed no sign of wetness.
Perez found that except for the bottom of the crate which was slightly broken, the crate itself appeared
to be completely dry and had no water marks. But he confirmed that the tools which were stored
inside the crate were already corroded. He further explained that the grounded outside warehouse
notation in the bill of lading referred only to the container van bearing the cargo.
In a letter dated August 15, 1993, Willig informed Aboitiz of the damage noticed upon opening of the
cargo. CAC reported to ICNA that the goods sustained water damage, molds, and corrosion which
were discovered upon delivery to consignee. On September 21, 1993, the consignee filed a formal
claim with Aboitiz. CAC reported to ICNA that based on official weather report, it would appear that
heavy rains caused water damage to the shipment. CAC noted that the shipment was placed outside
the warehouse when it was delivered. The shipment was placed outside the warehouse as can be
gleaned from the bill of lading issued by Aboitiz which contained the notation grounded outside
warehouse. Aboitiz refused to settle the claim. ICNA paid the amount to consignee.
Issue
Whether or not notice was timely filed.
Held
Timely.
The giving of notice of loss or injury is a condition precedent to the action for loss or injury or the
right to enforce the carriers liability. Circumstances peculiar to this case lead Us to conclude that the
notice requirement was complied with.
The notice requirement protects the carrier by affording it an opportunity to make an investigation of
the claim while the matter is still fresh and easily investigated. It is meant to safeguard the carrier
from false and fraudulent claims.
Under the Code of Commerce, the notice of claim must be made within twenty four (24) hours from
receipt of the cargo if the damage is not apparent from the outside of the package. For damages that
are visible from the outside of the package, the claim must be made immediately. The law provides:
66*
Article 366. Within twenty four hours following the receipt of the merchandise, the claim against the carrier for
damages or average which may be found therein upon opening the packages, may be made, provided that the
indications of the damage or average which give rise to the claim cannot be ascertained from the outside part of
such packages, in which case the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be
admitted against the carrier with regard to the condition in which the goods transported were delivered.
The periods above, as well as the manner of giving notice may be modified in the terms of the bill of
lading, which is the contract between the parties. Notably, neither of the parties in this case presented
the terms for giving notices of claim under the bill of lading issued by petitioner for the goods.
The shipment was delivered on August 11, 1993. Although the letter informing the carrier of the
damage was dated August 15, 1993, that letter, together with the notice of claim, was received by
petitioner only on September 21, 1993. But petitioner admits that even before it received the written
notice of claim, Mr. Mayo B. Perez, Claims Head of the company, was informed by telephone
sometime in August 13, 1993. Mr. Perez then immediately went to the warehouse and to the delivery
site to inspect the goods in behalf of petitioner.
In the case of Philippine Charter Insurance Corporation (PCIC) v. Chemoil Lighterage Corporation,
the notice was allegedly made by the consignee through telephone. The claim for damages was denied.
This Court ruled that such a notice did not comply with the notice requirement under the law. There
was no evidence presented that the notice was timely given. Neither was there evidence presented that
the notice was relayed to the responsible authority of the carrier.
As adverted to earlier, there are peculiar circumstances in the instant case that constrain Us to rule
differently from the PCIC case, albeit this ruling is being made pro hac vice, not to be made a
precedent for other cases.
Bernhard Willig, the representative of consignee who received the shipment, relayed the information
that the delivered goods were discovered to have sustained water damage to no less than the Claims
Head of petitioner, Mayo B. Perez. Immediately, Perez was able to investigate the claims himself and
he confirmed that the goods were, indeed, already corroded. We give due consideration to the fact that
the final destination of the damaged cargo was a school institution where authorities are bound by
rules and regulations governing their actions. Understandably, when the goods were delivered, the
necessary clearance had to be made before the package was opened. Upon opening and discovery of
the damaged condition of the goods, a report to this effect had to pass through the proper channels
before it could be finalized and endorsed by the institution to the claims department of the shipping
company.
The call to petitioner was made two days from delivery, a reasonable period considering that the
goods could not have corroded instantly overnight such that it could only have sustained the damage
during transit. Moreover, petitioner was able to immediately inspect the damage while the matter was
still fresh. In so doing, the main objective of the prescribed time period was fulfilled. Thus, there was
substantial compliance with the notice requirement in this case.
67*
New Zealand vs. Joy

Facts
The ship "Jupiter", received in good order and condition, 107 bundles of first class loose weight hemp
weighing from Lee Teh & Co., Inc., for transportation and delivery to Manila. The ship was owned by
Adriano Choa Joy, doing business under the name of South Sea Shipping Line, while the cargo was
shipped by the branch office of Lee Teh & Co., Inc. at Carangian, Samar, for transportation and
delivery to its main office at Manila.
The cargo failed to arrive in Manila because the vessel ran aground due to the negligence of its
captain, Jose Molina, who, in the investigation conducted by the Marine Board of Inquiry, was found
negligent of his duties and was suspended from office for a period of three months. Of the cargo, only
some were saved and because of their damaged condition, they were sold at a loss thereby causing
Lee Teh & Co., Inc. losses in the sum of P5,196.20.
The cargo was insured by the New Zealand Insurance Co., Ltd., and because of the damage caused to
said cargo while in transit, the losses were paid by said company to the shipper. The carrier having
refused to reimburse these damages despite demands made to that effect, the insurance company, as
subrogee of the shipper instituted the present action before the Court of First Instance of Manila.
After the parties had presented their evidence, the court found that, while the shipper had suffered
damages because of the inability of the carrier to transport the cargo as agreed upon, however, the
liability of the carrier did not attach because of the failure of the shipper or of the consignee to file its
claim for damages within 24 hours from receipt of the cargo as required by law. Consequently, the
court dismissed the case, with costs against the plaintiff. Plaintiff brought this case on appeal directly
to this Court.
Issue
Whether Lee Teh & Co., Inc, of Manila, as consignee, or Lee Teh & Co., Inc. of Catarman, Samar, as
consignor, should have filed its claim for damages to the cargo with the shipping company, herein
defendant, within twenty four hours from the date the said cargo was salvaged by the consignor, in
accordance with Article 366 of the Code of Commerce for this action to prosper, or that neither the
said consignee nor the said consignor was under the obligation to file the said claim within the said
period, as they are not bound by the provisions of Article 366 of the Code of Commerce.
Held
Art. 366 doesnt apply.
Article 366 of the Code of Commerce, which was applied by the court, provides:
Within twenty-four hours following the receipt of the merchandise, the claim against the carrier for damage or
average which may be found therein upon opening the packages, may be made, provided that the indications of
the damage or average which gives rise to the claim cannot be ascertained from the outside part of such
packages, in which case the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be
admitted against the carrier with regard to the condition in which the goods transported were delivered.
In the instant case, the consignor is the branch office of Lee Teh & Co., Inc., at Catarman, Samar,
which placed the cargo on board the ship Jupiter, and the consignee, its main office at Manila. The
lower court found that the cargo never reached Manila, its destination, nor was it ever delivered to the
consignee, the office of the shipper in Manila, because the ship ran aground. Such being the case, it
follows that the aforesaid article 366 does not have application because the cargo was never received
by the consignee. Moreover, under the bill of lading, it was the letter's undertaking to bring the cargo
to its destinationManila,and deliver it to consignee, which undertaking was never complied with.
The carrier, therefore, breached its contract, and, as such, it forfeited its right to invoke in its favor the
conditions required by article 366.
68*
One case parallel to the present is Roldan vs. Lim Ponzo & Co. In that case, plaintiff sought to recover
damages for failure of defendant to transport 2 sugar from plaintiff's hacienda to Iloilo. It was proven
that the cargo did not reach its destination because the lorcha carrying it was wrecked in the river
through the negligence and lack of skill of the master of the lorcha. Only part of the sugar was saved
but in damaged condition through the efforts made by the shipper. Because plaintiff failed to comply
with the requirement of article 366 of the Code of Commerce, the lower court found for defendant and
dismissed the case. But this Court held that said article "is limited to cases of claims for damages to
goods actually received by the consignee; it has no application in cases wherein the goods entrusted to
the carrier are not delivered to the consignee by the carrier in pursuance of the terms of the carriage
contract." Elaborating on this point, this Court commented:
Article 366 of the Commercial Code is limited to cases of claims for damages to goods actually turned over by
the carrier and received by the consignee, whether those damages be apparent from an examination of the
packages in which the goods are delivered, or of such character that the nature and extend of the damage is not
apparent until the packages are opened and the contents examined. Clearly it has no application in cases
wherein the goods entrusted to the carrier are not delivered by the carrier to the consignee. In such cases there
can be no question of a claim for damages suffered by the goods while in transport, since the claim for damages
arises exclusively out of the failure to make delivery. . . .
We are of opinion, however, that the necessity for making the claim in accordance with that article did not arise
if, as it is alleged, these 1,022 packages, of sugar were recovered from the wreck by the plaintiff, himself, in an
effort, by his own activities, to save his property from total loss. The measures to be taken under the terms of
Article 367 of the Code when the parties are unable to arrive at an amicable settlement of claims for damages
set up in accordance with Article 366, quite clearly indicate that the necessity for the presentation of claims
under this article arises only in those cases wherein the carrier makes delivery and the consignee receives the
goods in pursuance of the terms of the contract.
It is true that in the instant case there is some disagreement as to whether the salvage of the portion of
the cargo that was saved was due to the efforts of the carrier itself or to the combined efforts of the
latter and the shipper as a result of which the salvaged cargo was placed in possession of the shipper
who sold it and deducted its proceeds from the liability of the carrier. But this discrepancy, in our
opinion, would seem to be immaterial because the law as well as the contract contemplates delivery of
the cargo to the consignee at its port of destination in order that the benefit of the law may be availed
of.
The fact that the consignor is but the branch office of the company that shipped the goods, and the
consignee is the main office at Manila, is of no moment, because the duties of each party under the
law are different. Moreover, even if the consignor and the consignee be considered as one and the
same party, still the carrier cannot disclaim responsibility under its contract for the simple reason that
it failed to comply with its obligation to bring the cargo to its destination. This breach alone justifies
its liability under the carriage contract.
69*
Lufthansa vs. CA
Facts
Tirso V. Antiporda, Sr. was, contracted by Sycip, Gorres, Velayo & Co. (SGV) to be the institutional
financial specialist for the agricultural credit institution project of the Investment and Development
Bank of Malawi in Africa. For the engagement, Antiporda would be provided one round-trip economy
ticket from Manila to Blantyre and back with a maximum travel time of four days per round-trip.
Lufthansa issued ticket for Antiporda's confirmed flights to Malawi, Africa with itenerary:
Manila to SQ 081 25-9-84 1530 OK
Singapore
Singapore to LH 695 25-9-84 2200 OK
Bombay
Bombay to KQ 203 26-9-84 0215 OK
Nairobi
Nairobi to QM 335 26-9-84 1395 OK
Lilongwe
Lilongwe to QM 031 26-9-84 1600 OK
Blantyre
Antiporda took the Lufthansa flight to Singapore from where he proceeded to Bombay on board the
same airline. He arrived in Bombay as scheduled and waited at the transit area of the airport for his
connecting flight to Nairobi which was, per schedule given him by Lufthansa, to leave Bombay in the
morning of September 26, 1984. Finding no representative of Lufthansa waiting for him at the gate,
Antiporda asked the duty officer of Air India how he could get in touch with Lufthansa. He was told
to call up Lufthansa which informed him that somebody would attend to him shortly. Ten minutes
later, Gerard Matias, Lufthansa's traffic officer, arrived, asked for Antiporda's ticket and told him to
just sit down and wait. Matias returned with one Leslie Benent, duty officer of Lufthansa, who
informed Antiporda that his seat in Air Kenya Flight 203 to Nairobi had been given to a very
important person of Bombay who was attending a religious function in Nairobi. Antiporda protested,
stressing that he had an important professional engagement in Blantyre, Malawi in the afternoon of
September 26, 1984. He requested that the situation be remedied but Air Kenya Flight 203 left for
Nairobi without him on board. Stranded in Bombay, Antiporda was booked for Nairobi via Addis
Ababa only on September 27, 1984. He finally arrived in Blantyre at 9:00 o'clock in the evening of
September 28, 1984, more than a couple of days late for his appointment with people from the
institution he was to work with in Malawi.
Consequently, Antiporda's counsel wrote the general manager of Lufthansa in Manila demanding
damages for the airline's "malicious, wanton, disregard of the contract of carriage." In reply,
Lufthansa general manager Hagen Keilich assured Antiporda that the matter would be investigated.
Apparently getting no positive action from Lufthansa, Antiporda filed a complaint against Lufthansa.
Issue
Whether or not petitioner Lufthansa German Airlines which issued a confirmed Lufthansa ticket to
private respondent Antiporda covering a five-leg trip abroad different airlines should be held liable for
damages occasioned by the "bumping-off" of said private respondent Antiporda by Air Kenya, one of
the airlines contracted to carry him to a particular destination of the five-leg trip.
Held
Liable.
The fourth paragraph of the "Conditions of Contract" stipulated in the ticket indubitably showed that
the contract of carriage was considered as one of continuous air transportation from Manila to
Blantyre, Malawi. In light of the stipulations expressly specified in the ticket defining the true nature
of its contract of carriage with Antiporda, Lufthansa cannot claim that its liability thereon ceased at
Bombay Airport and thence, shifted to the various carriers that assumed the actual task of transporting
said private respondent.
70*
We, therefore, reject Lufthansa's theory that from the time another carrier was engaged to transport
Antiporda on another segment of his trip, it merely acted as a ticket-issuing agent in behalf of said
carrier. In the very nature of their contract, Lufthansa is clearly the principal in the contract of
carriage with Antiporda and remains to be so, regardless of those instances when actual carriage was
to be performed by various carriers. The issuance of a confirmed Lufthansa ticket in favor of
Antiporda covering his entire five-leg trip abroad successive carriers concretely attests to this. This
also serves as proof that Lufthansa, in effect guaranteed that the successive carriers, such as Air
Kenya would honor his ticket; assure him of a space therein and transport him on a particular segment
of his trip.
This ruling finds corroboration in the Supreme Court decision in KLM thus:
The passage tickets of the respondents provide that the carriage to be performed thereunder by several
successive carriers "is to be regarded as a single operation," which is diametrically incompatible with the
theory of the KLM that the respondents entered into a series of independent contracts with the carriers which
took them on the various segments of their trip. This position of KLM we reject. The respondents dealt
exclusively with the KLM which issued them tickets for their entire trip and which in effect guaranteed to them
that they would have sure space in Aer Lingus flight 861. The respondents, under that assurance of the
internationally prestigious KLM, naturally had the right to expect that their tickets would be honored by Aer
Lingus to which, in the legal sense, the KLM had indorsed and in effect guaranteed the performance of its
principal engagement to carry out the respondents' scheduled itinerary previously and mutually agreed upon
between the parties.
On the issue of whether the Warsaw Convention, particularly Section 2, Article 30 thereof is
applicable herein, we agree with the Court of Appeals in ruling in the negative. We reiterate what has
been settled in KLM:
The applicability insisted upon by the KLM of Article 30 of the Warsaw Convention cannot be sustained. That
article presupposes the occurrence of either an accident or a delay, neither of which took place at the
Barcelona airport; what is here manifest, instead, is that the Aer Lingus, through its manager there, refused to
transport the respondents to their planned and contracted destination. . . .
Lufthansa prays this court to take heed of jurisprudence in the United States where the term "delay"
was interpreted to include "bumping-off" or failure to carry a passenger with a confirmed reservation.
These decisions in the United States are not controlling in this jurisdiction. We are not prepared,
absent reasons of compelling nature, to entertain an extended meaning of the term "delay," which in
KLM was given its ordinary signification.
Consequently, Section 2, Article 30 of the Warsaw Convention which does not contemplate the
instance of "bumping-off" but merely of simple delay, cannot provide a handy excuse for Lufthansa
as to exculpate it from any liability to Antiporda. The payment of damages is, thus, deemed warranted
by this Court.
According to the findings of the appellate court which affirmed that of the lower court, the reasons
given by the witnesses for Lufthansa for private respondent's being "bumped off" at Bombay airport
were conflicting.
Clearly, bad faith attended the performance of the contract of carriage, for even while Antiporda was
in Bombay, representatives of Lufthansa already tried to evade liability first, by claiming that the
contract of carriage between Lufthansa and Antiporda ceased at Bombay airport, in disregard of the
fact that Antiporda was holding a Lufthansa ticket for the entire five-leg trip; second, despite Berndt
Loewe's knowledge that Antiporda's seat was allowed to be given to another passenger, the same
suppressed the information and feigned ignorance of the matter, presenting altogether another reason
why Antiporda was not listed in the manifest, i.e. that Air Kenya Boeing 707 was overbooked,
notwithstanding clear proof that Lufthansa in Manila confirmed his reservation for said flight.
71*
China Airlines vs. CA

Facts
Respondent, a local firm dealing in insecticides, pesticides and related services appurtenant thereto,
purchased a plane ticket for a Manila-Taipei-Hongkong-Manila flight from the Transaire Travel
Agency. The said agency, through its Cecille Baron, contacted the Manila Hotel branch of defendant
Philippine Air Lines which at that time was a sales and ticketing agent of defendant China Air lines.
PAL, issued PAL Ticket, through its ticketing clerk Espiritue, for a Manila-Taipei-Hongkong-Manila
flight.
One hour before the scheduled time of the flight as stated in his ticket, the plaintiff arrived at the
airport to check in. Upon arriving at the airport, the plaintiff was informed that the plane he was
supposed to take for Taipei had left at 10:20 in the morning of that day. The PAL employees at the
airport made appropriate arrangements for the plaintiff to take PAL's flight to Taipei the following
day. The plaintiff took said flight and arrived in Taipei around noontime of the said date.
Plaintiff made formal demand on defendant PAL, for moral damages for what the plaintiff allegedly
suffered as a result of his failure to take the flight as stated in his plane ticket. After a series of
negotiations among the plaintiff, PAL and CAL failed to reach an amicable settlement, the plaintiff
instituted this action.
The damages arose from the gross negligence of defendant Roberto Espiritu in stating on the plane
ticket that the time of departure was 17:20 hours, instead of 10:20 hours which was the correct time of
departure in the revised summer schedule of CAL. He further averred that his trip to Taipei was for
the purpose of conferring with a certain Peng Siong Lim, President of the Union Taiwan Chemical
Corporation.
Defendant Philippine Air Lines alleged in its answer that the departure time indicated by Espiritu in
the ticket was furnished and confirmed by the reservation office of defendant China Air Lines. It
further averred that CAL had not informed PAL's Manila Hotel Branch of the revised schedule of its
flight, nor provided it with revised timetable.
Defendant China Air Lines, for its part, disclaims liability for the negligence and incompetence of the
employees of PAL. It avers that it had revised its schedule and the said revised schedule was adopted
only after proper petition with and approval of the Civil Aeronautics Board of which all airlines,
including defendant PAL, were notified; that both printed copies of the international timetable and of
the mimeographed notices of the official schedule and flight departure schedules were distributed to
all its sales agents, including PAL, that after the effectivity of the new time schedules, PAL's Manila
Hotel office had been issuing and selling tickets based on the revised time schedule; and that,
assuming that the plaintiff is entitled to recover damages, the liability is on PAL and not on CAL. A
cross-claim was likewise asserted by CAL against its co-defendant PAL.
Issue
Whether or not PAL and CAL are liable for damages.
Held
Only PAL is liable.
There is indeed no basis whatsoever to hold CAL liable on a quasi-delict or culpa aquiliana. As
hereinbefore stated, the court a quo absolved CAL of any liability for fault or negligence. This finding
was shared by respondent court when it concluded that defendant CAL did not contribute to the
negligence committed by therein defendants-appellants PAL and Roberto Espiritu.
Respondent Pagsibigan insists that CAL was barred from proving that it observed due diligence in the
selection and supervision of its employees. This argument is obviously misplaced. CAL is not the
employer of PAL or Espiritu.
72*
With respect to PAL and Espiritu, they disclaim any liability on the theory that the former is merely
an agent of CAL and that the suit should have been directed against CAL alone. There is no question
that the contractual relation between both airlines is one of agency. Suffice it to say, however, that in
an action premised on the employee's negligence, whereby respondent Pagsibigan seeks recovery for
the resulting damages from both PAL and Espiritu without qualification, what is sought to be imposed
is the direct and primary liability of PAL as an employer under said Article 2180.
When an injury is caused by the negligence of an employee, there instantly arises a presumption of
law that there was negligence on the part of the employer either in the selection of the employee or in
the supervision over him after such selection. The presumption, however, may be rebutted by a clear
showing on the part of the employer that it has exercised the care and diligence of a good father of a
family in the selection and supervision of his employee.
Hence, to escape solidary liability for the quasi-delict committed by Espiritu, it is imperative that
PAL must adduce sufficient proof that it exercised such degree of care. PAL failed to overcome the
presumption. As found by respondent court, CAL had revised its schedule of flights since April 1,
1968; that after the Civil Aeronautics Board had approved the revised schedule of flights, PAL was
duly informed thereof and, in fact, PAL's Manila Hotel branch office had been issuing and selling
tickets based on the revised time schedule before June 10, 1968.
PAL's main defense is that it is only an agent. As a general proposition, an agent who duly acts as
such is not personally liable to third persons. However, there are admitted exceptions, as in this case
where the agent is being sued for damages arising from a tort committed by his employee.
The respondent court found that the mistake committed by Espiritu was done in good faith. While
there is no evidence that he acted with malice, we can not entirely condone his actuations. As an
employee of PAL, the nature of his functions requires him to observe for the protection of the
interests of another person that degree of care, precaution and vigilance which the circumstances
justly demand. He committed a clear neglect of duty.
Ergo, for his negligence, Espiritu is primarily liable to respondent Pagsibigan under Article 2176 of
the Civil Code. For the failure of PAL to rebut the legal presumption of negligence in the selection
and supervision of its employee, it is also primarily liable under Article 2180 of the same code which
explicitly provides that employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry.
Under the aforesaid provision, all that is required is that the employee, by his negligence, committed a
quasi-delict which caused damage to another, and this suffices to hold the employer primarily and
solidarity responsible for the tortious act of the employee. PAL, however, can demand from Espiritu
reimbursement of the amount which it will have to pay the offended party's claim.
73*
Santiago Lighterage vs. CA

Facts
Defendant-third party plaintiff Manuel A. Pelaez as sole proprietor of the firm M.A.P. Trading offered
to plaintiff [C-Square Consolidated Mines] the vessel MV Christine Gay for the use of the latter in
shipping and exporting its milled chromite ores in bulk to Pohang Port, South Korea. Pelaez assured
Emilio G. Libatigue, Vice-President of plaintiff-corporation, that the MV Christine Gay was
seaworthy. It was specifically agreed upon that the [Voyage] Charter Agreement shall automatically
be considered rescinded and inoperative if the (v)essel is found not seaworthy to undertake a safe
voyage to Korea or if the defendant should fail to (g)et the necessary permits and/or shipping
documents to allow said voyage to Korea.
The MV Christine Gay was turned over by Santiago Lighterage Corporation to Pelaez in Manila.
The new set of crew members boarded and took possession of the vessel to determine her actual
condition. After boarding the vessel, they immediately proceeded to Masinloc, Zambales from Manila.
From the time they started their voyage from Manila to Masinloc, Zambales, Marine Chief Engineer
Simeon Panaguiton observed that the engine of the vessel was not in good condition because heavy
smoke was going out from the exhaust manifold. Engr. Panaguiton, however, allowed the vessel to
make the voyage to Zambales, because he was assured that the vessel will be repaired in Masinloc.
At Masinloc, Zambales, the chromite ores of plaintiff were loaded on the vessel while repairs on the
vessel were also being made by the men of third party defendants Santiago Lighterage Corporation
and Robert Tan. Because of the inadequacy of the repairs, Engr. Panaguiton recommended to Pelaez
that the vessel may not be able to continue with her voyage to South Korea. He also informed Capt.
Sorongon that the vessel was not seaworthy. Capt. Sorongons reaction was that, it was not really
seaworthy.
Thereafter, it was decided that the vessel which was already loaded with chromite ores will sail back
towards Manila instead of proceeding to Korea as sailing to Korea would be very dangerous. The
engines of the vessel suddenly stopped, thus, making the vessel stop in the middle of the sea. Because
of this, Capt. Sorongon allowed Maximo Alvarez, the ship purser, to board a passing fishing boat, and
instructed Alvarez to inform plaintiff, Pelaez, and Tan about what happened to the vessel (ibid.).
Thereafter, the plaintiff sent a demand letter informing Pelaez that the former suffered damages
because the vessel lacked the documentation and that the vessel was not seaworthy.
Because the engines of the vessel suffered a breakdown, the vessel was towed by a tugboat to Manila.
A re-investigation was conducted by a MARINA surveyor which stated that the MV Christine Gay
was a dead ship at the time of inspection.
Issue
Whether or not the vessel was seaworthy.
Held
Not.
Petitioner challenges the trial and appellate courts appreciation of the Charter Party Agreement as
part of the evidence in this case. Petitioner asserts that delivery of the MV Christine Gay to Pelaez
and Pelaezs subsequent takeover of the vessel is already a full performance of petitioners obligations.
Thus, petitioner is not liable for defects in MV Christine Gay after the delivery and turn over.
The mere physical transfer of MV Christine Gay from petitioner to Pelaez does not constitute full
performance of its obligation under their bareboat charter agreement. Neither is it considered a
delivery. Under the agreement, physical transfer of a seaworthy vessel is necessary to satisfy delivery.
74*
Since petitioner did not deliver a seaworthy vessel, petitioner failed to perform his obligation to
Pelaez under the agreement.
Seaworthiness is a relative term. Petitioner claims that MV Christine Gay later undertook voyages
within the Philippines. However, such subsequent voyages in the Philippines do not prove the vessels
seaworthiness to withstand a voyage to South Korea.
The degree of seaworthiness varies in relation to the contemplated voyage. In examining what is
meant by seaworthiness we must bear in mind the dual nature of the carriers obligations under a
contract of affreightment. To satisfy these duties the vessel must (a) be efficient as an instrument of
transport and (b) as a storehouse for her cargo. The latter part of the obligation is sometimes referred
to as cargoworthiness.
A ship is efficient as an instrument of transport if its hull, tackle and machinery are in a state of good
repair, if she is sufficiently provided with fuel and ballast, and is manned by an efficient crew.
And a vessel is cargoworthy if it is sufficiently strong and equipped to carry the particular kind of
cargo which she has contracted to carry, and her cargo must be so loaded that it is safe for her to
proceed on her voyage. A mere right given to the charterer to inspect the vessel before loading and to
satisfy himself that she was fit for the contracted cargo does not free the shipowner from his
obligation to provide a cargoworthy ship.
Petitioner asserts that MV Christine Gay is sufficient in materials, construction, equipment and outfit
as shown by the documents the Philippine Coast Guard (Coast Guard) and the Maritime Industry
Authority (MARINA) issued to petitioners. Petitioner presents the following documents to show
MV Christine Gays seaworthiness: Certificate of Inspection No. 2361-89, Cargo Ship Safety
Equipment Certificate No. 561-89 dated 11 September 1989, Cargo Ship Safety Construction
Certificate No. 538-89, Manning Certificate for Vessels on International Trade, and Special Permit
No. 0313-89 dated 1 September 1989. Petitioner overlooks that these documents are mere prima facie
evidence of the facts stated and contrary proof can overturn such prima facie evidence. The trial court
relied, however, on the testimonies of Engineer Panaguiton and Captain Sorongon which revealed the
contrary.
75*
Aboitiz vs. new India

Facts
Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from France on
board a vessel owned by Franco-Belgian Services, Inc. The cargo was consigned to General Textile,
Inc., in Manila and insured by respondent New India Assurance Company, Ltd. While in Hongkong,
the cargo was transferred to M/V P. Aboitiz for transshipment to Manila.
Before departing, the vessel was advised by the Japanese Meteorological Center that it was safe to
travel to its destination. But while at sea, the vessel received a report of a typhoon moving within its
general path. To avoid the typhoon, the vessel changed its course. However, it was still at the fringe of
the typhoon when its hull leaked. The vessel sank, but the captain and his crew were saved.
The captain of M/V P. Aboitiz filed his "Marine Protest", stating that the wind force was at 10 to 15
knots at the time the ship foundered and described the weather as "moderate breeze, small waves,
becoming longer, fairly frequent white horses.
Thereafter, petitioner notified the consignee, General Textile, of the total loss of the vessel and all of
its cargoes. General Textile, lodged a claim with respondent for the amount of its loss. Respondent
paid General Textile and was subrogated to the rights of the latter.
Respondent hired a surveyor, Perfect, Lambert and Company, to investigate the cause of the sinking.
In its report, the surveyor concluded that the cause was the flooding of the holds brought about by the
vessels questionable seaworthiness. Consequently, respondent filed a complaint for damages.
Franco-Belgian Services and Zuellig responded, claiming that they exercised extraordinary diligence
in handling the shipment while it was in their possession; its vessel was seaworthy; and the proximate
cause of the loss of cargo was a fortuitous event.
For its part, petitioner also raised the same defense that the ship was seaworthy. It alleged that the
sinking of M/V P. Aboitiz was due to an unforeseen event and without fault or negligence on its part.
It also alleged that in accordance with the real and hypothecary nature of maritime law, the sinking of
M/V P. Aboitiz extinguished its liability on the loss of the cargoes.
Meanwhile, the Board of Marine Inquiry (BMI) conducted its own investigation to determine whether
the captain and crew were administratively liable. However, petitioner neither informed respondent
nor the trial court of the investigation. The BMI exonerated the captain and crew of any
administrative liability; and declared the vessel seaworthy and concluded that the sinking was due to
the vessels exposure to the approaching typhoon.
Issue
Whether or not the limited liability doctrine, which limits respondents award of damages to its prorata share in the insurance proceeds, applies in this case.
Held
Inapplicable.
Petitioner, citing Monarch Insurance Co. Inc. v. Court of Appeals, contends that respondents claim
for damages should only be against the insurance proceeds and limited to its pro-rata share in view of
the doctrine of limited liability.
Respondent counters that the doctrine of real and hypothecary nature of maritime law is not
applicable in the present case because petitioner was found to have been negligent. Hence, according
to respondent, petitioner should be held liable for the total value of the lost cargo.
76*
Our ruling in Monarch may appear inconsistent with the exception of the limited liability doctrine, as
explicitly stated in the earlier part of the Monarch decision. An exception to the limited liability
doctrine is when the damage is due to the fault of the shipowner or to the concurrent negligence of the
shipowner and the captain. In which case, the shipowner shall be liable to the full-extent of the
damage. We thus find it necessary to clarify now the applicability here of the decision in Monarch.
Considering the evidence presented and the circumstances obtaining in this case, we find that
petitioner failed to discharge this burden. It initially attributed the sinking to the typhoon and relied on
the BMI findings that it was not at fault. However, both the trial and the appellate courts, in this case,
found that the sinking was not due to the typhoon but to its unseaworthiness. Evidence on record
showed that the weather was moderate when the vessel sank.
In contrast, the findings of the BMI are not deemed always binding on the courts. Besides,
exoneration of the vessels officers and crew by the BMI merely concerns their respective
administrative liabilities. It does not in any way operate to absolve the common carrier from its civil
liabilities arising from its failure to exercise extraordinary diligence, the determination of which
properly belongs to the courts.
Where the shipowner fails to overcome the presumption of negligence, the doctrine of limited liability
cannot be applied. Therefore, we agree with the appellate court in sustaining the trial courts ruling
that petitioner is liable for the total value of the lost cargo.
77*
Caltex vs. Sulpicio Lines

Facts
Motor tanker MT Vector left Limay, Bataan, enroute to Masbate, loaded with 8,800 barrels of
petroleum products shipped by petitioner Caltex. MT Vector is a tramping motor tanker owned and
operated by Vector Shipping Corporation, engaged in the business of transporting fuel products such
as gasoline, kerosene, diesel and crude oil. 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.
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.
Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife and mother respectively, filed a
complaint for Damages Arising from Breach of Contract of Carriage against Sulpicio Lines, Inc.
(hereafter Sulpicio). Sulpicio, in turn, filed a third party complaint against Francisco 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, illequipped, unseaworthy and a hazard to safe navigation; as a result, it rammed against MV Doa Paz
in the open sea setting MT Vectors highly flammable cargo ablaze.
Issue
Held
Not liable.
The charterer has no liability for damages under Philippine Maritime laws.
Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.
A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner
to another person for a specified time or use; a contract of affreightment is one by which the owner of
a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment of freight.
A contract of affreightment may be either time charter, wherein the leased vessel is leased to the
charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage.
In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period
of time or for a single or consecutive voyage, the ship owner to supply the ships store, pay for the
wages of the master of the crew, and defray the expenses for the maintenance of the ship.
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Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own
people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for
damages caused by negligence.
If the charter is a contract of affreightment, which leaves the general owner in possession of the ship
as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The
charterer is free from liability to third persons in respect of the ship.
MT Vector is a common carrier
Charter parties fall into three main categories: (1) Demise or bareboat, (2) time charter, (3) voyage
charter. Does a charter party agreement turn the common carrier into a private one? We need to
answer this question in order to shed light on the responsibilities of the parties.
In this case, the charter party agreement did not convert the common carrier into a private carrier.
The parties entered into a voyage charter, which retains the character of the vessel as a common
carrier.
Is Caltex liable for damages under the Civil Code? We rule that it is not.
The nature of the obligation of Caltex demands ordinary diligence like any other shipper in shipping
his cargoes. A cursory reading of the records convinces us that Caltex had reasons to believe that MT
Vector could legally transport cargo that time of the year. 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.
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Macondray vs. Provident

Facts
At Vancouver, B.C. Canada, CANPOTEX SHIPPING SERVICES LIMITED INC., of Saskatoon,
Saskatchewan, (hereinafter the SHIPPER), shipped and loaded on board the vessel M/V 'Trade
Carrier', Standard Grade Muriate of Potash in bulk for transportation to and delivery at the port of
Sangi, Toledo City, Cebu, in favor of ATLAS FERTILIZER CORPORATION, (hereinafter
CONSIGNEE). Subject shipments were insured with [respondent] against all risks.
Provident
When the shipment arrived, CONSIGNEE discovered that the shipment sustained losses/shortage.
Provident paid losses. Formal claims was then filed with Trade & Transport and Macondray but the
same refused and failed to settle the same. Hence, this complaint.
Defendant MACONDRAY filed ANSWER, denying liability over the losses, having NO absolute
relation with defendant TRADE AND TRANSPORT, the alleged operator of the vessel who
transported the subject shipment; that accordingly, MACONDRAY is the local representative of the
SHIPPER; the charterer of M/V TRADE CARRIER and not party to this case; that it has no control
over the acts of the captain and crew of the Carrier and cannot be held responsible for any damage
arising from the fault or negligence of said captain and crew; that upon arrival at the port of Sangi,
Toledo City, Cebu, the M/V Trade Carrier discharged the full amount of shipment, as shown by the
draft survey with a total quantity of 5,033.59 metric tons discharged from the vessel and delivered to
the CONSIGNEE.
Issue
Whether or not petitioner was the ship agent.
Held
Was ship agent.
In the present case, we find no compelling reason to overturn the Court of Appeals in its categorical
finding that petitioner was the ship agent. Such factual finding was not in conflict with the trial court's
ruling, which had merely stated that petitioner was not the agent of Trade and Transport. Indeed,
although it is not an agent of Trade and Transport, petitioner can still be the ship agent of the vessel
M/V Trade Carrier.
Article 586 of the Code of Commerce states that a ship agent is "the person entrusted with
provisioning or representing the vessel in the port in which it may be found."
Hence, whether acting as agent of the owner of the vessel or as agent of the charterer, petitioner will
be considered as the ship agent and may be held liable as such, as long as the latter is the one that
provisions or represents the vessel.
The trial court found that petitioner "was appointed as local agent of the vessel, which duty includes
arrangement for the entrance and clearance of the vessel." Further, the CA found and the evidence
shows that petitioner represented the vessel. The latter prepared the Notice of Readiness, the
Statement of Facts, the Completion Notice, the Sailing Notice and Custom's Clearance. Petitioner's
employees were present at Sangi, Toledo City, one day before the arrival of the vessel, where they
stayed until it departed. They were also present during the actual discharging of the cargo. Moreover,
Mr. de la Cruz, the representative of petitioner, also prepared for the needs of the vessel, like money,
provision, water and fuel.
These acts all point to the conclusion that it was the entity that represented the vessel in the Port of
Manila and was the ship agent within the meaning and context of Article 586 of the Code of
Commerce.
As ship agent, it may be held civilly liable in certain instances. The Code of Commerce provides:
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"Article 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the
obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that
the amount claimed was invested for the benefit of the same."
"Article 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may
arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt
himself therefrom by abandoning the vessel with all her equipments and the freight it may have earned during
the voyage."
Petitioner does not dispute the liabilities of the ship agent for the loss/shortage of 476.140 metric tons
of standard-grade Muriate of Potash valued at P1,657,700.95. Hence, we find no reason to delve
further into the matter or to disturb the finding of the CA holding petitioner, as ship agent, liable to
respondent for the losses sustained by the subject shipment.
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Central Shipping vs. Ins

Facts
Petitioner 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 shipment was insured. Upon completion of loading of the cargo, the vessel left Palawan and
commenced the voyage to Manila. While enroute to Manila, the vessel listed about 10 degrees
starboardside, due to the shifting of logs in the hold.
After the listing of the vessel had increased to 15 degrees, the ship captain ordered his men to
abandon ship and the vessel completely sank. Due to the sinking of the vessel, the cargo was totally
lost.
Respondent alleged that the total loss of the shipment was caused by the fault and negligence of the
[petitioner] and its captain and as direct consequence thereof the consignee suffered damage.
The consignee, Alaska Lumber Co. Inc., presented a claim for the value of the shipment to the
[petitioner] but the latter failed and refused to settle the claim, hence [respondent], being the insurer,
paid said claim and now seeks to be subrogated to all the rights and actions of the consignee as
against the petitioner.
Petitioner, while admitting the sinking of the vessel, interposed the defense that the vessel was fully
manned, fully equipped and in all respects seaworthy; that all the logs were properly loaded and
secured; that the vessels master exercised due diligence to prevent or minimize the loss before,
during and after the occurrence of the storm.
It 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 [petitioner] nor the captain of its
vessel could have foreseen.
Issue
Held
Liable.
In the present case, petitioner disclaims responsibility for the loss of the cargo by claiming the
occurrence of a storm under Article 1734(1). It attributes the sinking of its vessel solely to the
weather condition.
Established is the fact that the M/V Central Bohol encountered a southwestern monsoon in the course
of its voyage. Having made such factual representation, petitioner cannot now be allowed to retreat
and claim that the southwestern monsoon was a storm.
Normally expected on sea voyages were such monsoons, during which strong winds were not
unusual. It would not be sufficient to categorize the weather condition at the time as a storm within
the absolutory causes enumerated in the law. Significantly, no typhoon was observed within the
Philippine area of responsibility during that period. The strong winds accompanying the southwestern
monsoon could not be classified as a storm. Such winds are the ordinary vicissitudes of a sea
voyage.
Even if the weather encountered by the ship is to be deemed a natural disaster under Article 1739 of
the Civil Code, petitioner failed to show that such natural disaster or calamity was the proximate and
only cause of the loss. Human agency must be entirely excluded from the cause of injury or loss. The
defense of fortuitous event or natural disaster cannot be successfully made when the injury could have
been avoided by human precaution.
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However, 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 vessel
felt the strain because the logs in the bodega shifted and there were already seawater that seeped
inside. Had the logs not shifted, the ship could have survived and reached at least the port of El
Nido.
Being clearly prone to shifting, the round logs should not have been stowed with nothing to hold them
securely in place. Each pile of logs should have been lashed together by cable wire, and the wire
fastened to the side of the hold. Considering the strong force of the wind and the roll of the waves, the
loose arrangement of the logs did not rule out the possibility of their shifting. By force of gravity,
those on top of the pile would naturally roll towards the bottom of the ship.
The evidence indicated that strong southwest monsoons were common occurrences during the month
of July. Thus, the officers and crew of M/V Central Bohol should have reasonably anticipated heavy
rains, strong winds and rough seas. They should then have taken extra precaution in stowing the logs
in the hold, in consonance with their duty of observing extraordinary diligence in safeguarding the
goods. But the carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it
cannot now escape responsibility for the loss.
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. It has already been established that the
sinking of M/V Central Bohol had been caused by the fault or negligence of the ship captain and the
crew, as shown by the improper stowage of the cargo of logs. Closer supervision on the part of the
shipowner could have prevented this fatal miscalculation. As such, the shipowner was equally
negligent. It cannot escape liability by virtue of the limited liability rule.
83*
Heirs of Santos vs. CA

Facts
This is a complaint filed by the heirs of Delos Santos and others as pauper litigants against the
Compania Maritima, for damages due to the death of several passengers as a result of the sinking of
the vessel of defendant, the M/V 'Mindoro.'
M/V 'Mindoro' sailed from pier 8 North Harbor, Manila bound for New Washington, Aklan, with
many passengers aboard. It appears that said vessel met typhoon 'Welming' causing the death of many
of its passengers, although about 136 survived.
Mauricio delos Santos declared that on November 2, 1967 he accompanied his common-law wife,
Amparo delos Santos, and children, namely: Romeo, Josie, Hernani, who was 10 years old, Abella, 7
years old, Maria Lemia, 5 years old and Melany, 5 months old, to pier 8, North Harbor, Manila, to
board the M/V Mindoro 'bound for Aklan.
The boat met typhoon 'Welming' and due to the strong waves it sank causing the drowning of many
passengers.
Issue
Whether or not the shipper can be held liable with the captain.
Held
Liable.
We note that there is no dispute as to the finding of the captain's negligence in the mishap. The
present controversy centers on the questions of Maritima's negligence and of the application of Article
587 of the Code of Commerce. Under that provision, a shipowner or agent has the right of
abandonment; and by necessary implication, his liability is confined to that which he is entitled as of
right to abandon-"the vessel with all her equipments and the freight it may have earned during the
voyage."
Notwithstanding the passage of the New Civil Code, Article 587 of the Code of Commerce is still
good law. The reason lies in the peculiar nature of maritime law which is exclusively real and
hypothecary that operates to limit such liability to the value of the vessel, or to the insurance thereon,
if any. Contrary to the petitioners' supposition, the limited liability doctrine applies not only to the
goods but also in all cases like death or injury to passengers wherein the shipowner or agent may
properly be held liable for the negligent or illicit acts of the captain. It must be stressed at this point
that Article 587 speaks only of situations where the fault or negligence is committed solely by the
captain. In cases where the shipowner is likewise to be blamed, Article 587 does not apply. Such a
situation will be covered by the provisions of the New Civil Code on Common Carriers.
Guided by the above legal provisions, We painstakingly reviewed the records of the case and found
imprints of Maritima's negligence which compel Us to reverse the conclusion of the appellate court.
Maritima claims that it did not have any information about typhoon 'Welming' until after the boat was
already at sea. Modern technology belie such contention. The Weather Bureau is now equipped with
modern apparatus which enables it to detect any incoming atmospheric disturbances. In his summary
report on tropical cyclone 'Welming' which occurred within the Philippine Area of Responsibility, Dr.
Roman L. Kintanar, Weather Bureau Director, stated that during the periods of November 15, 1967,
the Bureau issued a total of seventeen (17) warnings or advisories of typhoon 'Welming' to shipping
companies.
Considering the above report and the evidence on record showing the late departure of the ship at 6:00
p.m. (instead of the scheduled 2:00 p.m. departure) on November 2, 1967, We find it highly
84*
improbable that the Weather Bureau had not yet issued any typhoon bulletin at any time during the
day to the shipping companies. Maritima submitted no convincing evidence to show this omission.
Significantly, the appellate court found that the ship's captain through his action showed prior
knowledge of the typhoon. If the captain knew of the typhoon beforehand, it is inconceivable for
Maritima to be totally in the dark of 'Welming.' In allowing the ship to depart late from Manila despite
the typhoon advisories, Maritima displayed lack of foresight and minimum concern for the safety of
its passengers taking into account the surrounding circumstances of the case.
While We agree with the appellate court that the captain was negligent for overloading the ship, We,
however, rule that Maritima shares equally in his negligence. We find that while M/V Mindoro was
already cleared by the Bureau of Customs and the Coast Guard for departure at 2:00 p.m. the ship's
departure was, however, delayed for four hours. Maritima could not account for the delay because it
neither checked from the captain the reasons behind the delay nor sent its representative to inquire
into the cause of such delay. It was due to this interim that the appellate court noted that "(i)ndeed
there is a great probability that unmanifested cargo and passengers were loaded during the four (4)
hour interval." Perchance, a closer supervision could have prevented the overloading of the ship.
Maritima could have directed the ship's captain to immediately depart in view of the fact that the
typhoon had already attained surface winds of about 240 kilometers per hour. As the appellate court
stated, '(v)erily, if it were not for have reached (its) destination and this delay, the vessel could thereby
have avoided the effects of the storm."
Maritima presents evidence of the seaworthy condition of the ship prior to its departure to prove that
it exercised extraordinary diligence in this case. M/V Mindoro was drydocked for about a month.
Necessary repairs were made on the ship. Life saving equipment and navigational instruments were
installed.
While indeed it is true that all these things were done on the vessel, Maritima, however, could not
present evidence that it specifically installed a radar which could have allowed the vessel to navigate
safely for shelter during a storm. Consequently, the vessel was left at the mercy of ''Welming' in the
open sea because although it was already in the vicinity of the Aklan river, it was unable to enter the
mouth of Aklan River to get into New Washington, Aklan due to darkness and the Floripon
Lighthouse at the entrance of the Aklan River was not functioning or could not be seen at all
The foregoing clearly demonstrates that Maritima's lack of extraordinary diligence coupled with the
negligence of the captain as found by the appellate court were the proximate causes of the sinking of
M/V Mindoro.
85*
Sweet Lines vs. CA

Facts
Briefly, the facts of record show that private respondents purchased first-class tickets from petitioner
at the latter's office in Cebu City. They were to board petitioner's vessel, M/V Sweet Grace, bound for
Catbalogan, Western Samar. Instead of departing at the scheduled hour of about midnight on July 8,
1972, the vessel set sail at 3:00 A.M. of July 9, 1972 only to be towed back to Cebu due to engine
trouble, arriving there at about 4:00 P.M. on the same day. Repairs having been accomplished, the
vessel lifted anchor again on July 10, 1972 at around 8:00 A.M.
Instead of docking at Catbalogan, which was the first port of call, the vessel proceeded direct to
Tacloban at around 9:00 P.M. of July 10, 1972. Private respondents had no recourse but to disembark
and board a ferryboat to Catbalogan.
Issue
Whether or not the interruption is a fortutious event exempting petitioner from liability.
Held
Not exempt from liability.
The crucial factor then is the existence of a fortuitous event or force majeure. Without it, the right to
damages and indemnity exists against a captain who fails to fulfill his undertaking or where the
interruption has been caused by the captain exclusively.
There was no fortuitous event or force majeure which prevented the vessel from fulfilling its
undertaking of taking private respondents to Catbalogan. In the first place, mechanical defects in the
carrier are not considered a caso fortuito that exempts the carrier from responsibility.
In the second place, even granting arguendo that the engine failure was a fortuitous event, it
accounted only for the delay in departure. When the vessel finally left the port of Cebu, there was no
longer any force majeure that justified by-passing a port of call. The vessel was completely repaired
the following day after it was towed back to Cebu. In fact, after docking at Tacloban City, it left the
next day for Manila to complete its voyage.
The reason for by-passing the port of Catbalogan, as admitted by petitioner's General Manager, was to
enable the vessel to catch up with its schedule for the next week. The record also discloses that there
were 50 passengers for Tacloban compared to 20 passengers for Catbalogan, so that the Catbalogan
phase could be scrapped without too much loss for the company.
In defense, petitioner cannot rely on the conditions in small bold print at the back of the ticket reading.
The passenger's acceptance of this ticket shall be considered as an acceptance of the following
conditions:
3. In case the vessel cannot continue or complete the trip for any cause whatsoever, the carrier reserves the
right to bring the passenger to his/her destination at the expense of the carrier or to cancel the ticket and refund
the passenger the value of his/her ticket;
xxx xxx xxx
11. The sailing schedule of the vessel for which this ticket was issued is subject to change without previous
notice.
Even assuming that those conditions are squarely applicable to the case at bar, petitioner did not
comply with the same. It did not cancel the ticket nor did it refund the value of the tickets to private
respondents. Besides, it was not the vessel's sailing schedule that was involved. Private respondents'
complaint is directed not at the delayed departure the next day but at the by- passing of Catbalogan,
their destination. Had petitioner notified them previously, and offered to bring them to their
destination at its expense, or refunded the value of the tickets purchased, perhaps, this controversy
would not have arisen.
86*
The voyage to Catbalogan was "interrupted" by the captain upon instruction of management. The
"interruption" was not due to fortuitous event or for majeure nor to disability of the vessel. Having
been caused by the captain upon instruction of management, the passengers' right to indemnity is
evident. The owner of a vessel and the ship agent shall be civilly liable for the acts of the captain.
87*
American Home Assurance vs. CA

Facts
Both petitioner American Home Assurance Co. and the respondent National Marine Corporation are
foreign corporations licensed to do business in the Philippines, the former through its branch. The
American Home Assurance Company (Philippines), Inc. and the latter through its branch. The
National Marine Corporation (Manila).
Cheng Hwa Pulp Corporation shipped 5,000 bales (1,000 ADMT) of bleached kraft pulp from
Haulien, Taiwan on board "SS Kaunlaran", which is owned and operated by herein respondent
National Marine Corporation. The said shipment was consigned to Mayleen Paper, Inc. of Manila,
which insured the shipment with herein petitioner American Home Assurance Co.
The shipment arrived in Manila and was discharged into the custody of the Marina Port Services, Inc.,
for eventual delivery to the consignee-assured. However, upon delivery of the shipment to Mayleen
Paper, Inc., it was found that 122 bales had either been damaged or lost.
Mayleen Paper, Inc. then duly demanded indemnification from respondent National Marine
Corporation for the aforesaid damages/losses in the shipment but, for apparently no justifiable reason,
said demand was not heeded.
As the shipment was insured with petitioner, Mayleen Paper, Inc. sought recovery from the former.
American Home Assurance paid Mayleen Paper, Inc. the adjusted amount for the damages/losses
suffered by the shipment, hence, the former was subrogated to the rights and interests on Mayleen
Paper, Inc.
Later, the petitioner, as subrogee, then brought suit against respondent for recovery of the amount.
Respondent, National Marine Corporation, filed a motion to dismiss stating that American Home
Assurance Company had no cause of action based on Article 848 of the Code of Commerce which
provides "that claims for averages shall not be admitted if they do not exceed 5% of the interest which
the claimant may have in the vessel or in the cargo if it be gross average and 1% of the goods
damaged if particular average, deducting in both cases the expenses of appraisal, unless there is an
agreement to the contrary." It contended that based on the allegations of the complaint, the loss
sustained in the case was P35,506.75 which is only .18% of P17,420,000.00, the total value of the
cargo.
On the other hand, petitioner countered that Article 848 does not apply as it refers to averages and that
a particular average presupposes that the loss or damages is due to an inherent defect of the goods, an
accident of the sea, or a force majeure or the negligence of the crew of the carrier, while claims for
damages due to the negligence of the common carrier are governed by the Civil Code provisions on
Common Carriers.
Issue
Whether or not the law on averages applies.
Held
Doesnt apply.
On the main controversy, the pivotal issue to be resolved is the application of the law on averages.
Petitioner avers that respondent court failed to consider that respondent National Marine Corporation
being a common carrier, in conducting its business is regulated by the Civil Code primarily and
suppletorily by the Code of Commerce; and that respondent court refused to consider the Bill of
Lading as the law governing the parties.
88*
Private respondent countered that in all matters not covered by the Civil Code, the rights and
obligations of the parties shall be governed by the Code of Commerce and by special laws as provided
for in Article 1766 of the Civil Code; that Article 806, 809 and 848 of the Code of Commerce should
be applied suppletorily as they provide for the extent of the common carriers' liability.
For cargoes transported to the Philippines as in the case at bar, the liability of the carrier is governed
primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations of
common carrier shall be governed by the Code of Commerce and by special laws.
But more importantly, the Court ruled that common carriers cannot limit their liability for injury or
loss of goods where such injury or loss was caused by its own negligence. Otherwise stated, the law
on averages under the Code of Commerce cannot be applied in determining liability where there is
negligence.
Under the foregoing principle and in line with the Civil Code's mandatory requirement of
extraordinary diligence on common carriers in the care of goods placed in their stead, it is but
reasonable to conclude that the issue of negligence must first be addressed before the proper
provisions of the Code of Commerce on the extent of liability may be applied.
The records show that upon delivery of the shipment in question of Mayleen's warehouse in Manila,
122 bales were found to be damaged/lost with straps cut or loose, calculated by the so-called
"percentage method" at 4,360 kilograms and amounting to P61,263.41. Instead of presenting proof of
the exercise of extraordinary diligence as required by law, National Marine Corporation (NMC) filed
its Motion to Dismiss hypothetically admitting the truth of the facts alleged in the complaint to the
effect that the loss or damage to the 122 bales was due to the negligence or fault of NMC. As ruled by
this Court, the filing of a motion to dismiss on the ground of lack of cause of action carries with it the
admission of the material facts pleaded in the complaint. Such being the case, it is evident that the
Code of Commerce provisions on averages cannot apply.
On the other hand, Article 1734 of the Civil Code provides that common carriers are responsible for
loss, destruction or deterioration of the goods, unless due to any of the causes enumerated therein. It is
obvious that the case at bar does not fall under any of the exceptions. Thus, American Home
Assurance Company is entitled to reimbursement of what it paid to Mayleen Paper, Inc. as insurer.
89*
Phil Home Assurance vs. CA

Facts
Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan, a shipment
for carriage to Manila and Cebu.
While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene cylinder
located in the accommodation area near the engine room on the main deck level. As the crew was
trying to extinguish the fire, the acetylene cylinder suddenly exploded sending a flash of flame
throughout the accommodation area, thus causing death and severe injuries to the crew and instantly
setting fire to the whole superstructure of the vessel. The incident forced the master and the crew to
abandon the ship.
Thereafter, SS Eastern Explorer was found to be a constructive total loss and its voyage was declared
abandoned. Several hours later, a tugboat under the control of Fukuda Salvage Co. arrived near the
vessel and commenced to tow the vessel for the port of Naha, Japan.
Fire fighting operations were again conducted at the said port. After the fire was extinguished, the
cargoes which were saved were loaded to another vessel for delivery to their original ports of
destination. ESLI charged the consignees several amounts corresponding to additional freight and
salvage charges.
The charges were all paid by Philippine Home Assurance Corporation (PHAC) under protest for and
in behalf of the consignees. PHAC, as subrogee of the consignees, thereafter filed a complaint against
ESLI to recover the sum paid under protest on the ground that the same were actually damages
directly brought about by the fault, negligence, illegal act and/or breach of contract of ESLI.
In its answer, ESLI contended that it exercised the diligence required by law in the handling, custody
and carriage of the shipment; that the fire was caused by an unforeseen event; that the additional
freight charges are due and demandable pursuant to the Bill of Lading; and that salvage charges are
properly collectible under Act No. 2616, known as the Salvage Law.
Issue
Who, among the carrier, consignee or insurer of the goods, is liable for the additional charges or
expenses incurred by the owner of the ship in the salvage operations and in the transshipment of the
goods via a different carrier.
Held
Prescinding from the foregoing premises, it indubitably follows that the cargo consignees cannot be
made liable to respondent carrier for additional freight and salvage charges. Consequently, respondent
carrier must refund to herein petitioner the amount it paid under protest for additional freight and
salvage charges in behalf of the consignees.
The goods subject of the present controversy were neither lost nor damaged in transit by the fire that
razed the carrier. In fact, the said goods were all delivered to the consignees, even if the transshipment
took longer than necessary. What is at issue therefore is not whether or not the carrier is liable for the
loss, damage, or deterioration of the goods transported by them but who, among the carrier, consignee
or insurer of the goods, is liable for the additional charges or expenses incurred by the owner of the
ship in the salvage operations and in the transshipment of the goods via a different carrier.
In absolving respondent carrier of any liability, respondent Court of Appeals sustained the trial court's
finding that the fire that gutted the ship was a natural disaster or calamity. Petitioner takes exception
to this conclusion and we agree.
90*
In our jurisprudence, fire may not be considered a natural disaster or calamity since it almost always
arises from some act of man or by human means. It cannot be an act of God unless caused by
lightning or a natural disaster or casualty not attributable to human agency.
In the case at bar, it is not disputed that a small flame was detected on the acetylene cylinder and that
by reason thereof, the same exploded despite efforts to extinguish the fire. Neither is there any doubt
that the acetylene cylinder, obviously fully loaded, was stored in the accommodation area near the
engine room and not in a storage area considerably far, and in a safe distance, from the engine room.
Moreover, there was no showing, and none was alleged by the parties, that the fire was caused by a
natural disaster or calamity not attributable to human agency. On the contrary, there is strong
evidence indicating that the acetylene cylinder caught fire because of the fault and negligence of
respondent ESLI, its captain and its crew.
First, the acetylene cylinder which was fully loaded should not have been stored in the
accommodation area near the engine room where the heat generated therefrom could cause the
acetylene cylinder to explode by reason of spontaneous combustion. Respondent ESLI should have
easily foreseen that the acetylene cylinder, containing highly inflammable material was in real danger
of exploding because it was stored in close proximity to the engine room.
Second, respondent ESLI should have known that by storing the acetylene cylinder in the
accommodation area supposed to be reserved for passengers, it unnecessarily exposed its passengers
to grave danger and injury. Curious passengers, ignorant of the danger the tank might have on humans
and property, could have handled the same or could have lighted and smoked cigarettes while
repairing in the accommodation area.
Third, the fact that the acetylene cylinder was checked, tested and examined and subsequently
certified as having complied with the safety measures and standards by qualified experts before it was
loaded in the vessel only shows to a great extent that negligence was present in the handling of the
acetylene cylinder after it was loaded and while it was on board the ship. Indeed, had the respondent
and its agents not been negligent in storing the acetylene cylinder near the engine room, then the same
would not have leaked and exploded during the voyage.
Verily, there is no merit in the finding of the trial court to which respondent court erroneously agreed
that the fire was not the fault or negligence of respondent but a natural disaster or calamity. The
records are simply wanting in this regard.
On the issue of whether or not respondent court committed an error in concluding that the expenses
incurred in saving the cargo are considered general average, we rule in the affirmative. As a rule,
general or gross averages include all damages and expenses which are deliberately caused in order to
save the vessel, its cargo, or both at the same time, from a real and known risk. While the instant case
may technically fall within the purview of the said provision, the formalities prescribed under Articles
813 and 814 of the Code of Commerce in order to incur the expenses and cause the damage
corresponding to gross average were not complied with. Consequently, respondent ESLI's claim for
contribution from the consignees of the cargo at the time of the occurrence of the average turns to
naught.
91*
Sulpicio Lines vs. CA

Facts
The case stemmed from a complaint for damages of Aquarius Fishing Co., Inc. against Sulpicio Lines,
Inc. and Cresencio G. Castaneda.
The question to be determined is whether the collision between M/V Don Sulpicio and F/B Aquarius
'G' was due to the negligence of the defendants or of the plaintiff. It is admitted in the evidence that at
a distance of about 4 miles M/V Don Sulpicio has sighted 2 fishing boats, namely: F/B Aquarius 'C'
and F/B Aquarius G. From the evidence it appears that the 2 fishing boats had a speed of about 7.5
to 8 knots per hour while M/V Don Sulpicio was running about 15.5 knots per hour. It would appear
that the speed of M/V Don Sulpicio was more than twice as fast as the speed of the two fishing boats.
The weather at that time the accident happened was clear and visibility was good. In other words,
from the distance of about four miles at sea, the men of Don Sulpicio could clearly see the 2 fishing
boats which were ahead about 4 miles and likewise, the men of the 2 fishing boats could clearly see
M/V Don Sulpicio following. The plaintiff claims that they continued on their speed in their course
and while maintaining their speed they were rammed by M/V Don Sulpicio.
Defendants claim that plaintiff was negligent and that the collision was due to the negligence of the
men manning F/B Aquarius 'B' and submit that considering that F/B Aquarius 'B' had no lookout and
that the fishing boat was ahead, F/B Aquarius 'B' should have given way to M/V Don Sulpicio who
was following in order to avoid collision. And considering that F/B Aquarius 'B' was at fault, it should
suffer its own damage.
Issue
Held
Negligent.
Petitioners asserted that private respondent, through its patron, admitted that the vessel had no lookout
during the collision despite the absolute rule provided in Rule 9 of the Rules of Road. To bolster its
stance, it contended that it was a privileged vessel pursuant to Rules 19, 21, 22, 23 of the Regulations
for the Prevention of Collisions at Sea.
Both the trial court and the respondent court found that M/V Don Sulpicio was crossing at 15.5
knots per hour while F/B Aquarius G was obeying a speed limit of 7.5 knots per hour. The weather
was clear and visibility was good. M/V Don Sulpicio was four (4) miles away when it first sighted
F/B Aquarius G. All the time up to the collision, M/V Don Sulpicio maintained its speed of 16
knots. It was only two (2) minutes before the collision when M/V Don Sulpicio changed its course.
Whether or not the collision sued upon occurred in a crossing situation is immaterial as the Court of
Appeals, relying on Rule 24-C, Regulations for Preventing Collisions at the Sea, rules that the duty to
keep out of the way remained even if the overtaking vessel cannot determine with certainty whether
she is forward of or abaft more than 2 points from the vessel. It is beyond cavil that M/V Don
Sulpicio must assume responsibility as it was in a better position to avoid the collision. It should
have blown its horn or give signs to warn the other vessel that it was to overtake it.
Assuming argumenti ex gratia that F/B Aquarius G had no lookout during the collision, the
omission does not suffice to exculpate Sulpicio Lines from Liability. M/V Don Sulpicio cannot
claim that it was a privileged vessel being in the portside which can maintain its course and speed
during the collision. When it overtook F/B Aquarius G, it was duty bound during the collision. to
slacken its speed and keep away from other vessel, which it failed to do. The stance of petitioners that
F/B Aquarius G is a burdened vessel which should have kept out of the way of M/V Don Sulpicio
is not supported by facts.

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