Transpo Reviewer PDF

TRANSPORTATION AND MARITIME LAW
Based on the outline of Prof. Rodrigo Quimbo

_______________
I. General Considerations
A. Public Utilities
1. Article XII, 1987 Constitution
Art. XII, Section 11.
No franchise,
certificate or any other form of authorization for
the operation of a public utility shall be granted
except to citizens
of the Philippines or to
corporations or associations organized under
the laws of the Philippines at least 60% of
whose capital is owned by such citizens, nor
shall such franchise, certificate or authorization
be exclusive in character or for a longer period
than fifty years. Neither shall any franchise or
right be granted except under the condition that
it shall be subject to amendment, alteration or
repeal by the Congress when the common good
so requires. The State shall encourage equity
participation in public utilities by the general
public. The participation of foreign investors in
the governing body of any public utility
enterprise
shall
be
limited
to
their
proportionate share in its capital, and all the
executive and managing officers of such
corporation or association must be citizens of
the Philippines.
Section 17.
In times of national
emergency, when the public interest so
requires, the State may, during the emergency
and under reasonable terms prescribed by it,
temporarily take over or direct the operation of
any privately owned public utility or business
affected with public interest.
Section 18.
The State may, in the
interest of national welfare or defense,
establish and operate vital industries and, upon
payment of just compensation, transfer to
public ownership utilities and other private
enterprises to be operated by the Government.
Section 19. The State shall regulate or
prohibit monopolies when the public interest so
requires. No combinations in restraint of trade
or unfair competition shall be allowed.
(a) What is a public utility?
A public utility is a business or service
engaged in regularly supplying the public with some
commodity or service of public consequence such as
electricity, gas, water, transportation, telephone or
telegraph service. Apart from statutes which define
the public utilities that are within the purview of such
statutes, it would be difficult to construct a definition
of a public utility which would fit every conceivable
case. As its name indicates, however, the term public
utility implies a public use and service to the public.
(Am. Jur. 2d V. 64, p.549.) (Albano vs Reyes)
(b) What is a public service?
The Public Service Act (CA No. 146 as
amended) provides that the term public service
"includes every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire
or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and
done for general business purposes, any common

carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or
both with or without fixed route and whatever may be
its classification, freight or carrier service or any class,
express service, steamboat, or steamship line,
pontines, ferries, and water craft, engaged in the
transportation of passengers and freight or both,
shipyard, marine repairshop, [warehouse], wharf or
dock, ice plant, ice refrigeration plant, canal, irrigation
system, gas, electric light, heat and power, water
supply and power, petroleum, sewerage system, wire
or wireless communications system, wire or wireless
broadcasting stations and other similar public
services..." [Sec. 13(b)] (Albano vs Reyes)
Albano vs Reyes 175 SCRA 264
F:
On 20 April 1987, the Phil. Ports Authority
(PPA) adopted a resolution directing mgmt. to prepare
the Invitation to Bid and all relevant bidding
documents necessary for the public bidding of the
development, mgmt., and operation of the Manila Intl.
Container Terminal (MICT) and authorized the Board
Chairman Secretary Reyes to oversee and implement
the project.
Secretary Reyes created a 7-man MICT Bidding
Committee to evaluate all bids and recommend to the
Board the best bid. The PPA published the Invitation to
Bid with the reservation that it had the right to reject
any bid and to accept such bid it may deem
advantageous to the govt.
Seven companies submitted bids.
The
Committee recommended that the contract be
awarded to Intl. Container Terminal Services (ICTSI) on
the ground that it offered the best technical and
financial proposal.
Secretary Reyes awarded the
contract to ICTSI. Before the contract could be signed,
two cases were filed questioning the legality or
regularity of the bidding. The first was a special action
for prohibition with prelim injunction filed by Alo, a
concerned taxpayer. The second was a civil case for
prohibition with prayer for TRO filed by Sharp Co.
which actively participated in the bidding.
The President approved the proposed MICT
contract. The PPA and ICTFSI perfected the contract.
Rodolfo Albano, a member of the House of
Representatives filed the present case assailing the
award of the contract on the ground that since the
MICT is a public utility, it needs a legislative franchise
before it can legally operate as a public utility.
Issue : WON a legislative franchise is necessary.
Held : NO. Petition dismissed.
A franchise specially granted by Congress is
not necessary for the operation of the MICT by a
private entity. A contract entered into by the PPA and
such entity is substantial compliance with the law. 1.
Executive Order No. 30 authorized the PPA to take
over, manage and operate the MICT in accordance
with PD 857 (Revised Charter of the PPA). PD 857
expressly empowers the PPA to provide services within
Port Districts "whether on its own, by contract or
otherwise." Therefore, under EO 30 and PD 857, the
PPA may contract with ICTSI for the mgmt., operation
and devt. of the MICT.
2. Even if the MICT be considered a public utility or a
public service on the theory that it is a wharf or a dock
as contemplated by the Public Service Act, its
operation would not necessarily call for a legislative
franchise.
Legislative franchises are not required
before each and every public utility may operate. The
law has granted certain administrative agencies the
power to grant licenses for or to
authorize the
operation of certain public utilities.
That the Consti provides that the issuance of a
franchise for the operation of a public utility shall be
subject to amendment, alteration or repeal by

Congress does not necessarily imply that only
Congress has the power to grant such authorization.
There are several laws granting specified agencies in
the Executive Dept. the power to issue such
authorization for certain classes of public utilities. [ 1.
LTFRB wrt Certificates of Public Convenience
authorizing the operation of public land transportation
services provided by motorized vehicles; 2. ERB wrt
operation of electric power utilities and services
except electric coops]
Reading EO 30 and PD 857 together, the PPA
has been empowered to undertake by itself or to
authorize the operation and mgmt. of the MICT by
another by contract. The latter power having been
delegated to the PPA, a legislative franchise is no
longer necessary. In this case, the PPA's contracting
with ICTSI is wholly within its jurisdiction and powers.
3. The award of the contract to ICTSI is all the
authorization that is necessary. The award made by
the PPA and the President enjoys the presumption of
validity and regularity of official action. There is no
evidence to the contrary.
4. Albano has standing to assail the contract. While
the expenditure of public funds may not be involved
under the contract, public interest is definitely
involved considering the important role of the MICP in
the economic devt. of the country and the magnitude
of the amount involved. He has sufficient standing
since a public right (disclosure provision) is sought to
be enforced.
5. There in no conflict among the 3 branches of govt.
The Executive Dept. has not contravened an act of
Congress. There is no usurpation of powers of another
branch.
6. The determination of the winning bid should be left
to the sound judgment of the PPA. It is in the best
position to evaluate the bids. It has the technical
expertise which neither the Court nor Congress has.
No abuse of discretion has been shown.
shall not be considered as operating a public

service for the purposes of this Act.
B. Transportation
1.
Definition
A
contract
transportation is one whereby a certain person
association of persons obligate themselves
transport persons, things, news from one place
another for a fixed price. It is the removal of goods
persons from one place to another.
of
or
to
to
or
2. Public Nature
(a) Public Service Act
Section 13 (a) The Commission (PSC)
shall have jurisdiction, supervision, and control
over all public services and their franchises,
eqpt., and other properties, and in the exercise
of its authority, it shall have the necessary
powers and the aid of the public force:
Provided, That public services owned or
operated by govt. entities or GOOCs shall be
regulated by the Commission in the same way
as privately owned public services, but
certificates of public convenience or certificates
of public convenience and necessity shall not
be required of such entities or corporations: And
provided, further, That it shall have no authority
to
require
steamboats,
motorships
and
steamship lines, whether privately owned or
owned or operated by any govt. controlled
corporation
or
instrumentality
to
obtain
certificates of public convenience or to
prescribe their definite routes or lines of
service.
(b)
The term public service includes
every person that now or hereafter may
operate, manage, or control in the Philippines,
for hire or compensation, with general or limited
clientele, whether permanent, occasional or
accidental, and done for general business
purposes, any common carrier, railroad, street
railway, traction railway, sub-way motor vehicle,
either for freight or passenger, or both with or
without fixed route and whatever may be its
classification, freight or carrier service or any
class, express service, steamboat, or steamship
line, pontines, ferries, and water craft, engaged
in the transportation of passengers and freight
or
both,
shipyard,
marine
repairshop,
warehouse, wharf or dock, ice plant, ice
refrigeration plant, canal, irrigation system,
gas, electric light, heat and power, water supply
and power, petroleum, sewerage system, wire or
wireless communications system, wire or
wireless broadcasting stations and other similar
public services: Provided, however, that a
person engaged in agriculture, not otherwise a
public service, who owns a motor vehicle and
uses it personally and/or enters into a special
contract whereby said motor vehicle is offered
for hire or compensation to a third party or third
parties engaged in agriculture, not itself or
themselves a public service, for operation by
the latter for a limited time and for a specific
purpose directly connected with the cultivation
of his or their farm, the transportation,
processing, and marketing of agricultural
products of such third party or third parties
shall not be considered as operating a public
service for the purposes of this Act.
2. CA 146, as amended, Sec 13 (b)

The term public service includes every
person that now or hereafter may operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele,
whether permanent, occasional or accidental,
and done for general business purposes, any
common carrier, railroad, street railway, traction
railway, sub-way motor vehicle, either for
freight or passenger, or both with or without
fixed
route
and
whatever
may
be
its
classification, freight or carrier service or any
class, express service, steamboat, or steamship
line, pontines, ferries, and water craft, engaged
in the transportation of passengers and freight
or
both,
shipyard,
marine
repairshop,
[warehouse], wharf or dock, ice plant, ice
refrigeration plant, canal, irrigation system,
gas, electric light, heat and power, water supply
and power, petroleum, sewerage system, wire or
wireless communications system, wire or
wireless broadcasting stations and other similar
public services: Provided, however, that a
person engaged in agriculture, not otherwise a
public service, who owns a motor vehicle and
uses it personally and/or enters into a special
contract whereby said motor vehicle is offered
for hire or compensation to a third party or third
parties engaged in agriculture, not itself or
themselves a public service, for operation by
the latter for a limited time and for a specific
purpose directly connected with the cultivation
of his or their farm, the transportation,
processing, and marketing of agricultural
products of such third party or third parties
(c) The word "person" includes every

individual, copartnership, joint stock co. or
PAGE 2

corporation, whether domestic or foreign, their
lessees, trustees, or receivers, as well as any
municipality, province, city, GOOC, or agency of
the govt. of the Philippines, and whatever other
person or entities that may own or possess or
operate public services.
Philippines; Provided, that 60% of the stock or

paid-up capital ... must belong entirely to
citizens of the Philippines or of the US;
Provided, further, that no such certificate shall
be issued for a period of more than 50 years.
(b) To approve, subject to constitutional
limitations any franchise, privilege granted
under the provisions of Act No. 667, as amended
by Act. No. 1022, by any political subdivision of
the Philippines when, in the judgment of the
Commission, such franchise or privilege will
properly conserve the public interests xxx
Section 14. The ff. are exempted from

the provisions of the preceding section :
(a) Warehouses;
(b) Vehicles drawn by animals and
bancas moved by oar or sail, and tugboats and
lighters;
(c) Airships within the Philippines except
as regards the fixing of their maximum rates on
freight and passengers;
(d) Radio companies except with respect
to the fixing of rates;
(e) Public services owned or operated by
any instrumentality of the Natl. Govt. or by any
GOOC, except with respect to the fixing of rates.
(c) To fix and determine individual or

joint rates, tolls, charges, classifications, or
schedules thereof, as well as commutation,
mileage, kilometrage, and other special rates
which shall be imposed, observed and followed
thereafter by any public service ; Provided,
further that in case the public service
equipment of an operator is used principally or
secondarily for the promotion of a private
business, the net profits of said business shall
be considered in relation with the public service
of such operator for the purpose of fixing the
rates.
Section 15. With the exception of those

enumerated in the preceding section, no public
service shall operate in the Philippines without
possessing a valid and subsisting certificate
from the PSC known as the certificate of public
convenience,
or
certificate
of
public
convenience and necessity as the case may be,
to the effect that the operation of said service
and the authorization to do business will
promote the public interests in a proper and
suitable manner.
The Commission may prescribe as a
condition for the issuance of the certificate
provided in the preceding paragraph that the
service can be acquired by the Republic of the
Philippines or any instrumentality thereof upon
payment of the cost price of its useful eqpt.,
less reasonable depn.; and likewise, that the
certificate shall be valid only for a definite
period of time; and that the violation of any of
these conditions shall produce the immediate
cancellation of the certificate without the
necessity of any express action on the part of
the Commission.
In estimating the depn., the effect of the
use of the eqpt., its actual condition, the age of
the model, or other circumstances affecting its
value in the market shall be taken into
consideration.
The foregoing is likewise applicable to
any extension or amendment of certificates
actually in force and to those which may
hereafter be issued, to permit to modify
itineraries and time schedules of public
services, and to authorizations to renew and
increase eqpt. and properties.
(d) To fix just and reasonable standards,

classifications,
regulations,
practices,
measurements, or service to be furnished,
imposed, observed, and followed thereafter by
any public service.
(e) To ascertain and fix adequate and
serviceable standards for the measurement of
quantity, quality, pressure, initial voltage, or
other condition pertaining to the supply of the
product or service rendered by any public
service, and to prescribe reasonable regulations
for the examination and test of such product or
service and for the measurement thereof.
(f)
To
establish
reasonable
rules,
regulations, instructions, specifications, and
standards, to secure the accuracy of all meters
and appliances for measurements.
(g) To compel any public service to
furnish safe, adequate, and proper service as
regards the manner of furnishing the same as
well as the maintenance of the necessary
material and eqpt.
(h) To require any public service to
establish, construct, maintain and operate any
reasonable extension of its existing facilities,
where, in the judgment of said commission,
such extension is reasonable and practicable,
and will furnish sufficient business to justify the
construction and maintenance of the same, and
when the financial condition of the said public
service
reasonably
warrants
the
original
expenditure required in making and operating
such extension.
Section
16.
Proceedings
of
the
Commission, upon notice and hearing. The
Commission shall have power, upon proper
notice and hearing in accordance with the rules
and provisions of this Act, subject to the
limitations and exceptions mentioned and
saving provisions to the contrary.
(i) To direct any railroad, street, railway

or traction co. to establish and maintain at any
junction or point of connection or intersection
with any other line of said road or track, or with
any other line of any other railroad, street,
railway or traction co., such just and reasonable
connection as shall be necessary to promote the
convenience of shippers of property, or of
passengers, and in like manner to direct any
railroad, street railway or traction co. engaged
in carrying merchandise, to construct, maintain
and operate, upon reasonable terms, a switch
(a) To issue certificates ... authorizing the

operation
of
public
services
within
the
Philippines, whenever the Commission finds
that the operation of the public service
proposed and the authorization to do business
will promote the public interest in a proper and
suitable manner. Provided, that certificates will
be granted only to citizens of the Philippines or
of the US or to corps., co-partnerships,
associations
or
joint
stock
companies
constituted and organized under the laws of the
PAGE 3

connection with any private sidetrack which
may be constructed by any shipper to connect
with the railroad, street railway or traction
company line where, in the judgment of the
commission, such connection is reasonable and
practicable, and can be put in with safety, and
will furnish sufficient business to justify the
construction and maintenance of the same.
Provided, that said fees shall be smaller than

those charged for auto- buses, trucks, and
motor trucks of types not made regulation
under this subsection.
Section 17. Proceedings of commission
without previous hearing:
(a) To investigate, upon its own initiative,
or upon complaint in writing, any matter
concerning any public service as regards
matters under its jurisdiction; to require any
public service to furnish safe, adequate and
proper service as the public interest may
require and warrant; to enforce compliance with
any standard xxx and to prohibit or prevent any
public service from operating without first
securing a certificate of public convenience or
public necessity and convenience xxx and
require existing public services to pay the fees
provided for in this act for the issuance of the
proper certificate xxx under the penalty, in the
discretion of the commission, of the revocation
and cancellation of any acquired right.
(j) To authorize, in its discretion, any

railroad, street railway of traction company to
lay its tracks across tracks of any other railroad,
street railway or traction company, or across
any public highway.
(k) To direct
any railroad or street
railway co. to install such safety devices or to
adopt such other reasonable measures as may
in the judgment of the commission be necessary
for the protection of the public at passing grade
crossings of (1) public highways and railroads,
(2) public highways and street railways, or (3)
railroads and street railways.
(l) To fix and determine the proper and
adequate rates of depn. of the property of any
public service which will be observed in proper
and adequate depn. account to be carried for
the protection of stockholders, or bondholders
or creditors, in accordance with such rules,
regulations, and forms of account as the
commission may prescribe. Said rates shall be
sufficient to provide the amounts required over
and above the expenses of maintenance to keep
such
property in a
state of efficiency
corresponding to the progress of the industry.
Each
public
service
shall
conform
its
depreciation
accounts
to
the
rates
so
determined and fixed, and shall set aside the
money so provided for out of its earnings and
carry the same in a depreciation fund. The
income from such investments of money in such
fund shall likewise be carried in such fund. This
fund shall not be expended otherwise than for
depreciation, improvements, extensions, new
constructions or additions to the property of
such public service.
(b) To require payment of actual

expenses incurred in any investigation if a
violation shall be found; to assess costs not to
exceed 25% with reference to such investigation
(c) To appraise and value the property of
any public service; in relation thereto, to have
access to and use any books, documents or
records in the possession of any govt. dept.,
bureau, office, or political subdivision
(d) To provide, on motion by or at the
request of any consumer, for the examination
and test of any appliance used for the
measuring of any product or service of a public
service, to enter any premises where said
appliances may be, and other premises of the
public service, for the purpose of setting up and
using on said premises any apparatus necessary
therefor, and to fix fees to be paid by the
consumer who may apply for such examination,
and in case of defect, to refund the fees paid
(m) To amend, modify or revoke at any

time any certificate under the provisions of this
act, whenever the facts and circumstances on
the strength of which said certificate was issued
have
been
misrepresented
or
materially
changed.
(e) To permit any street railway or

traction company to change its existing gauge
to standard steam railroad gauge
(f) To grant any public service special
permits to make extra or special trips within the
territory covered by its certificate and to make
special excursions outside if the public interest
or special circumstances so require; Provided
where the public service cannot render such
extra service on its own line or in its own
territory, a special permit for such extra service
may be granted to any other public service
(n) To suspend or revoke any certificate

issued under the provisions of this act whenever
the holder thereof has violated or willfully and
consumatedly refused to comply with any order,
rule or regulation of the commission or any
provisions of this act: Provided, that the
commission for good cause, may prior to the
hearing suspend for a period not exceeding 30
days any certificate or the exercise of any right
or authority issued or granted under this act by
order of the commission, whenever such step
shall in the judgment of the commission be
necessary to avoid serious and irreparable
damage or inconvenience to the public or to
private interests.
(g) To require any public service to keep

its books, records, and accounts; to adopt a
uniform system of accounting as approved by
the auditor general
(h) To require any public service to
furnish
annual
reports
of
finances
and
operations, covering the 12 month period
ending December 31
(o) To fix, determine, and regulate, as the

convenience of the state may require, a special
type for auto buses, trucks and motor trucks, to
be hereafter constructed, purchased, and
operated by operators after the approval of this
act; to fix and determine a special registration
fee for auto-buses, trucks and motor trucks so
constructed,
purchased,
and
operated:
(i) To require every public service to file

with the commission a written, verified
statement made by the owner, president or
secretary setting forth the officers, authority,
power and duties of every officer, as to disclose
the source and origin of each administrative act
or rule
PAGE 4

(j) To require any public service to
comply with the laws of the Philippines and with
any local resolution or ordinance or its charter
commission in accordance with section 16 of

this act.
Section 20. Acts requiring the approval
of the Commission - Subject to established
limitations
and
exceptions
and
saving
provisions to the contrary, it shall be unlawful
for any public service or for the owner, lessee or
operator thereof, without the approval and
authorization of the Commission previously had
-
(k) To investigate accidents directly or

indirectly arising from or connected with the
maintenance or operation of the public service
(l) To require every public service to file a
complete schedule of every classification,
individual or joint rate, toll, fare or charge, and
in case of public carriers, a complete statement
of itineraries or routes
(a) To adopt, establish, fix, impose,

maintain, collect or carry into effect any
individual or joint rates, commutation, mileage
or other special rate, toll, fare, charge,
classification or itinerary. The Commission shall
approve only those that are just and reasonable
and not nay that are unjustly discriminatory or
unduly preferential, only upon reasonable
notice to the public services and other parties
concerned,
giving
them
a
reasonable
opportunity to be heard and the burden of the
proof to show that the proposed rates or
regulations are just an reasonable shall be upon
the public service proposing the same.
o Section 18 - It shall be unlawful for any

individual,
copartnership,
association,
corporation or joint-stock company, their
lessees, trustees or receivers xxx to engage in
any public service business without having first
secured from the commission a certificate,
except
grantees
of
legislative
franchises
expressly exempting such grantee from the
reqts of securing a certificate from the
commission, as well as those expressly
exempted
from
the
jurisdiction
of
the
commission
Section 19. Unlawful acts - It shall be
unlawful for any public service :
(b) To establish, construct, maintain or

operate new units or extend existing facilities or
make any other addition to or general extension
of the service.
(a) To provide or maintain any service

that is unsafe, improper or inadequate ,or
withhold or refuse any service which can
reasonably be demanded
and furnished, as
found and determined by the commission in a
final order which shall be conclusive and shall
take effect in accordance with this act, upon
appeal or otherwise.
(e) Hereafter to issue any stock or stock

certificates representing an increase of capital;
or issue any share of stock without par value; or
issue any
bonds
or other evidence of
indebtedness payable in more than one year
from the issuance thereof, provided that it shall
be the duty of the Commission, after hearing, to
approve any such issue maturing in more than
one year from the date thereof, when satisfied
that the same is to be made in accordance with
law, and the purpose of such issue be approved
by the Commission.
(b) To make or give, directly or indirectly,

by itself or through its agents, attorneys or
brokers, or any of them, discounts or rebates on
authorized rates, or grant credit for the
payment of freight charges, or any undue or
unreasonable preference or advantage to any
person or corporation or to any locality or to any
particular person or corporation or locality or
any particular description of traffic or service,
or subject any particular person or corporation
or locality or any particular description of traffic
to any prejudice or disadvantage in any respect
whatsoever; to adopt, maintain, or enforce any
regulation, practice or measurement which shall
be found or determined by the commission to be
unjust, unreasonable, unduly preferential, or
unjustly discriminatory, in a final order which
shall be conclusive and shall take effect in
accordance with the provisions of this act, upon
appeal or otherwise.
(g) To sell, alienate, mortgage, encumber

or lease its property, franchises, certificates,
privileges or rights or any part thereof; or
merge or consolidate its property, franchises,
privileges or rights, or any part thereof, with
those of any public service. The approval herein
required shall be given, after notice to the
public and after hearing, if it be shown that
there are just and reasonable grounds for
making the mortgage or encumbrance, for
liabilities of more than one year maturity, or the
sale, alienation, lease , merger or consolidation
to be approved, and that the same are not
detrimental to the public interest, and in case of
a sale, the date on which the same is to be
consummated shall be fixed in the order of
approval: Provided, however, that nothing
herein contained shall be construed to prevent
the transaction from being negotiated or
completed before its approval or to prevent the
sale, alienation, or lease by any public service
of any of its property in the ordinary course of
its business.
(c) To refuse or neglect, when requested

by the director of posts or his authorized
representative to carry public mail on the
regular trips of any public land transportation
service maintained or operated by any such
public service, upon such terms and conditions
and for a consideration in such amount as may
be agreed upon between the Director of Posts
and the public service carrier or fixed by the
commission in the absence of an agreement
between the Director of Posts and the carrier.
In case the Director of Posts and the public
service carrier are unable to agree on the
amount of the compensation to be paid for the
carriage of the mail, the Director of Posts shall
forthwith request the commission to fix a just
and reasonable compensation for such carriage
and the same shall be promptly fixed by the
(h) To sell or register in its books the

transfer or sale of shares of its capital stock, if
the result of that sale in itself or in connection
with another previous sale, shall be to vest in
the transferee more than 40% of the subscribed
capital of said public service.
Any transfer
made in violation of this provision shall be void
and of no effect and shall not be registered in
the books of the public service corporation.
PAGE 5

Nothing herein contained shall be construed to
prevent the holding of shares lawfully acquired.
- prior operator is given opportunity to improve service

- prior operator given opportunity to extend lines
- basis of rule : to prevent ruinous and wasteful
competition in order that the interests of the public
would be conserved and preserved; so long as the
operator complied with the terms and conditions of the
license and the reasonable demands of the public, it is
the duty of the PSC to protect rather than to destroy
its investment
(i) To sell, alienate or in any manner

transfer shares of its capital stock to any alien
if the result of that sale, alienation, or transfer
in itself or in connection with another previous
sale shall be the reduction to less than 60% of
the capital stock belonging to Philippine
citizens. Such sale, alienation or transfer shall
be void and of no effect and shall be sufficient
cause for ordering the cancellation of the
certificate.
Raymundo vs Luneta Motor 58 Phil 889

F:
Nicanor de Guzman signing as Guzco Transit
purchased trucks from Luneta Motor and executed PNs
guaranteed by a chattel mortgage on several trucks.
Failing to pay the PNs, a suit for collection was filed. A
writ of attachment was issued and garnishment was
served on the PSC attaching the right, title, and
participation of Guzco Transit in the CPC covering the
bus transportation lines between Manila and Rizal. The
CFI ordered the selling of these certificates in a public
bidding in which Luneta Motor was the highest bidder.
Nine days after the certificates were attached,
these were sold to Raymundo (including certificate No.
25951 which was not included in the sale to Luneta
Motor Co.). The approval of the sale was sought from
the PSC. The PSC approved the sale in the public
bidding and disapproved the sale to Raymundo except
with respect to Certificate No. 25951 which Raymundo
could apply for its approval.
(b) The Certificate of Public

Convenience (CPC), the Certificate of
Public Convenience and Necessity
(CPCN), and the Prior Operator Rule
Difference between CPC and CPCN : A CPCN is issued
by the PSC to a public service to which any political
subdivision has granted a franchise under Act 667
after the PSC has approved the same under Section
16(b). A CPC is any authorization to operate a public
service issued by the PSC. A CPC is an authorization
issued by the Commission for the operation of public
services for which no franchise, either municipal or
legislative, is required by law (e.g. auto-trucks and
motor vehicles). A CPCN is an authorization issued by
the PSC for the operation of public services for which a
franchise is required by law (e.g. electric, telephone
services).
Issue : Which of the two sales should prevail? public

auction by virtue of an attachment vs voluntary sale
Held : Sale to Luneta Motor Co. in a public auction
The Public Service Law authorizes certificates
of public convenience to be secured by public service
operators from the PSC. A CPC grants a right in the
nature of a limited franchise. The Code of Civil
Procedure does not exclude franchises or certificates
from the word "property."
The test by which to
determine WON a property can be attached and sold
upon execution is whether the judgment debtor has
such a beneficial interest therein that he can sell or
otherwise dispose of it for value. The Public Service
Law permits the PSC to approve the sale, alienation,
mortgaging, encumbering or leasing of property,
franchises, privileges, or rights or any part thereof. If
the holder of a certificate can voluntary sell it, there is
no reason why the same cannot be sold involuntarily
pursuant to court process.
CPCs have considerable material value. They
are valuable assets. They are subject to being sold for
consideration as much as any other property. They are
even more valuable than ordinary properties, taking
into consideration that they are not granted to every
one who applies for them but only to those who
undertake to furnish satisfactory and convenient
service to the public. Though intangible, they are of
value and are considered properties which can be
seized through legal process.
Nature of certificate : It constitutes neither a franchise

nor a contract, confers no property rights and is a
mere license or privilege, and such privilege is
forfeited when the grantee fails to comply with his
commitments behind which lies the paramount
interest of the public, for public necessity cannot be
made to wait, nor sacrificed for private convenience.
However, certificates represent property rights
to the extent that if the rights which any public utility
is exercising pursuant to lawful orders of the PSC has
been invaded by another public utility, in appropriate
cases actions may be maintained by the complainant
public utility. Owners of public utilities have the right
to maintain appropriate actions against other public
utilities not authorized to operate in competition with
the complainant.
Certificates are considered as property as used
in Civil Procedure as they have material value and are
material assets. They are subject to attachment and
seizure by legal process, and may be acquired by
purchase.
Determination of WON an issuance of a certificate is
for public convenience - (1) financial responsibility of
the applicant, (2) reliability of the applicant, (3)
priority of filing the application for a certificate, and
(4) priority of operation
Prior operator rule - to carry out the purpose and
intent for which the PSC was created the law
contemplates that the first licensee will be protected
in his investment and will not be subjected to a
ruinous competition. It is not therefore the policy of
the law for the PSC to issue a CPC to a second
operator to cover the same field and in competition
with a first operator who is rendering sufficient,
adequate and satisfactory service, and who in all
things and respects is complying with the rules and
regulations of the PSC. Accordingly, a CPC or CPCN
ought not to be granted where there is no complaint
as to existing rates and the co. in the field is rendering
adequate services.
- regular operators are preferred over irregular
operators
Batangas Transportation Co. vs Orlanes 52 Phil 455

F:
Orlanes sought to have a CPC to operate a line
of auto trucks with fixed times of departure between
Taal and Bantilan, with the right to receive passengers
and freight from intermediate points. The evidence is
conclusive that at the time of his application, Orlanes
was an irregular operator between Bantilan and Taal,
and that BTC was a regular operator between
Batangas and Rosario. Orlanes sought to have his
irregular operation changed into a regular operation,
and to set aside and nullify the prohibition against him
in his CPC that he shall not have or receive any
passengers or freight at any of the points served by
the BTC which holds a prior license from the PSC. His
petition is based on the fact that to comply with the
PAGE 6

growing demands of the public, the BTC applied for a
permit to increase the no. of trip hours at and between
the same places and for an order that all irregular
operators be prohibited from operating unless they
should observe an interval of 2 hours before or one
hour after the regular hours of the BTC. The PSC
granted the petition of Orlanes.
Issue : WON
operator in a
first operator
adequate and
Carmelo and Oriol then applied to the PSC for

a CPC to operate a taxicab service within Manila.
Monserrat opposed. The PSC denied the application.
Held : There is no valid, legal reason why Monserrat
should have the exclusive right of operating a taxicab
service. In the granting and refusal of a CPC, the
question is what is for the best interest of the public.
Tested by that rule, it is hard to conceive how it would
be for the best interests of the public to have one
taxicab service only, and how the public would be
injured by the granting of the certificate in question,
for it must be conceded that two companies in the
field would stimulate the business, and the public
would much sooner and much easier become
educated in the use of taxi.
Monserrat does not have a vested right in the
business of any person that might want the use of a
taxi, for the simple reason that the use of any taxi is
the sole discretion of the customer. This is unlike the
BTC case which dealt with an autobus service with
fixed schedules and routes.
a CPC should be issued to a second

field where, and in competition with, a
who is already operating a sufficient,
satisfactory service.
Held : NO. Decision of PSC is revoked.

An autobus line is a public utility, and as such,
is a common carrier and an impt. factor in the
business affairs of the community.
The PSC has the power to specify and define
the terms and conditions upon which any public utility
shall operate and to make reasonable rules and
regulations for its operation, and to fix the
compensation that it shall receive for its service to the
public, and for good cause may suspend or even
revoke a license granted.
It is not the policy of the law for the PSC to
issue a CPC to a second operator to cover the same
field and in competition with a first operator who is
rendering sufficient, adequate and satisfactory service,
and who in all things and respects is complying with
the rules and regulations of the PSC.
The power of the PSC to issue a CPC is founded
on the condition precedent that after a full hearing and
investigation, it shall find as a fact that the proposed
operation is for the convenience of the public.
So long as the first operator keeps and
performs his terms and conditions of its license and
complies with the reasonable demands of the public, it
has more or less of a vested and preferential right
over another who seeks to acquire a later license to
operate over the same route.
To carry out the purpose and intent for which
the PSC was created, the law contemplates that the
first license will be protected in his investment and will
not be subjected to ruinous competition.
The primary purpose of the PSC is to secure
adequate, sustained service for the public at the least
possible cost and to protect and conserve investments
which have already been made for that purpose. A
CPCN for the operation of an auto truck line in
occupied territory should not be granted where there
is no complaint as to existing rates and the co. in the
field is rendering adequate service. It is the duty of
the PSC to protect rather than to destroy the
investment of a public utility.
The policy of regulation upon which the
present public utility commission plan is based and
which tends to do away with competition among public
utilities as they are natural monopolies, is at once the
reason that the regulation of an existing system of
transportation, which is properly serving a given field,
or may be required to do so, is to be preferred to
competition among several independent systems.
While requiring a proper service from a single system
for a territory in consideration for protecting it as a
monopoly for all the service required and in conserving
its resources, no economic waste results and service
may be furnished at a minimum cost.
San Pablo vs Pantranco South Express, Inc. 153 SCRA

199
F:
Pantranco operates passenger buses from
Metro Manila to Bicol and Eastern Samar. It wrote to
the Maritime Industry Authority (MARINA) requesting
authority to lease/purchase MV Black Double to be
used in operating a ferryboat service from Matnog,
Sorsogon and Allen, Samar that will provide service to
co. buses and freight trucks that have to cross the
Bernardo Strait. MARINA denied the petition on the
ground that the Matnog- Allen run is adequately
serviced by the Cardinal Shipping Corp. and Epitacio
San Pablo and that market conditions cannot support
the entry of additional tonnage.
Pantranco acquired the vessel. It then applied
to BOT claiming that it can operate a ferry service in
connection with its franchise for bus operation in the
highway from Pasay City to Tacloban City for the
purpose of continuing
the highway, which is
interrupted by a small body of water, and that the
proposed ferry operation is merely a necessary and
incidental service to its main service and obligation of
transferring passengers from Pasay City to Tacloban
City. Accdg. to it, there is no need to obtain a separate
CPC to operate a ferry service to cater exclusively to
its passenger buses and ferry trucks. Pantranco began
operating its ferry service. The BOT held that the
ferryboat service is part of Pantranco's CPC and
amended Pantranco's CPC to provide so. The two
other ferry boat services filed motions for
reconsideration.
Issue : WON the sea can be considered as a
continuation of the highway. WON a land transpo co.
can be authorized to operate a ferry service or
coastwise or interisland shipping service along its
authorized route as an incident to its franchise without
the need of filing a separate application for the same.
Held : The water transport service between Matnog
and Allen is not a ferryboat service but a coastwise or
interisland
shipping
service.
Before
private
respondent may be issued a franchise or CPC for the
operation of the said service as a common carrier, it
must comply with the usual reqts. of filing an
application, payment of the fees, publication, adducing
evidence at a hearing and affording the oppositors the
opportunity to be heard.
Considering the environmental circumstances
of the case, the conveyance of passengers from
Matnog to Allen is not a ferryboat service but a
coastwise or interisland shipping service. Under no
circumstances can the sea between Matnog and Allen
be considered a continuation of the highway. While a
ferryboat service has been considered as a
Carmelo vs Monserrat 55 Phil 644

F:
Monserrat twice applied to Congress for an
exclusive franchise to operate a taxicab service in
Manila. The Governor General twice vetoed the bill.
Monserrat then applied to the PSC for a CPC. It was
granted.
PAGE 7

continuation of the highway when crossing rivers or
even lakes, which are small body of waters separating
the land, however, when as in this case the two
terminals are separated by an open sea, it cannot be
considered a continuation of the highway. Pantranco
must secure a separate CPC for the operation of an
interisland or coastwise shipping service. Its CPC
cannot be merely amended to include this water
service under the guise that it is a mere private ferry
service.
Pantranco does not deny that it charges its
passengers separately from the charges for the bus
trips and issues separate tickets whenever they board
the MV Black Double. It cannot pretend that it issued
tickets as a private carrier and not as a common
carrier. It in fact accepts walk in passengers during
the trips. It cannot claim that it is both a private
carrier and a common carrier at the same time.
EO 125, Sec. 4. Mandate. The DOTC shall

be the primary policy, planning, programming,
coordinating, implementing, regulating, and
administrative entity of the Executive Branch of
the govt. in the promotion, devt. and regulation
of dependable and coordinated networks of
transportation and communication systems, as
well as in the fast, safe, efficient, and reliable
postal,
transportation
and
communication
services.
To accomplish such mandate, the Dept.
shall have the ff. objectives:
(a) promote the devt. of dependable and
coordinated networks of transportation and
communication systems;
(b) guide govt. and private investments
in the devt. of the country's inter-modal
transportation and communication system in a
most practical, expeditious, and orderly fashion
for
maximum
safety,
service
and
cost
effectiveness;
(c) impose appropriate measures so that
technical, economic and other conditions for the
continuing
economic
viability
of
the
transportation and communication entities are
not
jeopardized
and
do
not
encourage
inefficiency and distortion of traffic patronage;
(d) develop an integrated plan for a
nationwide transmission system in accordance
with national and intl. telecommunications
service reqts. including, among others, radio
and
television
broadcast
relaying
leased
channel services and data transmission;
(e) guide govt. and private investments
in
the
establishment,
operation
and
maintenance of an intl. switching system for
incoming
and
outgoing
telecommunication
services;
(f) encourage the devt. of a domestic
telecommunications industry in coordination
with the concerned entities particularly, the
manufacture
of
communications/electronics
equipment and components to complement and
support, as much as possible, the expansion,
development, operation and maintenance of the
nationwide telecommunication network;
(g) Provide for a safe, reliable and
efficient postal system for the country.
In the case of Javellana vs PSC, the Court

differentiated between ferry service and interisland or
coastwide service. Ferry means service either by
barges or rafts, even by motor or steam vessels,
between the banks of a river or stream to continue the
highway which is interrupted by a body of water, or in
some cases, to connect two points on opposite shores
of an arm of the sea such as a bay or lake which does
not involve too great a distance or too long a time to
navigate.
But where the line or service involves
crossing a body of water which is wide and dangerous
with big waves, then such line or service belongs
properly to interisland or coastwide trade.
3.
Private
nature:
rights
and
obligations of parties
inter se arising from
transactions relating to transportation
(a)
absent
transportation
contract
(b)
arising
from
transportation contract
(i)
contract
of
transportation, defined - one
whereby a certain person or
association of persons obligate
themselves
to
transport
persons, things or news from
one place to another for a fixed
price
(ii)
contract
EO 125-A, Sec. 5. To accomplish its

mandate, the Dept. shall have the ff. powers
and functions:
(a) formulate and recommend national
policies and guidelines for the preparation and
implementation
of
integrated
and
comprehensive
transportation
and
communications systems at the national,
regional and local levels;
(b)
establish
and
administer
comprehensive
and
integrated
programs
for
transportation
and
communications, xxx call on any agency, corp.,
or organization xxx to participate and assist in
the preparation and implementation of such
program;
(c) assess, review and provide direction
to xxx research and devt. programs of the govt
xxx;
(d) administer and enforce all laws xxx in
the field of transportation and communication;
(e) coordinate with the DPWH in the
design,
location,
devt,
rehabilitation,
improvement, etc. of all infrastructure projects
and facilities of the Dept. xxx
(f) establish, operate and maintain a
nationwide postal system xxx;
of
transportation, elements
Parties to the contract :
1. shipper - one who gives rise to the contract
of transportation by agreeing to deliver the things or
news to be transported, or to present his own person
or those of other or others in the case of
transportation of passengers
2. carrier or conductor - one who binds himself
to transport persons, things, or news as the case may
be or one employed in or engaged in the business of
carrying goods for others for hire
Persons or corporations who undertake to
transport or convey goods, property, or persons from
one place to another, gratuitously or for hire, and are
classified as private or special carriers and common or
public carriers
C. Regulation of the Transportation Industry
* The Department of Transportation
and Communications
PAGE 8

(g)
issue
certificates
of
public
convenience for the operation of public land and
rail transportation utilities and services;
(h) accredit foreign aircraft and
manufactures xxx;
(i) establish and prescribe rules and
regulations for identification of routes, zones
and/or areas of operation of particular operator
of public land services;
(j) establish and prescribe rules xxx for
the establishment, operation and maintenance
of such telecommunication facilities in areas not
adequately served by the private sector xxx;
(k) establish and prescribe rules xxx
operation and maintenance of a nationwide
postal system xxx;
(l) establish and prescribe rules xxx
issuance of CPCs for public land transportation
utilities, such as motor vehicles, trimobiles, and
railways;
(m) establish and prescribe rules xxx
inspection and registration of air and land
transportation facilities, such as motor vehicles,
trimobiles, and aircrafts;
(n) establish and prescribe rules xxx
issuance of licenses xxx;
(o) establish and prescribe rules xxx
enforcement of laws governing transportation
xxx;
(p) determine, fix and/or prescribe
charges and/or rates pertinent to the operation
of public air and land transportation utility
facilities and services xxx;
(q) establish and prescribe rules xxx
accreditation of driving schools;
(r) administer and operate the Civil
Aviation Training Center xxx;
(s) perform such other powers and
functions as it may be prescribed by law, or as
may be necessary, incidental, or proper to its
mandate, or as may be assigned from time to
time by the President.
RA 776, as amended
Section 5. The Civil Aeronautics Board
shall be composed of the Secretary of
Commerce and Industry (now DOTC) as
Chairman,
the
CAB
Administrator,
the
Commanding Officer of the Phil. Air Force, and 2
others to be appointed by the President xxx
Section 10 (A) Except as otherwise
provided herein, the Board shall have the power
to regulate the economic aspect of air
transportation, and shall have the general
supervision and regulation of, and jurisdiction
and control over, air carriers, as well as their
property, property rights, equipment, facilities,
and franchise, in so far as may be necessary for
the purpose of carrying out the provisions of
this Act.
Section 10 (C) Powers and Duties of the
CAB
1. issue, deny, amend, revise, alter,
modify, cancel, suspend, or revoke xxx any
temporary operating permit or CPCN xxx
2.
fix
and
determine
reasonable
individual, joint or special rates, charges, or
fares which an air carrier may demand, collect
or receive for any service in connection with air
commerce xxx
3. authorize charters whether domestic
or intl. and special air services or flights xxx;
4. approve or disapprove increase of
capital, sale of equipment of an air carrier
engaged
in
air
commerce,
consolidation,
merger, purchase, lease, operating contract, or
acquisition and control between domestic air
carriers xxx
5. inquire into the mgmt. of the business
of any air carrier xxx;
6. require annual, monthly, periodical
and special reports from any carrier xxx;
7. prescribe the forms of any and all
accounts, records, and memoranda of the
movement of traffic, as well as of the receipt
and expenditures of money and the length of
time such accounts, records, and memoranda
shall be preserved xxx;
8. require each officer and director of
any air carrier to transmit a report describing
the shares of stock or other interest held by
such air carrier with any person engaged in any
phase of aeronautics, and the holding of the
stock in, and control of, other persons engaged
in any phase of aeronautics.
(a) Air
(i) Air Transportation
Office
EO 125, as amended by EO 125-A
Sec. 10. Assistant Secretaries and
Service Chiefs.
xxx
h)
Office
of
the
Assistant
Secretary for Air Transportation
Sec. 11. xxx The present Airport Offices
of the Bureau of Air Transportation are hereby
abolished and their functions are transferred to
the Dept. Airport Offices. xxx
Section 11. A CPCN is a permit issued by

the Board authorizing a person to engage in air
commerce and/or air transportation, foreign
and/or domestic.
Any permit may be altered, amended,
modified, suspended, canceled and revoked by
the Board xxx whenever the Board finds such
action to be in the public interest.
There shall be attached to the exercise of
the privileges xxx such reasonable terms,
conditions, or limitations as, in the judgment of
the Board, the public interest may require.
xxx
Sec. 13. xxx

d) The Civil Aeronautics Board is hereby
transferred from the Dept. of Tourism to the
Dept. as an attached agency xxx. The Secretary
of Transportation and Communications or his
designated
representative
shall
be
the
Chairman of the Board xxx
Sec. 25, RA 776. The Civil Aeronautics
Administration shall be under the administrative
supervision and control of the Dept. of
Commerce and Industry (now the DOTC) xxx
Section 12. Except as otherwise provided

in the Constitution and existing treaty or
treaties, a permit authorizing a person to
engage in domestic air commerce and/or air
transportation shall be issued only to citizens of
the Philippines.
(ii) Civil Aeronautics

Board
PAGE 9

(b) Land
(i) Land Transportation
Office
EO 125-A
Section 9. Assistant Secretaries and
Service Chiefs
xxx
e) Office of the Assistant Secretary for
Land Transportation
Section 11. xxx The present Regional
Offices of the Land Transportation Commission
are hereby abolished and their functions are
transferred to the respective Department
Regional offices for Land Transportation. xxx
Section 13 (a) The Land Transportation
Commission is hereby abolished and its staff
functions are transferred to the service offices
of the Dept. Proper and line functions are
transferred to the Dept. Regional Offices for
Land Transportation as provided in Section 11
herein. xxx The quasi-judicial powers and
functions of the Commission are transferred to
the Dept. The corresponding position structure
and staffing pattern shall be approved and
prescribed by the Secretary xxx.
Administrative Code of 1987, Title XV
Sec. 9. The Department shall have the
following line offices :
(1) The Office of the Assistant Secretary
for Land Transportation.
xxx
(ii) Land Transportation
Franchising and Regulatory Board
EO 202
Sec.1. There is hereby created in the
DOTC, the Land Transportation Franchising and
Regulatory Board.
Sec.2. The Board shall be composed of a
Chairman and 2 members with the same rank,
salary and privileges of an Assistant Secretary,
xxx
Sec.4. The Secretary of Transportation
and
Communications,
through
his
duly
designated
Undersecretary,
shall
exercise
administrative supervision and control over the
LTFRB.
Sec.5. Powers and functions:
a. prescribe and regulate routes of
service, xxx zones or areas of operation of
public land transportation services provided by
motorized vehicles xxx;
b. issue, amend, revise, suspend or
cancel
CPCs
or permits authorizing the
operation of public land transportation services
provided by motorized vehicles xxx;
c. determine, prescribe, approve and
periodically review and adjust reasonable fares,
rates and other related charges, relative to the
operation of public land transportation services
provided by motorized vehicles;
d. issue preliminary or permanent
injunction xxx;
e. punish for contempt of the Board, both
direct and indirect xxx;
f. issue subpoena and subpoena duces

tecum and to summon witnesses to appear in
any proceedings of the Board, to administer
oaths and affirmations;
g. conduct investigations and hearings of
complaints for violation of the public service
laws on land transportation and of the Board's
rules and regulations xxx;
h. to review motu proprio the decisions,
actions of the Regional Franchising and
Regulatory Office herein created;
i. promulgate rules and regulations
governing proceedings before the Board and the
Regional Franchising and Regulatory Office xxx;
j.
fix,
impose,
and
collect,
and
periodically review and adjust reasonable fees
and
other
related
charges
for
services
rendered;
k. formulate, promulgate, administer,
implement and enforce rules and regulations on
land transportation public utilities, standards of
measurements and/or design, and rules and
regulations requiring operators of any public
land transportation service to equip, install and
provide in their utilities and in their stations
such devices, eqpt. facilities and operating
procedures and techniques as may promote
safety, protection, comfort and convenience to
persons and property in their charges as well as
the safety of persons and property within their
areas of operations;
l. coordinate and cooperate with other
govt. agencies and entities xxx;
m. perform such other functions and
duties as may be provided by law, or as may be
necessary, or proper or incidental to the
purposes and objectives of this Executive Order.
Sec.6. The Board xxx shall sit and render
its decision en banc; xxx concurrence and
signature of at least 2 members xxx
The decision shall be appealable to the
Secretary within 30 days from receipt of the
decision; Provided, that the Secretary may motu
proprio review any decision or action of the
Board before the same becomes final.
Sec.7. There shall
be a
Regional
Franchising and Regulatory Office in each of the
administrative regions of the country which
shall be headed by a Board Regional Manager
having the rank, salary and privileges of a Dept.
Assistant Regional Director. The Regional
Franchising and Regulatory Offices shall hear
and decide uncontested applications/petitions
for
routes,
within
their
respective
administrative
regions:
Provided,
that
applications/petitions for routes extending their
respective territorial jurisdictions shall be heard
and decided by the Board.
Administrative Code, Title XV
Sec. 15. The quasi-judicial powers and
functions with respect to land transportation
shall
be
exercised
through
the
Land
Transportation and Regulatory Board.
Sec. 16. The Board shall be composed of
a Chairman and 2 members with the rank, salary
and privileges of an Assistant Secretary, all of
whom shall be appointed by the President upon
the recommendation of the Secretary of
Transportation and Communications xxx
Sec. 17. The Board shall have an
Executive Director who shall also be appointed
PAGE 10

by the President xxx. He shall have the rank,
salary and privileges of a Dept. Service Chief.
He shall assist the Board in the performance of
its powers and functions.
The Board shall be supported by the
Technical Evaluation Division, Legal Division,
Management
Information
Division,
Administrative Division and Finance Division.
Sec. 18. The Secretary of Transportation
and
Communications
shall
exercise
administrative supervision and control over the
Board.
Sec. 19. Powers and functions of the
Board:
1. prescribe and regulate routes xxx;
2. issue, amend, revise, suspend, or
cancel CPCs or permits, xxx;
3. determine, prescribe, approve and
periodically review and adjust reasonable fares
xxx;
4. issue injunctions xxx;
5. punish for contempt of the Board xxx;
6. issue subpoena and subpoena duces
tecum and to summon witnesses xxx;
7. conduct investigations and hearings of
complaints for violation of the public service
laws on land transportation xxx;
8. review motu proprio the decisions,
actions of the Regional Franchising and
Regulatory Offices xxx;
9. promulgate rules and regulations
governing proceedings before the Board and the
Regional Franchising and Regulatory Office xxx;
10.
fix,
impose
and
collect,
and
periodically review and adjust reasonable fees,
and
other
related
charges
for
services
rendered;
11. formulate, promulgate, administer,
implement and enforce rules and regulations on
land transportation xxx;
12. coordinate and cooperate with other
govt. agencies and entities concerned with any
aspect involving public land transportation
services xxx;
13. perform such other functions and
duties as may be provided by law, or as may be
necessary, or proper or incidental to the
purposes and objectives of the Dept.
Sec. 20. The Board shall xxx sit and
decide en banc; concurrence and signature of at
least 2 members; decision shall be appealable
to the Secretary within 30 days from receipt of
the decision; the Secretary may motu proprio
review any decision or action of the Board
before it becomes final.
Sec.
21.
Regional
Franchising
and
Regulatory
Offices
hear
and
decide
uncontested applications/ petitions for routes
xxx;
Sec. 22. decisions of the Regional
Franchising and Regulatory Offices shall be
appealable to the Board within 30 days from
receipt of the decision.
The Maritime Industry Authority is

hereby retained and shall have the ff. functions:
a. develop and formulate plans, policies,
projects xxx geared toward the promotion and
devt. of the maritime industry, the growth and
effective regulation of shipping enterprises, and
for the national security objectives of the
country;
b. establish, prescribe and regulate
routes, zones and/or areas of operation of
particular operators of public water services;
c. issue CPCs for the operation of
domestic and overseas water carriers;
d. register vessels as well as issue
certificates, licenses or document necessary or
incident thereto;
e. undertake the safety regulatory
functions pertaining to vessel construction and
operation
including
the
determination
or
manning levels and issuance of certificates of
competency to seamen;
f. enforce laws, prescribe and enforce
rules and regulations, including penalties for
violations
thereof,
governing
water
transportation and the Phil. merchant marine
xxx;
g. undertake the issuance of licenses to
qualified seamen and harbor, bay and river
pilots;
h. determine, fix, prescribe charges/rates
pertinent to the operation of public water
transport utilities xxx;
i.
accredit
marine
surveyors
and
maritime enterprises engaged in shipbuilding,
ship repair xxx;
j. issue and register the continuous
discharge book of Filipino seamen;
k. establish and prescribe rules and
regulations, standards and procedures for the
efficient and effective discharge of the above
functions;
l. perform such other functions as may
now or hereafter be provided by law.
II. Common Carriers
A. In General
1. Definitions; essential elements
Art. 1732. Common carriers are persons,
corporations, firms or associations engaged in
the business of carrying or transporting
passengers or goods or both, by land, water or
air, for compensation, offering their services to
the public.
Aguedo F. Agbayani, COMMERCIAL LAWS OF THE
PHILIPPINES, vol. 4, 1989 ed. (hereinafter 4 Agbayani)
Transportation
defined.-a
contract
transportation is one whereby a certain person
association of persons obligate themselves
transport persons, things, or news from one place
another for a fixed price
Classification :
1. As to object: (1) things; (2) persons; (3) news
(c) Water
2. As to place of travel: (1) land; (2) water; (3) air
(i) Maritime Industry
Authority
Parties to contract of transportation:
EO 125, Sec. 14 as amended by EO 125-A, Sec. 3
PAGE 11
of
or
to
to

(1) shipper or consignor.-- person to be
transported; one who gives rise to the contract of
transportation by agreeing to deliver the things or
news to be transported, or to present his own person
or those of other or others in the case of
transportation of passengers
(2) carrier or conductor.-- one who binds
himself to transport persons, things, or news as the
case may be; one employed in or engaged in the
business of carrying goods for other for hire
(3) consignee.-- the party to whom the carrier
is to deliver the things being transported; one to
whom the carrier may lawfully make delivery in
accordance with its contract of carriage (but the
shipper and the consignee may be one person)
Freight defined.-- The terms has been defined as:
(1) the price or compensation paid for the
transportation of goods by a carrier, at sea, from port
to port. But the term is also used to denote (2) the
hire paid for the carriage of goods on land from place
to place, or on inland streams or lakes. The name is
also applied to (3) the goods or merchandise
transported at sea, on land, or inland streams or lakes.
Thus the term is used in 2 senses: to designate the
price for the carriage, also called freightage, or to
designate the goods carried.
Contracts through transportation agents.-A
contract of transportation is not changed, altered or
affected by the mere fact that the obligor avails of
other parties to effect the transportation agreed upon,
as in the case of transportation agents.
Carriers defined.-- Persons or corporations who
undertake to transport or convey goods, property or
persons, from one place to another, gratuitously or for
hire, and are classified as private or special carriers,
and common or public carriers
and is therefore not subject

to regulation as a common carrier
Test for a common carrier:
(1) He must be engaged in the business of
carrying goods for others as a public employment, and
must hold himself out as ready to engage in the
transportation of goods for persons generally as a
business, and not a casual occupation.
(2) He must undertake to carry goods of the
kind to which his business is confined.
(3) He must undertake to carry by the methods
by which his business is conducted, and over his
established roads.
(4) The transportation must be for hire.
The true test is whether the given undertaking
is a part of the business engaged in by the carrier
which he has held out to the general public as his
occupation rather than the quantity or extent of the
business actually transacted, or the no. and character
of the conveyances used in the employment (the test
is therefore the character of the business actually
carried on by the carrier.)
Case : an airplane owner is a common carrier where
he undertakes for hire to carry all persons who apply
for passage indiscriminately as long as there is room
and no legal excuse for refusing; airlines engaged in
the passenger service on regular schedules on definite
routes, who solicit patronage of the traveling public,
advertise schedules for routes, times of leaving and
rates of fare, and make the usual stipulation as to
baggage are common carriers
Characteristics of common carriers:
Private carriers defined.-- Those who transport or

undertake to transport in a particular instance for hire
or reward
Common carriers vs Private carriers:
(1) the common carrier holds
(1) the private carrier agrees
himself out in common, that is,
in some special case with some
to all persons who choose to emprivate individual to carry
ploy him, as ready to carry for
for hire
hire; no one can be a common
carrier unless he has held himself
out to the public as a carrier in
such a manner as to render him
liable to an action if he should
refuse to carry for anyone who
wished to employ him
(2) a common carrier is bound to
(2) a private carrier is not
carry all who offer such goods as
bound to carry for any reason,
it is accustomed to carry and
unless it enter into a special
tender reasonable compensation
agreement to do so
for carrying them
(3) a common carrier is a public service
(3) a private carrier does not
and is therefore subject to regulation
hold itself out as engaged in
the business for the public,
(1) The common carrier undertakes to carry for

all people indifferently; he holds himself out as ready
to engage in the transportation of goods for hire as a
public employment and not as a casual occupation,
and he undertakes to carry for all persons indifferently,
within the limits of his capacity and the sphere of the
business required of him, so that he is bound to serve
all who apply and is liable for refusal, without sufficient
reason, to do so
(2) The common carrier cannot lawfully decline
to accept a particular class of goods for carriage to the
prejudice of the traffic in those goods
Exception : for some sufficient reason, where
the discrimination in such goods is reasonable and
necessary (substantial grounds)
(3) No monopoly is favored - the Commission
has the power to say what is a reasonable
compensation to the utility and to make reasonable
rules and regulations for the convenience of the
traveling public and to enforce them
(4) Public convenience - for the best interests
of the public
Meaning of Public use.-- It is not confined to
privileged individuals, but is open to the indefinite
public; there must be a right which the law compels
the owner to give to the general public. Public use is
not synonymous with public interest. The true criterion
is whether the public may enjoy it by right or only by
permission
The law prohibits unreasonable discrimination
by common carriers.-- The law requires common
carriers to carry for all persons, either passengers or
property, for exactly the same charge for a like or
contemporaneous service in the transportation of like
kind
of
traffic
under
substantially
similar
PAGE 12

circumstances or conditions. The law prohibits
common carriers (CC) from subjecting any person, etc.
or locality, or any kind of traffic, to any undue or
unreasonable prejudice or discrimination whatsoever.
Exception: When the actual cost of handling
and transporting is different, then different rates may
be charged
owner to give to the general public. It is not enough

that the general prosperity of the public is promoted.
Public use is not synonymous with public interest. The
true criterion by which to judge the character of the
use is whether the public may enjoy it by right or only
by permission.
Cases : (1) merchandise of like quantity may not be

considered alike - the quantity, kind and quality may
be exactly the same, and yet not be alike, so far as the
cost of transportation is concerned
(2) shipments may be alike although
composed of different classes of merchandise difference in the charge for handling and transporting
may only be made when the difference is based upon
actual cost
Home Insurance Co. vs American Steamship Agencies,

23 SCRA 24
Determination of justifiable refusal:

This involves a consideration of the following-(1) suitability of the vessels of the company for
the transportation of such products;
(2) reasonable possibility of danger or disaster,
resulting from their transportation in the form and
under the conditions in which they are offered for
carriage;
(3) the general nature of the business done by
the carrier;
(4) all the attendant circumstances which
might affect the question of the reasonable necessity
for the refusal by the carrier to undertake the
transportation of this class of merchandise
Case: The mere fact that the carriage of dynamites
may lead to destructive explosions is not sufficient to
justify refusal if it can be proven that in the condition
in which it is offered for carriage there is no real
danger to the carrier nor reasonable ground to fear
that the vessel and those on board will be exposed to
unnecessary or unreasonable risks
US vs Tan Piaco, 40 Phil 853
F:
Tan Piaco rented two automobile trucks and
was using them upon the highways of Leyte for the
purpose of carrying some passengers and freight. He
carried passengers and freight under a special
contract in each case and had not held himself out to
carry all passengers and freight for all persons who
might offer passengers and freight. He was convicted
for violation of the Public Utility Law for operating a
public utility without permission from the Public Utility
Commission.
Issue: WON defendant operated a public utility. NO.
Held: There is no public use. The trucks were used
under special agreements to carry particular persons
and property.
Under the Public Service Law, two things are
necessary : (1) the individual, co-partnership, etc.
must be a public utility; and (2) the business in which
such individual, co-partnership, etc. is engaged must
be for public use. "Public use" means the same as
"use by the public." The essential feature of public use
is that it is not confined to privileged individuals, but
is open to the indefinite public. In determining whether
a use is public, we must look not only to the character
of the business to be done, but also to the proposed
mode of doing it. If the use is merely optional with the
owners, or the public benefit is merely incidental, it is
not a public use, authorizing the exercise of the
jurisdiction of the public utility commission. There
must be, in general, a right which the law compels the
F:
A Peruvian firm shipped fishmeal through the
SS Crowborough consigned to the SMB and insured by
the Home Insurance Co. The cargo arrived with
shortages. SMB demanded and Home Insurance Co.
paid P14,000 in settlement of SMB's claim. Home
Insurance filed for recovery from Luzon Stevedoring
and American Steamship Agencies. Luzon Stevedoring
claimed that it merely delivered what it received from
the carrier in the same condition it received it.
American Steamship contended that it was not liable
because of a stipulation in the charter party that the
charterer and not the shipowner was to be liable for
any loss or damage to the cargo. The CFI absolved
Luzon Stevedoring but ordered American Steamship to
reimburse the P14,000 to Home Insurance, declaring
that Art. 587 of the Code of Commerce makes the ship
agent civilly liable for damages in favor of third
persons due to the conduct of carrier's captain and
that the stipulation in the charter party exempting
owner from liability is against public policy under Art.
1744 of NCC.
Issue : Is the stipulation valid? YES.
Held : The provisions of our Civil Code on common
carriers were taken from Anglo-American law. Under
American
jurisprudence,
a
common
carrier
undertaking to carry a special cargo or chartered to a
special person only, becomes a private carrier. As a
private carrier, a stipulation exempting the owner
from liability for the negligence of its agents is not
against public policy and is deemed valid.
The Civil Code provisions on common carriers
should not be applied where the carrier is not acting
as such but as a private carrier. The stipulation in the
charter party absolving the owner from liability for loss
due to the negligence of the agent would be void only
if the strict public policy governing CC is applied. Such
policy has no force where the public at large is not
involved, as in the case of a ship totally chartered (as
in this case) for the use of a single party. Based on the
stipulation, recovery cannot be had, for loss or
damage to the cargo against shipowners, unless the
same is due to personal acts or negligence of said
owner or its managers, as distinguished from agents
or employees. No personal act or negligence has been
proved.
In a charter of the entire vessel, the bill of
lading issued by the master to the charterer, as
shipper, is in fact and legal contemplation merely a
receipt and a document of title and not a contract, for
the contract is the charter party.
De Guzman vs CA, 168 SCRA 612
F:
Cendana was a junk dealer and was engaged
in buying used bottles and scrap materials in
Pangasinan and brought these to Manila for resale. He
used two 6-wheeler trucks. On the return trip to
Pangasinan, he would load his vehicles with cargo
which various merchants wanted delivered to
Pangasinan. For that service, he charged freight lower
than regular rates. General Milk Co. contracted with
him for the hauling of 750 cartons of mild. On the way
to Pangasinan, one of the trucks was hijacked by
armed men who took with them the truck and its cargo
and kidnapped the driver and his helper. Only 150
PAGE 13

cartons of milk were delivered. The Milk Co. sued to
claim the value of the lost merchandise based on an
alleged contract of carriage. Cendana denied that he
was a common carrier and contended that he could
not be liable for the loss since it was due to force
majeure. The TC ruled that he was a common carrier.
The CA reversed.
Issue : WON Cendana is a common carrier. YES.
Held : Cendana is properly characterized as a common
carrier even though he merely backhauled goods for
other merchants, and even if it was done on a periodic
basis rather than on a regular basis, and even if his
principal occupation was not the carriage of goods.
Art. 1732 makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and one who does such
carrying only as an ancillary activity. It also avoids
making a distinction between a person or enterprise
offering transportation services on a regular or
scheduled basis and one offering service on an
occasional, episodic or unscheduled basis. Neither
does it make a distinction between a carrier offering
its services to the general public and one who offers
services or solicits business only from a narrow
segment of the population.
The fact that Cendana does not hold a CPC is
no excuse to exempt him from incurring liabilities as a
CC. Otherwise, it would be to reward persons who fail
to comply with applicable statutory reqts. and would
be offensive to public policy. The liability arises the
moment a person or firm acts as a common carrier,
without regard to whether or not such carrier has also
complied with the requirements of the applicable
regulatory statute and implementing regulations.
Issue : WON Cendana may be held liable for the loss of
the milk. NO.
Held: Common carriers by the very nature of their
business and for reasons of public policy are held to a
very high degree of care and diligence (extra-ordinary
diligence) in the carriage of goods as well as
passengers. Article 1734 establishes the general rule
that CC are responsible for the loss, destruction, or
deterioration of the goods which they carry unless the
same is due to the causes enumerated therein. Such
enumeration is a closed list. Causes falling outside
the list, even if they are force majeure, fall within the
scope of Art. 1735 which provides that CC are
presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary diligence required under Art. 1733.
However, Art. 1745 provides that a CC cannot
be allowed to divest or diminish his responsibility even
for acts of strangers like thieves or robbers, except
where such thieves or robbers acted with grave or
irresistible threat, violence or force. The limits of
extraordinary diligence are reached where there is
grave or irresistible threat, violence or force. In this
case, the loss was quite beyond the control of the CC.
Even CC are not made absolute insurers against all
risks of travel and of transport of goods, and are not
liable for acts or events which cannot be foreseen or
are inevitable, provided that they shall have complied
with the rigorous standard of extraordinary diligence.
Planters Products vs CA, G.R. 101503 (Sept. 15, 1993)
F:
Planters purchased urea fertilizer from
Mitsubishi, New York. The fertilizer was shipped on MV
Sun Plum, which is owned by KKKK, from Alaska to San
Fernando, La Union. A time charter party was entered
into between Mitsubishi as shipper/charterer and KKKK
as shipowner. Upon arrival in the port, PPI unloaded
the cargo. It took PPI 11 days to unload the cargo. PPI
hired a marine and cargo surveyor to determine if

there was any shortage.
A shortage and
contamination of the fertilizer was discovered. PPI
sent a claim letter to SSA, the resident agent of KKKK
for the amount of the loss. An action for damages was
filed. SSA contended that the provisions on CC do not
apply to them because they have become private
carriers by reason of the charter-party. The TC awarded
damages. The CA reversed.
Issue : Does a charter party between a shipowner and
a charterer transform a CC into a private one as to
negate the civil law presumption of negligence in case
of loss or damage to its cargo? NO.
Held : 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. There
are 2 kinds: (1) contract of affreightment which
involves the use of shipping space or vessels leased by
the owner in part or as a whole, to carry goods for
others; and (2) charter by demise or bareboat charter
where the whole vessel is let to the charterer with a
transfer to him of its entire command and possession
and consequent control over its navigation, including
the master and the crew, who are his servants.
It is not disputed that the carrier operates as a
CC in the ordinary course of business. When PPI
chartered the vessel, the ship captain, its officers and
crew were under the employ of the shipowner and
therefore continued to be under its direct supervision
and control. Thus it continued to be a public carrier.
It is therefore imperative that a public carrier
shall remain as such, notwithstanding the charter of
the whole or portion of a vessel, provided the charter
is limited to the ship only, as in the case of a timecharter or a voyage-charter.
It is only when the
charter includes both the vessel and the crew, as in a
bareboat or demise that a CC becomes private, insofar
as such particular voyage is concerned.
Issue : WON the carrier is liable for damages. NO.
Held : The presumption of negligence on the part of
respondent carrier has been overcome by the showing
of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. On the other hand, no
proof was adduced by the petitioner showing that the
carrier was remiss in the exercise of due diligence in
order to minimize the loss or damage to the goods it
carried.
Coastwise Lighterage Corp. vs. CA, GR No. 114167,
July 12, 1995
F:
Pag-asa Sales, Inc. entered into a contract to
transport molasses from Negros to Mla. w/ Coastwise,
using the latter's dumb barges. The barges were
towed in tandem by the tugboat MT Marcia, w/c is
likewise owned by Coastwise.
Upon reaching Mla. Bay, while approaching
Pier 18, one of the barges, "Coastwise 9," struck an
unknown sunken object.
The forward buoyancy
compartment was damaged, and water gushed in
through a hole 2 inches wide and 22 inches long. 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 to
reject the shipment of molasses as a total loss.
Thereafter, Pag-asa filed a formal claim w/ the insurer
of its cargo, herein pvt. resp., Phil. Gen. Insurance Co.
(Philgen) and against the carrier, herein petitioner
Coastwise. Coastwise denied the claim and it was
Philgen w/c paid the consignee the amount of
P700,000 representing the value of the damaged cargo
of molasses.
PAGE 14

In turn, Phil-gen filed an action agsint
Coastwise bef. RTC-Mla. seeking to recover the
P700,000 it paid to Pag-asa. RTC ruled in favor of
Philgen. CA affirmed the RTC decision. Hence, this
petition.
RULINGS:
(1)
Bareboat charter and contract of
affreightment, difference; Coastwise, by the contract
of affreightment, was not converted into a private
carrier, but remained a common carrier.-- Under the
demise or bareboat charter of the vessel, the charterer
will generally be regarded as the owner of the voyage
or service stipulated. The charterer mans the vessel
w/ his own people and becomes the owner pro hac
vice, subject to liability to others for damages caused
by negligence. To create a demise, the owner of a
vessel must completely and exclusively relinquish
possession, command and navigation thereof to the
charterer; anything short of such a complete transfer
is a contract of affreightment (time or voyage charter
party) or not a charter party at all.
A contract of affreightment is one in w/c 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 ships, the
charterer or freighter merely having use of the space
in the vessel in return for his payment of the charter
hire. xxx
xxx
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 bet. the two.
Petitioner admits that the contract it entered
into w/ the consignee was one of afreightment. We
agree. Pag-asa only leased 3 of petitioner's vessels, in
order to carry cargo from one point to another, but the
possession, command and navigation of the vessels
remained w/ petitioner.
(2) Petitioner is liable for breach of contract of
carriage, having failed to overcome the presumption
of negligence w/ the loss and destruction of goods it
transported, by proof of its exercise of extraordinary
diligence.-- Mere proof of delivery of goods 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. Jesus Constantino, the
patron of the vessel "Coastwise 9" admitted that he
was not licensed. This violates the rule in the Code of
Commerce (Art. 609) w/c requires that patrons must
"have the legal capacity to contract in accordance w/
this code, and prove the skill, capacity and
qualifications necessary to command and direct the
vessel xxx and must be qualified xxx for the discharge
of the duties of the position. xxx" Coastwise cannot
safely claim to have extraordinary diligence, by
placing a person whose navigational skills are
questionable, at the helm of the vessel w/c eventually
met the fateful accident. xxx 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 8. RAM.
2. Nature of business; power of State
to regulate
Art.
1765.
The
[Public
Service
Commission] Board of Transportation may, on its
own motion or on petition of any interested
party, after due hearing, cancel the certificate
of public convenience granted to any common
carrier that repeatedly fails to comply with his
or its duty to observe extraordinary diligence as

prescribed in this Section.
4 Agbayani:
Common carriers are subject to legislative
regulation.-- The business of a common carrier holds
such a peculiar relation to the public interest that
there is superinduced upon it the right of public
regulation.
The business of a common carrier is
affected with public interest. When, therefore, one
devotes his property to a use in which the public has
an interest, he, in effect, grants to the public an
interest in that use, and must submit to be controlled
by the public for the common good, to the extent of
the interest he had thus created.
Limitation on power to regulate.-Such
regulations must not have the effect of depriving an
owner of his property without due process of law, nor
of confiscating, or appropriating private property
without just compensation, nor of limiting or
prescribing irrevocably vested rights or privileges
lawfully acquired under a charter or franchise [just
compensation, due process of law]
When judiciary may interfere with legislative
regulation of common carriers.-- The judiciary
ought not to interfere with legislative regulations
unless they are so plainly and palpably unreasonable
as to make their enforcement equivalent to the taking
of property for public use without such compensation
as under all circumstances is just both to the owner
and to the public.
Pantranco vs PSC, 70 Phil 221
F:
Pantranco has been engaged for the past 20
years in the business of transporting passengers by
means of motor vehicles in accordance with the CPCN
issued to it. It filed with the PSC an application for
authorization to operate 10 addtl. new trucks. The
application was granted with two conditions : (1) that
the CPCN would be valid for only 25 years and (2) that
the service can be acquired by the govt. upon
payment of cost price of its useful eqpt. less
reasonable depreciation. Pantranco challenged the
constitutionality of Art. 15, CA 146 as an undue
delegation of legislative powers.
Issue : WON the PSC may prescribe the 2 conditions as
a prerequisite to the issuance of the CPCN.
Held : Yes. CA 146 provides a sufficient standard,
which is public interest, by which the PSC is guided in
imposing such conditions.
The business of a common carrier holds such a
peculiar relation to the public interest that there is
superinduced upon it the right of public regulation.
When private property is affected with a public
interest, it ceases to be juris privati only. When,
therefore, one devotes his property to a use in which
the public has an interest, he, in effect, grants to the
public an interest in that use, and must submit to be
controlled by the public for the common good, to the
extent of the interest he had thus created. He may
withdraw his grant by discontinuing the use, but so
long as he maintains the use, he must submit to
control. Indeed this right is so far beyond question that
it is settled that the power of the state to exercise
legislative control over public utilities may be
exercised through the board of commissioners. This
right of the state to regulate public utilities is founded
upon the police power, and statutes for the control and
regulation of utilities are a legitimate exercise thereof,
for the protection of the public as well as the utilities
themselves. Such statutes are not unconstitutional,
PAGE 15

either as impairing the obligation of contracts, taking
property without due process, or denying the equal
protection of the laws, especially inasmuch as the
question WON private property shall be devoted to a
public use and the consequent burdens assumed is
ordinarily for the owner to decide; and if he voluntarily
places his property in public service he cannot
complain that it becomes subject to the regulatory
powers of the state. This is more so in the light of
authorities which hold that a CPC constitutes neither a
franchise nor a contract, confers no property rights
and is a mere license or privilege.
loss, destruction, or deterioration

of goods on account of the
defective condition of the car,
vehicle, ship, airplane or other
equipment used in the contract of
carriage.
Art. 1755.
A common
carrier is bound to carry the
passengers safely as far as human
care and foresight can provide,
using the utmost diligence of very
cautious persons, with a due
regard for all circumstances.
3. Nature and Basis of Liability

Art. 1733. Common carriers, from the
nature of their business and for reasons of
public
policy,
are
bound
to
observe
extraordinary diligence in the vigilance over the
goods and for the safety of the passengers
transported
by
them,
according
to
the
circumstances of each case.
Such extraordinary diligence in the
vigilance over the goods is further expressed in
Articles 1734, 1735, and 1745, Nos. 5,6, and 7,
while the extraordinary diligence for the safety
of the passengers is further set forth in Articles
1755 and 1756.
Art. 1734. Common carriers
are responsible for the loss,
destruction, or deterioration of
the goods, unless the same is due
to any of the following causes
only:
(1)
Flood,
storm,
earthquake, lightning, or other
natural disaster or calamity;
(2) Act of the public enemy
in war, whether international or
civil;
(3) Act or omission of the
shipper or owner of the goods;
(4) The character of the
goods or defects in the packaging
or in the containers;
(5)
Order
or
act
of
competent public authority.
Art. 1735. In all cases other
than those mentioned in Nos. 1, 2,
3, 4 and 5 of the preceding article,
if the goods are lost, destroyed or
deteriorated, common carriers are
presumed to have been at fault or
to have acted negligently, unless
they prove that they observed
extraordinary
diligence
as
required in Art. 1733.
Art. 1745. Any of the ff. or
similar
stipulations
shall
be
considered unreasonable, unjust
and contrary to public policy:
xxx
(5)
That
the
common
carrier shall not be responsible for
the acts or omissions of his or its
employees;
(6)
That
the
common
carrier's
liability
for
acts
committed by thieves, or of
robbers who do not act with grave
or irresistible threat, violence or
force,
is
dispensed
with
or
diminished;
(7)
That
the
common
carrier is not responsible for the
Art. 1756. In case of death

of or injuries to passengers,
common carriers are presumed to
have been at fault or to have
acted negligently, unless they
prove
that
they
observed
extraordinary
diligence
as
prescribed in articles 1733 and
1755.
4 Agbayani:
Extraordinary diligence required of common
carriers.-- The law requires CC to exercise extraordinary diligence which means that they must render
service with the greatest skill and utmost foresight.
The extra-ordinary diligence required of carriers in the
handling of the goods of the shippers and consignees
last from the time the cargoes are loaded in the
vessels until they are discharged and delivered to the
consignees.
Reasons for requiring extra-ordinary diligence.-The nature of the business of common carriers and the
exigencies of public policy demand that they observe
extra-ordinary diligence; the business of CC is
impressed with a special public duty and therefore
subject to control and regulation by the state. The
public must of necessity rely on the care and skill of
CC in the vigilance over the goods and safety of the
passengers
Rigorous law on common carriers not applicable
to special employment as carrier.-The laws
applicable to CC are rigorous and should not be
extended to a person who has neither expressly
assumed that character, nor by his conduct and from
the nature of his business justified the belief on the
part of the public that he intended to assume it.
Registered owner primarily and solidarily liable
with driver, under the "kabit system."-Registered owner is primarily and solidarily liable for
the damage caused by the vehicle registered in his
name, even if the said vehicle had already been sold,
leased or transferred to another person who was, at
the time of the accident, actually operating the
vehicle. The operator of record continues to be the
operator of the vehicle in contemplation of law, as
regards the public and third persons, and as such is
responsible for the consequences incident to its
operation; such owner/operator of record is held in
contemplation of law as the employer of the driver.
Kabit system.-- One whereby a person who has
been granted a certificate of public convenience allows
other persons who own vehicles to operate them
under such license, for a fee or percentage of the
earnings.
This is contrary to public policy, and
therefore, void and inexistent; "this is a pernicious
system that cannot be too severely condemned; it
constitutes an imposition upon the good faith of the
govt."
PAGE 16

Reason for holding registered owner liable.-- The
law does not relieve the registered owner directly of
the responsibility that the law fixes and places upon
him as an incident or consequence of registration -where a registered owner allowed to evade
responsibility by proving who the supposed transferee
or owner is, it would be easy for him by collusion with
others or otherwise, to escape said responsibility and
transfer the same to an indefinite person or to one
who possesses no property with which to respond
financially for the damage or injury done; in case of an
accident, the registered owner should not be allowed
to disprove his ownership to the prejudice of the
person injured or to be relieved from responsibility
Cangco vs MRR, 38 Phil 768
F:
Jose Cangco, an employee of MRR, was riding
on its train. As it drew up to the station, the plaintiff
made his exit. As he alighted, his foot stepped on a
sack of watermelons causing him to slip and his right
arm was crushed. This happened between 7 and 8
p.m. and as the railroad station was lighted dimly by a
single light, objects on the platform were difficult to
see.
Issue : WON MRR is liable to pay damages for the acts
of its EEs.
Held : YES.
It cannot be doubted that the EEs of the
railroad co. were guilty of negligence in piling sacks on
the platform; their presence constituted an effective
legal cause of the injuries sustained by Cangco.
It is impt. to note that the foundation of the
legal liability of the defendant is the contract of
carriage, and that the obligation to respond for the
damage which plaintiff has suffered arises, if at all,
from the breach of that contract by reason of the
failure of defendant to exercise due care in its
performance. Its liability is direct and immediate
(culpa contractual), differing essentially, from that
presumptive responsibility for the negligence of its
servants, which can be rebutted by proof of the
exercise of due care in the selection and supervision of
EEs (culpa aquiliana).
The liability of masters and employers for the
negligent acts or omissions of their servants or agents,
when such act or omissions cause damage which
amount to the breach of a contract, is not based upon
a mere presumption of the master's negligence in their
selection or control, and proof of exercise of the
utmost diligence and care in this regard does not
relieve the master of his liability for the breach of his
contract. When the facts averred show a contractual
undertaking by defendant for the benefit of plaintiff,
and it is alleged that plaintiff has failed or refused to
perform the contract, it is not necessary for plaintiff to
specify in his pleadings whether the breach of the
contract is due to wilful fault or to negligence on the
part of the defendant, or of his servants or agents.
Proof of the contract and of its nonperformance is
sufficient prima facie to warrant recovery.
The contract of defendant to transport plaintiff
carried with it, by implication, the duty to carry him in
safety and to provide safe means of entering and
leaving its trains. That duty, being contractual, was
direct and immediate, and its nonperformance could
not be excused by proof that the fault was morally
imputable to defendant's servants.
Medina vs Cresencia, 99 Phil 506
F:
A passenger jeepney driven by Brigido Avorque
smashed into a Meralco post resulting in the death of
Vicenta Medina, one of its passengers. In a criminal

case of homicide through reckless imprudence,
Avorque pleaded guilty. The right to file a separate
action for damages was reserved. Cresencia was still
the registered operator of the jeepney in the records of
the Motor Vehicles Office and the PSC, while Rosario
Avorque was the owner at the time of the accident.
Issue: WON Cresencia is liable for breach of the
contract of carriage. YES.
Ratio: The law requires the approval of the PSC, in
order that a franchise, or any privilege pertaining
thereto, may be sold or leased without infringing the
certificate issued to the grantee; and that if property
covered by the franchise is transferred or leased
without this requisite approval, the transfer is not
binding against the public or the PSC; and in
contemplation of law, the grantee of record continues
to be responsible under the franchise in relation to the
PSC and to the public. Since a franchise is personal in
nature, any transfer or lease thereof should be notified
to the PSC so that the latter may take proper
safeguards to protect the interest of the public.
Plaintiff's action is based on the breach of the
carrier's contractual obligation to carry his passengers
safely to their destination (culpa contractual). The
liability of the carrier is direct and immediate.
Isaac vs A.L. Ammen Trans. Co., 101 Phil 1046
F:
Plaintiff boarded defendant's bus as a paying
passenger from Albay. The bus collided with a pick-up
truck which was coming from the opposite direction
trying to swerve from a pile of gravel. As a result, his
left arm was completely severed. Plaintiff chose to
hold defendant liable on its contractual obligation.
Plaintiff brought this action for damages which the
lower court dismissed holding the driver of the pick-up
negligent and not that of the bus.
Issue : WON defendant observed extra-ordinary
diligence or the utmost diligence of a very cautious
person in avoiding the collision. YES.
Held : The facts of the case show that the bus and the
pick-up were approaching each other head-on. The
bus swerved to the right and went over a pile of stones
and gravel. Despite the efforts of the bus driver, the
pick up car still hit the rear left side of the bus. The
sense of caution one should observe cannot always be
expected from one who is placed suddenly in a
predicament where he is not given enough time to
take the proper course of action under ordinary
circumstances.
Furthermore, plaintiff is guilty of
contributory negligence since he placed his left elbow
outside the window.
Ratio: A CC is bound to carry the passengers safely as
far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with due
This extra-ordinary
diligence required of common carriers is calculated to
protect the passengers from the tragic mishaps that
frequently occur in connection with rapid modern
transportation.
This high standard of care is
imperatively demanded by the preciousness of human
life and by the consideration that every person must in
every way be safeguarded against all injury.
Principles as to liability of CC:
(1) the liability of a carrier is contractual and
arises upon breach of its obligation; there is breach if
it fails to exert extra-ordinary diligence accdg. to all
the circumstances of each case
(2) a carrier is obliged to carry its passenger
with the utmost diligence of a very cautious person,
having due regard for all the circumstances
PAGE 17

(3) a carrier is presumed to have been at fault
or to have acted negligently in case of death of, or
injury to, passengers, it being it duty to prove that it
exercised extra-ordinary diligence
(4) the carrier is not an insurer against all risks
of travel.
Fores vs Miranda, 105 Phil 266
F:
Respondent, a professor of Fine Arts, was a
passenger of a jeep registered in the name of Fores
but actually operated by Carmen Sackerman. While
the jeep was descending at Sta. Mesa bridge at
excessive speed, the driver lost control of it causing it
to swerve and hit the bridge wall resulting to injuries
to its passengers including respondent who suffered a
fracture of the upper right humerus. In an action for
damages, the CFI awarded actual damages. The CA
reduced the actual damages and added moral
damages and attorney's fees.
Issue : WON the approval of the PSC is necessary for
the sale of a public service vehicle even without
conveying therewith the authority to operate the
same. YES.
Held : A transfer made without the requisite approval
of the PSC is not effective and binding in so far as the
responsibility of the grantee under the franchise in
relation to the public is concerned. The law was
designed primarily for the protection of the public
interest.
Ratio: The principle of last clear chance would call for

application in a suit between the owners and drivers of
two colliding vehicles. It does not arise where a
passenger demands responsibility from the carrier to
enforce its contractual obligations. For it would be
inequitable to exempt the negligent driver of the
jeepney and its owners on the ground that the other
driver was likewise guilty of negligence.
On the presumption that the drivers who bump
the rear of another vehicle are guilty and the cause of
the accident, unless contradicted by other evidence,
the SC held that the jeep made a sudden U-turn which
was so abrupt that the other driver de los Reyes did
not anticipate the sudden U-turn.
The proximate cause of the accident was the
negligence of Manalo and the spouses Mangune. In
culpa contractual, the carrier is presumed to have
been at fault or to have acted negligently, and this
disputable presumption may only be overcome by
evidence that he had observed extra-ordinary
diligence or that the death or injury of the passenger
was due to a fortuitous event.
The driver cannot be held jointly liable with the
owners of the jeep in case of breach of the contract of
carriage. The contract of carriage is between the
carrier and the passenger, and in the event of
contractual liability, the carrier is exclusively
responsible therefore to the passenger, even if such
breach be due to the negligence of the driver. To make
the driver jointly liable would make the carrier's
liability personal instead of merely vicarious and
consequently, the victim is entitled to recover only the
share which corresponds to the driver.
Issue : WON moral damages may be awarded.

4. Classes of common carriers
Held : In case of breach of contract (including one of
transportation), proof of bad faith or fraud, i.e., wanton
or deliberately injurious conduct, is essential to justify
an award of moral damages. The exception to this is
when a mishap results in the death of a passenger, in
which a CC is liable to pay moral damages for the
mental anguish by reason of the death of the
passenger. So where the injured passenger does not
die, moral damages are not recoverable unless it is
proved that the carrier was guilty of malice or bad
faith.
Under the law, the presumption is that
common carriers acted negligently but not maliciously.
The distinction between fraud, bad faith or malice in
the sense of deliberate or wanton wrong doing and
negligence (as mere carelessness) is too fundamental
in our law to be ignored. A carrier's bad faith is not to
be lightly inferred from a mere finding that the
contract was breached through negligence of the
carrier's employees.
Phil. Rabbit Bus Lines vs IAC, 189 SCRA 159
F:
Several passengers boarded the jeepney
owned by spouses Mangune and driven by Manalo at
Dau, Pampanga bound for Carmen, Rosales,
Pangasinan. Their contract with Manalo was P24 for
the trip. Upon reaching Tarlac, the right wheel of the
jeepney was detached, so it was running in an
unbalanced position. Manalo stepped on the brake,
making a sudden U-turn and encroaching on the right
of way of the other vehicles. The Phil. Rabbit bus
bumped from behind the jeepney. As a result of the
collision, 3 persons died while the others sustained
injuries. Cases were filed against the spouses
Mangune, Manalo, Phil. Rabbit and De los Reyes
(driver).
Issue: Who should be held liable? the Mangunes and
Filriters Guaranty Assurance Corp. (Insurance co.)
Art. 1732. Common carriers are persons,

corporations, firms or associations engaged in
the business of carrying or transporting
passengers or goods or both, by land, water, or
air, for compensation, offering their services to
the public.
public
policy,
are
bound
to
observe
transported
by
them,
according
to
the
1755 and 1756.
Art. 1755. A common carrier is bound to
carry the passengers safely as far as human
care and foresight can provide, using the
utmost diligence of very cautious persons, with
a due regard for all circumstances.
5. Laws applicable
Art. 1766. In all matters not regulated by
this Code, the rights and obligations of common
carriers shall be governed by the Code of
Commerce and by special laws.
4 Agbayani:
New Civil Code primarily governs common
carriers.-- The Provisions of the Civil Code [17321766] primarily govern common carriers and the
provisions of the Code of Commerce [Overland
PAGE 18

Transportation and Maritime Commerce] and special
laws [Carriage of Goods by Sea Act; Salvage Act] have
only subsidiary application to common carriers.
of the goods unless the same is due to any of the ff.

causes only (Art. 1734, NCC):
"(1) Flood, storm, earthquake, lightning or
other natural disaster or calamity; xxx"
Art. 1753, NCC. The law of the country to

which the goods are to be transported shall
govern the liability of the common carrier for
their loss, destruction or deterioration.
The Carrier claims that the loss of the vessel

by fire exempts it from liability under the phrase
"natural disaster or calamity." However, we are of the
opinion that fire may not be considered a natural
disaster or calamity. This must be so as it arises
almost invariably from some act of man or by human
means. It does not fall within the category of an act of
God unless caused by lightning or by other natural
disaster or calamity. It may even be caused by the
actual fault or privity of the carrier.
As the peril of fire is not comprehended within
the exceptions in Article 1734, then Article 1735
provides that in all cases other than those mentioned
in Art. 1734, the CC shall be presumed to have been at
fault or to have acted negligently, unless it proves that
it has observed the extra-ordinary diligence required
by law.
In this case, the respective Insurers, as
subrogees of the cargo shippers, have proven that the
transported goods have been lost. Petitioner carrier
has also proven that the loss was caused by fire. The
burden then is upon Petitioner carrier to prove that it
has exercised the extra-ordinary diligence required by
law.
Having failed to discharge the burden of
proving that it had exercised the extra-ordinary
diligence required by law, Petitioner Carrier can not
escape liability for the loss of the cargo.
And even if fire were to be considered a
natural disaster within the meaning of Art. 1734, it is
required under Art. 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. This petitioner carrier has also failed to
establish satisfactorily.
Nor may Petitioner Carrier seek refuge from
liability under the COGSA. It is provided therein that:
The provisions of the NCC primarily govern

contracts of carriage of goods from foreign ports to
Philippine ports
Eastern Shipping Lines vs IAC 150 SCRA 463

F:
These two cases, both for the recovery of value
of cargo insurance, arose from the same incident, the
sinking of the M/S ASIATICA when it caught fire,
resulting in the total loss of ship and cargo.
In the first case, the M/S ASIATICA, a vessel
operated by petitioner Eastern Shipping Lines, loaded
at Kobe, Japan for transportation to Manila 5,000
pieces of colorized lance pipes in 28 packages valued
at P256,039 consigned to Phil. Blooming Mills and 7
cases of spare parts valued at P92,361.75 consigned
to Central Textile Mills. Both sets of goods were
insured against marine risk for their stated value with
respondent Devt. Insurance and Surety Corporation.
In the second case, the same vessel took on
board 128 cartons of garment fabrics and accessories,
in 2 containers, consigned to Mariveles Apparel
Corporation, and 2 cases of surveying instruments
consigned to Aman Enterprises and General
Merchandise.
The 128 cartons were insured by
respondent Nisshin Fire and Marine Insurance Co. and
Dowa Fire & Marine Insurance Co.
En route for Manila, the ship caught fire and
sank. The insurers paid the corresponding marine
insurance values and were subrogated to the rights of
the latter as the insured. They filed suits against the
petitioner Carrier and won (affirmed by the CA).
Petitioner carrier denies liability on the ff. grounds:
(a) that the loss was due to an extraordinary
fortuitous even which is an exempting circumstance
under Sec. 4(2)(b) of the Carriage of Goods by Sea Act
(COGSA);
(b) that when fire is established, the burden of
proving negligence is shifted to the cargo shipper.
Issues: (1)Which law should govern : the Civil Code or
the Carriage of Goods by Sea Act.
(2)Who has the burden of proof to show
negligence of the carrier.
Ratio : (1) The law of the country to which the goods
are to be transported governs the liability of the
common carrier in case of their loss, destruction or
deterioration.
As the cargoes in question were
transported from Japan to the Philippines, the liability
of Petitioner Carrier is governed primarily by the Civil
Code. However, in all matters not regulated by said
Code, the rights and obligations of common carriers
shall be governed by the Code of Commerce and
special laws. Thus, the COGSA, a special law, is
suppletory to the provisions of the Civil Code.
"Sec.4 (2). Neither the carrier nor the ship

shall be responsible for loss or damage arising or
resulting from: (b) Fire, unless caused by the actual
fault or privity of the carrier."
In this case, both the TC and the CA, in effect,
found, as a fact, that there was "actual fault" of the
carrier shown by lack of diligence in that when the
smoke was noticed, the fire was already big; that the
fire must have started 24 hrs before the same was
noticed; and that after the cargoes were stored in the
hatches, no regular inspection was made as to their
condition during the voyage.
The foregoing suffices to show that the
circumstances under which the fire originated and
spread are such as to show that Petitioner carrier or its
servants were negligent in connection therewith.
Consequently, the complete defense afforded by the
COGSA when the loss results from fire is unavailing to
petitioner carrier.
B. Common Carriers
1.
Liability
and
presumption
of
negligence
(2) Under the Civil Code, common carriers,
from the nature of their business and for reasons of
public policy, are bound to observe extra-ordinary
diligence in the vigilance over goods, accdg. to all the
circumstances of each case. Common carriers are
responsible for the loss, destruction, or deterioration

public
policy,
are
bound
to
observe
PAGE 19

transported
by
them,
according
to
the
1755 and 1756.
(read discussion under [3] Nature and basis of
liability)
Art. 1734.
Common carriers are
responsible for the loss, destruction, or
deterioration of the goods, unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning,
or other natural disaster or calamity;
(2) Act of the public enemy in war,
whether international or civil;
(3) Act or omission of the shipper or
owner of the goods;
(4) The character of the goods or defects
in the packaging or in the containers;
(5) Order or act of competent public
authority.
Art. 1735. In all cases other than those
mentioned in Nos. 1, 2, 3, 4 and 5 of the preceding
article, if the goods are lost, destroyed or deteriorated,
common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that
they observed extraordinary diligence as required in
Art. 1733.
4 Agbayani:
Responsibility of common carriers.-In
general, CC are responsible for the loss, destruction,
or deterioration of the goods carried by them. This
responsibility arises from contract, as the relation
between a carrier and its patrons is of a contractual
nature. A failure on the carrier to use extra-ordinary
care in carrying goods or passengers safely is a breach
of contract and constitutes culpa contractual not culpa
aquiliana. While the liability of a carrier as an insurer
is not recognized in this jurisdiction, a carrier is liable
for damages suffered by goods carried if such
damages arise from its negligence. The carrier is also
liable even in those cases where the cause of the loss
or damage is unknown.
Due extraordinary diligence required, carriers
given
wide
discretion
in
selection
and
supervision of persons to handle goods.-- The
law requires CC to exercise extra-o diligence which
means that they must render service with the greatest
skill and utmost foresight.
The extra-o diligence
required of CC in the handling of the goods of the
shipper and the consignees lasts from the time the
cargoes are loaded in the vessels until they are
discharged and delivered to the consignees.
To
comply with this obligation, CC should be afforded the
right of having a wide discretion in the selection and
supervision of persons who will handle the goods.
Air carrier can terminate services of pilot for
serious misconduct and drunkenness, because
of its duty of extraordinary dilignece.-- The CC
can terminate the services of its drivers, pilots and EEs
for serious misconduct and drunkenness because of its
duty of extra-ordinary diligence.
Whenever a
passenger dies or is injured the presumption is that
the CC is at fault notwithstanding the fact that it has
exercised due diligence of a good father of a family in
the selection and supervision of its EEs. Thus, extraordinary measures and diligence should be exercised
by it for the safety of its passengers and their
belongings.
A CC can terminate an EE whose
continued service is inimical to its interests and the
safety of the passengers.
Carrier has duty to keep and care for goods
carried.-- It is the duty of the CC to properly and
carefully handle, carry, keep and care for the goods
carried and to exercise due care to ascertain and
consider the nature of the goods offered for shipment
and to use such methods for their care during the
voyage as their nature requires. The carrier is liable
for injury to, or loss of, cargo resulting from the failure
to properly care for and handle the cargo en route; and
it is required to provide adequate ventilation for the
safe carriage of the cargo, and provide reasonable and
ordinary inspection and care in and about the
transportation of cargo. A vessel should not accept
cargo unless it can be given the type of storage that
its character requires, for placing of conditions in a bill
of lading does not relieve the vessels of obligation to
take appropriate care of the cargo.
Duty of carrier to deliver cargo in good
condition as when loaded.-- There is no absolute
obligation for a CC to accept cargo. It should not be
accepted unless it can be given the type of storage
that its character requires. Where a vessel accepts a
cargo for shipment for valuable consideration, it takes
the risk of delivering it in good condition as when it
was loaded. And if the fact of improper packing is
known to the carrier or his servants, or apparent upon
ordinary observation, but it accepts the goods
notwithstanding such condition, it is not relieved of
liability for loss or injury resulting therefrom.
In the exercise of extra-ordinary diligence
required by law, the CC must give due regard to all
circumstances and take all steps necessary to insure
the safety of the passengers and the goods given the
circumstances.
Presumption of negligence.-- Under Art. 1735, if
the goods are proved to have been lost, destroyed or
deteriorated, CC are presumed to have been at fault or
to have acted negligently, unless they prove that they
have observed the extra-o diligence required by law.
The plaintiff needs only to prove that the
goods he transported have been lost, destroyed or
deteriorated
CC must then prove that he has exercised
extra-ordinary diligence required by law or that the
loss, etc. was due to accident or some other
circumstances inconsistent with its liability
Mere proof of delivery of goods in order to a
carrier, and of their arrival at the place of destination
in bad order makes out a prima facie case against the
CC
Defenses available to CC:
1. Art. 1734
2. Art. 1735 (exercise of extra-ordinary
diligence required by law)
3. Natural disaster: The CC is exempt from
liability if he proves that the loss or destruction of the
merchandise was due to accident and force majeure
and not to fraud, fault or negligence on the part of the
EEs and owners of the CC.
CC cannot interpose the defense that it
exercised due diligence in the selection and
supervision of EEs. The liability of the CC arises from
breach of the contract of carriage and not from culpa
aquiliana. It is however the duty of CC to teach their
drivers not to overload vehicles, not to exceed safe
and legal speed limits, and other safety precautions.
Carrier not insurer.-- CC are not required to exercise
all the care, skill and diligence of which the human
mind can conceive nor such as will free the
PAGE 20

transportation of passengers from all possible perils.
A CC is not an insurer of the safety of the passengers
and is not absolutely and at all events to carry them
safely and without injury.
Ynchausti Steamship Co. vs Dexter 41 Phil 289
F:
The Govt. of the Philippines, acting through the
Insular Purchasing Agent, employed the services of
petitioner, Ynchausti Steamship Co., a common carrier
for the transportation, on board the steamship Venus,
from the port of Manila to the port of Appari, Cagayan,
of consignments of merchandise, consisting of 30
cases of Wine Rose mineral oil of two 5-gallon cans to
the case. On another occasion, the Govt. also sent 96
cases of Cock brand mineral oil, ten gallons to the
case. The goods were delivered by the shipper to the
carrier which accordingly received them, and to
evidence the contract of transportation, the parties
duly executed and delivered what is popularly called
Govt. bill of lading, whereby it was stipulated that the
carrier, Ynchausti, received the above-mentioned
supplies in apparent good condition, obliging itself to
carry said supplies to the place agreed upon.
Both shipments arrived with one case missing
per shipment. Ynchausti denied negligence. However,
upon investigation, the Insular Auditor decided that
the leakages were due to Ynchausti's negligence. The
Insular Auditor deducted the amount of the lost goods
from the entire amount payable to Ynchausti.
Petitioner refused to accept the warrant. Hence, this
action was filed.
Issue : Is Ynchausti liable for the loss? YES.
Ratio : Sec. 646 of the Administrative Code provided
that when Govt. property is transmitted from one
source to another by carrier, it shall be upon proper
bill of lading or receipt, from such carrier; and it shall
be the duty of the consignee or his representative to
make all notation of any evidence of loss, shortage, or
damage, on the bill of lading or receipt before
accomplishing it. It is admitted by petitioner that the
consignee, at the time the goods were delivered,
noted the losses in the respective bill of ladings. Such
notation made in obedience to the code, is competent
evidence to show that
the shortage did exist.
Inasmuch as the fact of loss was proven, it results in
the presumption that the petitioner was to blame for
the loss; and it was incumbent upon the petitioner to
rebut that presumption by proving that the loss was
not due to any fault or negligence of the petitioner.
The mere proof of delivery of goods in good
order to a carrier, and of their arrival at the place of
destination in bad order, makes out a prima facie case
against the carrier, so that if no explanation is given
as to how the injury occurred, the carrier must be held
responsible. It is incumbent upon the carrier to prove
that the loss was due to accident or some other
circumstance inconsistent with its liability. Indeed, if
the Govt. had instituted an action in court against
petitioner to recover the value of the oil lost, it would,
based on the facts, be entitled to judgment. In the
absence of proof showing that the carrier was not at
fault for the loss, the Insular Auditor was entitled to
withhold the amount admittedly due to the petitioner
for the freight charges, a sum sufficient to cover the
value of the oil lost in transit.
loss of the other. Mirasol filed claims, but Dollar

refused to pay alleging that the damage was caused
by sea water and that Mirasol entered into a contract
providing that Dollar will not be held liable for loss or
damage of merchandise resulting from "acts of God" or
"perils of the sea," and that in no case shall it be held
liable beyond $250 for any article not enclosed in a
package unless a higher value is stated therein and ad
valorem freight paid or assessed thereon. The LC ruled
in favor of Mirasol for payment of P 2,080.
Issue : WON Dollar may be held liable. YES.
Ratio: There was no claim or pretense that Mirasol
signed the bill of lading or that he knew of its
contents. In that situation, he was not legally bound by
the clause limiting Dollar's liability. Where it appears
that a bill of lading was issued to a shipper containing
a clause limiting the carrier's liability, printed in fine
letters on the back of the bill of lading, which the
shipper did not sign and of which he was not advised,
the shipper is not bound by the clause limiting liability
and the stipulation is void or against public policy.
Shippers who are forced to ship goods in an
ocean liner have legal rights. When the goods are
delivered on board the ship in good order and
condition and the carrier delivers them to the shipper
in bad order and condition, in an action for damages,
the burden of proof shifted and it devolves upon the
carrier to both allege and prove that the goods were
damaged by reason of some act which legally exempts
it from liability.
Having received the boxes in good condition,
its legal duty was to deliver them in the same
condition as received. Dollar, having admitted that
the goods were damaged while in transit and in its
possession, the burden of proof then shifted and it
devolved upon him to allege and prove that the
damage was caused by reason of some fact which
exempted it from liability. As to when and how the
goods were damaged in transit is a matter peculiarly
within the knowledge of the carrier and its employees.
To require Mirasol to prove such, would force him to
rely upon the EEs of Dollar's ship, which in legal effect
would be to say that he could not recover damages at
all.
Since Dollar was not even able to prove that
the goods were wet with sea water due to a fortuitous
event, it must be presumed that the carrier was liable.
2. Exemption from liability
Proof of the delivery of the goods in good order
to a carrier, and of their arrival at the place of
destination short or in bad order, makes a prima facie
case; it is incumbent on the carrier, in order to
exonerate itself, to prove that the loss or injury was
due to some circumstances inconsistent with its
liability
(a) Natural disaster
Art. 1734.
Common carriers are
due to any of the ff. causes only:
xxx
Mirasol vs Dollar 53 Phil 124

F:
Mirasol was the owner of two cases of
Encyclopedia Brittanica shipped in good order and
condition on board Dollar's steamship, President
Garfield, to be transported from New York to Manila.
The books arrived in bad order and damaged
condition, resulting in total loss of one case and partial
Art. 1739. In order that the common carrier

may be exempted from responsibility, the natural
disaster must have been the proximate and only cause
of the loss. However, the common carrier must
exercise due diligence to prevent or minimize loss
before, during and after the occurrence of flood, storm,
or other natural disaster in order that the common
PAGE 21

carrier may be exempted from liability for the loss,
destruction, or deterioration of the goods. The same
duty is incumbent upon the common carrier in case of
an act of the public enemy referred to in Art. 1734 (2).
Art. 1740. If the CC negligently incurs in
delay in transporting the goods, a natural
disaster shall not free such carrier from
responsibility.
Art.
361.
Merchandise
shall
be
transported at the risk and venture of the
shipper, if the contrary has not been expressly
stipulated.
As a consequence, all the losses and
deteriorations which the goods may suffer
during
the
transportation
by
reason
of
fortuitous event, force majeure, or the inherent
nature and defect of the goods, shall be for the
account and risk of the shipper.
Proof of these accidents is incumbent
upon the carrier. (Code of Commerce.)
4 Agbayani:
Effect of New Civil Code.-- Transportation of the
merchandise "at the risk and venture of the shipper"
means that the shipper will suffer losses and
deterioration arising from fortuitous event, force
majeure, or inherent nature and defects of the goods.
It does not mean that the carrier is free from liability
for losses and deterioration arising from his negligence
or fault, w/c is presumed. Thus construed, par. 1 of
Art. 361 is not inconsistent with Art. 1735 of the NCC.
Requisites for defense of natural disaster:
1. Art. 1739 -- natural disaster must have been
the proximate and only cause of the loss
2. The CC must exercise due diligence to
prevent or minimize the loss before, during and after
the occurrence of flood, storm, or other natural
disaster. If the CC does not exercise due diligence in
minimizing the loss, he may yet be held liable
notwithstanding the fact that the loss, destruction or
deterioration of the goods arose out of natural
disaster.
3. Art. 1740 -- the CC must not be in delay. If
the CC incurs in delay, a natural disaster shall not free
it from responsibility. Under Art. 1165 par. 3, if the
obligor incurs delay, he shall be responsible for any
fortuitous event until he has effected delivery.
However, if between the delay or refusal of the
CC to transport the goods and the loss of the goods
due to an act of God there intervened the shipper's
negligence, thus causing a break in the chain of
causation between the act of God which caused their
loss and the CC's fault, the act of God is the proximate
cause of the loss and the carrier's delay or refusal to
transport the goods, is merely the remote cause. In
such cases, the shipper is not even entitled to set up
the claim of contributory negligence. It is then
necessary that it be established that the CC was guilty
of a willful or negligent act and that between this
willful or negligent act and the act of God, no
negligence on the part of the shipper intervened.
Accident due to defects of carrier not caso
fortuito.-- Accidents caused either by defects in the
carrier or through the negligence of the carrier is not
caso fortuito. The passenger or shipper has every
right to presume that the carrier is perfectly in good
condition and could transport him safely and securely
to his destination
Tan Chiong San vs Ynchausti & Co., 22 Phil 152

F:
Ynchausti and Co. received from Ong Bien Sip
in Manila 205 bundles of goods to be conveyed by YC's
steamer to Gubat in Sorsogon, and there to be
transhipped to another vessel belonging to YC and
transported to Catarman, in Samar. As the lorcha
Pilar, which was to transport the goods to Catarman
was not yet in Gubat when the cargo arrived, the cargo
was stored in YC's warehouse.
Several days later, the lorcha arrived and the
goods were loaded. However, as the lorcha was being
towed, a storm arose, drove the lorcha to the shore
and wrecked it, scattering the goods on the beach.
YC's laborers proceeded to gather up the goods. As it
was impossible to preserve the goods, they were sold
at a public auction. Plaintiff filed an action for
damages for P 20,000. LC decided that plaintiff was
entitled only to P 14,642.63.
Issues: (1) WON the carrier is relieved from liability
due to force majeure. YES.
(2) WON the carrier is liable for the loss of the
cargo and for failure to deliver the same at the place
of destination. NO.
Ratio: (1) It is a proven fact that the loss or damage to
the goods shipped on the said lorcha was due to the
force majeure which caused the wreck of the said
craft. Accdg. to Art. 361 of the Code of Commerce,
merchandise shall be transported at the risk and
venture of the shipper, unless the contrary be
expressly stipulated. No such stipulation appears of
record, therefore, all damages and impairment
suffered by the goods in transportation, by reason of
accident, force majeure, or by virtue of the nature or
defect of the articles, are for the account and risk of
the shipper. The carrier is exempt from liability if he is
able to prove, as he did prove, that the loss or
destruction of the merchandise was due to accident
and force majeure and not to fraud, fault or negligence
on the part of the captain or owner of the ship -- that
the loss was a result of the stranding of Pilar because
of the hurricane that overtook it.
(2) The record bears no proof that said loss
caused by the destruction of Pilar occurred through the
carelessness or negligence of the defendant, its
agents or patron of the lorcha. The defendant as well
as its agents and patron had a natural interest in
preserving the craft -- an interest equal to that of the
plaintiff. The record discloses that Pilar was manned
by an experienced patron and a sufficient number of
crewmen plus the fact that it was fully equipped. The
crewmen took all the precautions that any diligent
man should have taken whose duty it was to save the
boat and its cargo, and by the instinct of selfpreservation of their lives. Considering, therefore, the
conduct of the men of the defendant Pilar and of its
agents during the disaster, the defendant has not
incurred any liability whatsoever for the loss of the
goods, inasmuch as such loss was the result of a
fortuitous event or force majeure, and there was no
negligence or lack of care or diligence on the part of
the defendant or its agents.
Loss of a ship and of its cargo, in a wreck due
to accident or force majeure must, as a general rule,
fall upon their respective owners, except in cases
where the wrecking or stranding of the vessel occurred
through malice, carelessness or lack of skill on the
part of the captain or because the vessel put to sea is
insufficiently repaired and prepared. (Art. 841, Code of
Commerce)
Martini Ltd. vs Macondray & Co., 39 Phil 934
F:
Martini shipped on board the Easter, owned by
the Australian Steamship Co. represented in the
PAGE 22

Philippines by Macondray, 219 cases of chemicals for
Kobe, Japan. Upon arrival in Kobe, it was discovered
that the shipment was damaged by rain and sea water.
Martini claims that it was the ship's duty to stow the
cargo in the hold and not to place it on the deck
exposed to the elements.
Macondray denied any
responsibility on the ground that the contract of
affreightment clearly states that the cargo was to be
carried on deck at shipper's risk as evidenced by the
words "on deck at shipper's risk" stamped on the bill of
lading.
Ordinarily, when a shipper wishes to avail of
space on board a ship, he first obtains a shipping order
from the ship owner. This shipping order is authority
for the ship's officers to accept the shipper's cargo.
When signed by the ship's mate, this would constitute
the mate's receipt showing that the cargo has been
taken aboard. The shipper would then present this
receipt to the agent of the ship's company who would
then issue the bill of lading. However, in this case,
the shipper obtained the bill of lading without first
presenting the mate's receipt (so as to expedite the
negotiation of the bill with the banks). By doing so, the
shipper entered into a written guaranty, binding
himself to abide by the terms of the mate's receipt
which in this case obtained a stipulation that the cargo
shall be shipped on or under the deck at the option of
the ship and at shipper's risk.
In
this
case,
plaintiff
protested
the
arrangement but when the defendant informed them
that the cargo could be discharged if they were
dissatisfied, plaintiff did not order its discharge. The
CFI ruled for Martini.
Issues: (1) WON plaintiff consented to having the
cargo carried on deck. YES.
(2) WON defendant was negligent and thus
liable for the damage to the cargo. NO.
Ratio: While Martini would have greatly preferred for
the cargo to be carried under the hatches, they
nevertheless consented for it to go on deck. Codina,
an EE of Martini, if attentive to the interests of his
company, must have known from the tenor of the
guaranty which he signed that defendant had reserved
the right to carry the cargo on deck. The bill of lading
plainly showed that the cargo would be so carried.
The plaintiff was duly notified as to the manner by
which was the cargo was to be shipped. They only
protested after the bill had been negotiated at the
bank and even when there was time to stop the
shipment, they failed to give the necessary
instructions thereby manifesting acquiescence.
In every contract of affreightment, losses by
dangers of the seas are excepted from the risk which
the carrier takes upon himself whether the exception
is expressed in contract or not. The exception is made
by law and falls within the general principle that no
one is responsible for fortuitous events. But then this
general law is subject to the exception that when the
inevitable accident is preceded by fault of the carrier,
without which it would not have happened, then he
becomes responsible for it.
The carrier is responsible for safe and proper
storage of the cargo, and there is no doubt that by the
general maritime law he is bound to secure the cargo
safely under deck. If he carries the goods on deck
without the consent of the shipper and the goods are
damaged or lost in consequence of being exposed, the
carrier cannot protect himself by showing that they
were damaged or lost by the dangers of the sea.
When the shipper consents to his goods being carried
on deck, he takes the risk upon himself.
If goods shipped are found to have been
damaged, the burden of proof is on the carrier to show
that the damage was due to fortuitous events. But,
even if the damage is caused by one of the excepted
causes, the carrier is still responsible if the injury
might have been avoided by the exercise of

reasonable skill and attention on their part. However,
in this case, where the shipper consented to the
conditions of carriage, the burden of proof is shifted to
the shipper.
As there is no allegation or proof of negligence
on the part of the carrier in protecting the cargo from
rain or sea water and as the complaint clearly
indicates that the damage was due to it being kept on
deck, and such manner of carriage having been
consented to by the plaintiff, the defendant is
absolved. It is not permissible for the court, in the
absence of any allegation or proof of negligence, to
attribute negligence to the ship's employees in the
matter of protecting the goods from rains and storms.
Eastern Shipping Lines vs IAC, 150 SCRA 463
Issue: Should petitioner be exempted from liability
under Art. 1734 on the ground that the loss of the
vessel by fire comes under the phrase "natural
disaster or calamity?" NO.
Ratio: Fire may not be considered a natural disaster or
calamity.
This must be so as it arises almost
invariably from some act of man or by human means.
It does not fall within the category of an act of God
unless caused by lightning or by another natural
disaster or calamity. It may even be caused by the
actual fault or privity of the carrier. Art. 1680 which
considers fire as an extra-ordinary fortuitous event
does not apply since it refers only to leases of rural
lands where a reduction of rent is allowed when more
than 1/2 of the fruits have been lost due to such event.
As the peril of fire is not comprehended under
Art. 1734, Art. 1735 applies and the CC shall be
presumed to have been at fault or to have acted
negligently, unless it proves extra-ordinary diligence.
The burden is on the CC.
The LC and the CA found that there was lack of
diligence on the part of CC amounting to actual fault.
Even if the fire were to be considered a natural
disaster under Art. 1734, it is required under Art. 1739
that the disaster must have been the proximate and
only cause of the loss, and that the CC exercised due
diligence to prevent or minimize the loss before,
during or after the occurrence of the disaster. Nor may
petitioner seek refuge under COGSA since fire is only
an exempting circumstance if not caused by actual
fault or privity of the carrier.
Issue: On the $500 Per Package Limitation
Ratio: Petitioner carrier avers that its liability should
not exceed $500 per package as provided in Section
4(5) of the COGSA, which reads:
"(5) Neither the carrier nor the ship shall in
any event be or become liable for any loss or damage
to or in connection with the transportation of goods in
an amount exceeding $500 per package xxx or in case
of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other
currency, unless the nature and value of such goods
have been declared by the shipper before shipment
and inserted in the bill of lading."
Article 1749, NCC also allows the limitations of
liability in that it provides that "a stipulation that the
CC's liability is limited to the value of the goods
appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding."
It is to be noted that the Civil Code does not of
itself limit the liability of the CC to a fixed amount per
package, although the Code expressly permits a
stipulation limiting such liability. Thus, the COGSA,
which is suppletory to the Civil Code, steps in and
supplements the Code by establishing a statutory
PAGE 23

provision limiting the carrier's liability in the absence
of a declaration of a higher value of the goods by the
shipper in the bill of lading. The provisions of the
COGSA on limited liability are as much a part of a bill
of lading as though physically in it and as much a part
thereof as though placed therein by agreement of the
parties.
In these cases, there is no stipulation in the
respective bills of lading limiting the carrier's liability
for the loss or destruction of the goods. Nor is there a
declaration of a higher value of the goods. Hence,
petitioner carrier's liability should not exceed $500 per
package, or its peso equivalent, at the time of the
payment of the value of the goods lost, but in no case
"more than the amount of damage actually sustained."
The liability was computed as: 128 cartons
(shipping unit) x $500 = $64,000. The cartons and not
the containers should be considered as the shipping
unit.
Dissenting : Yap, J.
There is no evidence that the containers were
carrier- supplied. The shipper must have saved on
freight charges by using containers for shipment. The
containers should be considered as the shipping unit.
(b) Act of public enemy
Art.
1734.
Common
carriers
are
xxx
Art. 1739.
In order that the common
carrier may be exempted from responsibility,
the natural disaster must have been the
proximate and only cause of the loss. However,
the common carrier must exercise due diligence
to prevent or minimize loss before, during and
after the occurrence of flood, storm, or other
natural disaster in order that the common
carrier may be exempted from liability for the
loss, destruction, or deterioration of the goods.
The same duty is incumbent upon the common
carrier in case of an act of the public enemy
referred to in Art. 1734 (2).
4 Agbayani:
Acts of public enemy.-This defense is not
absolute. Under 1739, in order for the CC to be
exempted from liability, (1) the act of the public
enemy must have been the proximate and only cause;
and (2) the CC must have exercised due diligence to
prevent or minimize the loss before, during and after
the act of the public enemy causing the loss,
destruction or deterioration of the goods.
thereof being the negligence of the common

carrier, the latter shall be liable in damages,
which, however, shall be equitably reduced.
Act or omission of the shipper.-The act or
omission of the shipper must be the proximate cause
of the loss, destruction or deterioration of the goods.
If the shipper merely contributed to the loss,etc. and
the proximate cause is still the negligence of the CC,
the CC shall still be liable for damages although the
damages shall be equitably reduced.
(d) Character of goods, etc.
Art. 1734.
Common carriers are
in the packaging or in the containers;
Art. 1742. Even if the loss, destruction,
or deterioration of the goods should be caused
by the character of the goods, or the faulty
nature of the packing or of the containers, the
common carrier must exercise due diligence to
forestall or lessen the loss.
Art. 366. Within the twenty four hours
following the receipt of the merchandise, a
claim may be brought against the carrier on
account of damage or average found therein on
opening the packages, provided that the signs
of the damage or average giving rise to the
claim may not be known from the exterior part
of the packages, and in case that they may be
so ascertained, 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. (Code of Commerce.)
Claims for damages must be made at the time
the goods are delivered unless the indications of the
damage cannot be ascertained from the exterior of the
package, in which case such written claims must be
made w/in 24 hours from delivery
Rule: As long as the damage to the goods
was due purely to the inherent nature or defect of the
goods or of the containers thereof, the CC cannot be
held responsible. However, under 1742, the CC must
exercise due diligence to forestall or lessen the loss for
it to completely escape liability.
Govt. vs Ynchausti, 40 Phil 219
(c) Act or omission of the

shipper
Art.
1734.
Common
carriers
are
xxx
owner of the goods;
Art. 1741. If the shipper or owner merely
contributed
to
the
loss,
destruction
or
deterioration of the goods, the proximate cause
F:
Plaintiff shipped a cargo of roofing tiles from
Manila to Iloilo on a vessel owned by Ynchausti.
Defendant stamped on the bill of lading the condition
that the goods have been accepted for transportation
subject to the conditions prescribed by the Insular
Collector of Customs. The tiles were delivered by
defendant to the consignee of the plaintiff at Iloilo.
Upon delivery, it was found that some of the tiles had
been damaged. The LC absolved the defendant from
any liability since the defendant was able to prove that
the tiles were leaded, stored and discharged by hand
labor and not by any mechanical device. Defendant
proved, without dispute from the plaintiff, that there
PAGE 24

was no negligence on its part, the tiles being
discharged by handlabor and not by mechanical
device.
(e)
Order
of
competent
authority
Issue : WON the terms and conditions of the bill of
lading were binding upon the plaintiff. YES.
Ratio: The defendant placed said stamp upon the bill
of lading before the plaintiff shipped the tiles, and that
having shipped the tiles under said bill, with the terms
and conditions of carriage stamped thereon, the govt.
must be deemed to have assented to said terms and
conditions.
The binding effect of the conditions
stamped on the bill of lading did not proceed from the
Collector of Customs, but from the actual contract
which the parties made. Each bill of lading is a
contract and the parties thereto are bound by its
terms.
The defendant, to free itself from liability, was
only obliged to prove that the damages suffered by the
tile were by virtue of the nature or defect of the
articles. The plaintiff, to hold the defendant liable, was
obliged to prove that the damage to the tiles, by virtue
of their nature, occurred on account of the defendant's
negligence or because the latter did not take
precaution usually adopted by careful persons.
The defendant proved,and the plaintiff did not
attempt to dispute that the tiles were of a brittle and
fragile nature and that they were delivered to the
defendant without any packing or protective covering.
The plaintiff, not having proved negligence on the part
of the defendant, is not entitled to recover damages.
Southern Lines vs CA, 4 SCRA 256
F:
The city of Iloilo requisitioned for rice from
NARIC in Manila. NARIC shipped from Manila to Iloilo
1726 sacks of rice on board the SS Gen. Wright
belonging to Southern Lines. After the city paid for the
rice, it was noted that 41 sacks were missing. The city
filed a complaint against NARIC and Southern Lines to
recover the amount. The LC absolved NARIC but
ordered Southern Lines to pay. The CA affirmed.
Issue:
WON petitioner is liable for the loss or
shortage. YES.
Ratio: Under Art. 361 of the Code of Commerce, the
carrier, in order to free itself from liability, was only
obliged to prove that the damage suffered by the
goods were by virtue of defects of the articles. Under
Art. 362, the plaintiff in order to hold the carrier liable,
was obliged to prove that the damage to the goods by
virtue of their nature, occurred on account of the
carrier's negligence or because the carrier did not take
the precaution adopted by careful persons.
Petitioner claims exemption based on the fact
that the sacks were in bad condition and that rice was
improperly packed causing a lot of spillage of the rice
while it was being loaded.
Southern Lines' contention is untenable, for if
the fact of improper packing is known to the carrier or
its servants or apparent upon ordinary observation,
but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury
resulting therefrom. Furthermore, the petitioner itself
frankly admitted that the strings tying the bags of rice
were broken, that some bags were with holes and
plenty of rice were spilled inside the hull of the vessel,
and that the boat personnel collected 26 sacks of rice,
which they distributed among themselves. This shows
that the shortage resulted from the negligence of the
petitioner.
This is an action for refund of the amount paid
in excess of delivery and is not for damages.
Therefore, the 24 hour rule under Art. 366 does not
apply.
Art. 1734.
Common carriers are
xxx
authority.
Art. 1743.
If through order of public
authority the goods are seized or destroyed, the
common carrier is not responsible, provided
said public authority had power to issue the
order.
4 Agbayani:
Order or act of competent authority.-- Under
1743, the CC is not responsible for the loss, etc. of the
goods if the public authority had power to issue the
order. Where the officer acts without legal process,
the CC will be held liable.
Ganzon vs CA, 161 SCRA 646
F:
Gelacio Tumambing contracted the services of
Ganzon to haul 305 tons of scrap iron from Mariveles,
Bataan to the port of Manila on board the lighter LCT
Batman. When half of the scrap iron was already
loaded, the mayor of Mariveles arrived and demanded
P 5,000 from Tumambing. An argument resulted in the
shooting of Tumambing. The loading of the scrap iron
was resumed but the acting mayor arrived and
ordered Captain Niza to dump the scrap iron. The
acting mayor took the rest to the compound of
NASSCO and took custody of the scrap iron.
Tumambing filed an action for damages against
Ganzon based on culpa contractual. The TC and CA
held Ganzon liable.
Held: Ganzon contended that the scrap iron had not
been unconditionally placed under his custody and
control to make him liable. However, he admitted that
he received the scraps of iron which Tumambing
delivered to him. By the said act of delivery, the
scraps were unconditionally placed in the possession
and control of the common carrier and upon their
receipt by the carrier for transportation, the contract
of carriage was deemed perfected. The carrier's
extraordinary responsibility for the loss, destruction, or
deterioration of the goods commenced.
Pursuant to Art. 1736, such extra-ordinary
responsibility would cease only upon the delivery,
actual or constructive, by the carrier to the consignee
or to the person who has the right to receive them.
The fact that part of the shipment had not been loaded
on board the lighter did not impair the said contract of
transportation as the goods remained in the custody
and control of the carrier, albeit still unloaded.
Ganzon failed to show that the loss was due to
any causes under Art. 1734. We cannot sustain the
theory of caso fortuito. The carrier raised the defense
that the loss was due to an order or act of competent
public authority. The carrier, however, failed to show
that the acting mayor had the power to issue the
disputed order or that it was lawful or issued under
legal process of authority. The order was part of the
pressure by the mayor to shakedown Tumambing for P
5,000. The order did not constitute valid authority for
Ganzon to carry out.
In any case, the intervention of the municipal
officials was not of a character that would render
PAGE 25

impossible the fulfillment by the carrier of its
obligation. The petitioner was not duty bound to obey
the illegal order to dump into the sea the scrap iron.
There is absence of sufficient proof that the issuance
of the order was attended with such force or
intimidation as to completely overpower the will of the
carrier's EEs.
Melencio-Herrera, Dissenting: Through the order or
act of competent public authority, the performance of
the contract was rendered impossible. The captain has
no control over the situation just as Tumambing had no
control over the situation.
3.
Duration
of
Extraordinary
Responsibility
Art.
1736.
The
extraordinary
responsibility of the common carrier lasts from
the time the goods are unconditionally placed in
the possession of, and received by the carrier
for transportation until the same are delivered,
actually or constructively, by the carrier to the
consignee, or to the person who has a right to
receive
them,
without
prejudice
to
the
provisions of Art. 1738.
Art. 1737. The common carrier's duty to
observe extra-ordinary diligence in the vigilance
over the goods remains in full force and effect
even when they are temporarily unloaded or
stored in transit, unless the shipper or owner
has made use of the right of stoppage in
transitu.
Art. 1738. The extra-ordinary liability of
the common carrier continues to be operative
even during the time the goods are stored in a
warehouse of the carrier at the place of
destination until the consignee has been
advised of the arrival of the goods and has
reasonable opportunity thereafter to remove
them or otherwise dispose of them.
carrier, due in turn to the failure of the former, upon

receipt of notice of the arrival of the goods at the place
of destination, to unload forthwith and take away the
cargo from the vehicles.
This is a charge for
demurrage (addtl. service provided by CC)
Effect of storing in transit.-- Under 1737, the
temporary unloading or storage of the goods during
the time that they are being transported does not
interrupt the extra-ordinary responsibility of the CC
Exception:
Where the shipper or owner
exercises its right of stoppage in transitu (the act by
which the unpaid vendor of goods stops their progress
and resumes possession of them, while they are in the
course of transit from him to the purchaser, and not
yet actually delivered to the latter. This is exercised
when the buyer is or becomes insolvent.)
Responsibility of carrier when right exercised.-The extra-ordinary responsibility of the CC ceases
when the goods being transported are temporarily
unloaded or stored in transit be reason of the exercise
of the right of stoppage in transitu by the unpaid
seller. The CC holds the goods in the capacity of an
ordinary bailee or warehouseman upon the theory that
the exercise of the right of stoppage in transitu
terminates the contract of carriage (ordinary diligence
is required)
Effect of storage in warehouse of carrier.-Under 1738, the extra-ordinary responsibility of the CC
does not cease notwithstanding the fact that the
goods being transported are stored in the warehouse
of the CC at the place of destination. Extra-ordinary
responsibility ceases only after the consignee has
been advised of the arrival of the goods and has had
reasonable opportunity to remove them or otherwise
dispose of them.
Liability as
a warehouseman (ordinary
diligence) arises only when the consignee has been
advised of the arrival of the goods and has had
reasonable opportunity to remove them or otherwise
dispose of them
4 Agbayani:
When carrier's responsibility begins.-- Under Art.
1738, the extra-o responsibility of the CC begins from
the time the goods are delivered to the carrier. The
delivery to the CC must place the goods to be
transported unconditionally in the possession of the
CC and the CC must receive them. Otherwise, the
extra-ordinary responsibility of the CC will not
commence.
When
carrier's
responsibility
terminates.-Under 1738, the extra-ordinary responsibility of the CC
is terminated at the time the goods are delivered to
the consignee or the person who has a right to receive
them (actual or constructive delivery).
Constructive delivery: Notice by the CC that
the cargo had already arrived, placing them at the
disposal of the shipper or consignee releases CC from
extra-ordinary responsibility. From such moment the
consignee or shipper should exercise over the cargo
the ordinary control pertinent to ownership (should
unload cargo from the CC)
Shipper bound to observe all diligence in
obtaining delivery of goods.-The shipper is
bound to observe all diligence in obtaining delivery of
the goods. Once the goods are delivered, the extraordinary responsibility of the CC ceases.
Liability of shipper for delay in obtaining
delivery of goods, demurrage.-- The shipper is
liable for lost earnings occasioned by the unnecessary
delay in the use of the vehicles belonging to the
Cia Maritima vs Insurance Co. of North America,

SCRA 213
12
F:
Macleod and Co. contracted the services of Cia
Maritima for the shipment of bales of hemp from
Davao to Manila. The bales were loaded into CC's
lighters. One of the lighters sunk. The insurance co.
paid Macleod and filed to collect from CC. CC denied
liability on the grounds that the hemp was loaded on a
barge owned by the CC free of charge, that there was
no bill of lading issued thereby resulting to the
nonexistence of a contract of carriage, that the sinking
was due to a fortuitous event, and that the insurance
co. has no personality to sue.
Held: There was a complete contract of carriage the
consummation of which has already begun when the
shipper delivered the cargo to the carrier and the
latter took possession of the same by placing it on a
lighter manned by its EEs, under which Macleod
became entitled to the privilege secured to him by law
for its safe transportation and delivery, and the carrier
to the full payment of its freight upon completion of
the voyage.
The barges or lighters were merely
employed as the first step of the voyage, which is part
of the contract.
The receipt of the goods by the carrier has
been said to lie at the foundation of the contract to
carry and deliver, and if no goods are received there
can be no such contract.
The liability and
responsibility of the carrier under a contract for the
carriage of goods commence on their actual delivery
to, or receipt by the carrier or an authorized agent, of
PAGE 26

the goods. The test as to whether the relation of
shipper and carrier had been established is: Had the
control and possession of the goods been completely
surrendered by the shipper to the CC. Whenever the
control and possession of goods passes to the carrier
and nothing remains to be done by the shipper, then it
can be said with certainty that the relation of shipper
and carrier has been established.
The bill of lading is not indispensable to a
contract of carriage. It is merely documentary proof of
the agreement of the parties.
There was no force majeure. The reason for
the damage or the loss was lack of adequate
protections and measures taken by the carrier to
prevent the loss.
Lu Do vs Binamira, 101 Phil 120
F:
Delta Co. of NY shipped six cases of films and
photographic supplies consigned to Binamira. The
shipped arrived in Cebu and discharged her cargo,
placing it in the possession and custody of the arrastre
operator appointed by the Bureau of Customs. The
cargo was checked both by the stevedoring co. as well
as by the arrastre operator and was found in good
order. In the contract of carriage, however, it was
stipulated that the carrier is no longer liable for the
cargo upon its delivery to the hands of the custom
authorities. The cargo was delivered to Binamira and
some goods were missing.
Held: The general rule is that CC's responsibility to
observe extra-ordinary diligence lasts from the time
the goods are placed in the possession of the carrier
until they are delivered to the consignee. BUT this
rule applies only when the loss, destruction and
deterioration of the goods takes place while the goods
are in the possession of the carrier and not after it has
lost control of them. While the goods are in its
possession, it is but fair that it exercise extra-ordinary
diligence in protecting them from damage and if loss
occurs, the law presumes that it was due to its fault or
negligence.
While delivery to the customs authorities is not
delivery to the consignee, the parties may however,
agree to limit the liability of the carrier considering
that the goods have still to go through the inspection
of the customs authorities before they are actually
turned over to the consignee. This stipulation is not
contrary to morals or public policy. This is a situation
where the CC loses control of the goods because of
custom regulations and it is unfair that it be made
responsible for any loss or damage during such
interregnum.
APL vs Klepper, 110 Phil 243
F:
Klepper shipped one lift van containing
personal and household effects from Yokohama to
Manila. While the lift van was being unloaded by
crane, it fell on the pier damaging its contents. The TC
found for Klepper.
Held: APL does not question the finding that the
damage was due its negligence but contends that its
liability cannot exceed $500 based on the bill of lading
and Sec 4(5) of the COGSA.
Regardless of its
negligence, the carrier's liability would attach because
being a CC, its responsibility is extra-ordinary and
lasts from the time the goods are placed in its
possession until they are delivered, actually or
constructively, to the consignee or to the person who
has a right to receive them.
The carrier should only pay $ 500; the shipper
who accepted the bill of lading is bound by its terms.
COGSA is merely suppletory to the provisions of the
NCC which govern the contract.
4. Agreement Limiting Liability

(a) As to diligence required
Art. 1744.
A stipulation between the
common carrier and the shipper or owner
limiting the liability of the former for the loss or
destruction, or deterioration of the goods to a
degree less than extra-ordinary diligence shall
be valid, provided it be:
(1) In writing, signed by the shipper or
owner;
(2)
Supported
by
a
valuable
consideration other than the service rendered
by the CC; and
(3) Reasonable, just and not contrary to
public policy.
Art. 1745. Any of the following or similar
stipulations shall be considered unreasonable,
unjust and contrary to public policy:
(1) That the goods are transported at the
risk of the owner or shipper;
(2) That the common carrier will not be
liable for any loss, destruction or deterioration
of the goods;
(3) That the common carrier need not
observe any diligence in the custody of the
goods;
(4) That the common carrier shall
exercise a degree of diligence less than that of
a good father of a family, or of a man of
ordinary prudence in the vigilance over the
movable transported;
(5) That the common carrier shall not be
responsible for the acts or omissions of his or
its employees;
(6) That the common carrier's liability for
acts committed by thieves, or of robbers who do
not act with grave or irresistible threat, violence
or force, is dispensed with or diminished;
(7) That the common carrier is not
deterioration of goods on account of the
defective condition of the car, vehicle, ship,
airplane or other equipment used in the
contract of carriage.
Art. 1751.
The fact that the common
carrier has no competitor along the line or
route, or a part thereof, to which the contract
refers shall be taken into consideration of the
question of whether or not a stipulation limiting
the common carrier's liability is reasonable, just
and in accordance with public policy.
(b) As to amount liability
Art. 1749. A stipulation that the common
carrier's liability is limited to the value of the
goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is
binding.
Art. 1750. A contract fixing the sum that
may be recovered by the owner or shipper for
the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under
the circumstances, and has been fairly and
freely agreed upon.
Ysmael vs Barreto, 51 Phil 90
PAGE 27

F:
Plaintiff sought to recover from defendant the
alleged value of 4 cases of merchandise which it
delivered to a vessel of defendant at the port of Manila
to be shipped to Surigao, but which were never
delivered to consignee. Defendant relied on clause 7
of the bill of lading where it provided that actions not
brought within 60 days from the time the cause of
action accrued shall be barred, and on clause 12 which
provided that the defendant is not liable for any
package in excess of P 300 unless the value and
contents of such package are correctly stated in the
bill of lading at the time of the shipment. Plaintiffs
complaint was filed a little less than 6 months after
the shipment was made.
Held:
The evidence shows that 164 cases were
shipped valued at P 2,500 a case.
The limit of
defendant's liability for each case for loss or damage
from any cause or for any reason, would put it in the
power of the defendant to take the whole cargo of 164
cases at a value of P 300/case, or less than 1/8 of its
actual value. If that rule should be sustained, no silk
would ever be shipped. Such limitation of value is
unconscionable and void as against public policy.
The validity of stipulations limiting the carrier's
liability is to be determined by their reasonableness
and their conformity to the sound public policy. It
cannot lawfully stipulate for exemption from liability
unless such exemption is just and reasonable and
unless the contract is freely and fairly made. No
contractual limitation is reasonable which is
subversive of public policy. A CC cannot limit its
liability for injury or loss where such is caused by its
own negligence, unskillfulness or carelessness of its
EEs. The rule rests on public policy. The shipper and
CC are not on equal terms; the shipper is entirely at
the mercy of the CC unless protected by the law. Such
contracts are wanting in the element of voluntary
assent.
The action was brought within reasonable time
considering the distance between Surigao and Manila
and the fact that plaintiff had to make a full
investigation to determine liability.
Stipulations
limiting the time for bringing suit must be reasonable,
otherwise they can be declared void.
Heacock vs Macondray, 42 Phil 205
F:
Plaintiff shipped Edmonton clocks from NY to
Manila on board defendant's vessel. It was agreed in
the bill of lading that the value of the goods receipted
do not exceed $500 per freight on or in proportion for
any part of a ton, unless the value be expressly stated
in the bill and freight paid. It was also agreed that in
the event of claims for shortage or damage the carrier
shall not be liable for more than the net invoice price
plus freight and insurance less charges, and any loss
or damage for which the carrier may be liable shall be
adjusted pro rata on said basis. The clocks were not
delivered despite demands. Plaintiff claimed P420 as
the MV of the clocks, while defendant claimed P76.36
as the proportionate freight ton value.
Held: Three kinds of stipulations have often been
made in a bill of lading. First, one exempting the
carrier from any and all liability for loss or damage
occasioned by its own negligence.
Second, one
providing for an unqualified limitation of such liability
to an agree valuation. Third, one limiting the liability
of the carrier to an agreed valuation unless the
shipper declares a higher value and pays a higher rate
of freight. The first and second stipulations are invalid
as contrary to public policy. The third is valid and
enforceable.
A stipulation in the bill of lading limiting the
liability of the CC to a specified amount unless the
shipper declares a higher value and pays a higher
freight is valid and enforceable. If a CC gives to a

shipper the choice of 2 rates, the lower of them
conditioned upon his agreeing to a stipulated valuation
of his property in case of loss, even by the carrier's
negligence, if the shipper makes the choice
understandingly and freely, and names his valuation,
he cannot thereafter recover more than the value
which he thus places upon his property.
Shewaram vs PAL, 17 SCRA 606

F:
Plaintiff bought a plane ticket from Zamboanga
to Manila. When he arrived in Manila, his suitcase was
tampered with and his camera and radio were lost.
PAL contended that plaintiff was bound by the
conditions printed at the back of his ticket which
provided that the liability of PAL for any loss is limited
to the value of the thing unless the passenger declares
in advance a higher valuation and pays an additional
charge, and that the value is conclusively deemed not
to exceed P 100/ticket.
Held : Two requisites must be fulfilled in order that the
liability of PAL be limited according to the stipulations
behind the ticket stub : (1) the contract is just and
reasonable under the circumstances; and (2) it has
been fairly and freely agreed upon. (Art. 1750)
The fact that the conditions are printed at the
back of the ticket stub in letters so small that they are
hard to read would not warrant the presumption that
plaintiff was aware of those conditions such that he
had "fairly and freely agreed" to those conditions. PAL
has admitted that passengers do not sign the ticket.
Also the carrier cannot limit his liability for injury or
loss of goods shipped when such injury or loss was
caused by its own negligence. (Arts. 1734, 1735)
Ong Yiu vs CA, 91 SCRA 223
F:
Atty. Ong Yiu was a passenger on a PAL CebuButuan flight to attend court hearings in Butuan. His
suitcase was accidentally sent to Manila. PAL-Manila
sent the suitcase to Butuan but the lock had been
opened and a folder containing court documents was
missing. Plaintiff refused to accept the luggage. PALCebu delivered the luggage to Ong Yiu with the
promise to investigate the matter. Plaintiff sued and
was awarded moral and exemplary damages. CA
reversed holding that PAL was guilty of simple
negligence and denied moral and exemplary damages
but ordered PAL to pay P100, the baggage liability
assumed by it under the condition of carriage printed
on the back of the ticket.
Held: PAL incurred delay in the delivery of petitioner's
luggage. However, there was no bad faith. The liability
of PAL was limited to the stipulations printed on the
back of the ticket.
While the passenger had not signed the plane
ticket, he is nevertheless bound by the provision
thereof; such provisions have been held to be part of
the contract of carriage and valid and binding upon
the passenger regardless of the latter's lack of
knowledge or assent to the regulation. It is what is
known as a contract of adhesion wherein one party
imposes a ready made form of contract on the other; it
is not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he
adheres, he gives his consent. A contract limiting
liability upon an agree valuation does not offend
against the policy of the law forbidding one from
contracting against his own negligence.
Considering that petitioner had failed to
declare a higher value for his baggage, he cannot be
PAGE 28

permitted a recovery in excess of P 100.00. Besides,
passengers are advised not to place valuable items
inside their baggage. Also, there is nothing in the
evidence to show the actual value of the goods
allegedly lost by petitioner.
PAN AM vs IAC, 164 SCRA 268
F:
This is a petition filed by Pan Am to limit its
liability for lost baggage containing promotional and
advertising materials for films to be exhibited in Guam
and the US, clutch bags, barong tagalogs and personal
belongings of Rene Pangan to the amount specified in
the airline ticket absent a declaration of a higher
valuation and payment of additional charges.
Pan Am contends that its liability for lost
baggage is limited to $600 ($20 x 30 kilos) as the
latter did not declare a higher value for his baggage.
Such stipulation is printed at the back of the ticket.
Held : Pan Am cited Ong Yiu vs CA. Such case is
squarely applicable in this case.
The ruling in
Shewaram vs PAL is inapplicable since it was premised
on the fact that the conditions printed at the back of
the ticket were so small and hard to read.
Liability is limited to $600 as stipulated at the
back of the ticket.
The SC reversed the CA ruling awarding
respondent damages for lost profits. The rule laid
down in Mendoza vs PAL provides that before damages
can be awarded for loss of profits on account of delay
or failure of delivery, it must have appeared that CC
had notice at the time of delivery to him of the
particular circumstances attending the shipment, and
which probably would lead to such special loss if he
defaulted. In the absence of a showing that Pan Am's
attention was called to the special circumstances
requiring prompt delivery of the luggage, it cannot be
held liable for the cancellation of respondent's
contracts as it could not have foreseen such an
eventuality when it accepted the luggage for transit.
Pan Am vs Rapadas, 209 SCRA 67
F:
Jose Rapadas was en route from Guam to
Manila. While standing in line to board the flight, he
was ordered by Pan Am's handcarry control agent to
check in his Samsonite attache case. He protested on
the ground that other passengers were permitted to
handcarry bulkier baggages. He tried to check-in
without having to register his attache case. He was
however forced to register his baggage. He gave his
attache case to his brother who checked it in for him
without declaring its contents or the value of its
contents. Upon arriving in Manila, he was given all his
checked-in baggages except the attache case. Since
he felt ill, he sent his son to request for the search of
the missing luggage. He sent letters of demand to Pan
Am.
Pan Am offered to settle the claim for $160,
representing the CC's alleged limit of liability for loss
or damage to a passenger's personal property.
Rapadas filed this action for damages. He alleged that
Pan Am discriminated or singled him out in ordering
that his luggage be checked in; that Pan Am neglected
its duty in the handling and safekeeping of his attache
case from the point of embarkation in Guam to his
destination in Manila; that the value of the lost attache
case and its contents is $42,403.90. According to him,
the loss resulted in his failure to pay certain
obligations, failure to remit money sent through him to
relatives, inability to enjoy the fruits of his retirement
and vacation pay and inability to return to Tonga
Construction Co. to comply with then existing
contracts. During the trial, he showed proof of the
contents of his attache case.
Pan Am contended that the claim was subject

to the Notice of Baggage Liability Limitations attached
to the ticket. Such notice was also conspicuously
posted in its offices. It alleged that its liability is
limited to $160 because Rapadas did not declare a
higher value and did not pay the corresponding
additional charges.
The lower court ruled in favor of Rapadas. It
however did not find Pan Am guilty of discriminatory
acts or bad faith. CA affirmed the decision.
Issue: WON a passenger is bound by the terms of a
passenger ticket declaring that the limitations of
liability set forth in the Warsaw Convention as
amended by the Hague Protocol shall apply in case of
loss, damage or destruction to a registered luggage of
a passenger. YES. Pan Am was ordered to pay $400
and P 10,000 as attorney's fees and costs of suit.
Held: There is no dispute that there was a notice
appearing on page 2 of the ticket stating that the
Warsaw Convention governs in case of death or injury
to a passenger or of loss, damage or destruction to a
passenger's luggage. Such notice should be sufficient
notice showing the applicability of the Warsaw
limitations. The passenger, upon contracting with the
airline and receiving the plane ticket, was expected to
be vigilant insofar as his luggage is concerned. If the
passenger fails to adduce evidence to overcome the
stipulations, he cannot avoid the application of the
liability limitations.
The Warsaw Convention, as amended,
specifically provides that it is applicable to
international carriage which it defines as "any carriage
in which, according to the agreement between the
parties, the place of departure and the place of
destination xxx are situated either within the
territories of two High Contracting Parties or within the
territory of a single High Contracting Party if there is
an agreed stopping place within the territory of
another State xxx."
Nowhere in the Warsaw
Convention is such detailed notice of baggage liability
limitations required. It is however a common, safe and
practical custom for air carriers to indicate beforehand
the precise sums equivalent to those fixed by Art.
22(2) of the Convention.
The facts show that Rapadas actually refused
to register his attache case. In attempting to avoid
registering the luggage, he manifested a disregard of
airline rules on allowable handcarried baggages.
Prudence dictates that cash and jewelry should be
removed from checked-in luggage and placed in one's
pockets or handcarried. The alleged lack of enough
time for him to make a declaration of a higher value
and to pay the corresponding supplementary charges
cannot justify his failure to comply with the
requirement that will exclude the application of limited
liability.
Had he readily complied with airline
regulations from the start, this situation would not
have arisen.
While contracts of adhesion are not entirely
prohibited, neither is blind reliance on them
encouraged. In the face of facts showing they should
be ignored because of their basically one- sided
nature, the Court does not hesitate to rule out blind
adherence to their terms. The SC is not saying that
passengers are always bound to the stipulated
amounts printed on a ticket, found in a contract of
adhesion, or printed elsewhere but referred to in
handouts or forms. The Court simply recognizes that
the reasons behind stipulations on liability limitations
arise from the difficulty, if not impossibility, of
establishing with a clear preponderance of evidence
the contents of a lost suitcase. Unless the contents
are declared, it will always be the word of a passenger
against that of the airline. If the loss of life or property
is caused by the gross negligence or arbitrary acts of
the airline or the contents of the lost luggage are
PAGE 29

proved by satisfactory evidence other than the selfserving declarations of one party, the Court will not
hesitate to disregard the fine print in a contract of
adhesion. Otherwise, the Court is constrained to rule
that we have to enforce the contract as it is the only
reasonable basis to arrive at a just award.
The parties may stipulate that the diligence to

be exercised by the CC be less than extra-ordinary
diligence, provided that the requirements under Article
1744 are complied with. However, the parties cannot
reduce the diligence to less than that of a good father
of a family. Art. 1745 provides for 7 stipulations which
shall be considered unreasonable, unjust and contrary
to public policy.
(c) Factors affecting agreement

Art. 1746.
An agreement limiting the
common carrier's liability may be annulled by
the shipper or owner if the CC refused to carry
the goods unless the former agree to such
stipulation.
Art. 1747. If the common carrier, without
just cause, delays the transportation of the
goods or changes the stipulated or usual route,
the contract limiting the common carrier's
liability cannot be availed of in case of the loss,
destruction, or deterioration of the goods.
Art. 1748.
An agreement limiting the
common carrier's liability for delay on account
of strikes or riots is valid.
Art. 1751.
The fact that the common
carrier has no competitor along the line or route
or a part thereof, to which the contract refers
shall be taken into consideration on the
question of whether or not a stipulation limiting
the common carrier's liability is reasonable,
just, and in consonance with public policy.
Art. 1752.
Even when there is an
agreement limiting the liability of the common
carrier in the vigilance over the goods, the
common carrier is disputably presumed to have
been negligent in case of their loss, destruction
or deterioration.
4 Agbayani:
Kinds of stipulation limiting liability.-The
following stipulations are often made in a bill of lading
bill of lading:
1. stipulation exempting the CC from any and
all liability for loss or damage occasioned by its own
negligence - VOID
2. stipulation providing for an unqualified
limitation of such liability to an agreed stipulation VOID
3. stipulation limiting the liability of the CC to
an agreed valuation unless the shipper declares a
higher value and pays a higher rate of freight -- VALID
and ENFORCEABLE
When stipulation limiting liability valid.-- Under
1744, the shipper or owner and the CC may stipulate
to limit the liability of the CC for the loss, destruction
or deterioration of goods to a degree less than extraordinary diligence :
1. the stipulation must be in writing and
signed by both parties;
2. the stipulation must be supported by
valuable consideration other than the service rendered
by the CC;
3. the stipulation must be reasonable, just and
not contrary to public policy. This applies only when
the CC is acting as such but not when it acts as a
private carrier [in Home Insurance vs American
Steamship Co., the SC held that the Civil Code
provisions on CC should not be applied where the CC
is not acting as such but as a private carrier; such
policy has no force where the public at large is not
involved]
Construction of stipulations limiting common

carrier's liability.-- An exemption in general words
not expressly relating to negligence, even though the
words are wide enough to include loss by negligence
or default of CC's servants, must be construed as
limiting the liability of the CC as assurer, and not as
relieving him from the duty of exercising reasonable
skill and care
Effect of lack of competitor to common carrier.-Under 1751, the lack of competition of the CC shall be
considered in determining WON a stipulation limiting
CC's liability is reasonable, just and in consonance
with public policy.
Examples of valid stipulations:
1. 1748 - an agreement limiting the CC's
liability for delay on account of strikes or riots
2. 1749, Heacock vs Macondray - a stipulation
that the CC's liability is limited to the value of the
goods appearing in bill of lading unless the shipper or
owner declares a greater value
3. 1750 - a contract fixing the sum that may be
recovered by the owner or shipper for the loss,
destruction or deterioration of the goods, if it is
reasonable and just under the circumstances, and has
been fairly and freely agreed upon
Under 1746, an agreement limiting the CC's liability
may be annulled by the shipper or owner if the CC
refused to carry the goods unless the former agreed to
such stipulation. The effect of the shipper's consent
obtained by means of refusal on the part of the carrier
to carry the goods is to make the agreement limiting
the CC's liability voidable at the instance of the
shipper
Principles : [St. Paul Insurance vs Macondray, 70 SCRA
122]
1. A stipulation in the bill of lading limiting the
CC's liability to the value of the goods appearing in the
bill, unless the shipper or owner declares a greater
value, is valid and binding.
2. The insurer who pays the insured on his
claim for damage is merely subrogated to the rights of
the insured; therefore, said insurer cannot collect from
the CC more than what the insured can collect from
the CC.
3. The obligation to pay the damage begins
from the date it fails to deliver the shipment in good
condition to the consignee (on the basis of the rate of
exchange on that date).
Effect of delay in transportation, etc.-- Under
1747, the CC cannot avail of the contract limiting his
liability in these cases : (1) where the CC delays the
transportation of the goods; (2) where the CC changes
the stipulated or usual route [in both cases, the delay
or change of route must be without just cause]
Presumption as to negligence in case of limited
liability.-- Under 1752, the presumption continues
even when there is an agreement limiting the liability
of the CC in the vigilance of the goods. This
presumption is disputable or rebuttable by evidence
that the CC exercised extra-ordinary diligence.
PAGE 30
5. Applicable Law in foreign trade

Art. 1753.
The law of the country to
which the goods are to be transported shall
govern the liability of the common carrier for
their loss, destruction or deterioration.
4 Agbayani:
The Civil Code governs the liability of the CC in
case of loss, damage or deterioration. Under 1766, in
all matters not regulated by the Civil Code, the rights
and obligations of CC shall be governed by the Code of
Commerce and by special laws which are suppletory to
the provisions of the Civil Code.
6. Rules on Passenger Baggage
Art. 1754. The provisions of Arts.1733 to
1753 shall apply to the passenger's baggage
which is not in his personal custody or in that of
his employees. As to other baggage, the rules
in Articles 1998 and 2000 to 2003 concerning
the responsibility of hotel keepers
shall be
applicable.
Art. 1998. The deposit of effects made
by travelers in hotels and inns shall also be
regarded as necessary. The keepers of hotels
and inns shall be responsible for them as
depositaries, provided that notice was given to
them, or to their employees, of the effects
brought by the guests and that, on the part of
the latter, they take the precautions which said
hotel-keepers or their substitutes advised
relative to the care and vigilance of their
effects.
Art. 2000. The responsibility referred to
in the preceding article shall include the loss of,
or injury to the personal property of the guests
caused by the servants or employees of the
keepers of hotels or inns as well as by
strangers; but not that which may proceed from
any force majeure. The fact that travelers are
constrained to rely on the vigilance of the
keeper of the hotel or inn shall be considered in
determining the degree of care required of him.
Art. 2001. The act of a thief or robber,
who has entered the hotel is not deemed force
majeure, unless it is done with the use of arms
or through irresistible force.
Art. 2002. The hotelkeeper is not liable
for compensation if the loss is due to the acts of
the guest, his family, servants or visitors, or if
the loss arises from the character of the things
brought into the hotel.
Art. 2003. The hotelkeeper cannot free
himself from responsibility by posting notices to
the effect that he is not liable for the articles
brought by the guest. Any stipulation between
the hotelkeeper and the guest where the
responsibility of the former as set forth in Arts.
1998 to 2001 is suppressed or diminished shall
be void.
Classes of baggage of passengers.-- The law
makes a distinction between (1) baggage in the
custody of the passengers or their EEs; and (2)
baggage not in such custody but in that of the CC.
Liability for baggage in custody of passenger.-Art. 1754 refers to Arts. 1998, 2000- 2003 concerning
the responsibility of hotel keepers. Under 1998, the
baggage of passengers in their personal custody or in
that of their EEs while being transported shall be
regarded as necessary deposits. The CC shall be

responsible for such baggage as depositaries, provided
that (1) notice was given to them or to their EEs, of the
baggage brought by their passengers, and that (2) the
passengers take the precautions which said CCs
advised relative to the care and vigilance of their
baggage.
Responsibility for acts of EEs, thieves.-Under 2000, a CC is responsible as a depositary for the
loss of or injury to the baggage in the personal
custody of passengers, caused by the CC's servants or
EEs but not those caused by force majeure.
Under 2001, the act of a thief or robber, who
has entered the CC's vehicle is not deemed force
majeure, unless it is done with the use of arms or
through irresistible force.
Under 2002, the CC is not liable if the loss of
the baggage in the personal custody of the passenger
is due to the acts of the passengers, his family,
servants or visitors, OR if the loss arises from the
character of the baggage.
Stipulations limiting liability.-Under
2003, a CC cannot free himself from responsibility by
posting notices to the effect that he is not liable for
the baggage brought by the passengers. Any
stipulation diminishing the responsibility required
under 1998 to 2001 shall be void.
Liability for baggage not in custody of
passenger.-- This refers to baggage delivered to the
custody of the CC and received by him, to be carried
in the same manner as other goods being transported
by him. As the CC has custody of such baggage and
are carried like any other goods, the provisions on
carriage of goods shall apply (extra-ordinary diligence
in the vigilance over the goods).
The moment the effects of a passenger are
unconditionally placed in the possession of and
received by a carrier for conveyance, the law
immediately imposes on the CC extra-ordinary
responsibility for the loss thereof which lasts until the
actual or constructive delivery of the effects to the
passenger as the person who has the right to receive
them (presumption of negligence exists but may be
rebutted by proof of exercise of extraordinary diligence
or causes under 1734).
A CC is liable for the loss of baggage although
not declared and the charges not paid, if it accepted
them for transportation
C. Common Carrier of Passengers
1. Nature and extent of responsibility
public
policy,
are
bound
to
observe
transported
by
them,
according
to
the
Articles 1734, 1735, and 1745, Nos. 5, 6, and 7,
1755 and 1756.
Art. 1755. A common carrier is bound to
carry the passengers safely as far as human
care and foresight can provide, using the
utmost diligence of very cautious persons, with
a due regard for all circumstances.
PAGE 31

4 Agbayani:
Common carriers must exercise extraordinary
diligence in carrying passengers.-Art. 1755
shows clearly the high degree of care and extra-o
diligence required of a CC with respect to its
passengers.
Carrier's
duty
of
extraordinary
diligence
extends also to crew members.-- The duty to
exercise the utmost diligence on the part of CCs is for
the safety of passengers as well as for the members of
the crew or the complement operating the carrier.
This must be so for any omission, lapse or neglect
thereof will certainly result to the damage, prejudice,
injuries or even death to all aboard the plane.
Cangco vs MRR, 38 Phil 768
Facts: supra. EE riding on train who stepped on
watermelons.
Held : In aviation, inevitable accident is defined as one

that is not occasioned in any degree remotely or
directly by want of such skill or care as the law holds
for what man is bound to exercise.
Airplane
companies are not required to exercise all the care.
Passengers necessarily should take upon the usual and
ordinary perils to airplane travel. A carrier is not an
insurer against all risks.
A carrier is not liable for defects of ignition
cables used on his plane, nor of the installation
thereof, which cables were purchased from a
competent and reputable manufacturer in the absence
of a showing that it knew those defects or that such
kind of ignition cable is not ordinarily used on the
airplane operated by it.
The doctrine of res ipsa loquitor cannot be
applied when there is no proof that according to the
general experience of mankind, the accident was such
that it does not usually occur in the ordinary course of
events without the negligence on the part of those in
control.
Isaac vs A.L. Ammen Trans. Co., 101 Phil 1046
Held: The conduct of plaintiff in undertaking to alight

while the train was yet slightly underway was not
characterized by imprudence and that he was not
guilty of contributory negligence.
It is not negligence per se for a traveler to alight from
a slowly moving train.
MRR failed to exercise due care in not
providing for safe exit of its passengers. It also failed
to provide adequate lighting for its station.
It is impt. to note that the foundation of the
legal liability of the defendant is the contract of
carriage, and that the obligation to respond for the
damage which plaintiff has suffered arises, if at all,
from the breach of that contract by reason of the
failure of defendant to exercise due care in its
performance. Its liability is direct and immediate
(culpa contractual), differing essentially, from that
presumptive responsibility for the negligence of its
servants, which can be rebutted by proof of the
exercise of due care in the selection and supervision of
EEs (culpa aquiliana).
The liability of masters and employers for the
negligent acts or omissions of their servants or agents,
when such act or omissions cause damage which
amount to the breach of a contract, is not based upon
a mere presumption of the master's negligence in their
selection or control, and proof of exercise of the
utmost diligence and care in this regard does not
relieve the master of his liability for the breach of his
contract. When the facts averred show a contractual
undertaking by defendant for the benefit of plaintiff,
and it is alleged that plaintiff has failed or refused to
perform the contract, it is not necessary for plaintiff to
specify in his pleadings whether the breach of the
contract is due to willful fault or to negligence on the
part of the defendant, or of his servants or agents.
Proof of the contract and of its nonperformance is
sufficient prima facie to warrant recovery.
The contract of defendant to transport plaintiff
carried with it, by implication, the duty to carry him in
safety and to provide safe means of entering and
leaving its trains. That duty, being contractual, was
direct and immediate, and its nonperformance could
not be excused by proof that the fault was morally
imputable to defendant's servants.
Strong vs Iloilo-Negros Air Express, 40 OG 269
F:
Plaintiff was a passenger aboard defendant's
plane en route from Iloilo to Manila. The plane's
motors went dead and, notwithstanding the efforts of
its pilot, it plunged into the sea and sank.
The
passengers and the pilot were rescued.
F:
supra. Passenger aboard a bus who placed his
left arm on the window lost his arm when the bus
collided with a pick up.
Held : If the carrier's EE is confronted with a sudden
emergency, he is not held to the same degree of care
he would otherwise be required in the absence of such
emergency.
By placing his left arm on the window, the
passenger is guilty of contributory negligence, and
although contributory negligence cannot relieve the
carrier but can only reduce his liability (Art. 1762), this
is a circumstance which militates against plaintiff's
position. It is negligence per se for passengers to
protrude any part of his body and that no recovery can
be had for an injury.
Ratio: A CC is bound to carry the passengers safely as
far as human care and foresight can provide, using the
This extraordinary
diligence required of common carriers is calculated to
protect the passengers from the tragic mishaps that
frequently occur in connection with rapid modern
transportation.
This high standard of care is
imperatively demanded by the preciousness of human
life and by the consideration that every person must in
every way be safeguarded against all injury.
Principles as to liability of CC:
(1) The liability of a carrier is contractual and
arises upon breach of its obligation; there is breach if
it fails to exert extraordinary diligence accdg. to all the
circumstances of each case
(2) A carrier is obliged to carry its passenger
with the utmost diligence of a very cautious person,
having due regard for all the circumstances
(3) A carrier is presumed to have been at fault
or to have acted negligently in case of death of, or
injury to, passengers, it being its duty to prove that it
exercised extraordinary diligence
(4) The carrier is not an insurer against all
risks of travel
Landingin vs Pantranco, 33 SCRA 284
F:
Plaintiffs are parents of 2 girls who were
passengers on a Pantranco bus on an excursion trip
from Dagupan to Baguio. The bus was open on one
side. The TC found that the crossjoint of the bus broke
and the bus started to roll back. Some passengers
jumped out. The bus driver maneuvered the bus safely
to the mountainside. Two of the girls who jumped
were seriously injured and died.
PAGE 32

Held : In Lasam vs Smith, the court held that accidents
caused by defects in the automobile are not caso
fortuito. The rationale is that the passenger has
neither the choice nor control over the carrier in the
selection and use of the equipment and appliances in
use by the carrier.
When the passenger dies or is injured, the
presumption is that the CC is at fault or acted
negligently. This is only rebutted by proof on the
carrier's part that it observed extraordinary diligence
required in Art. 1733 and the utmost diligence of very
cautious persons required in Art. 1755.
It does not appear that the carrier gave due
regard for all the circumstances with cross joints'
inspection the day previous to the accident. The bus
was heavily laden, and it would be traversing
mountainous, circuitous and ascending road. Thus the
entire bus would naturally be taxed more heavily than
it would be under the ordinary circumstances. The
mere fact that the bus was inspected only recently and
found to be in order would not exempt carrier from
liability unless it is shown that the particular
circumstances under which the bus would travel were
also considered.
Landicho vs BTC, 52 OG 764
F:
Landicho boarded a BTC bus. Before he did so,
the conductor helped him in placing his two baskets of
chicken inside the running board. After a distance, he
claimed that he noticed one cage falling and he called
the conductor's attention who did not respond. He
tried to fix it himself resulting in his fall in which he
suffered injuries.
Held : The facts show that the cage was not about to
fall. Plaintiff was probably dizzy or sleepy that he fell
from the truck.
It is true that defendant being a CC is bound to
transport its passengers from the point of origin to the
place of destination, but the duty does not encompass
all the risks attendant to a passenger in transit, for
then the co. would be a good source of stipend for a
family who would like to end it all by simply boarding,
paying the fare and intentionally falling off. It is
enough for the CC's EEs to see to it that the passenger
places himself safely inside the vehicle, that it is
operated carefully and that its mechanism is perfectly
alright to prevent mishaps. It would be unreasonable
to exact upon operators to determine beforehand
whether a passenger is likely to fall dizzy or sleepy on
the way, for that is the lookout of the passenger
himself. A passenger must see to it that he seats
himself in a safe portion of the vehicle.
Necesito vs Paras, 105 Phil 75
F:
A mother and son boarded a passenger
autotruck of the Phil. Rabbit Bus Lines. While entering
a wooden bridge, its front wheels swerved to the right,
the driver lost control and the truck fell into a creek.
The mother drowned; the son was injured.
Held : While the carrier is not an insurer of the safety
of the passengers, it should nevertheless be held
answerable for the flaws of its equipment if such flaws
were discoverable. The liability of the CC rests upon
negligence or his failure to exercise the utmost degree
of diligence that the law requires. The rationale of
CC's liability for manufacturing defects is the fact that
the passenger has neither choice nor control over the
carrier in the selection and use of the eqpt. and
appliances in use by the carrier. Having no privity
whatever with the manufacturer or vendor of the
defective eqpt, the passenger has no remedy against
him. In this case, the defect could have been detected
with the exercise of utmost diligence by the CC.
2. Duration of responsibility
4 Agbayani:
When relationship of carrier and passenger
terminates.-- The relation of CC and passenger does
not cease at the moment that the passenger alights
from the CC's vehicle at a place selected by the CC at
the point of destination, but continues until the
passenger had reasonable time or a reasonable
opportunity to leave the CC's premises. What is a
reasonable time or a reasonable delay within this rule
is to be determined from all the circumstances
La Mallorca vs CA, 17 SCRA 739
F:
Husband and wife together with minor children
boarded a La Mallorca bus. They alighted from the
bus. The father returned to the bus to get their
baggage. He was followed by his daughter. While the
father was still on the running board awaiting for the
conductor to give his baggage, the bus stated to run
so that the father had to jump. His daughter was run
over and was killed. The bus co. contended that when
she was killed, she was no longer a passenger and the
contract of carriage had terminated.
Held: Whether or not the relation between carrier and
passenger does not cease at the moment the
passenger alights from the carrier's premises is to be
determined from the circumstances.
In this case, there was no utmost diligence.
The driver stopped the bus but did not turn off the
engine. He started to run the bus even before the
conductor gave him the signal.
The presence of
passengers near the bus was not unreasonable and
the duration of the responsibility still exists.
Bataclan vs Medina, 102 Phil 181
F:
The bus of Medina Trans left Cavite for Pasay
with 18 passengers. Around dawn, the front tires burst
and the vehicles began to zigzag until it fell into a
canal and turned turtle. Some passengers were able
to get out while four were trapped including Bataclan.
Later, 10 men came to help, one of them carrying a
lighted torch, fueled by petroleum. A fire started,
burning the bus and the 4 passengers. Gas had leaked
when the bus overturned.
Held: The proximate cause of the death was the
overturning of the vehicle which was followed by the
negligence of the driver and the conductor who were
on the road walking back and forth. They should have
known that with the position of the bus, leakage was
possible aside from the fact that gas when spilled can
be smelled from a distance. The failure of the driver
and conductor to have cautioned or taken steps to
warn rescuers not to bring a lighted torch too near the
bus constitutes negligence on the part of the agents of
the carrier.
Aboitiz vs CA 179 SCRA 95
F:
A farmer boarded a boat owned by Aboitiz at
Mindoro bound for Manila. When the vessel arrived,
Pioneer Stevedoring took over control of the cargoes
loaded at the vessel and placed its crane alongside the
vessel. One hour after he disembarked, he went back
to get his cargo but the crane hit him and he died.
Held: Aboitiz is still liable for his death under the
contract of carriage.
The relation of carrier and
PAGE 33

passenger continues until the passenger has been
landed at the port of destination and has left the
vessel owner's dock. Once created the relationship
will not ordinarily terminate until the passenger has
safely alighted from the carrier's conveyance or had
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 reasonable time is to be
determined from all circumstances and includes a
reasonable time to see after his baggage and prepare
for his departure. The CC-passenger relationship is
not terminated merely by the fact that the person
transported has been carried to his destination if the
person remains in the premises to claim his baggage.
The test is the existence of a reasonable cause
as will justify the presence of the passenger near the
vessel.
A CC is bound to carry its passengers as far as
human care and foresight can provide, using the
utmost diligence of a very cautious person with due
PAL vs CA, G.R. 82619, Sept. 1993
F:
Pedro Zapatos was among 21 passengers on a
PAL flight from Cebu to Ozamis. The flight was CebuOzamis-Cotabato. Fifteen minutes before landing in
Ozamis, the pilot received a message that the airport
was closed due to heavy rains and inclement weather
and that he should proceed to Cotabato City. In
Cotabato, PAL informed the passengers of their options
and that due to limited number of seats in the other
flights, the basis for priority would be the check-in
sequence at Cebu. Zapatos chose to return to Cebu
but was not accommodated because he checked in as
passenger no. 9. However, his personal belongings
including a camera from Japan were still on board the
flight to Manila. He tried to stop the departure but his
plea fell on deaf ears. He was given a free ticket to
Iligan City which he received under protest. He was
left at the airport. PAL neither provided him with
transportation from the airport to the city proper nor
food and accommodation for his stay in Cotabato City.
The next day, he purchased a ticket to Iligan City. He
informed PAL that he would not use the free ticket
because he was filing a case against PAL. His personal
belongings were never recovered.
PAL denied that it unjustifiably refused to
accommodate Zapatos.
It alleged that there was
simply no more seat for him on Flight 560 to Manila;
and that there was force majeure which was a valid
justification for the pilot to bypass Ozamis City and
proceed directly to Cotabato City. PAL contended that
it did not unjustifiably deny his demand for priority
over confirmed passengers which they could not
satisfy in view of the limited seats. PAL also asserted
that it should not be charged with the task of looking
after the passengers' comfort and convenience
because the diversion of the flight was due to a
fortuitous event, and that if made liable, an added
burden is given to PAL which is over and beyond its
duties under the contract of carriage. It argued that
granting there was negligence, PAL cannot be liable in
damages in the absence of fraud or bad faith.
The RTC held in favor of plaintiff. The CA
affirmed.
Held: The passenger's complaint touched on PAL's
indifference and inattention to his predicament and
not on PAL's refusal to comply with his demand for
priority over the other passengers. He claimed that he
was exposed to the peril of Muslim rebels and that he
suffered mental anguish, mental torture, social
humiliation, besmirched reputation and wounded
feeling. He referred to PAL's apathy.
The contract of air carriage is a peculiar one.

Being imbued with public interest, the law requires
common carriers to carry the passengers safely as far
as human care and foresight can provide, using the
regard for all the circumstances. In Air France vs
Carrascoso, the SC held that the contract to transport
passengers is quite different from any contractual
relation in that it invites people to avail of the comforts
and advantages it offers. The diversion of the flight
was due to a fortuitous event. However, such did not
terminate PAL's contract with its passengers. Being in
the business of air carriage, PAL is deemed equipped
to deal with situations like the case at bar. The
relation of carrier and passenger continues until the
latter has been landed at the port of destination and
has left the CC's premises. Hence, PAL necessarily
would still have to exercise extraordinary diligence in
safeguarding the comfort, convenience and safety of
the stranded passengers until they have reached their
final destination. PAL was therefore remiss in its duty
of extending utmost care to Zapatos while being
stranded in Cotabato City.
The CA held : "While the failure of Zapatos to
reach his destination xxx in accordance with the
contract of carriage was due to the closure of the
airport on account of rain and inclement weather xxx it
becomes the duty of PAL to provide all means of
comfort and convenience to its passengers when they
would have to be left in a strange place in case of such
by-passing. If the cause of non-fulfillment of the
contract is due to a fortuitous event, it has to be the
sole and only cause. Since part of the failure to
comply with the obligation to deliver its passengers
safely to their destination lay in PAL's failure to provide
comfort and convenience to its stranded passengers
using extraordinary diligence, the cause of nonfulfillment is not solely and exclusively due to
fortuitous event, but due to something that PAL could
have prevented, PAL becomes liable to the passenger."
However the SC found that although PAL was remiss in
its duty of extending utmost care to Zapatos while
being stranded in Cotabato City, there was no
sufficient basis to conclude that PAL failed to inform
him about his other options.
3. Presumption of negligence
Art. 1756. In case of death of or injuries
to passengers, common carriers are presumed
to have been at fault or to have acted
negligently, unless they prove that they
observed extraordinary diligence as prescribed
in articles 1733 and 1755.
4 Agbayani:
Presumption of negligence.-- CCs are presumed to
have been at fault or to have acted negligently in case
of death or injuries to passengers. This disputable
presumption may only be overcome by superior
evidence that he had observed extraordinary diligence
prescribed in 1733, 1755, 1756
Where death or injury results to the passenger
because of the negligence of the CC's Es, the CC is
liable, notwithstanding the fact that he had exercised
all the diligence of a good father of a family, in the
selection and supervision of his EEs
xxx
Consequently, in an action for damages, the
issue is not WON the party seeking damages has
adduced sufficient evidence to show the negligence of
the CC but WON the carrier has presented the required
quantum of proof to overcome the presumption that it
has been at fault or that it acted negligently in the
performance of its duty.
PAGE 34

In the exercise of extraordinary diligence, the
CC must give due regard for all circumstances in
connection with the transport of passengers
How presumption of negligence overcome.-- To
overcome such presumption, it must be shown that
the CC had observed the required extraordinary
diligence or that the accident was caused by fortuituos
event. In order to constitute caso fortuito that would
exempt a person from responsibility, it is necessary
that :
1. The event must be independent of human
will;
2. The occurrence must render it impossible
for the obligor to fulfill his obligation in a normal
manner;
3. The obligor must be free of a concurrent or
contributory fault or negligence.
[Estrada vs
Consolacion, 71 SCRA 523]
Carrier not precluded from proving negligence
of other carrier involved in collision.-- While the
plaintiff-passenger does not need to prove the
negligence of the CC, he may not preclude the CC
from proving the legal defense of negligence of the
other vehicle involved in the collision (the CC may file
a third-party complaint against the other vehicle for
reimbursement)
"Last clear chance" rule not applicable to
contracts of carriage.-- The principle of last clear
chance applies only in a suit between the owners and
drivers of two colliding vehicles; it does not apply
where a passenger demands responsibility from the
CC to enforce its contractual obligation; it would be
iniquitous to exempt the driver and his ER on the
ground that the other driver was also negligent
Court need not make express finding of carrier's
fault or negligence.-- The court need not make an
express finding of fault or negligence on the part of the
CC in order to hold it responsible to pay the damages
sought by the passenger. By the contract of carriage,
the CC assumes the express obligation to observe
extraordinary diligence in transporting the passenger
This is an exception to general rule that negligence
must be proved.
Carriers not ordinarily liable for injuries to
passengers due to fires or explosions caused by
articles brought into conveyance by other
passengers.-- CC is not ordinarily liable for injuries
to passengers due to fires or explosions caused by
articles brought into conveyance by other passengers.
Fairness demands that in measuring the CC's duty
towards its passengers, allowance should be given to
the reliance that should be reposed on the sense of
responsibility of all the passengers in regard to their
common safety (that the passenger will not take with
him anything dangerous to his co-passengers.) For
the carrier to be liable, he must be aware, through his
EEs of the nature of the article or must have had some
reason to anticipate danger therefrom (circumstances
must show that there are causes for apprehension that
the passenger's baggage is dangerous and that the CC
fails to act in the fact of such evidence) [Nocum vs
Laguna Bus Co., 1969]
4. Force Majeure
Bachelor Express vs CA 188 SCRA 217
F:
Bus No. 800 owned by Bachelor Express and
driven by Cresencio Rivera was the situs of a
stampede which resulted in the death of passengers
Beter and Rautrat. The bus came from Davao City on
its way to Cagayan de Oro passing Butuan City. While
in Tabon-Tabon, Butuan, the bus picked up a

passenger. A passenger suddenly stabbed a PC soldier
which caused commotion and panic among the
passengers. Two passengers jumped out (finding of
the TC which was reversed by the CA) of the bus and
were found dead as a result of head injuries. The
passenger- assailant ran away from the bus but was
killed by the police.
The parents of the dead
passengers filed a complaint for a sum of money
against the CC, the owner and the driver.
The CC denied liability and alleged that the
driver was able to transport his passengers safely to
their respective places of destination except for the
two passengers who jumped off the bus without the
knowledge and consent, much less, the fault of the
driver; that the CC exercised due diligence in the
choice of its EEs to avoid as much as possible
accidents; that the incident was not a traffic or
vehicular accident but was an incident very much
beyond the control of the CC; that the CC was not a
party to the incident as it was an act of a third party
who is not in any way connected with the CC and of
which they have no control and supervision. The CC
argued that the incident's proximate cause was the act
of the passenger who ran amuck and which triggered
off the commotion and panic.
The TC dismissed the complaint.
The CA
reversed and ordered the CC, the owner and driver
solidarily liable to the heirs of the deceased.
Held : The CC is liable for the death of the passengers.
Bachelor Express as a CC is bound to carry its
passengers safely as far as human care and foresight
can provide using the utmost diligence of very
cautious person, with due regard for all the
circumstances. In this case where passengers suffered
injuries which caused their death, under 1756, the CC
is presumed to have acted negligently unless it can
prove that it had observed extraordinary diligence. The
CC raised the defense of caso fortuito. Art. 1174
provides that no person shall be responsible for those
events which could not be foreseen or which though
foreseen were inevitable. In Lasam vs Smith, the SC
held that a caso fortuito must have the following
elements: (1)
The cause of the unforeseen and
unexpected occurrence must be independent of the
human will; (2) It must be impossible to foresee the
event; (3) The occurrence must be so as to render it
impossible for the debtor to fulfill his obligation in a
normal manner; and (4) The obligor must be free
from any participation in the aggravation of the injury
resulting to the creditor. The running amuck of the
passenger was the proximate cause of the incident
and is within the context of force majeure.
However, in order that a CC may be absolved
from liability in case of force majeure, it is not enough
that the accident was caused by force majeure. The
CC must still prove that it was not negligent in causing
the injuries resulting from such accident. It must prove
that there was no negligence or lack of care and
diligence on the part of the CC.
The TC and the CA had conflicting findings of
fact. The SC upheld the findings of the CA-- the driver
did not immediately stop the bus at the height of the
commotion; the bus was speeding from a full stop; the
victims fell from the bus door when it was opened or
gave way while the bus was still running; the
conductor panicked and blew his whistle after people
had already fallen off the bus; the bus was not
properly equipped with doors in accordance with law.
It is therefore clear that the petitioners have failed to
overcome the presumption of fault and negligence
found in the law governing CCs.
The CC's argument that it is not an insurer of
its passengers deserves no merit in view of the failure
of the CC to prove that the deaths of the 2 passengers
were exclusively due to force majeure and not to the
failure of the CC to observe extra-ordinary diligence in
PAGE 35

transporting
safely
the
passengers
destinations as warranted by law.
to
their
5. Limitation of liability; validity of

stipulations
Art. 1757. The responsibility of the
common carrier for the safety of passengers as
required in Arts. 1733 and 1755 cannot be
dispensed with or lessened by stipulation, by
the posting of notices, by statements on tickets,
or otherwise.
Art. 1758. When a passenger is carried
gratuitously, a stipulation limiting the common
carrier's liability for negligence is valid, but not
for willful acts or gross negligence.
The reduction of fare does not justify any
limitation of the common carrier's liability.
Ticket given to a passenger is a written
contract.-- Ticket given to passenger is a written
contract with the ff. elements: (1) the consent of the
contracting parties manifested by the fact that the
passenger boards the ship and the shipper consents or
accepts him in the ship for transportation; (2) cause or
consideration which is the fare paid by the passenger
as stated in the ticket; (3)
object, which is the
transportation of the passenger from the place of
departure to the place of destination which are stated
in the ticket.
Passenger bound notwithstanding his failure to
sign ticket containing stipulation limiting
liability.-- Even if the passenger failed to sign the
ticket, he is nevertheless bound by the provisions
thereof. Such provisions are part of the contract of
carriage, regardless of the passenger's lack of
knowledge or assent to the regulation. It is what is
known as a contract of adhesion which is not entirely
prohibited by law.
The one who adheres to the
contract is in reality free to reject it entirely; if he
adheres, he gives his consent. Accordingly, where the
CC incurred delay, it is liable only for the amount
printed in the ticket the passenger not having declared
a higher value for his luggage nor paid addtl. charges.
Dispensing with or limiting liability.-- General
rule: Under 1757, the extraordinary diligence required
under 1733 and 1755 for the carriage of passengers
cannot be dispensed with or lessened (1) by
stipulation, (2) by the posting of notices, (3) by
statements on tickets, or (4) otherwise
What cannot be stipulated in a carriage of
passengers :
(1) absolutely exempting the CC from liability
from the passenger's death or injuries;
(2) lessening the extraordinary diligence
required by law to the diligence of a good father of a
family
Exception:
Effect of gratuitous carriage.-Under 1758, the CC and the passenger may validly
stipulate limiting the CC's liability for negligence
where the passenger is carried gratuitously (but the
parties cannot stipulate to entirely eliminate liability of
CC)
Effect of reduction of fares.-Under 1758 (2),
the reduction of fare does not justify any limitation of
the CC's liability -the law requires gratuitous
passage.
The law is much stricter with respect to
carriage of passengers as compared with carriage of
goods: a stipulation limiting the CC's liability in
writing, signed by the parties, supported by sufficient
consideration, not contrary to law will still be void

where the passenger is not carried gratuitously.
Liability of owner of CC to accommodation
passengers or invited guests.-- [Lara vs Valencia,
1958] an owner of an automobile owes a guest the
duty to exercise ordinary or reasonable care to avoid
injuring him; since one riding in an automobile is no
less a guest because he asked for the privilege of
doing so, the same obligation of care is imposed upon
the driver and owner as in the case of one expressly
invited to ride
6. Responsibility for acts of EEs
Art. 1759. Common carriers are liable for
the death of or injuries to passengers through
the negligence or willful acts of the former's
employees, although such employees may have
acted beyond the scope of their authority or in
violation of the orders of the common carrier.
The liability of the common carrier does
not cease upon proof that they exercised all the
diligence of a good father of a family in the
selection and supervision of their employees.
Art. 1760. The common carrier's
responsibility prescribed in the preceding
article cannot be eliminated or limited by
stipulation, by the posting of notices, by
statements on the tickets, or otherwise.
4 Agbayani:
Liability for negligence or willful acts of
employees.-- Under 1759, CC are held liable for the
death or injuries to passengers caused by the
negligence or the willful acts of their EEs, although
such EEs may have acted beyond the scope of their
authority or in violation of the orders of the CC. The
CC cannot escape liability by interposing the defense
that its EEs have acted without any authority or
against the orders of the CC
The passenger is entitled to protection from
personal violence by the CC or its agents or EEs since
the contract of transportation obligates the CC to
transport a passenger safely to his destination and a
CC is responsible for the misconduct of its EEs
Cardenas vs Fernando, 54 OG no. 4, p. 1043 (1957):
(1) extraordinary diligence required of CC: calculated
to protect the passengers as demanded by the
preciousness of human life and by the consideration
that every person must in every way be safeguarded
against all injury; (2) liability for injury of passenger is
based on a breach of contract of carriage for failure to
bring the passenger safely to his destination
Reason for making the CC liable for the
misconduct of its EEs in their own interest.-The servant is clothed with delegated authority and
charged with the duty by the CC, to execute his
undertaking to carry the passenger safely; when the
EE mistreats the passenger, he violates the
contractual obligation of the CC for which he
represents the CC
Liability of CC for defects of its equipment.-- A
passenger is entitled to recover damages from a CC
for an injury resulting from a defect in an appliance
purchased from a manufacturer, whenever it appears
that the defect would have been discovered by the CC
if it had exercised the degree of care which under the
circumstances was incumbent upon it, with regard to
inspection and application of the necessary tests; for
the purposes of this doctrine, the manufacturer is
considered as being in law the agent or servant of the
PAGE 36

CC, as far as regards the work of constructing the
appliance
Common carrier is exempt from acts of EE not
done in line of duty.-- The CC is exempt from
liability where the EE was never in a position in which
it became his duty to his ER to represent him in
discharging any duty of the CC towards the passenger;
the EE is deemed as a stranger or co-passenger since
his act was not done in the line of duty
Defense of diligence in selection, etc., of
employees.-CC cannot escape liability by
interposing defense that he exercised due diligence in
the selection and supervision of his EEs; his liability is
based on culpa contractual
When relationship of carrier and passenger
terminates.-- The relation of CC and passenger does
not cease at the moment that the passenger alights
from the CC's vehicle at a place selected by the CC at
the point of destination, but continues until the
passenger had reasonable time or a reasonable
opportunity to leave the CC's premises. What is a
reasonable time or a reasonable delay within this rule
is to be determined from all the circumstances
Elimination or limitation of carrier's liability.-Under 1760, the CC's liability for the negligence or
willful acts of his EEs which cause death of or injury to
passengers cannot be eliminated or limited by (1)
stipulation, (2) by the posting of notice, (3) by
statements on the tickets, or (4) otherwise
Bataclan vs Medina, 104 Phil 181
F:
supra. Bus turned turtle with gas leaking out.
Rescuers brought torches which resulted in fire.
Held : There was a breach of the contract of carriage
and negligence on the part of the agent of the CC, the
driver. At the time of the blowout of the tires, the bus
was speeding. The proximate cause of the death was
the overturning of the vehicle which was followed by
the negligence of the driver and the conductor who
were on the road walking back and forth. They should
have known that with the position of the bus, leakage
was possible aside from the fact that gas when spilled
can be smelled from a distance. The failure of the
driver and conductor to have cautioned or taken steps
to warn rescuers not to bring a lighted torch too near
the bus constitutes negligence on the part of the
agents of the carrier.
De Gillaco vs MRR, 97 Phil 884
F:
Plaintiff's husband was a passenger in the train
from Calamba to Manila. When the train reached the
Paco Railroad, a train guard of MRR was in the station
waiting for the same train to take him to Tutuban to
report for duty. He had a long standing grudge against
Gillaco and he shot and killed him upon seeing him
inside the train coach.
Held : While a passenger is entitled to protection from
personal violence by the CC or its agents or EEs, the
responsibility of the CC extends only to those acts that
the CC could foresee or avoid through the exercise of
the degree of care and diligence required of it. The
OCC did not impose upon CC the absolute liability for
assaults of their EEs upon the passengers.
The
act
of
the
guard
was
entirely
unforeseeable by MRR which had no means to
ascertain or anticipate that the two would meet nor
could it foresee every personal rancor that might exist
between its EEs and its passengers. The shooting was
a caso fortuito, both being unforeseeable and

inevitable under the circumstances.
When the crime took place, the guard had no
duties to discharge. His position would be that of a
passenger also waiting transportation and not of an EE
assigned to discharge duties.
Maranan vs Perez, 20 SCRA 412
F:
A passenger in a taxicab was stabbed and
killed by the driver. The driver claimed self defense
since accdg to him, he was stabbed first by the
passenger. The taxicab operator claimed caso fortuito.
Held: The NCC unlike the OCC makes the CC
absolutely liable for intentional assaults committed by
its EEs upon its passengers (Art. 1754). The CC's
liability is based on either (1) respondeat superior or
(2) the CC's implied duty to transport the passenger
safely. Under respondeat superior (w/c is the minority
view), the CC is liable only when the act of the EE is
within the scope of his authority and duty. Under the
second view, the CC is liable as long as the assault
occurs within the course of the performance of the
EE's duty. It is no defense that the act was done in
excess of authority or in disobedience of the CC's
orders. The CC's liability is absolute in the sense that
it practically secures the passengers from assaults
committed by its own EEs. Three cogent reasons
underlie this rule : (1) the special undertaking of the
CC requires that it furnish the passengers the full
measure of protection afforded by the exercise of the
high degree of care prescribed in the law, from
violence and insults in the hands of strangers, other
passengers, and from its own servants charged with
the passenger's safety; (2) liability is based on the
CC's confiding in the servant's hands the performance
of his contract to safely transport the passenger,
delegating therewith the duty of protecting the
passenger with utmost care prescribed by law; (3) as
between the CC and the passenger, the CC must bear
the risk of wrongful acts or negligence of the CC's EEs
against passengers since it has the power to select
and remove them.
It is the CC's obligation to select its drivers
with due regard not only to their technical competence
and physical ability but also to their total personality,
including patterns of behavior, moral fiber, and social
attitude.
7. Responsibility for acts of strangers
and co-passengers
Art. 1763.
A common carrier is
responsible for injuries suffered by a passenger
on account of the willful acts or negligence of
other passengers or of strangers, if the common
carrier's employees through the exercise of the
diligence of a good father of a family could have
prevented or stopped the act or omission.
4 Agbayani:
The CC is responsible for such willful acts or
negligence of other passengers or of strangers,
provided that the CC's EEs could have prevented or
stopped the act or omission through the exercise of
ordinary diligence. If the injury could not have been
avoided by the exercise of ordinary diligence on the
part of the EEs of the CC, the CC is not liable
Notice that the law speaks of injuries suffered
by the passenger but not his death. However, there
appears to be no reason why the common carrier
should not be held liable under such circumstances.
The word "injuries" should be interpreted to include
"death."
(Aguedo F. Agbayani, COMMERCIAL LAW
REVIEWER, 1988 ed.)
PAGE 37

Art. 1761. The passenger must observe
the diligence of a good father of a family to
avoid injury to himself.
Pilapil vs CA 180 SCRA 546

F:
While on a bus, an unidentified bystander
hurled a stone at the bus and hit Pilapil above his left
eye. He sustained some injuries to his eye.
Held: The law does not make the CC an insurer of the
absolute safety of its passengers. Art. 1755 qualifies
the duty of the CC in exercising vigilance to only such
as human care and foresight can provide.
The
presumption created by law against the CC is
rebuttable by proof that the CC had exercised
extraordinary diligence in the performance of its
obligations and that the injuries suffered were caused
by fortuitous events.
The liability of the CC
necessarily rests upon its negligence, or its failure to
exercise the degree of diligence required by law.
Under Art. 1763, the diligence required, with regards
to its liability in cases when intervening acts of
strangers directly caused the injury, is the diligence
only of a good father of a family and not the
extraordinary diligence generally required. The rule is
not so exacting as to require one charged with its
exercise to take doubtful or unreasonable precautions
to guard against unlawful acts of strangers. The CC
would only be negligent if the tort caused by a third
person could have been foreseen and prevented by
them.
The injury was in no way connected to the
performance of the obligation of the bus company. It
was caused by a stranger, over which the carrier had
no control or even knowledge of, and which could not
have been prevented.
Bachelor Express vs CA, 180 SCRA 217
F:
supra. A passenger stabbed a PC officer which
caused a commotion which resulted in the death of 2
passengers.
Held: The CC raised the defense of caso fortuito. The
running amuck of the passenger was the proximate
cause of the incident and is within the context of force
majeure. However, in order that a CC may be absolved
from liability in case of force majeure, it is not enough
that the accident was caused by force majeure. The
CC must still prove that it was not negligent in causing
the injuries resulting from such accident. It must prove
that there was no negligence or lack of care and
diligence on the part of the CC.
The TC and the CA had conflicting findings of
fact. The SC upheld the findings of the CA-- the driver
did not immediately stop the bus at the height of the
commotion; the bus was speeding from a full stop; the
victims fell from the bus door when it was opened or
gave way while the bus was still running; the
conductor panicked and blew his whistle after people
had already fallen off the bus; the bus was not
properly equipped with doors in accordance with law.
It is therefore clear that the petitioners have failed to
overcome the presumption of fault and negligence
found in the law governing CCs.
The CC's argument that it is not an insurer of
its passengers deserves no merit in view of the failure
of the CC to prove that the deaths of the 2 passengers
were exclusively due to force majeure and not to the
failure of the CC to observe extraordinary diligence in
transporting
safely
the
passengers
to
their
destinations as warranted by law.
8. Duty
contributory negligence
of
passenger;
effect
of
Art. 1762. The contributory negligence of

the passenger does not bar recovery of
damages for his death or injuries, if the
proximate cause thereof is the negligence of the
common carrier, but the amount of damages
shall be equitably reduced.
Law does not protect negligence of passenger.-Law does not protect negligence of passenger to the
extent of doing harm or damage upon a public utility
Diligence required of passenger.-- Diligence of a
good father of a family to avoid injury to himself.
Effect of negligence of passenger.-- Where the
proximate cause of the death of or injury to the
passenger is his own negligence, and not that of the
CC, the CC is exempted from liability
Effect of passenger's contributory negligence.-Contributory negligence on the part of the passenger
does not justify the CC's exemption from liability.
Where it is not the proximate cause of the death or
injury, he or his heirs are not barred from recovery of
damages, provided of course that the CC is the
proximate cause of his death or injury
Cangco vs MRR 38 Phil 768
F:
supra. EE riding on train who stepped on
watermelons.
Held: The conduct of plaintiff in undertaking to alight
while the train was yet slightly underway was not
characterized by imprudence and that he was not
guilty of contributory negligence.
The circumstances show that it was no means so risky
for him to get off while the train was yet moving. It is
not negligence per se for a traveler to alight from a
slowly moving train.
Isaac vs A. L. Ammen
F:
supra. Passenger aboard a bus who placed his
left arm on the window lost his arm when the bus
collided with a pick up.
Held: By placing his left arm on the window, the
passenger is guilty of contributory negligence, and
although contributory negligence cannot relieve the
carrier but can only reduce his liability (Art. 1762), this
is a circumstance which militates against plaintiff's
position. It is negligence per se for passengers to
protrude any part of his body and that no recovery can
be had for an injury.
In this case, the bus driver had done what a
prudent man could have done to avoid the collision.
The injury was due to passenger's fault.
Liability of air carrier under
Convention (Oct. 12, 1929)
the
Warsaw
Art. 17. The carrier shall be liable for

damages sustained in the event of death or
wounding of a passenger or any other bodily
injury suffered by a passenger, if the accident
which caused the damage so sustained took
place on board the aircraft or in the course of
any of the operations of embarking or
disembarking.
PAGE 38

Art. 18. (1) The carrier shall be liable for
damage sustained in the event of the
destruction or loss of, or of damage to, any
checked baggage or any goods, if the
occurrence which caused the damage so
sustained took place during the transportation
by air.
(2) The transportation by air within the
meaning of the preceding paragraph shall
comprise the period during which the baggage
or goods are in the charge of the carrier,
whether in an airport or on board an aircraft, or,
in case of a landing outside an airport, in any
place whatsoever.
(3) The period of the transportation by
air shall not extend to any transportation by
land, by sea, or by river performed outside an
airport. If however, such transportation takes
place in the performance of a contract for
transportation by air, for the purpose of loading,
delivery, or transshipment, any damage is
presumed, subject to proof to the contrary, to
have been the result of an event which took
place during the transportation by air.
damages
occasioned
by
delay
in
the
transportation by air of passengers, baggage or
goods
SC has held that these provisions merely
declare the carrier liable for damages in the
enumerated cases, if the conditions therein specified
are present. Neither said provisions nor others in the
Convention regulate or exclude liability for other
breaches of contract by the carrier.
D. Damages Recoverable from Common
Carriers
1. In general
Art. 1764. Damages in cases comprised
in this Section shall be awarded with the title
XVIII of this book concerning damages. Article
2206 shall also apply to the death of a
passenger caused by the breach of contract by
a common carrier.
Art. 2197. Damages may be:
(1) Actual or compensatory;
(2) Moral;
(3) Nominal;
(4) Temperate or moderate;
(5) Liquidated;
(6) Exemplary or corrective.
2. Actual or compensatory
Art. 2199. Except as provided by law or
by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss
suffered by him as he has duly proved. Such
compensation
referred
to
as
actual
or
compensatory damages.
Art. 2201.
In contracts and quasicontracts, the damages for which the obligor
who acted in good faith is liable shall be those
that are natural and probable consequences of
the breach of the obligation, and which the
parties have foreseen or could have reasonably
foreseen at the time the obligation was
constituted.
In case of fraud, bad faith, malice or

wanton attitude, the
obligor shall be
responsible for all damages which may be
reasonably attributed to the non-performance
of the obligation.
Art. 2203. The party suffering loss or
injury must exercise diligence of a good father
of a family to minimize the damages resulting
from the act or omission in question.
Art. 1764. Damages in cases comprised
in this Section shall be awarded with the title
XVIII of this book concerning damages. Article
2206 shall also apply to the death of a
passenger caused by the breach of contract by
a common carrier.
Art. 2206. The amount of damages for
death caused by a crime or quasi-delict shall be
at least P 3,000 (now P50,000), even though
there may have been mitigating circumstances.
In addition:
(1) The defendant shall be liable for the
loss of the earning capacity of the deceased,
and the indemnity shall be paid to the heirs of
the latter; such indemnity shall in every case be
assessed and awarded by the court, unless the
deceased on account of permanent physical
disability not caused by the defendant, had no
earning capacity at the time of his death;
(2) If the deceased was obliged to give
support according to the provisions of article
291, the recipient who is not an heir called to
the decedent's inheritance by the law of testate
or intestate succession, may demand support
from the person causing the death, for a period
not exceeding five years, the exact duration to
be fixed by the court;
(3)
The
spouses,
legitimate
and
illegitimate descendants and ascendants of the
deceased may demand moral damages for
deceased.
Cariaga vs LTBCo., 110 Phil 346
F:
Edgardo Cariaga, a fourth year medical
student of UST, was a passenger of an LTBC bus which
bumped against a train of MRR on the national
highway crossing a railroad tract at Laguna de Bay.
Cariaga suffered severe injuries on the head making
him unconscious during the first 35 days after the
accident, reducing his intelligence by 50% and
rendering him in a helpless condition, virtually invalid,
both physically and mentally. LTBC paid all medical
expenses plus allowance during convalescence. Later,
Cariaga's parents brought an action to recover
damages from LTBC and MRR in the amount of P
312,000 as actual, compensatory, moral and
exemplary damages. LTBC disclaimed liability and
filed a cross-complaint against MRR for recovery of
expenses paid by it to the plaintiff placing MRR
negligent for not providing a crossing bar at the
national highway railroad track. Laguna CFI dismissed
the cross-complaint against MRR and held LTBC liable
for P 10,000 as compensatory damages with interest.
Plaintiff and LTBC appealed.
Held: The train driver was not negligent. He sounded
the train's whistle four times before the intersection,
which were heard even by the bus passengers. The
bus did not slow down but instead the bus driver tried
to pass the intersection before the train. In addition,
another LTBC bus which arrived ahead of the bus in
this case, at the crossing heeded the train whistle by
stopping and allowing the train to pass. Clearly, the
PAGE 39

bus driver was negligent in totally disregarding the
warning. On the other hand, MRR cannot be held to be
contributorily negligent because LTBC was not able to
discharge its burden of proof when it alleged that MRR
violated its charter by failing to ring the locomotive
bell.
The evidence shows that Ed C. had been
rendered physically and mentally invalid by the
accident.
He suffered head injuries specifically a
fractured right forehead necessitating the removal of
all the right frontal lobe of his brain, which reduced his
intelligence by 50% so that he can no longer finish his
medical course. In addition, he has to lead a quiet and
retired life because if the tantalum plate which
replaced a portion of his skull is pressed in or dented,
it would cause his death.
LTBC admitted that under Art. 2201, it is liable
for damages that are the natural and probable
consequences of the breach and which the parties had
foreseen or could have reasonably foreseen at the
time the obligation was constituted. It however claims
that the said provision contemplates only the medical,
hospital, and other expenses in the total sum of P
17,719.75. The SC ruled that the income which Ed
could earn if he should finish the medical course, and
pass the corresponding board exams must be deemed
included because they could have reasonably been
foreseen by the parties at the time he boarded the
bus.
While his scholastic record may not be first
rate, it is sufficient to justify the assumption that he
could have finished his course and would have passed
the board exams in due time. As regards the income
that he could possibly earn as a doctor, P 300 (accdg.
to LTBC witness, Dr. Doria) could easily be expected as
minimum monthly income of Ed C. had he finished his
studies. Compensatory damages should be increased
to P 25,000.
The claim for moral damages could not be
granted because Art. 2219 enumerates the instances
when moral damages may be recovered and the
present case does not fall under any of them, even
par. (2) thereof because this case is not one of quasidelict and could not be considered as such because of
a pre-existing contractual relation between Ed C. and
LTBC. Neither could LTBC be liable under Art. 2220
because it did not act fraudulently or in bad faith.
Attorney's fees could also not be granted because this
case does not fall under Art. 2208.
The claim by the parents for actual and
compensatory damages is also without merit because
the present action is based upon a breach of contract
of carriage and the parents were not a party thereto,
and were not themselves injured as a result of the
collision.
Pan Am vs IAC, 164 SCRA 268
F:
supra. Baggage containing promotional and
advertising materials for films to be exhibited in the
US, clutch bags, barong tagalogs and personal
belongings was lost.
PAN AM sought to limit its
liability to the amount specified in the ticket absent a
declaration of higher valuation and the payment of
addtl. charges.
Held: On the basis of stipulations printed at the back
of the ticket, Pan Am contends that its liability for the
lost baggage of Pangan is limited to $ 600.00 ($20 x
30 kilos) as the latter did not declare a higher value for
his baggage and pay the corresponding charges.
The SC applied the ruling in Mendoza vs PAL:
Before defendant could be held to special damages,
such as alleged loss of profits on account of delay or
failure of delivery, it must have appeared that he had
notice at the time of delivery to him of the particular
circumstances attending the shipment, and which
probably would lead to such special loss if he

defaulted. In order to impose on the defaulting party
further liability than for damages naturally and
directly, i.e. in the ordinary course of things, arising
from a breach of contract, such unusual or
extraordinary damages must have been brought
within the contemplation of the parties as the
probable result of the breach at the time of or prior to
contracting. In the absence of proof that Pan Am's
attention was called to the special circumstances
requiring prompt delivery of Pangan's luggages,
petitioner cannot be held liable for the cancellation of
Pangan's contracts as it could not have reasonably
foreseen such eventuality when it accepted the
luggage for transit. Pan Am was not privy to the
contracts of Pangan nor was its attention called to the
condition therein requiring delivery of the promotional
and advertising materials on or before a certain date.
No attorney's fees could be awarded since
there was no unjustified refusal by Pan Am to satisfy
the passenger's just and valid claim.
Villa Rey Transit vs CA, 31 SCRA 511
F:
Policronio Quintos boarded a Villa Rey Transit
bus at Lingayen, Pangasinan for Manila and was
seated on the first seat right side. When they reached
the national highway in Pampanga, the bus frontally
hit the rear side of a bull cart filled with hay. The end
of the bamboo pole tied to the cart hit the windshield
and landed on the face of Quintos who was seated in
front. He died of cerebral injuries. His sisters and
surviving heirs brought an action against the bus co.
The TC and CA held Villa Rey liable for P 63,750.00.
Held: The determination of damages due is dependent
on 2 factors : (1) on the no. of years on the basis of
which damages shall be computed (life expectancy);
and (2) rate at which the losses sustained should be
fixed.
CA determined life expectancy accdg. to the
American Expectancy Table of Mortality; and since
Quintos was around 30 years old at the time of his
death : 2/3 x [80 - 30] = 33 1/3 years. The bus co.
wanted to use the 4 year basis adopted in Alcantara vs
Surro but the court held that the case is not controlling
as it did not lay down any rule on the length of time to
be used in the computation of damages. In fact, it
declared that there is no fixed basis for determination
of indemnity and much is left to the discretion of the
court considering the material damages involved and
that there can be no exact or uniform rule for
measuring the value of human life and the measure of
damages
cannot
be
arrived
at
by
precise
mathematical calculations.
Villa Rey impugns the decision on the ground
that damages will have to be paid NOW where most of
those sought to be indemnified will be suffered years
later. This argument if offset by the fact that payment
of the award will take place upon the finality of the
decision, fixed at the rate of P 2,184 per year and did
not anymore compute the potentiality and capacity of
Quintos to increase his future income, upon conclusion
of his training, when he would be promoted and
receive a higher salary.
In determining the losses sustained by the
dependents and heirs of Quintos. they consist NOT of
the full amount of his earnings but of the support they
would have received from him had he not died. In
fixing said amount, the necessary living expenses
should therefore be deducted from his earnings. The
amount recoverable
would therefore be the NET
earnings, which is the portion which the beneficiaries
would have received. To this sum must be added
P12,000 pursuant to Art. 104 and 107 of the RPC, in
relation to Art. 2206, NCC and P 1,727.95 for the
PAGE 40

amount actually spent by the sisters for his medical
and burial expenses and
P 2, 500 attorney's fees.
PAL vs CA, 185 SCRA 110
F:
In 1960, Nicanor Padilla boarded the PAL flight
from Iloilo to Manila. The plane crashed on Mt. Baco,
Mindoro. The plane, a PI-C133, was manufactured in
1942 and was acquired by PAL in 1948. It had been
certified
airworthy
by
the
Civil
Aeronautics
Administration. As a result of her son's death, Mrs.
Padilla demanded P 600,000 as actual and
compensatory damages plus exemplary damages and
P 60,000 attorney's fees.
Prior to his death, Nicanor Padilla was 29 years
old, President and General Manager of Padilla Shipping
Co. at Iloilo City, and a legal assistant of the Padilla
Law Office. Upon learning of the death of her son, she
suffered shock and mental anguish, because her son
who was still single was living with her. Nicanor had
life insurance of P 20,000, the proceeds of which were
paid to his sister. Eduardo Mate of the Allied Overseas
Trading Co. testified that the deceased was one of the
incorporators of the co. and also its VP with a monthly
salary of P 455.
Isaac Reyes, auditor of Padilla
Shipping Co., declared that the deceased was
President and General Manager and received a salary
of P 1,500 per month.
The RTC and the CA awarded damages of P
477,000 as award for the expected income of the
deceased, P 10,000 as moral damages; P 10,000 as
attorney's fees and to pay the costs. PAL appealed the
decision since accdg. to it, the court erred in
computing the awarded indemnity based on the life
expectancy of the deceased rather than on the life
expectancy of the mother.
Accdg. to it, the life
expectancy of the deceased or of the beneficiary,
whichever is shorter, is used in computing for amount
of damages.
Held: Under Arts. 1764 and Article 2206 (1), the
award of damages for death is computed on the basis
of the life expectancy of the deceased and not of the
beneficiary. In this case, the lower courts determined
the deceased gross annual income to be P 23,100 less
P 9,200 as living expenses, resulting in a net
income of P 13,900. The lower court allowed the
deceased a life expectancy of 30 years. Multiplying
his annual net income by his life expectancy of 30
years, the product is P 417,000, which is the death
indemnity due to his mother and only forced heir.
Because of the long delay in this case, the
mother already died without being able to receive the
indemnity she deserved. PAL is ordered to pay her
heirs the death indemnity with legal rate of interest of
6% per annum.
discretion of the court, according

to
the
Art. 2219.
Moral damages may be
recovered in the following analogous cases :
(1) A criminal offense resulting in
physical injuries;
(2)
Quasi-delicts
causing
physical
injuries;
xxx
(10) Acts and actions referred to in
Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35.
xxx
Art. 2220. Willful injury to property may
be a legal ground for awarding moral damages
if the court should find that, under the
circumstances, such damages are justly due.
The same rule applies to breaches of contract
where the defendant acted fraudulently or in
bad faith.
Art. 2206. xxx
(3)
The
spouses,
legitimate
and
illegitimate descendants and ascendants of the
deceased may demand moral damages for
deceased.
Fores vs Miranda 105 Phil 266
F:
supra. While the jeepney was descending the
Sta. Mesa bridge at an excessive rate of speed, the
driver lost control, causing it to swerve and hit the
bridge wall. Five of the passengers were injured,
including the respondent. The CA awarded moral
damages.
Held: Art. 1764 makes it all the more evident that
where the injured passenger does not die, moral
damages are not recoverable unless it is proved that
the CC was guilty of malice or bad faith. In the case at
bar, there is no other evidence of such malice to
support an award of moral damages. To award moral
damages for breach of contract, without proof of bad
faith or malice on the part of the CC, as required by
Art. 2220, would be to violate the clear provisions of
the law, and constitute unwarranted legislation. A
CC's bad faith is not to be lightly inferred from a mere
finding that the contract was breached through
negligence of the CC's EEs. The exception is a mishap
resulting to the death of a passenger in which case
Art. 1764 makes the CC subject to Art. 2206 (award of
moral damages).
Air France vs Carrascoso, 18 SCRA 155
3. Moral
Art. 2217.
Moral damages include
physical suffering, mental anguish, fright,
serious
anxiety,
besmirched
reputation,
wounded
feelings,
moral
shock,
social
humiliation, and similar injury.
Though
incapable of pecuniary computation, moral
damages may be recovered if they are the
proximate result of the defendant's wrongful
act or omission.
Art. 2216. No proof of pecuniary loss is
necessary
in order that moral, nominal,
temperate, liquidated or exemplary damages
may be adjudicated. The assessment of such
damages, except liquidated ones, is left to the
F:
Plaintiff, a civil engineer, was a member of a
group of 48 Filipinos that left Manila for Lourdes on
March 30, 1958. Air France, through its authorized
agent, PAL, issued to plaintiff a first class round trip
ticket from Manila to Rome. From Manila to Bangkok,
he traveled first class, but at Bangkok, Air France
forced him to vacate the first class seat that he was
occupying because there was a white man who had a
better right to the seat. There was a commotion when
plaintiff first refused to give up his seat, but he was
pacified by his fellow Filipino passengers to give up his
seat and transfer to another class.
The lower court sentenced Air France to pay P
25,000 as moral damages, P 10,000 as exemplary
damages, the difference in fare between first class and
tourist class plus P 3,000 for attorney's fees and costs
of suit. The CA reduced the refund from P 393.20 to P
383.20.
PAGE 41

Held: Air France contended that the issuance of the
first class ticket was no guarantee that he would have
a first class ride, but such would depend upon the
availability of first class seats. The SC ruled that it
could not understand how a reputable firm like Air
France could have the indiscretion to give out tickets it
never meant to honor at all.
It received the
corresponding amount in payment of first-class tickets
and yet it allowed the passenger to be at the mercy of
its EEs. Plaintiff was indeed confirmed for first class all
the way to Rome.
There was contract to furnish plaintiff a first
class passage. Said contract was breached when the
CC failed to furnish the first class transportation at
Bangkok. Third, there was bad faith when petitioner's
EE compelled Carrascoso to leave his first class
accommodation after he was already seated and to
take a seat in the tourist class by reason of which he
suffered
inconvenience,
embarrassments
and
humiliation, thereby causing him mental anguish,
serious anxiety, wounded feelings, and social
humiliation, resulting in moral damages. It is true that
the complaint did not use the term Bad Faith. But the
interference of BF is there. The manager not only
prevented Carrascoso from enjoying his right to a first
class seat; worse, he imposed his arbitrary will; he
forcibly ejected him from his seat, made him suffer the
humiliation of having to go to the tourist class
compartment -- just to give way to another passenger
whose right thereto has not been established. This is
certainly BF. For the willful malevolent act of CC's
manager, the CC-ER must answer. Moral damages
are recoverable.
CC's contract with Carrascoso is attended with
public duty. The expulsion of Carrascoso is a violation
of a public duty by the CC -- a case of quasi-delict.
Damages are proper. The manner of ejectment of
Carrascoso fits into the legal precept for awarding
exemplary damages in addition to moral damages.
Lopez vs Pan Am, 16 SCRA 431
F:
Plaintiffs made first class reservations with
defendant air carrier, in its Tokyo-SF flight, which
reservation was confirmed and first class tickets
issued; but defendant's agent by mistake canceled
plaintiff's reservations and thereafter deliberately
withheld from plaintiffs the information, letting them
go on believing that their first class reservations stood
valid and confirmed, expecting some cancellations of
bookings would be made before the flight time, which
failed to occur. Upon arrival in Tokyo, only then were
the
plaintiffs
informed
that
there
were
no
accommodations for them in the first class, and they
were constrained, due to pressing engagements in the
US, to take the flight as tourist passengers, which they
did under protest. Plaintiffs sued the defendant for
moral and exemplary damages. The Rizal CFI awarded
the plaintiffs moral and exemplary damages and
attorney's fees. Upon plaintiff's MFR, said damages
were increased in amount.
Held: In so misleading the plaintiffs into purchasing
first class tickets in conviction that they had confirmed
reservations when in fact they had none, defendant
willfully and knowingly placed itself into position of
having breached its contract with plaintiffs.
Such actions of the defendant may indeed
have been prompted by nothing more than the
promotion of its self-interest in holding on to plaintiffs
as passengers and foreclosing on their chances to
seek the service of other airlines that may have been
able to afford to them first class accommodations. All
the same, in legal contemplation, such conduct
already amounts to action in BF. For bad faith means
a breach of a known duty through some motive of
interest of ill will. It may not be humiliating to travel

as tourist passengers, but it is humiliating to be
compelled to travel as such, contrary to what is
rightfully to be expected from the contractual
undertaking.
Plaintiffs are entitled to moral damages.
Considering their official, political, social and financial
standing, they are awarded P 200,000
as moral
damages, P 75,000 as exemplary damages all with
interest, and P 50,000 as attorney's fees considering
the standing of plaintiff's counsel.
Ortigas vs Lufthansa, 64 SCRA 610
F:
Plaintiff took a first class accommodation on
Lufthansa Airlines in Rome for his trip to Manila, with
confirmation of the airlines office, but its EE on seeing
plaintiff's Filipino nationality in his passport, disallowed
him to board the place and his seat was given to a
Belgian. Plaintiff having a heart ailment was advised
by his physician to take only a first class seat, but he
was compelled to take an economy seat with a
promise of the Lufthansa EE that plaintiff will be
transferred to first class in Cairo and onward to
Hongkong. Upon arrival in Cairo, the promise was not
complied with.
Similar false representations were
made to him at Dharnan and Calcutta. Plaintiff sued
the airlines for damages. TC awarded plaintiff moral
and exemplary damages.
Held: It is the opinion of the SC that moral damages
should be raised from P 100,000 to P 150,000 and
exemplary damages be increased from P 30,000 to P
100,000. It is our considered view that when it comes
to contracts of common carriage, inattention and lack
of care on the part of the CC resulting in the failure of
the passenger to be accommodated in the class
contracted for amounts to bad faith or fraud which
entitles the passenger to an award of moral damages
in accordance with Art. 2220. In this case, the breach
appears to be of graver nature, since the preference
given to the Belgian passenger over plaintiff was done
willfully and in wanton disregard of plaintiff's rights
and his dignity as a human being and as a Filipino,
who may not be discriminated against with impunity.
Since both Alitalia and Lufthansa are members of IATA
and are agents of each other, they are bound by the
mistakes committed by a member such as the mistake
of the Alitalia EE to inform Ortigas that he could travel
first class instead of only being waitlisted. The award
of higher damages is justified by the aggravation of
the situation when the Lufthansa EE at Rome falsely
noted on Ortigas' ticket that he was traveling economy
from Rome to HK and which was repeated four times.
Also taken into consideration was the heart condition
of Ortigas which gave him added apprehension about
traveling economy against the advice of the doctor.
4. Exemplary
Art. 2229.
Exemplary or corrective
damages are imposed, by way of example or
correction for the public good, in addition to the
moral, temperate, liquidated or compensatory
damages.
Art. 2232.
In contracts and quasi
contracts, the court may award exemplary
damages if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent
manner.
Art. 2233. Exemplary damages cannot be
recovered as a matter of right; the court will
decide whether or not they should be
adjudicated.
PAGE 42

Mecenas vs CA, 180 SCRA 83
F:
M/V Tacloban City (TC) left Amlan, Negros
Oriental bound for Manila. M/V Don Juan (DJ) left
Manila bound for Bacolod. TC had visual contact of DJ
when they were about 5 miles apart and as a
precaution, it was steered to its left. DJ had radar
contact of TC when they were four miles apart and
following R18 of the International Rules of the Road
when a collision is possible, it was steered to its right.
At 10:30 PM, both collided as a result of which DJ sank
15 minutes later and hundreds of its passengers
perished.
Petitioners, children of the victims, filed a case
against Negros Navigation, owner of DJ, based on
quasi-delict. The RTC awarded damages of P 400,000
for the death of plaintiffs' parents and P 15,000 for
attorney's fees. The CA modified the award to P
100,000 as actual and compensatory damages.
Held: Before going into the issue, the SC ruled that
the action which was based on quasi-delict should be
appropriately regarded as grounded on contract, and
indulged in the presumption of negligence on the part
of the CC although its EEs may have acted beyond the
scope of their authority or even in violation of its
instructions. Its liability would include moral damages
(Art. 1764) and exemplary damages if the defendants
acted recklessly or with gross negligence (Art. 2332).
There is no question that the defendants are
negligent. As found by the CFI, DJ steered to the right
while TC continued its course to the left. There can be
no excuse for them not to realize that with such
maneuvers, they will collide.
They executed
maneuvers inadequately and too late, to avoid
collision. The question is WON the defendants were
recklessly or grossly negligent. The SC ruled in the
affirmative.
As for the captain, he was playing mahjong
before and up to the time of the collision. WON he
was then off-duty is immaterial; there is, both
realistically speaking and in contemplation of law, no
such thing as off-duty hours for the master of a vessel
at sea that is a CC upon whom the law imposes the
duty of extraordinary diligence. When the collision
occurred, the captain failed to supervise his crew in
the process of abandoning the ship and he failed to
avail of measures to prevent the too rapid sinking of
his vessel, thus aggravating the casualties.
As for Negros Aviation, in permitting, or in
failing to discover and correct the regularity of the
captain's mahjong sessions while DJ was at sea, it
must be deemed grossly negligent. It also sailed with
an overload (1,004 passengers and crewmembers).
As for the failure of TC to follow R18 by turning
right instead of left, the SC ruled that it is not
applicable and will not relieve DJ from responsibility if
the collision could have been avoided by proper care
and skill on her part or even by a departure from the
rules. DJ is still at fault when, upon seeing TC turn to
its left, it still turned to its right resulting in the
collision.
The SC awarded moral damages of P 307,000
and exemplary damages of P 307,000 and attorney's
fees of P 15,000 together with actual and
compensatory damages for wrongful death of P
126,000 and P 60,000 for a total of P 815,000.
Although the petitioners only asked for P 400,000
award of damages granted by the CFI, the SC
increased it to P 800,000 following the doctrine that
the SC must consider and resolve all issues which
must be decided in order to render substantial justice
to the parties, including issues not explicitly raised by
the parties affected.
In discussing the rule of exemplary damages in
law, the SC looks to it as an instrument to serve the
ends of law and public policy by reshaping socially
deleterious behaviors, specifically, in the case, to

compel CC to control their EEs, to tame their reckless
instincts, and to force them to take adequate care of
human beings and their property.
5. Nominal, Temperate and Liquidated
Art. 2221.
Nominal damages are
adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the
defendant, may be vindicated or recognized,
and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.
Art. 2224.
Temperate or moderate
damages, which are more than nominal but less
than compensatory damages, may be recovered
when the court finds that some pecuniary loss
has been suffered but its amount cannot, from
the nature of the case, be proved with certainty.
Art. 2226. Liquidated damages are those
agreed upon by the parties to a contract, to be
paid in case of breach thereof.
Art. 1757.
The responsibility of a
common carrier for the safety of passengers as
required in Arts. 1733 and 1755 cannot be
dispensed with or lessened by stipulation, by
the posting of notices, by statements on tickets,
or otherwise.
Alitalia vs IAC, 192 SCRA 10
F:
Dr. Felipa Pablo, an associate professor of UP
and a research grantee of the Phil. Atomic Energy
Association was invited to take part at a meeting
sponsored by the United Nations in Ispra, Italy. She
accepted the invitation and was then scheduled by the
organizers to read her paper. She was to be the 2nd
speaker on the first day of the meeting. She then
booked passage with Alitalia. She arrived in Milan on
the day before the meeting in accordance with the
itinerary set for her by Alitalia but her luggage was
delayed as it was in one of the succeeding flights from
Rome to Milan. However, the other flights from Rome
did not have her baggage on board. Her luggage
consisted of 2 suitcases-- one for her clothing and
personal items and the other for her scientific papers,
slides and other research material.
Feeling desperate, she went to Rome to try to
locate her bags. She inquired about her suitcases in
the international and domestic airports and filled out
the forms required by Alitalia for people in her
predicament. However, her baggage could not be
found. Discouraged, she returned to Manila without
attending the meeting in Ispra, Italy.
In Manila, she demanded that Alitalia make
reparation for damages suffered by her.
Alitalia
offered her free airline tickets which she rejected while
instituting this action. Her bags were located and
forwarded to Ispra but only on the day after her
scheduled appearance. As she was no longer there to
accept delivery, her bags were not actually returned to
her until after 11 months. The CFI awarded nominal
damages of P 20,000 and attorney's fees of P 5,000
plus costs of the suit. The IAC increased the award of
nominal damages to P 40,000. The increase was
justified as follows-considering the negligence
committed by defendant, the amount of P20,000 under
present inflationary conditions as awarded to plaintiff
as nominal damages is too little to make up for the
plaintiff's frustration and disappointment in not being
able to appear at said conference, and for the
embarrassment and humiliation she suffered from the
academic community for failure to carry out an official
PAGE 43

mission for which she was singled out by the faculty to
represent her institution and the country.
Alitalia appealed on the following grounds: (1)
That the Warsaw Convention should have been applied
to limit Alitalia's liability; and (2) That there is no
warrant in fact or in law for the award of nominal
damages and attorney's fees.
Held: Under the Warsaw Convention, an air carrier is
made liable for damages for: (1) The death, wounding
or other bodily injury of a passenger if the accident
causing it took place on board the aircraft or in the
course of its operations of embarking or disembarking;
(2)
The destruction, or loss of damage to, any registered
luggage or goods, if the occurrence causing it took
place during the carriage by air; and (3) Delay in the
transportation by air of passengers, luggage or goods.
The Convention also limits the liability of the carriers
for each passenger to 250,000 francs and for
registered baggage and cargo to 250 francs per kg
unless the passenger has declared a higher rate and
has paid additional charges. The Warsaw Convention,
however, denies to the carrier availment of the
provisions which exclude or limit his liability, if the
damage is caused by his wilful misconduct or by such
default on his part as is considered to be equivalent to
wilful misconduct or if the damage is similarly caused
by any agent of the carrier acting within the scope of
his employment.
The Convention does not thus
operate as an exclusive enumeration of the instances
of an airline's liability, or as an absolute limit of the
extent of that liability. Such proposition is not borne
out by the language of the Convention.
The
Convention should be deemed a liability only in those
cases where the cause of the death or injury to person,
or destruction, loss or damage to property or delay in
its transport is not attributable to or attended by any
wilful misconduct, bad faith, recklessness, or
otherwise improper conduct. The Convention does not
regulate or exclude liability for other breaches of
contract by the carrier. Otherwise, an air carrier would
be exempt from any liability for damages in the event
of its absolute refusal, in bad faith, to comply with a
contract of carriage. The Warsaw Convention has
invariably been held inapplicable, or as not restrictive
of the carrier's liability, where there was satisfactory
evidence of malice or bad faith attributable to its
officers and employees.
In the case at bar, no bad faith or otherwise
improper conduct may be ascribed to the EEs of
Alitalia. Dr. Pablo's luggage was eventually returned
belatedly, but without appreciable damage. The fact
is, nevertheless, that some special species of injury
was caused to her because Alitalia misplaced her
baggage and failed to deliver it to her at the time
appointed -- a breach of its contract of carriage -- with
the result that she was unable to read her paper that
she had painstakingly labored over. The opportunity
to claim honor or distinction for herself, for UP and for
the country, was irretrievably lost to her. She also
underwent profound distress and anxiety, which
gradually turned into panic and despair, when she
learned that her suitcases were missing.
The compensation for the injury suffered by Dr.
Pablo cannot under the circumstances be restricted to
that prescribed by the Warsaw Convention for delay in
the transport of baggage. She is not entitled to be
compensated for loss or damage to her luggage since
they were ultimately delivered to her. She is however
entitled to nominal damages, which is adjudicated in
order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be
vindicated and recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered.
As to the argument that she failed to include a
specific claim for nominal damages in her complaint,
it suffices that her general prayer includes "such other
and further just and equitable relief in the premises."

Also absent any claim for actual or compensatory
damages (she asked for moral and exemplary
damages and attorney's fees), and with proof of Dr.
Pablo's right being violated, the issue of nominal
damages is raised.
The award of P 5,000 for attorney's fees is
reasonable. The law authorizes recovery of attorney's
fees where the defendant's act or omission has
compelled the plaintiff to litigate with third person or
to incur expenses to protect his interest, or where the
court deems it just and equitable.
Saludo vs CA 207 SCRA 498
F:
After the death of plaintiff's mother Crispina
Galdo, Saludo in Chicago, Pomierski and Son Funeral
Home, made the necessary preparations and
arrangements for the shipment of the body from
Chicago to the Philippines.
They had the body
embalmed and secured a permit from the Philippine
Vice Consul in Chicago. The Phil. Vice Consul sealed
the shipping case on Oct. 26,1976. On the same date,
Pomierski brought the remains to the Continental
Mortuary Air Service (CMAS) which made the
necessary arrangements such as flights, transfers,etc.
CMAS is a national service used by undertakers which
furnishes the air pouch in which the casket is enclosed
in and they see to it that the remains are taken to the
proper air freigh terminal. CMAS booked the shipment
with PAL, through its agent Air Care International, with
Pomierski as shipper and Maria Saludo as consignee.
PAL Airway Bill was issued for the route from Chicago
to SF on board TWA Flight 131 of Oct. 27, 1976, and
from SF to Manila, on board PAL Flight 107 of Oct. 27,
1976, and from Manila to Cebu on board PAL Flight 149
of Oct. 29, 1976.
Maria Saludo and Saturnino Saludo, children of
the deceased were booked with United Airlines from
Chicago to California and with PAL from California to
Manila.
When she learned of her mother's
arrangements, she changed reservations from UA to
TWA. She watched from the look-out area but she saw
no body being brought on the flight. She reluctantly
took the TWA flight with her cousin's assurance to look
into the matter. Upon arrival in SF, she went to the
TWA counter to inquire about her mother's remains
but she was told that they did not know anything
about it. She then called Pomierski who then called
CMAS which in a matter of 10 minutes told him that
the remains had been switched with another body and
had been sent to Mexico. Based on the facts, there was
a mix-up in Chicago Airport between the two bodies.
Arrangements were made to send the body to
California through Texas. On October 28, 1976, the
remains arrived in SF and was received by PAL at 7:45
p.m. The shipment was immediately loaded on PAL
flight for Manila that same evening and arrived in
Manila on October 30, 1976, a day after its expected
arrival on October 29, 1976.
Plaintiffs then filed a case against PAL and
TWA before the CFI of Leyte, praying for the award of
actual damages of P 50,000, moral damages of P
1,000,000, exemplary damages and attorney's fees
and costs of suit. The CFI and CA absolved the two
airline companies.
Plaintiffs then appealed the
decision on the ff. grounds: (1) That the delay in the
delivery of the remains was due to the fault of the
airlines, (2) The one day delay in the delivery
constitutes breach of contract as would entitle them to
damages, (3) That damages are recoverable by
petitioners for the humiliating, arrogant, and
indifferent acts of the EEs of TWA and PAL. The airlines
objected on the ground that this petition only raises
factual questions. Since it is precisely the soundness
of the inferences or conclusions that may be drawn
from the factual issues which are here being assailed,
PAGE 44

the issues raised in the petition indeed warrant a
second look.
Held: (1) Petitioners allege that private respondents
received the casketed remains of petitioner's mother
on Oct. 26, 1976 as evidenced by the issuance of the
PAL Airway Bill. From said date, private respondents
were charged with the responsibility to exercise
extraordinary diligence so much so that for the alleged
switching of the caskets on Oct. 27, 1976, or one day
after private respondents received the cargo, the latter
must necessarily be liable. Petitioners relied on the
doctrine that the issuance of the bill of lading carries
the presumption that the goods were delivered to the
carrier issuing the bill, for immediate shipment, and it
is nowhere questioned that a bill of lading is prima
facie evidence of the receipt of the goods by the
carrier. A bill of lading is a written acknowledgment of
the receipt of the goods and an agreement to
transport and deliver them at a specified place to a
person named or on his order. A bill of lading is a
receipt as to the quantity and description of the goods
shipped and a contract to transport the goods to the
consignee or other person therein designated, on the
terms specified in such instrument.
SC: An airway bill estops the carrier from
denying receipt of goods. However, as between the
shipper and the carrier, when no goods have been
delivered for shipment no recitals in the bill can estop
the carrier from showing the true facts. We must
therefore allow the airline companies to explain, why,
despite the issuance of the airway bill and the date
thereof, they deny having received the remains of
Saludo on Oct. 26, 1976.
As found by the CA, the airway bill was issued,
not as evidence of receipt of delivery but merely as
confirmation for the booking made for the SF-Manila
flight scheduled on October 27, 1976. It was not until
Oct. 28 that PAL received physical delivery of the body
at SF. The extraordinary responsibility of CC begins
from the time the goods are delivered to the carrier.
This responsibility remains in force even when they are
temporarily unloaded or stored in transit, unless the
shipper exercises the right of stoppage in transitu, and
terminates ony after the lapse of a reasonable time for
the acceptance of the goods by the consignee or other
person entitled to receive them. For such duty to
commence, there must in fact have been delivery of
the cargo subject of the contract of carriage. Only
when such fact of delivery has been unequivocally
esablished can the reqt. of extraordinary responsibility
arise.
As found by the CA, the body was really
received by PAL on Oct. 28, 1976 and it was from such
date that it became responsible for the agreed cargo
under the airway bill. Consequently, for the switching
of caskets prior thereto which was not caused by them
and subsequent events caused thereby, PAL cannot be
held liable.
(2) Petitioners allege that even assuming CMAS was at
fault, PAL would still be liable because whoever
brought the cargo to the airport or loaded it on the
plane did so as agent of PAL.
SC: This contention is without merit. When
the cargo was received from CMAS, Air Care Intl, PAL's
agent and TWA had no way of determining its actual
contents, since the casket was hermetically sealed by
the Philippine Vice-Consul. They had to rely on the
information given by CMAS. No amount of inspection
by the airlines could have guarded against the
switching that had taken place. They had no authority
to unseal and open the casket. It is the right of the
carrier to require good faith on the part of those
persons who deliver goods to be carried by it. In the
absence of more definite information, the carrier has
the right to accept shipper's marks as to the contents
of the package offered for transportation and is not

bound to inquire particularly about them. It can safely
be said that a CC is entitled to fair representation of
the nature and value of the goods to be carried, with
the concomitant right to rely thereon, and that a
carrier has no obligation to inquire into the correctness
or sufficiency of such information. The consequent
duty to conduct an inspection arises in the event that
there should be reason to doubt the veracity of such
representations.
In this case, private respondents had no
reason to doubt the truth of the shipper's
representations. The airway bill was issued on the
basis of such representations.
Neither can they be held accountable on the
basis of petitioner's theory that whoever brought the
cargo to the airport or loaded it on the plane did so as
an agent of private respondents, so that even if CMAS
was indeed at fault, the liability would be attributed to
the airlines.
CMAS was not an agent of private
respondents. It was hired to handle all the necessary
shipping arrangements for the transportation of the
remains. CMAS may be classified as a forwarder,
which is regarded as the agent of the shipper
(Pomierski) and not of the crrier. It merely contracts
for the transportation of goods by carriers and has no
interest in the freight but receives compensation from
the shipper as his agent.
The facts of the case would point to CMAS as
the culprit. In fact, even the petitioners wrote CMAS
entertaining serious doubts as to whether they were
responsible for the mix-up. But the court cannot rule
on the possible liability of CMAS as such is not at issue
in this case and there has not been convincing
evidence on the matter.
(3) Petitioners contended that TWA by agreeing to
transport the remains, it made itself a party to the
contract of carriage nad was therefore bound by the
airway bill. When TWA shipped the remains ten hours
earlier than scheduled, it allegedly violated the terms
of the airway bill which compounded, if not directly
caused, the switching of the caskets. The EEs of TWA
presumably caused the mix-up by loading the wrong
casket on the plane.
TWA must be presumed
negligent unless such is rebutted. TWA contends that
it faithfully complied with the obligations under the
airway bill. Said faithful compliance was not affected
by the fact that the remains were shipped on an earlier
flight as there was no fixed time for completion of
carriage stipulated on. TWA did not undertake to carry
the cargo aboard any specified aircraft, in view of the
condition on the back of the airway bill, which provides
that " xxx no time is fixed for the completion of the
carriage, xxx and that Carrier may without notice
substitute alternate carriers or aircrafts xxx."
SC : TWA's contention is tenable. TWA can use
substitute aircraft, even without notice and without the
assumption of any obligation whatsoever to carry the
goods on any specified aircraft. This is clearly
sanctioned by the contract of carriage. When a CC
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. In case at bar, no
special contract for prompt delivery was entered into
by the parties.
Condition No. 5 is binding on the plaintiff even
if it is printed at the back of the airway bill. This is in
the nature of a contract of adhesion. However, such
condition only serves to insulate the carrier from
liability in those instances when the changes in routes,
flights and schedules are clearly justified by the
peculiar circumstances of a particular cae, or by
general transportation practices, customs and usages,
or by contingencies, emergencies in aviation, such as
weather turbulence, mechanical failure, reqts. of
PAGE 45

national security and the like. In this case, the delay
in the delivery of the remains cannot be attributed to
the fault, negligence or malice of private respondents.
When TWA shipped the remains on an earlier flight, it
did so in the exercise of sound discretion and with
reasonable prudence -- they wanted to assure that the
shipment would be received in SF in sufficient time for
transfer to PAL. TWA knew of the urgency of the
shipment due to the notation on the airway bill : "xxx
Please return bag first available flight to SFO."
(4) Petitioners alleged that private respondents are
liable for tort on account of humiliating, arrogant and
indifferent acts of their officers and personnel. They
contended that there was no reason for the personnel
to disclaim knowledge of the arrival or whereabouts of
the body other than their sheer arrogance, indifference
and extreme insensitivity to their feelings.
SC: It affirmed the CA's findings that TWA EEs
did not deal with petitioners in a grossly humiliating,
arrogant or indifferent manner as to amount to BF or
malice. It must be pointed out that the lamentable
actuations of TWA's EEs leave much to be desired,
particularly so given the grief of petitioners, their
tension and anxiety wrought by the confusion and the
fear about where their mother's remains were. Airline
companies are sternly admonished to strictly require
their personnel to be more accommodating to
passengers and the general public.
Petitioners agonized for 5 hours unattended to
and without any assurance from the EEs of TWA.
Common sense should have dictated that they exert a
little extra effort in making more extensive inquiry, by
themselves or through their superiors, rather than just
shrug off the promblem with a callous and uncaring
remark that they had no knowledge about it.
The foregoing observations do not appear to
be applicable to PAl and its EEs.
(5) In the absence of strong and positive evidence of
fraud, malice or bad faith, moral damages cannot be
awarded.
Neither can exemplary damages nor
attorney's fees, in the absence of proof that
defendants acted with malice, fraud or BF.
The
censurable conduct of TWA's EEs cannot be said to
have approximated the dimensions of fraud, malice or
BF. Nonetheless, the facts show that petitioners' right
to be treated with due courtesy in accordance with the
degree of diligence required by law to be exercised by
every common carrier was violated by TWA and this
entitles them, at least, to nominal damages from TWA
alone. Arts. 2221 and 2222 of the Civil Code makes it
clear that nominal damages are not intended for
indemnification of loss suffered but for the vindication
or recognition of a right violated or invaded. They are
recoverable where some injury has been done but the
amount of which the evidence fails to show, the
assessment of damages being left to the discretion of
the court accdg. to the circumstances of the case.
Nominal damages of P 40,000 to be paid by TWA was
awarded in favor of petitioners as a reasonable
amount in the circumstances.
6. Attorney's Fees and Interest
Art. 2208. In the absence of stipulation,
attorney's fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:
(1)
When
exemplary
damages
are
awarded;
(2) When the defendant's act or omission
has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his
interest;
(3) In criminal cases of malicious
prosecution against the plaintiff;
(4) In case of a clearly unfounded civil

action or proceeding against the plaintiff;
(5) Where the defendant acted in gross
and evident BF in refusing to satisfy the
plaintiff's plainly valid, just and demandable
claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages
or household helpers, laboreres and skilled
workers;
(8)
In actions for indemnity under
workmen's
compensation
and
employer's
liability laws;
(9) In a separate civil action to recover
civil liability arising from a crime;
(10) When at least double judicial costs
are awarded;
(11) In any other cases where the court
deems it just and equitable that attorney's fees
and expenses of litigation should be recovered.
In all cases, the attorney's fees and
expenses of litigation must be reasonable.
Art. 2210. Interest may, in the discretion
of the court, be allowed upon damages awarded
for breach of contract.
4 Agbayani:
Damages arising from death; factors to be
considered
1. number of years on the basis of which the
damages shall be computed
2. the rate at which the losses sustained
should be fixed. In the determination of the losses or
damages sustained by dependents and heirs of the
deceased, said damages consist not of the full amount
of his earnings, but of the support they received or
would have received from him had he not died in
consequence of the negligence of defendant.
In fixing the amount of support, only net
earnings are to be considered-- total earnings less
expenses necessary in the creation of such earnings
less living and incidental expenses
Damages recoverable when death occurs due to
commission of crime.-- (1) indemnity for the death
of victim (P 50T); (2) indemnity for loss of earning
capacity of the deceased; (3) moral damages; (4)
exemplary damages; (5) attorney's fees and expenses
of litigation; and (6) interest. Indemnity arising from
the fact of death is fixed whereas the others are still
subject to the determination of the court based on
evidence presented; indemnity for death is distinct
and separate from the other forms of indemnity
Common carrier not liable for moral damages to
passenger injured due to negligence of driver.-A CC's bad faith is not to be lightly inferred from a
mere finding that the contract was breached through
negligence of the CC's employees (Fores vs Miranda)
Extent of liability of air carrier for death of
passenger:
(1) where there was no satisfactory explanation on
the part of PAL as to how and why the accident
occurred, the presumption is that it was at fault, under
Art. 1756
(2) liability for lost earnings are the deceased
passenger's net earnings during his expected length of
life based on accepted mortality tables (compensatory
damages)
(3) PAL is not liable for exemplary damages
where it was not proven that it acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner
[Davila vs PAL]
PAGE 46

Nature of liability
passengers:
of
air
carrier
to
its
[Zulueta vs Pan Am]

F:
Filipino passenger who went to relieve himself
was berated by the captain for coming back late to the
plane and was called a monkey.
Held: A passenger is entitled to courteous treatment
from the carrier and its EEs and failure of the CC to
comply with this obligation will entitle the passenger
to damages.
The relation between CC and passenger
involves special and peculiar obligations and duties,
differing in kind and degree, from those of almost
every legal or contractual relation. On account of the
peculiar situation of the parties, the law implies a
promise and imposes upon the CC the corresponding
duty of protection and courteous treatment.
Therefore, the CC is under the absolute duty of
protecting his passengers from assault or insult by
himself or his servants.
A contract to transport passengers is quite
different in kind and degree from any other contractual
relation. And this, because of the relation which an air
carrier sustains with the public. Its business is mainly
with the traveling public. It invites people to avail of
the comforts and advantages it offers. The contract of
air carriage, therefore, generates a relation attended
with a public duty. Neglect or malfeasance of the CC's
employees naturally could give ground for an action
for damages.
Passengers do not contract merely for
transportation. They have a right to be treated by the
CC's EEs with kindness, respect, courtesy and due
consideration.
They are entitled to be protected
against personal misconduct, injurious language,
indignities and abuses from such employees. So it is,
that any rude or discourteous conduct on the part of
EEs towards a passenger gives the latter an action for
damages against the CC.
Damages caused by CC on third persons.-Negligence refers to the failure to observe for the
protection of the interests of another person that
degree of care, precaution, and vigilance which the
circumstances justify demand, whereby such other
person suffers injury
Common carrier is liable only for damages that
are natural and probable consequence of breach
of contract.-- Where the CC is guilty of a breach of
contract, but acted in GF, it is liable only for the
natural and probable consequences of the breach and
which the parties had foreseen or could have
reasonably foreseen at the time the obligation was
constituted (includes medical, hospital expenses)
Actual damages.-(1) lost income.-- includes
income to be earned by the injured passenger or
deceased passenger had he finished his course (could
have been foreseen)
(2) sum being carried by the deceased
passenger which was lost
(3) funeral expenses
(4) attorney's fees
(5) loss of merchandise carried by the
deceased
(6) loss of baggage and personal belongings
Exception to rule that CC is not liable for moral
damages in breach of contract:
(1) where the mishap results in death of the
passenger
(2) where it is proved that the CC was guilty of
fraud or BF, even if death does not result
Ex.
where because of the BF of the CC, the passenger

suffered social humiliation, wounded feelings, serious
anxiety and mental anguish
Under 2206, the heirs of the deceased
passenger may demand moral damages in an amount
commensurate with the mental anguish suffered by
them
xxx
In a case where the passenger suffers physical
injuries because of the CC's injuries, he cannot recover
moral damages for such breach of contract since it
does not fall under any of the cases where moral
damages are recoverable under Art. 2219
xxx
In determining the amount of moral damages,
the TC may consider the nature and extent of the
injuries and the suffering occasioned by them and the
duration thereof. The appellate court should not
interfere unless such is palpably and scandalously
excessive so as to indicate that it was the result of
passion, prejudice or corruption on the part of the TC
BF justifying moral damages must be in the
securing, execution and enforcement of contract of
carriage. BF cannot be imputed but must be alleged
and proved; mere carelessness of the CC's driver does
not per se constitute or justify an inference of malice
or BF on the part of the CC
xxx
CC is subsidiarily liable for moral damages in
actions ex delicto or where the action is based upon its
liability arising from a crime
xxx
CC is not ordinarily liable for exemplary or
corrective damages based upon the wrongful act of its
EE or driver where it did not have anything to do with
the wrongful act or had not previously authorized or
subsequently ratified such act (Art. 2332) This cannot
be presumed but must be proven by evidence;
exemplary damages cannot be recovered as a matter
of right
Nominal and exemplary damages awarded for
willful breach of contract committed through agent or
EE
xxx
Where the CC has incurred in delay in the
delivery of the luggage of the offended party, but it
had not acted in BF nor been guilty of gross
negligence, the offended party is not entitled to moral
nor exemplary damages but only to the limited
amount printed in the plane ticket where the offended
party had not declared a higher value nor paid addtl.
transpo charges
Liability of air carriers for moral and exemplary
damages.-- [Ortigas vs Lufthansa] (1) Under the pool
arrangement among different airlines of the IATA
agreement of which Alitalia and Lufthansa are
signatories, both airlines are constituted as agents of
each other in the issuing of tickets and other matters
pertaining to their relations with those who would
need their services.
(2) When it comes to contracts of common
carriage, inattention and lack of care on the part of the
CC resulting in the failure of the passenger to be
accommodated in the class contracted for amounts to
BF or fraud which entitles the passenger to the award
of moral damages. Where the passenger's seat was
given to a white passenger, there is willful breach
giving rise to an action for moral damages.
(3) Exemplary damages were awarded.
Defendant as an airline should be made to pay an
amount that can really serve as a deterrent against a
seeming pattern of indifference and unconcern, and
discrimination for racial reasons, discernible in the
treatment of air passengers.
PAGE 47

[PAL vs CA, 106 SCRA 391] The duty to exercise the
utmost diligence on the part of the CC is for the safety
of passengers as well as for the members of the crew
or the complement operating the carrier.
Any
omission, lapse or neglect thereof will certainly result
to the damage, prejudice, injuries and even death to
all aboard the plane, passengers, and crew members
alike.
xxx
[KLM vs CA]
A provision in passage ticket that
carriage by successive air carriers is to be regarded as
a single operation makes the ticket-issuing carrier
liable for tortious conduct of other carriers
xxx
Exemplary damages may be awarded where
the vehicle involved in the accident operated under
the kabit system, which is a pernicious system in
violation of law and which is in fraud of the traveling
public which has a right to expect that the holder of
the certificate of convenience be the one to actually
operate his transport line.
xxx
CC is liable for nominal damages for its failure
to bring passengers to their destination which is in
violatin of their right as passengers.
xxx
The CC is liable for the negligence of his driver
in case of breach of contract and cannot avail of the
defense that he exercised due diligence in the
employment of his driver. The action for breach of
contract imposes on the CC a presumption of liability
upon mere proof of injury to the passenger.
xxx
An action for damages against CC for breach of
contract is primary and independent and does not
depend upon the previous conviction of the driver or
EE.
Indemnification in a criminal prosecution is
distinct from that awarded as damages in a civil
action.
Other Principles :
The offended party has the option between an
action for enforcement of civil liability based on culpa
criminal and an action for recovery of damages based
on culpa aquiliana.
Responsibility for negligence
under the Civil Code is entirely separate from
negligence under the Penal Code.
An independent civil action based on quasidelict against the ER-operator of a negligent driver
cannot be suspended by the filing of a criminal action
against the driver.
Death of driver is not a hindrance to a
separate quasi-delict action against the CC-employer
Art. 349. A contract of transportation by

land or waterways of any kind shall be
considered commercial:
1. When it involves merchandise or any
object of commerce.
2. When, no matter what its object may
be, the carrier is a merchant or is customarily
[habitually] engaged in transportation for the
public.
Requisites for a contract of transportation by
land or water to be commercial :
(1) transportation of merchandise is always
commercial
(2) transportation of person or news is
commercial only when the CC is a merchant or is
habitually engaged in transportation for the public
* principal requirement : the CC is a merchant
or is habitually engaged in transportation for the
public; the object carried is of little importance
A contract of air transportation may be
regarded as commercial since it is analogous to land
and water transportation. The reason for its noninclusion in the Code of Commerce was that at the
time of its promulgation, air transportation on a
commercial basis was not yet known.
C. Effect of Civil Code
Art. 1766. In all matters not regulated by
this Code, the rights and obligations of common
carriers shall be governed by the Code of
Commerce and by special laws.
(New Civil
Code.)
Art. 2270.
The following laws and
regulations are hereby repealed:
(2) The provisions of the Code of
Commerce
governing
sales,
partnership,
agency, loan, deposit and guaranty;
(4) All laws, Acts, parts of Acts, rules of
court, executive orders, and administrative
regulations which are inconsistent with this
Code. (Ibid.)
There is now no distinction between a
transportation contract of a CC under the Civil Code
and a transportation contract under the Code of
Commerce
The New Civil Code does not expressly repeal
the provisions of the Code of Commerce on overland
transportation; it makes such provisions suppletory to
the provisions of the Civil Code on CCs.
There is no error in awarding civil damages

against a driver in a criminal case even when a
separate civil action was filed against the ER. Culpa
contractual and an act or omission punishable by law
are two distinct sources of obligation.
III. CODE OF COMMERCE PROVISIONS ON
OVERLAND TRANSPORTATION
COMMERCIAL CONTRACTS FOR
TRANSPORTATION OVERLAND
A. Scope of Overland Transportation
D. Contract of Carriage
1. Bill of Lading
(a) Definition, Subject Matter
Art. 352. The bills of lading or tickets in
cases of transportation of passengers may be
diverse, one for persons and another for
baggage; but all of them shall bear the name of
the carrier, the date of shipment, the point of
departure and arrival, the cost, and with regard
to the baggage, the number and weight of the
packages, with such other statements which
may be necessary for their easy identification.
B. Nature of Contract
A bill of lading may defined as a written
acknowledgment of the receipt of goods and an
agreement to transport and to deliver them at a
PAGE 48

specified place to a person named or on his order. It
comprehends all methods of transportation.
Nature : (1) each bill is a contract in itself and the
parties are bound by its terms
(2) a bill of lading is also a receipt
(3) it is also a symbol of the goods covered by
it
A bill of lading is also a document of title. A
document of title is any document used in the ordinary
course of business in the sale or transfer of goods, as
proof of the possession or control of goods, or
authorizing or purporting to authorize the possessor of
the document to transfer or receive, either by
indorsement or by delivery, goods represented by such
document.
(b) Form, Contents
Art. 350.
The shipper as well as the
carrier of merchandise and goods may mutually
demand of each other the issuance of a bill of
lading in which there shall be stated:
1. The name, surname, and domicile of
the shipper.
the carrier.
the person to whom or to whose order the goods
are addressed, or whether they are to be
delivered to the bearer of the said bill.
4. A description of the goods, stating
their generic character, their weight, and the
external marks or signs of the packages
containing the same.
5. The cost of the transportation.
6. The date of which the shipment is
made.
7. The place of the delivery to the
carrier.
8. The place and time at which the
delivery is to be made to the consignee.
9. The damages to be paid by the
carrier in case of delay, if any agreement is
made on this point.
Art. 351. In transportation made by railroads or
other
enterprises
which
are
subject
to
schedules or the time fixed by regulations, it
shall be sufficient that the bills of lading or the
declarations of shipment furnished by the
shipper refer, with respect to the rate, terms,
and special conditions of the transportation, to
the schedules and regulations, the application
of which he requests; and should no schedule be
determined, the carrier must apply the rate of
the merchandise paying the lowest, with the
conditions inherent therein, always including
such statement or reference to them in the bill
of lading which he delivers to the shipper.
Many of the items required in a bill of lading may be
omitted with much advantage to commerce, which
aims to have the greatest number of transactions in
the last possible time especially in cases where there
are tariffs or regulations issued by the carrier
company. In this case, the circumstances relative to
price, term and conditions of carriage may be omitted
and simple reference be made to the tariff and
regulations under which the transportation is to be
made. (Art. 351)
The form of the bill of lading is not material : if
it contains an acknowledgment by the carrier of the
receipt of goods for transportation, it is in legal effect,

a bill of lading
A ticket issued by a carrier to a passenger is
not only a receipt for the fare paid but is the contract
between the passenger and the carrier, of the
passenger's right to ride in the CC's vehicle
Classes of bills of lading :
1. negotiable B/L - where it is stated that the
goods will be delivered to the bearer, or to the order of
any person named in such document
2. non-negotiable B/L - where the goods are to
be delivered to a specified person
3. clean B/L - does not indicate any defect in
the goods
4. foul B/L - indicates that the goods covered
by it are in bad condition
5. spent B/L - covers goods that have already
been delivered by the CC without a surrender of a
signed copy of the B/L; the subsequent delivery of the
spent B/L cannot give to the buyer of it any actual
control of the goods, or anything which can fairly be
called delivery
6. through B/L - issued by the CC who is
obliged to use the facilities of other carriers as well as
his own facilities for the purpose of transporting the
goods from the city of the seller to the city of the
buyer, which B/L is honored by the subsequent
interested carriers who do not issue their own ladings
7. on board B/L - states that the goods have
been received on board the vessels which is to carry
the goods
8. received for shipment B/L - states that the
goods have been received for shipment with or w/o
specifying the vessel by which the goods are to be
shipped; issued when conditions are not normal and
there is an insufficiency of shipping space
9. custody B/L - issued by the CC to whom the
goods have been delivered for shipment but the
steamer indicated in the B/L which is to carry the
goods has not yet reached the port where the goods
are held for shipment
10. port B/L - issued by the CC to whom the
goods have been delivered and the steamer indicated
in the B/L by which the goods are to be shipped is
already in the port where the goods are held for
shipment
Negotiation of Bills by delivery/ by indorsement
Effect of fraud, accident on validity of
negotiation : not impaired where the person to whom
the bill was negotiated paid value thereof in GF
without notice of the breach of duty or loss, theft,
fraud, accident, mistake, duress or conversion
Who may negotiate? owner; any person to
whom possession or custody of the bill has been
entrusted by the owner
Rights acquired:
1. such title to the goods as the person
negotiating the bill had or had ability to convey to a
buyer in good faith for value
2. direct obligation of the CC issuing the bill to
hold possession of the goods for him according to the
terms of the B/L as fully as if such CC contracted
directly with him
Transfer of non-negotiable B/L
Rights acquired:
1. as against the transferor, title to the goods
subject to the terms of any agreement with the
transferor
2. right to notify the CC who issued the bill and
thereby acquire the direct obligations of such CC to
hold possession of the goods for him accdg to the
PAGE 49

terms of the document; prior to notification of the CC,
the title of the transferee may be defeated by levy
upon the goods or a subsequent purchaser from the
transferor of a subsequent sale of the goods by a
transferor
(c) Function
Art. 353. The legal basis of the contract
between the shipper and the carrier shall be the
bills of lading, by the contents of which all
disputes which may arise with regard to their
execution and fulfillment shall be decided, no
exceptions being admissible other than forgery
or material errors in the drafting thereof.
After the contract has been complied
with, the bill of lading shall be returned to the
carrier who may have issued it, and by virtue of
the exchange of this title for the article
transported, the respective obligations and
actions shall be considered canceled, unless the
same act the claims which the contracting
parties desire to reserve are reduced to writing,
exception being made of the provisions of
Article 366.
In case the consignee, upon receiving the
goods, cannot return the bill of lading
subscribed by the carrier, due to its loss or for
any other cause, he shall give said carrier a
receipt for the goods delivered, this receipt
producing the same effect as the return of the
bill of lading.
B/L constitutes the legal evidence of the contract of
transportation --> all disputes between the parties
regarding the execution and performance of the
contract shall be decided by the contents of the B/L
issued by the CC --> the law admits no exceptions
other than falsity and material error in the drafting of
the B/L
As a contract expressing the terms and
conditions upon which the property is to be
transported, it is to be regarded as merging all prior
and contemporaneous agreements of the parties, and
in the absence of fraud, concealment or mistake, its
terms or legal import, when free from ambiguity
cannot be explained nor added to by parol (Parol
Evidence Rule)
2. Refusal to Transport
Art. 356. Carriers may refuse to accept
packages which appear unfit for transportation;
and if said transportation is to be made by
railway, and the shipment is insisted on, the
company shall carry them, being exempt from
all liability if its objections are so stated in the
bill of lading.
Art. 357. If by reason of well-founded

suspicions of falsity in the declaration of the
contents of a package, the carrier should decide
to examine it, he shall do so before witnesses,
in the presence of the shipper or of the
consignee.
Should the shipper or consignee cited not
appear, the examinations shall be made before
a notary, who shall draft a certificate of the
result of the examination, for such purposes as
may be proper.
If the declaration of the shipper should
be correct, the expenses caused by the
examination and those of carefully repacking
the packages shall be defrayed by the carrier,
and in a contrary case by the shipper.
If the CC has a well-founded suspicion of falsity in the
declaration as to the contents of a package, he may
examine it --> he must follow the procedure under 357
4. No bill of lading
Art. 354.
In the absence of a bill of
lading the respective claims of the parties shall
be decided by the legal proofs that each one
may submit in support of his claims, in
accordance
with
the
general
provisions
established in this Code for commercial
contracts.
Art. 351.
In transportation made by
railroads or other enterprises which are subject
to schedules or the time fixed by regulations, it
shall be sufficient that the bills of lading or the
declarations of shipment furnished by the
shipper refer, with respect to the rate, terms,
and special conditions of the transportation, to
the schedules and regulations, the application
of which he requests; and should no schedule be
determined, the carrier must apply the rate of
the merchandise paying the lowest, with the
conditions inherent therein, always including
such statement or reference to them in the bill
of lading which he delivers to the shipper.
Bill not essential to contract : While under 350, the
shipper and the CC may mutually demand that a B/L is
made, it is not obligatory. The fact that a B/L is not
issued does not preclude the existence of a contract of
transpo. Provided there is a meeting of the minds and
from such meeting arise rights and obligations, there
should be no limitations as to form.
The B/L is not essential to the contract,
although it may become obligatory by reason of the
regulations of companies or as a condition imposed in
the contract by agreement of the parties themselves
Where no B/L is issued, the disputes between
the parties shall be decided accdg. to the rules laid
down in Art. 354
E. Responsibility of the Carrier
CC cannot ordinarily refuse to carry a particular class

of goods to the prejudice of the traffic in those goods
exception : when the goods or packages are unfit for
transportation
--> if transpo is insisted upon, railroads cannot refuse
to carry them, but they shall be exempt from all
responsibility if their objections are made to appear in
the B/L
3. Doubtful declaration of contents
1. When it commences
Art. 355. The liability of the carrier shall
begin from the moment he receives the
merchandise, in person or through a person
entrusted therewith in the place indicated for
their reception.
The responsibility of the CC commences from the
moment he receives the merchandise --> the delivery
must be made to him personally or through his duly
authorized agent, and at the place indicated for
receiving the merchandise
PAGE 50

2. Route
Art. 359.
If there should be an
agreement between the shipper and the carrier
with regard to the road over which the
transportation is to be made, the carrier may
not change the route, unless obliged to do so by
force majeure; and should he do so without such
cause, he shall be liable for any damage which
may be suffered by the goods transported for
any other cause whatsoever, besides paying the
amount which may have been stipulated for
such a case.
When on account of said force majeure
the carrier is obliged to take another route,
causing an increase in the transportation
charges, he shall be reimbursed for said
increase after formal proof thereof.
Where there is an agreed route, the CC shall be liable
for losses due not only to the change of route but also
to other causes, together with the indemnity agreed
upon --> the CC may not avail of the contract limiting
his liability in case of unjustified change of route
Where there is no agreed route, the carrier
must select one which may be the shortest, least
expensive and practically passable
3. Care of Goods
Article 361. The merchandise shall be
transported at the risk and venture of the
shipper, if the contrary was not expressly
stipulated.
Therefore, all damages and impairment
suffered by the goods during the transportation,
by reason of accident, force majeure, or by
virtue of the nature or defect of the articles,
shall be for the account and risk of the shipper.
The proof of these accidents is
incumbent on the carrier.
When goods are delivered on board a ship in good
order and condition, and the shipper-owner delivers
them to the shipper in bad order and condition, it then
devolves upon the shipowner to both allege and prove
that the goods were damaged by reason of some fact
which legally exempts him from liability
The
shipper
will
suffer
losses
and
deteriorations arising from fortuitous event, force
majeure, or inherent nature and defects of the goods
(at the risk and venture of the shipper)
It does not mean that the CC is free from
liability for losses and deterioration arising from his
negligence or fault, which is presumed
Relate this with Art. 1734 and 1735 of the Civil
Code
nature or by reason of an unavoidable accident,

there being no time for the owners to dispose of
the same, the carrier shall proceed to their sale,
placing them for this purpose at the disposal of
the judicial authority or of the officials
determined by special provisions.
Burden of proof : the CC has the burden of proving that
the injury was occasioned by one of the excepted
causes
The shipper then has the burden to prove that
although the injury may have been occasioned by one
of the excepted causes, yet still the CC is responsible if
the injury might have been avoided by the exercise of
reasonable skill and attention on his part
Art. 362 is in consonance with Art. 1735, NCC
--> except that under 1732, proof of extra-o diligence
is required and not just ordinary diligence as implied
under 362
Where goods run risk of loss due to their
nature, Art. 362 provides for the remedy of sale by the
CC of the goods, placing them for the purpose at the
disposal of the judicial authority or of the officials
designated by special provisions
Art. 1734.
Common carriers are
due to any of the ff. causes only:
owner of the goods;
in the packing or in the containers;
authority. (New Civil Code.)
Art. 1735. In all cases other than those
mentioned in Nos. 1,2,3,4, and 5 of the
preceding article, if the goods are lost,
destroyed or deteriorated, CCs are presumed to
have been at fault or to have acted negligently,
unless
they
prove
that
they
observed
extraordinary diligence as required in Art. 1733.
(Ibid.)
4. Delivery
(a) Condition of Goods
Art. 362. The carrier, however, shall be

liable for the losses and damages arising from
the causes mentioned in the foregoing article if
it is proved that they occurred on account of his
negligence or because he did not take the
precautions usually adopted by careful persons,
unless the shipper committed fraud in the bill of
lading, making him believe that the goods were
of a class or quality different from what they
really were.
Art. 363. With the exception of the cases

prescribed in the second paragraph of Article
361, the carrier shall be obliged to deliver the
goods transported in the same condition in
which, according to the bill of lading, they were
at the time of their receipt, without any damage
or impairment, and should he not do so, he shall
be obliged to pay the value of the goods not
delivered at the point where they should have
been and at the time the delivery should have
taken place.
If part of the goods transported should
be delivered the consignee may refuse to
receive them, when he proves that he cannot
make use thereof without the others.
If,
notwithstanding
the
precaution
referred to in this article, the goods transported
run the risk of being lost on account of the
Duty to deliver goods : duty to deliver the goods in

the same condition in which accdg. to the B/L they
PAGE 51

were found at the time they were received, without
damage or impairment --> otherwise, the CC is liable
for damages
packages, in which case said claim shall only be

packages.
Partial delivery:
The consignee may refuse to
receive the goods delivered, if he can prove that he
cannot make use of them independently of those not
delivered --> true solution depends upon the economic
use which the goods transported have (consignee
cannot be arbitrary and must justify his determination)
Estoppel of shipper by laches : neglect or
delay of shipper to demand immediately, or within a
reasonable time, the return of the merchandise
shipped
or
its
value in case of non-delivery
constitutes estoppel by laches
Places the CC at a disadvantageous position to
show that it had fulfilled what it had undertaken;
makes it difficult for the CC to prove delivery
After
the
periods
mentioned
have
delivered.
Art. 364. If the effect of the damage

referred to in Article 361 should be only a
reduction in the value of the goods, the
obligation of the carrier shall be reduced to the
payment of the amount of said reduction in
value, after appraisal by experts.
Where all the goods are delivered but damage
is to such an extent that their value is diminished, the
obligation of the CC shall be reduced to the payment
of the amount which, in the judgment of experts,
constitute such difference in value --> subject of
course to other damages under the NCC
In case of damaged goods, the damage may either be

(1) ascertainable only by opening of the packages, or
(2) ascertainable from the outside part of the package
In Case 1, the claim against the CC for
damages must be made within 24 hours following the
receipt of the merchandise
In Case 2, the claim must be made at the time
of receipt
The claim must be made before the payment
of transportation charges
** otherwise, no action for damages may be
maintained against the CC
When period begins to run : period begins to
run when the consignee received possession of the
goods such that he may exercise over it the ordinary
control pertinent to ownership
There must be delivery of the merchandise by
the CC to the consignee at the place of destination -->
Art. 366 applies only to cases of claims for damage to
goods actually turned over by the CC and received by
the consignee
Art. 365. If, on account of the damage,

the goods are rendered useless for sale or
consumption for the use for which they are
properly destined the consignee shall not be
bound to receive them, and may leave them in
the hands of the carrier, demanding payment of
their value at the current market price that day.
If among the goods damages there
should be some in good condition and without
any defect whatsoever, the foregoing provision
shall be applicable with regard to the damaged
ones, and the consignee shall receive those
which are sound, this separation being made by
distinct and separate articles, no object being
divided for the purpose, unless the consignee
proves the impossibility of conveniently making
use thereof in this form.
The same provision shall be applied to
merchandise in bales or packages, with
distinction of the packages which appear sound.
The conditions under Art. 366 are not

limitation of action but are conditions precedent to a
cause of action --> if the shipper or consignee fails to
allege and prove the conditions under 366, he shall
have no right of action against the CC
Where damage renders the goods useless for sale and

consumption for the purposes for which they are
properly destined:
1. if the damage affects all goods, the
consignee may abandon all the goods to the CC who
shall pay the corresponding damages
2. if the damage affects only some of the
goods, the consignee may abandon only the damaged
goods --> but if the consignee can prove that it is
impossible to conveniently use the undamaged goods
in that form, without the damaged goods, the law
authorizes the consignee to abandon all the goods
The purpose of short period for claiming

damages : to afford the CC a reasonable opportunity
and facilities to check the validity of the claims while
the acts are still fresh in the minds of the person who
took part in the transaction and the documents are
still available.
Art. 366. Within the 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
The CC may require in the B/L that the goods

be examined at the time of delivery thereof --> the CC
may likewise waive such right
Art. 366 is modified by a B/L prescribing a
longer period for filing of written claim with the CC or
its agent
The unilateral action of a CC in stamping a
condition in the notice of arrival, requiring examination
of bad order cargo by the ship's agent before removal
from port authorities as condition precedent to an
action for recovery cannot modify or add conditions to
the B/L --> unreasonable and unfair in that it allows
CC to avoid responsibility for the loss of or damage to
their cargo when in packages or covered
The consignee may file a provisional claim : it

is not necessary that such claim should state a
detailed list of the loss or damage; they only have to
contain descriptions of the shipments in question
sufficient to have allowed the CC to make reasonable
verifications of such claim --> the determination of the
specific amount of damages claimed should be done
carefully and without haste and these can be done
only in a formal claim which will be filed after the
provisional claim
This stipulation is in the nature of a limitation
upon the owner's right to recovery --> the burden of
proof is on the CC to show that the limitation was
PAGE 52

reasonable and in proper form or within the time
stated (see Southern Lines vs CA)
A a stipulation in the B/L providing for a
shorter period than the statutory period within which
to bring action for breach is valid --> does not in
any way defeat the right to recover but merely
requires that said right be asserted by action at an
earlier period (filing of claims is different from filing of
suits)
Art. 367. If there should occur doubts
and disputes between the consignee and the
carrier with regard to the condition of goods
transported at the time of their delivery to the
former, the said goods shall be examined by
experts appointed by the parties, and in case of
disagreement, a third one appointed by the
judicial authority, the result of the examination
being reduced to writing; and if the persons
interested should not agree to the report of the
experts and could not settle their disputes, said
judicial authority shall order the deposit of the
merchandise in a safe warehouse, and the
parties interested shall make use of their rights
in the proper manner.
If doubts and disputes should arise between the
consignee and the CC with respect to the condition of
the goods transported at the time of the delivery, Art.
367 shall govern --> expert opinion on the matter is
not conclusive on the parties
shall be ordered by the municipal judge, where

there is no judge of first instance, to be placed
at the disposal of the shipper or sender, without
prejudice to a person having a better right, this
deposit having all the effects of a delivery.
Judicial deposit as a remedy:
1. where the consignee cannot be found at the
residence indicated
2. where the consignee refused to pay the
transportation charges
3. where the consignee refuses to receive the
goods
Judicial deposit shall produce all the effects of
delivery subject to third persons with better rights
Duty to look for consignee : if consignee is not
present, he is entitled to reasonable notice from the
CC of their arrival and a fair opportunity to take care of
and remove them
: if the consignee is unknown to the CC, the
latter must use proper and reasonable diligence to find
him, and if the consignee still cannot be found, the
goods may be stored in a proper place and the CC will
have performed his whole duty and shall be
discharged from liability as a CC
Failure to look for consignee and to give him
reasonable notice shall make the CC liable for
damages resulting from the delay in the receipt of the
goods by the consignee --> apply 1738 on the liability
of the CC even when the goods are deposited in its
warehouse until after the consignee has been given
reasonable notice and opportunity to remove the
goods
(b) To Whom Delivery Made

Art. 368. The carrier must deliver to the
consignee without any delay or obstruction the
merchandise received by him, by the mere fact
of being designated in the bill of lading to
receive it; and should he not do so he shall be
liable for the damages which may arise
therefrom.
Art. 1752.
Even when there is an
agreement limiting the liability of the CC in the
vigilance over the goods, the CC is disputably
presumed to have been negligent in case of
their loss, destruction or deterioration. (New
Civil Code.)
(d) When to be made
The delivery must be made to the consignee

Where the B/L is issued to the order of the shipper, the
CC is under a duty not to deliver the merchandise
except upon presentation of the B/L duly indorsed by
the shipper, and where the CC delivered the goods to
another person who did not present the B/L, such CC is
liable for misdelivery --> duty to transport the goods
safely and to deliver them to the person indicated in
the B/L
Misdelivery: Delivery to a person different from that
indicated in the B/L --> different from non-delivery
In case of conflicting orders of the shipper and
the consignee (where one orders the return and the
other orders the delivery of the goods), there is no
other recourse than to determine at what moment the
right of the shipper to countermand the shipment
terminates --> this moment can be no other than the
time when the consignee or legitimate holder of the
B/L appears with such B/L before the CC and makes
himself a party to the contract (prior to that time, he is
a stranger to the contract)
(c) Judicial Deposit
Art. 369. Should the consignee be not
found at the domicile indicated in the bill of
lading,
or
should
refuse
to
pay
the
transportation charges and expenses, or to
receive the goods, the deposit of said goods
Article 370. If a period has been fixed for

the delivery of the goods, it must be made
within the same, otherwise the carrier shall pay
the indemnity agreed upon in the bill of lading,
neither the shipper nor consignee being entitled
to anything else.
Should no indemnity have been agreed
upon and the delay exceeds the time fixed in
the bill of lading, the carrier shall be liable for
the damages which may have been caused by
the
delay.
Art. 358. Should no period within which
goods are to be delivered be previously fixed,
the carrier shall be under the obligation to
forward them in the first shipment of the same
or similar merchandise which he may make to
the point of delivery; and should he not do so,
the damages occasioned by the delay shall be
suffered by him.
Where period fixed for delivery : the CC must deliver
the goods within the time fixed --> for failure to do so,
the CC shall pay indemnity stipulated in the B/L,
neither the shipper nor the consignee being entitled to
anything else --> however, under the CC, damages
shall be paid if the carrier refuses to pay the stipulated
indemnity or is guilty of fraud in the fulfillment of his
obligation (Art. 1126,NCC)
PAGE 53

If no indemnity has been stipulated and the
delay exceeds the time fixed in the B/L, the CC shall be
liable for the damages that the delay may have
caused, e.g. the difference between the MV of the
goods at the time when they should have been
delivered, and the price at the time when they were
delivered to which may be added reasonable expenses
caused by delay
A CC in GF may be held liable only for
damages that were foreseen or might have been
foreseen at the time the contract of transpo was
entered into --> before a CC could be held liable for
special damages, such as loss of profits on account of
the delay or failure of deliver, he must have notice at
the time of the delivery of the particular circumstances
attending the shipment and which would probably lead
to such special loss if he defaulted (Mendoza vs PAL)
If the CC incurs in delay in transporting the
goods, a natural disaster shall not free such carrier
from responsibility; where the CC without cause delays
the transportation of the goods, the contract limiting
the CC's liability cannot be availed of in case of the
loss, destruction or deterioration of the goods
Where property in the hands of a CC is not
delivered within a reasonable time after it has reached
its destination, the CC in the absence of any legal
exemption and after demand has been made and
delivery refused, is liable for a conversion of the
property --> the consignee may waive title to the
property and sue for conversion and is entitled to the
value of the goods at the time they should have been
delivered to him --> subsequent tender of the goods
by the CC is not available as a defense
If there has been demand and the CC tenders
the goods, the consignee cannot refuse to receive the
goods and sue for conversion; his sole remedy is an
action for damages on account of the delay --> there
can only be conversion if there has been demand and
the CC refuses delivery
The time for delivery when no period fixed :
the CC shall be bound to forward them in the first
shipment of the same or similar goods which he makes
to the point where he must deliver them --> should he
not do so, the damages caused by the delay shall be
for his account
Art. 358 is not violated when though the
goods were not shipped on the train agreed upon, they
were shipped on another train which arrived earlier
than the one agreed upon
Successive carriers shall assume the obligations of

previous carriers but have a right of action against
previous carriers is the latter are directly responsible
for the fault giving rise to the claim of the shipper
(f) Obligation to keep registry
Art. 378. Transportation agents shall be
obliged to keep a special registry, with the
formalities required by Article 36, in which there
shall be entered, in progressive order of number
and dates, all the goods the transportation of
which is undertaken, stating the circumstances
required by Articles 350 et seq. for the
respective bills of lading.
(g) Compliance with
administrative regulations
Art. 377. The carrier shall be liable for all
the consequences arising from noncompliance
on his part with the formalities prescribed by
the laws and regulations
of the public
administration during the entire course of the
trip and upon arrival at the point of destination,
except when his omission arises from his having
been induced into error by false statements of
the
shipper
in
the
declaration
of
the
merchandise.
If the carrier has acted in accordance
with a formal order received from the shipper or
consignee of the merchandise both shall incur
liability.
The CC is exempted from responsibility where his
failure to comply arises from having been led into error
by the falsehood on the part of the shipper in the
declaration of the merchandise
The shipper or consignee may become liable
for noncompliance with govt. rules and regulations,
when the CC has acted by virtue of a formal order of
the shipper or consignee --> but the CC continues to
be liable
F. Rights and Obligations of Shipper and/or
Consignee
1. Right to Damages
(e) Two or more carriers

(a) Condition imposed on right
Art. 373.
A carrier who delivers
merchandise to a consignee by virtue of
agreements or combined services with other
carriers shall assume the obligations of the
carriers who preceded him, reserving his right
to proceed against the latter if he should not be
directly responsible for the fault which gives
rise to the claim of the shipper or of the
consignee.
The carrier making the delivery shall also
assume all the actions and rights of those who
may have preceded him in the transportation.
The shipper and the consignee shall have
an immediate right of action against the carrier
who executed the transportation contract, or
against the other carriers who received the
goods transported without reservation.
The reservations made by the latter shall
not however exempt them from the liabilities
they may have incurred by reason of their own
act.
Art. 366. Within the 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
packages.
After
the
periods
mentioned
have
delivered.
Art. 357. If by reason of well-founded
suspicions of falsity in the declaration of the
contents of a package, the carrier should decide
to examine it, he shall do so before witnesses,
PAGE 54

in the presence of the shipper or of the
consignee.
Should the shipper or consignee cited not
appear, the examinations shall be made before
a notary, who shall draft a certificate of the
result of the examination, for such purposes as
may be proper.
If the declaration of the shipper should
be correct, the expenses caused by the
examination and those of carefully repacking
the packages shall be defrayed by the carrier,
and in a contrary case by the shipper.
Article 366.
bill of lading.
Effect of return of the B/L or giving of the
receipt: The respective obligations and actions of the
parties against each other shall be considered
canceled, except where in the same act of return or
giving of a receipt the claims of the parties be reduced
to writing subject to the provisions of Art. 366
Par. 2 especially binds the horses, vehicles, vessels

and eqpt. and all other principal and accessory means
of the CC in favor of the shipper --> this lien is a
security for the payment of the value of the goods
which the CC must pay in case of loss or
misplacement
Art. 1744, NCC. A stipulation between
the CC and the shipper or owner limiting the
liability of the former for the loss, destruction or
deterioration of the goods to a degree less than
extra-o diligence shall be valid, provided it be:
(1) in writing, signed by the shipper or
owner;
(2) supported by a valuable consideration
other than the service rendered by the CC; and
(3) reasonable, just, and not contrary to
public policy. (New Civil Code.)
(c) Amount of damages for
delay
Art. 371. In cases of delay on account of
the fault of the carrier, referred to in the
foregoing articles, the consignee may leave the
goods transported in the hands of the carrier,
informing him thereof in writing before the
arrival of the same at the point of destination.
When this abandonment occurs, the
carrier shall satisfy the total value of the goods,
as if they had been lost or mislaid.
Should the abandonment not occur the
indemnity for loss and damages on account of
the delays cannot exceed the current price of
the goods transported on the day and at the
place where the delivery was to have been
made. The same provision shall be observed in
all cases where this indemnity is due.
Damages for delay (par. 3) : Provided there is no
express agreement as to indemnity in the B/L and
there is no fraud on the part of the CC, and the goods
have a known current price at the place and on the
day they should have been delivered, the damages
shall not exceed such value --> subject to Civil Code
provisions on damages in case of delay
(b) Amount of damages for loss

Art. 372. The value of the goods which
the carrier must pay in case of their being lost
or mislaid shall be fixed in accordance with
what is stated in the bill of lading, no proofs
being allowed on the part of the shipper that
there were among the goods declared therein
articles of greater value, and money.
Horses, vehicles, vessels, equipments,
and all the other principal and accessory means
of transportation, shall be especially obligated
in favor of the shipper, although with respect to
railroads said obligation shall be subordinated
to the provisions of the laws of concession with
regard to property and to those of this Code
with regard to the manner and form of making
attachments and seizures against the said
companies.
The value of the goods stated in the B/L is conclusive
between the parties and the shipper is not allowed to
prove a higher value
It is only when the CC's fault is so gross as to
amount to actual fraud, that the actual amount of the
losses and damages suffered may be proved by the
shipper against the carrier
2. Right to abandon
Art. 371. In cases of delay on account of
the fault of the carrier, referred to in the
foregoing articles, the consignee may leave the
goods transported in the hands of the carrier,
informing him thereof in writing before the
arrival of the same at the point of destination.
When this abandonment occurs, the
carrier shall satisfy the total value of the goods,
as if they had been lost or mislaid.
Should the abandonment not occur the
indemnity for loss and damages on account of
the delays cannot exceed the current price of
the goods transported on the day and at the
place where the delivery was to have been
made. The same provision shall be observed in
all cases where this indemnity is due.
Right of abandonment: Exceptional but limited
right
The right must be exercised during the
intervening period between the moment when the
fault of the CC produces a delay, which is the
generative cause of the action, until the moment just
before the arrival of the goods at the place of delivery,
by communicating such abandonment to the CC in
writing
PAGE 55

Where these conditions do not concur, the
refusal to accept cannot be effective
Damages for abandonment : Art. 371 (2) --> subject to
Civil Code
Art. 360.
The shipper may, without
changing the place where the delivery is to be
made, change the consignment of the goods
delivered to the carrier, and the latter shall
comply with his orders, provided that at the
time of making the change of the consignee the
bill of lading subscribed by the carrier, if one
were issued, be returned to him, exchanging it
for another containing the novation of the
contract.
The expenses arising from the change of
consignment shall be defrayed by the shipper.
Art. 365. If, on account of the damage,
the goods are rendered useless for sale or
consumption for the use for which they are
properly destined the consignee shall not be
bound to receive them, and may leave them in
the hands of the carrier, demanding payment of
their value at the current market price that day.
If among the goods damages there
should be some in good condition and without
any defect whatsoever, the foregoing provision
shall be applicable with regard to the damaged
ones, and the consignee shall receive those
which are sound, this separation being made by
distinct and separate articles, no object being
divided for the purpose, unless the consignee
proves the impossibility of conveniently making
use thereof in this form.
The same provision shall be applied to
merchandise in bales or packages, with
distinction of the packages which appear sound.
Art. 363. With the exception of the cases
prescribed in the second paragraph of Article
361, the carrier shall be obliged to deliver the
goods transported in the same condition in
which, according to the bill of lading, they were
at the time of their receipt, without any damage
or impairment, and should he not do so, he shall
be obliged to pay the value of the goods not
delivered at the point where they should have
been and at the time the delivery should have
taken place.
If part of the goods transported should
be delivered the consignee may refuse to
receive them, when he proves that he cannot
make use thereof without the others.
Cases where consignee may abandon goods :
1. Art. 363, in case of partial non-delivery
where the consignee proves that he cannot make use
of the goods capable of delivery independently of
those not delivered
2. Art. 365, where the goods are rendered
useless for sale and consumption for the purposes for
which they are properly destined
3. Art. 371, where there is delay through the
fault of the carrier
2. Right to change consignment
Art. 360.
The shipper may, without
changing the place where the delivery is to be
made, change the consignment of the goods
delivered to the carrier, and the latter shall
comply with his orders, provided that at the
time of making the change of the consignee the
bill of lading subscribed by the carrier, if one

were issued, be returned to him, exchanging it
for another containing the novation of the
contract.
The expenses arising from the change of
consignment shall be defrayed by the shipper.
3. Obligation to pay transportation
charges
Art. 374. The consignees to whom the
remittance may have been made may not defer
the payment of the expenses and transportation
charges on the goods that they received after
twenty-four hours have elapsed from the time
of the delivery; and in case of delay in making
this payment, the carrier may demand the
judicial sale of the goods he transported to a
sufficient amount to cover the transportation
charges and the expenses incurred.
Railroad corporations have the power to detain
freight, goods or luggage, to answer for the freight,
storage and other transportation charges
In case of failure of the shipper, owner or
consignee to pay for such charges, the CC has the
power to sell such freight, goods, or luggage at public
auction following the procedure under the law
Art. 375. The goods transported shall be
specifically
bound
to
answer
for
the
transportation charges and for the expenses
and fees caused by the same during their
transportation, and until the time of their
delivery.
This special right shall be limited to eight
days after the delivery has been made, and
after said prescription the carrier shall have no
further right of action than that corresponding
to an ordinary creditor.
Art. 376. The preference of the carrier to
the payment of what is due him for the
transportation and expenses of the goods
delivered to the consignee shall not be affected
by the bankruptcy of the latter, provided the
action is brought within the eight days
mentioned in the foregoing article.
Art. 2241. With reference to specific
movable property of the debtor, the ff. claims or
liens shall be preferred :
xxx
(9) Credits for transportation, upon the
goods carried, for the price of the contract and
incidental expenses, until their delivery and for
thirty days thereafter. (New Civil Code.)
Two sanctions for the enforcement by the CC of the
payment of expenses and transpo charges :
1. Art. 374 - judicial sale of the goods
transported
2. Art. 375 - creating a lien in favor of the CC
on the goods transported --> 8 day period has been
increased to 30 days by the NCC
The purpose of the lien and time limit:
Reciprocal to that established in favor of the shipper
under
Art. 372(par. 2); time limit rests on the necessity which
the consignee must have for alienation of the goods,
by which the CC is given a period relatively urgent
pertaining to the said goods transported --> after the
PAGE 56

time has prescribed, his preference prescribes and his
only remedy is by ordinary action
The mere fact that the goods remain in the
possession of the CC because they have not been
removed by the consignee, and the right of the CC to
demand the sale of the goods to satisfy the cost of
transportation and other expenses, do not deprive the
CC of its right to demand in a proper action the
amounts owing to it by reason of the contract of
transpo
The bankruptcy of the consignee shall not cut
off the preference of the CC, provided that the claim is
made w/in 30 days from date of delivery (NCC)
5. Obligation to return bill of lading
Article 366.
bill of lading.
IV. ADMIRALTY AND MARITIME COMMERCE

A. Concept of Admiralty; Jurisdiction over
Admiralty Cases
BP 129, Sec. 19.
Regional Trial Courts
shall exercise exclusive original jurisdiction:
xxx
(3)
In all actions in admiralty and
maritime jurisdiction where the demand or
claim exceeds one hundred thousand pesos
(P100,000) xxx.
BP 129, Sec. 33.
Metropolitan Trial
Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts shall exercise:
(1) Exclusive original jurisdiction over
civil actions and probate proceedings, testate
and intestate, including the grant of provisional
remedies in proper cases, where the value of
the personal property, estate or amount of the
demand does not exceed one hundred thousand
pesos (P100,000), or in Metro Manila where such
personal property, estate, or amount of the
demand does not exceed Two hundred thousand
pesos (P200,000),
exclusive of interest,
damages of whatever kind, attorney's fees,
litigation expenses, and costs, the amount of
which must be specifically alleged: Provided,
That interest, damages of whatever kind,
attorney's fees, litigation expenses, and costs
shall be included in the determination of the
filing fees: Provided, further, That where there
are several claims or causes of action between
the same or different parties, embodied in the
same complaint, the amount of the demand
shall be the totality of the claims in all the
causes of action, irrespective of whether the
causes of action arose out of the same or
different actions.
International Harvester vs Aragon 84 Phil 363
Under par. 2, Art. 353, after the contract of transpo

has been complied with, the B/L shall be returned to
the issuing CC in exchange for the goods transported
which are delivered to the shipper or consignee
Where the consignee upon receiving the goods
cannot return the B/L to the CC by reason of its loss or
any other cause, par. 3, Art. 353 provides that he must
give the CC a receipt of the goods delivered
Effect of return of the B/L or giving of the
receipt: The respective obligations and actions of the
parties against each other shall be considered
canceled, except where in the same act of return or
giving of a receipt the claims of the parties be reduced
to writing subject to the provisions of Art. 366
G. Applicability of Provisions
Art. 379.
The provisions contained in
Article 349 et seq. shall also be understood as
relating to persons who, although they do not
personally
effect
the
transportation
of
commercial goods, contract to do so through
others, either as contracts for a special and
fixed
transaction
or
as
freight
and
transportation agents.
In either case they shall be subrogated to
the place of the carriers with regard to the
obligations and liability of the latter, as well as
with regard to their right.
F:
The S/S Belle of the Sea took on board in LA,
goods for shipment to Manila and covered by B/L No.
105. The S/S Belle of the Sea arrived in Manila and
discharged her cargo at the govt. piers under the
supervision and custody of the defendant Manila
Terminal Inc. Of the entire shipment, one carton of
assorted samples with a stipulated value of P200 was
not delivered to plaintiff Yaras and Co. The latter filed
a complaint with the Municipal Court of Manila against
International Harvester, as agent of the S/S Belle of
the Sea and Manila Terminal Inc.
The complaint
charged that the merchandise was lost through the
negligence of either of the defendants. Before trial
could proceed, the International Harvester Inc. (IH)
filed a motion to dismiss on the ground that the court
had no jurisdiction.
The motion was denied.
Prohibition proceedings were instituted before the CFI
of Manila to stop the judge from proceeding with the
action. The petition was granted and the respondents
now appeal.
Held : It is clear from the complaint that IH is being
held liable only on the assumption that the goods had
been lost in transit or before being discharged at the
pier. The liability of IH is predicated on the contract of
carriage by sea between IH and Yaras & Co. as
evidenced by the B/L, independently of the liability of
the Manila Terminal Co. as operator of an arrastre
service.
Admiralty has jurisdiction over all maritime
contracts, in whatever form, wherever they were
executed or are to be performed, but not over nonmaritime contracts. Whether or not a contract is
PAGE 57

maritime depends not on the place where the contract
is made and is to be executed, making the locality the
test, but on the subject matter of the contract, making
the true criterion a maritime service or a maritime
transaction. Specifically, admiralty has jurisdiction of
a proceeding in rem or in personam for the breach of a
contract of affreightment, whether evidenced by a B/L
or a charter party. And typical of a controversy over
contracts of affreightment is a suit of one party
against the other for loss or damage to the cargo. This
is the very case before us, because the respondent
Yaras & Co. seeks to recover from the petitioner IH the
value of certain lost cargo.
The contention of Yaras that the admiralty
jurisdiction is not involved because the contract in
question was made upon land and to be terminated
upon land, merely reflects the English rule which had
long been rejected in the US. It is now well-settled in
the latter country that the jurisdiction of admiralty in
matters of contract depends upon the subject matter,
i.e., the nature and character of the contract and that
the English rule which conceded jurisdiction only to
contracts made upon and to be performed upon
navigable waters, is inadmissible, the true criterion
being that the contract has reference to maritime
service or maritime transaction. Under the law, the
CFI has jurisdiction over admiralty cases.
B. Vessels
1. Meaning
Lopez vs Duruelo 52 Phil 229
F:
Augusto Lopez, of Silay, Occidental Negros,
wanted to embark on the interisland steamer San
Jacinto bound for Iloilo. The steamer was anchored
some half a mile from the shore or port of Silay. In
order to board the steamer, Lopes boarded the motor
boat Jison at the landing which was then engaged in
conveying passengers and luggage to and from the
steamer. Whether due to negligence or incompetence
of Duruelo, the engineer of Jison aged 16, as alleged,
the boat approached too near to the stern of the
steamer wherein it was struck by the still turning
propeller of the steamer. The boat sunk and Lopez
was thrown into the water against the propeller
wherein he suffered a bruise in the breast, two serious
fractures of the bones of the left leg and a compound
fracture of the left femur. As a result, Lopez was
hospitalized from February 28 to October 19, 1927 or
eight months. Lopez filed a complaint and sought
damages amounting to P120,000 alleging that he
suffered injuries due to the negligence and
inexperience having only been in its third day of
apprenticeship on the day of the accident. It was also
alleged that Jison was overloaded when it carried 14
passengers instead of its capacity for eight or nine.
The defendants assigned in it demurrer that the
plaintiff did not show a right of action since the
complaint did not allege that a protest had been
presented by the plaintiff within 24 hours after the
occurrence, to the competent authority of the port
where the accident occurred as provided under the
Code of Commerce. CFI dismissed the complaint,
hence the appeal.
Held : Assuming that article 835 of the Code of
Commerce states a condition precedent to the
maintenance of an action in a case requiring protest,
such as protest is nevertheless not necessary in the
case at bar. The article is found in the section dealing
with collisions and the context shows the collisions
intended are collisions of sea-going vessels. Said
article cannot be applied to small boats engaged in
river and bay traffic. The vessels intended in the Third
Book of the Code of Commerce which deals with

maritime commerce and in which Art. 865 is found
was evidently intended to define the law relative to
merchant vessels and marine shipping, and the
vessels intended in that Book are such as are run by
masters having special training with the elaborate
apparatus of crew and equipment indicated in the
Code. The word "vessel" used in the section was not
intended to include all ships, craft, or floating
structures of every kind without limitation, and the
provision of that section should not be held to include
minor craft engaged only in river or bay traffic. Vessels
of minor nature, such as river boats and those carrying
passengers from ship to shore are governed as to their
liability in passengers, by the Civil Code.
The word ship and vessel, in their grammatical
sense are applied to designate every kind of craft,
large or small, merchant or war, a signification which
does not differ essentially from its juridical meaning
according to which vessels for the purpose of the Code
of Commerce, are considered not only those engaged
in navigation whether coastwise or high seas, but also
floating docks, pontoons,dredges, scows, and other
floating apparatus for the service of the industry or
maritime commerce.
Yet notwithstanding these principles from
which it would seem that any floating apparatus which
serves directly for the transportation of things or
persons or which indirectly is related to this industry,
ought to be subjected to the principles of the Code
with reference to ownership, transfer, rights,
registrations, etc. they are not applicable to small craft
which are only subject to administrative regulations in
the matter of port service and in the fishing industry.
But even if The Code Of Commerce was
applicable, a protest still need not be made since
under Art. 836, want of protest cannot prejudice a
person not in a condition to make known his wishes. A
person who has suffered injuries like that of the
plaintiff cannot be supposed to be in a condition to
make a protest.
2. Nature and acquisition of vessels
Art. 573.
Merchant vessels constitute
property which may be acquired and transferred
by any of the means recognized by law. The
acquisition of a vessel must be included in a
written instrument, which shall not produce any
effect with regard to third persons if not
recorded in the registry of vessels.
The
ownership of a vessel shall also be acquired by
the possession thereof in good faith for three
years, with a good title duly recorded.
In the absence of any of these requisites,
uninterrupted possession for ten years shall be
necessary in order to acquire ownership.
A captain cannot acquire by prescription
the ship of which he is in command.
Vessels:
Those engaged in navigation , whether
coastwise or on the high seas, including floating
docks, pontoons, dredges, scows and any other
floating apparatus destined for the services of the
industry or maritime commerce
Vessels engaged in the business of carrying or
transporting passengers or goods for compensation,
offering their services to the public are common
carriers --> governed primarily by the Civil Code
provisions on common carriers and subsidiarily by the
Code of Commerce and special laws
The Code of Commerce regulates merchant
ships or those engaged in the transportation of
passengers and freight from one port to another or
from place to another
PAGE 58

The Code of Commerce does not refer to
pleasure ships, yachts, pontoons, health service and
harbor police vessels, floating storehouses, warships
or patrol vessels, coast guard vessels, fishing vessels,
towboats and other craft destined to other uses, such
as coast and geodetic survey, scientific research and
exploration, crafts engaged in the loading and the
discharge of vessels, or transhipments from one vessel
to another
Vessels of a minor nature not engaged in
maritime commerce, such as, river boats and those
carrying passengers from ship to shore, must be
governed as to their liability to passengers, by the
provisions of the Civil Code
Modes of acquisition:
(1) purchase and sale,
(2) prescription, (3) construction, (4) capture, (5)
donation, (6) succession, and (7) other means, such as
barter
Possession in GF will ripen into ownership in 3
years; if the possession is otherwise, it will ripen into
ownership in 10 years
There can be no prescription in favor of the
captain because the nature of the possession of the
captain is such that he is only an agent of the owner, a
depositary of the vessel
The acquisition of a vessel must appear in a
written instrument and such instrument must be
registered in order that the transfer may affect third
persons
Art. 574. Builders of vessels may employ
the material and follow with regard to their
construction and rigging the systems most
suitable to their interest.
Ship owners and
seamen shall be subject to the provisions of the
laws
and
regulations
of
the
public
administration on navigation, customs, health,
safety of vessels, and other similar matters.
The business of constructing and repairing vessels or
parts thereof shall not be considered a public utility
and no CPC shall be required thereof
Art. 585. For all purposes of law not
modified or restricted by the provisions of this
Code, vessels shall continue to be considered as
personal property.
Vessels are considered personal or movable property;
but they partake to a certain extent, of the nature and
conditions of real property, on account of their value
and importance in the world of commerce
Art. 712.
Ownership is acquired by
occupation and by intellectual creation.
Ownership and other real rights over
property are acquired and transmitted by law,
by
donation,
by
testate
and
intestate
succession, and in consequence of certain
contracts, by tradition.
They may also be acquired by means of
prescription. (New Civil Code.)
3. Registration; certificates issued;
distinctions
Tariff and Customs Code, Sec. 802
(1) vessels - every sort of boat, craft or
other artificial contrivance used, or capable of
being used, as a means of transportation on
water
(2) duly registered - person, natural or
juridical, registered with the proper govt.
agencies, as Bureau of Commerce, SEC, NACIDA,

BOI, Export Incentives Board or Oil Commission,
as now or may hereafter be required by law.
PD 761 as amended by PD 1064, 1521
Sec. 806. Upon registration of a vessel of
domestic ownership, and of more than 15 tons
gross, a certificate of Philippine registry shall
be issued for it. If the vessel is of domestic
ownership and of 15 tons gross or less, the
taking of the certificate of Philippine registry
shall be optional with the owner.
Domestic ownership means ownership
vested in the citizens of the Philippines or
corporations or association organized under the
laws of the Philippines at least 60% of the C/S or
capital of which is wholly owned by citizens of
the Philippines, and in the case of corporations
or associations which will engage in coastwise
trade the president and managing directors
thereof shall be such citizens xxx
xxx an enterprise duly registered with
the Board of Investments WON entirely owned
by foreign nationals, may register its own
vessels xxx if such vessels are to be used
exclusively to transport its own raw materials
and finished products in Philippine waters as an
incident to its manufacturing,
processing or
business activity registered with the BOI and
certified to by said Board as an essential
element in the operation of the registered
project.
Rule III, Marina Rules and Regulations:
Subjects of Registration:
1) All vessels used in Phil. waters, not
being transients of foreign registry, shall be
registered with the MARINA. To this end, it shall
be the duty of the master, owner and agent of
every such vessel to make application to the
proper MARINA district office for registration
thereof within 15 days after the vessel becomes
subject to such registration.
2) A vessel of 3 tons gross or less shall
not be registered unless the owner shall so
desire, nor shall documents licenses of any kind
be required for such vessel, but the proper fee
shall be charged for measurement when
measurement is necessary, except when the
same is engaged in towing or carrying of
articles and passengers for hire.
3) All undocumented vessels shall be
numbered in such form as may be prescribed by
the Administrator.
Vessels exempt from Registration :

AFP vessels, vessels owned and/or
operated by the AFP or by foreign govt. for
military purposes, and bancas, sail boats and
other water craft which are not motorized of
less than 3 gross tons shall not be subject to the
requirements of these rules and regulations
relative to registration and navigation, except in
so far as may be prescribed by regulations of
MARINA.
The Phil. Coast Guard is vested with exclusive
authority over the registration and documentation of
Phil. vessels, as well as the issuance of all certificates,
PAGE 59

licenses, or other documents necessary or incident to
such registration
The registration shall be effected at its home
port or at the nearest Coast Guard district or station
when the home port does not have such
Certificates
of
Philippine
register:
upon
registration of a vessel of domestic ownership and of
more than 15 tons gross, a certificate of Phil. register
shall be issued for it
The
purpose of certificates of register of
vessels : to declare the nationality of a vessel engaged
in trade with foreign nations and to enable her to
assert that nationality wherever found
Privileges of certificate: It confers upon the
vessel the right to engage, consistently with law, in
the Philippines coastwise trade and entitles it to the
protection of the authorities and the flag of the
Philippines in all ports and on the high seas, and at the
same time secures to it the same privileges and
subjects it to the same disabilities as, under the laws
of the Philippines, pertain to foreign built vessels
transferred abroad to citizens of the Philippines
Certificates of ownership : upon registration of a
vessel of more than 5 tons gross, a certificate of
ownership shall be issued for it
4. Significance of registration of
transactions affecting vessels
Presumption of ownership from registration : the
presumption is that the person in whose name a
vessel is registered has legal title thereto --> but such
is not conclusive proof against the real owners
It is essential that a record of documents
affecting the title of a vessel be entered in the
Philippine Coast Guard
bank's defective title.

That the collector did not
perform his duty was no fault of PNB.
Judgment affirmed in part in the sense that as
between Yu and PNB, the latter has a superior right to
its claim for P20,000, and set aside in part in the sense
that the record is remanded for further proceedings.
Rubiso vs Rivera 37 Phil 72
F:
Defendant Rivera acquired by purchase the
pilot boat Valentina on a date prior to that of the
purchase and adjudication at public auction by plaintiff
Rubiso. But the sale at public auction to Rubiso was
recorded in the office of the collector of customs on
Jan. 27, 1915 and in the commercial registry on March
4, 1915, while the sale to Rivera was entered in the
customs registry only on March 17, 1915. Lower court
decided for plaintiff. Defendant appealed.
HELD : The requisite of registration in the registry of
the purchase of a vessel is necessary and
indispensable in order that the purchaser's rights may
be maintained against a claim filed by a third person.
Such registration is required both Art. 573 of the Code
of Commerce in connection with Sec 2 of Act No. 1900
which Act amended said article. The amendments
solely consisted in charging the Insular Collector of
Customs, as at present, with the fulfillment of the
duties of the commercial register concerning the
registering of vessels, so that the registration of a bill
of sale of a vessel shall be made in the Insular
Collector of Customs, who, since May 18, 1909, has
been performing the duties of the commercial registry
in place of this latter official. In view of said legal
provisions, it is undeniable that defendant's rights
cannot prevail over those acquired by plaintiff in the
ownership of said boat, in as much as defendant's
registration came after plaintiff's registration.
Arroyo vs Yu 54 Phil 511
C. Persons Participating in Maritime Commerce
F:
The appeal of Yu relates to the preferences to
the ten lorchas as between herself and the PNB.
Among the facts found by the trial judge is that they
were owned by Lim Ponzo Navigation Co. They were
mortgaged to Po Pauco to guarantee a loan of
P20,000. This was duly registered with the register of
deeds. Po Pauco later mortgaged them in favor of PNB
and registered with the register of deeds but was
recorded in the Office of Collector of Customs much
later. Meanwhile, Yu secured a judgment against Lim
Ponzo Navigation Co.
The notice of seizure was
recorded by the collector of customs of Iloilo on which
date the records of the office disclosed the vessels as
free from encumbrances.
HELD : Sec. 1171 of AC has modified the provisions of
the Chattel Mortgage Law, particularly Sec. 4 thereof.
It is now not necessary for a chattel mortgage of a
vessel to be noted in the register of deeds. But it is
essential that a record of documents affecting the title
of a vessel be entered in the office of the collector of
customs at a port of entry. This is designed to protect
persons who deal with a vessel on the strength of the
record title.
Mortgages on vessels., although not
recorded, are good as between the parties. But as
against creditors of the mortgagor, an unrecorded
mortgage is valid.
However, we find an explanation of the delay
of registration with the collector of customs-because of
doubts entertained by the latter relative to the
applicability of Act No. 3324 to a mortgage executed in
1918 in favor of a Chinese subject.
This
uncontradicted fact must be taken as curing the
1. Shipowners and shipagents

Art. 586. The owner of a vessel and 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 creditors proves that the
amount claimed was invested therein.
By agent is understood the person
entrusted with the provisioning of a vessel, or
who represents her in the port in which she
happens to be.
Art. 587. The ship agent shall also be
civilly liable for the indemnities in favor of third
persons which arise from the conduct of the
captain in the care of the goods which the
vessel carried; but he may exempt himself
therefrom by abandoning the vessel with all her
equipments and the freightage he may have
earned during the voyage.
Art. 588. Neither the owner of the vessel
nor the agent shall be liable for the obligations
contracted by the captain if the latter exceeds
his powers and privileges inherent in his
position or those which may have been
conferred upon him by the former.
However, if the amounts claimed were
made use of for the benefit of the vessel, the
owner or agent shall be liable.
Liability of shipowner and shipagent :
PAGE 60

(1) under Art. 857, for the acts of the captain
(2) for contracts entered into by the captain to
repair, equip and provision the vessel, provided that
the amount claimed was invested for the benefit of the
vessel
(3) for the indemnities in favor of third persons
which may arise from the conduct of the captain in the
care of the goods transported, as well as for the safety
of passengers transported
(4) for damages to third persons for tort or
quasi-delict committed by the captain, except collision
with another vessel
(5) under Art. 826, for damages in case of
collision due to the fault, negligence, or want of skill of
the captain, sailing mate, or any other member of the
complement
The agent is liable to the shippers and owners
of the cargo transported by it, for losses and damages
occasioned to such cargo without prejudice to his
rights against the owner of the ship, to the extent of
the value of the vessel, its equipment and the freight
Under 588, the shipowner and the shipagent are not
liable for the obligations contracted by the captain if
he exceeds his authority, unless the amounts claimed
were invested for the benefit of the vessel --> however
under Art. 1759, NCC, the ship owner is liable for the
death of or injuries to the passengers which are
caused by the negligence or wilful acts of his EEs
although such EEs may have acted beyond the scope
of their authority or in violation of the orders of the
shipowner
Art. 589. If two or more persons should
be part owners of a merchant vessel, an
association shall be presumed as established by
the part owners.
This association shall be governed by the
resolutions of a majority of the members.
A majority shall be the relative majority
of the voting members.
If there should be only two part owners,
in case of disagreement the vote of the member
having the largest interest shall be decisive. If
the interests are equal, it shall be decided by
lot.
The representation of the smallest part
in the ownership shall have one vote; and
proportionately the other part owners as many
votes as they have parts equal to the smallest
one.
A vessel cannot be detained, attached or
levied upon execution in her entirety for the
private debts of a part owner, but the
proceedings shall be limited to the interest the
debtor may have in the vessel, without
interfering with her navigation.
Art. 590. The co-owners of a vessel shall
be civilly liable, in the proportion of their
contribution to the common fund, for the results
of the acts of the captain, referred to in Article
587.
Each part owner may exempt himself
from this liability by the abandonment before a
notary of the part of the vessel belonging to
him.
Art. 591. All the part owners shall be
liable, in proportion to their respective
ownership, for the expenses which are incurred
by virtue of a resolution of the majority.
They shall likewise be liable in the same

proportion for the expenses of maintenance,
equipment, and provisioning of the vessel,
necessary for navigation.
Art. 592. The resolutions of the majority
with regard to the repair, equipment, and
provisioning of the vessel in the port of
departure shall bind the minority, unless they
renounce their participation therein, which must
be acquired by the other part owners after a
judicial appraisement of the value of the portion
or portions assigned.
The resolutions of the majority relating
to the dissolution of the association and sale of
the vessel shall also be binding on the minority.
The sale of the vessel shall be made at a
public auction, subject to the provisions of the
law of civil procedure unless the part owners
unanimously agree otherwise, subject always to
the right of pre-emption and redemption
mentioned in Article 575.
Art. 593. The owners of a vessel shall
have preference in her charter over other
persons, offering equal conditions and price. If
two or more of the former should claim said
right the one having greater interest shall be
preferred, and should they have an equal
interest it shall be decided by lot.
Art. 594. The part owners shall elect the
manager who is to represent them in the
capacity of agent.
The appointment of director or agent
shall be revocable at the will of the partners.
Art. 595. The agent, be he at the same
time an owner of a vessel or a manager for an
owner or for an association of co- owners, must
be qualified to trade and must be recorded in
the merchant's registry of the province.
The agent shall represent the ownership
of the vessel, and may in his own name and in
such capacity take judicial and extrajudicial
steps in all that relates to commerce.
Art. 596. The agent may discharge the
duties of captain of the vessel, subject, in every
case, to the provisions contained in Article 609.
If two or more co-owners request the
position of captain, the disagreement shall be
decided by a vote of the members; and if the
vote should result in a tie, the position shall be
given to the part owner having the larger
interest in the vessel.
If the interest of the petitioners should
be the same, and there should be a tie, the
matter shall be decided by lot.
Art. 597.
The agent shall select and
enter into an agreement with the captain, and
shall contract in the name of the owners, who
shall be bound in all that refers to repairs,
details of equipment, armament, provisions,
fuel, and freight of the vessel, and, in general,
in all that relates to the requirements of
navigation.
Art. 598. The agent cannot order a new
voyage, nor make contracts for a new charter,
PAGE 61

nor insure the vessel, without the authority of
her owner or by virtue of a resolution of the
majority of the co-owners, unless these powers
were granted him in the certificate of his
appointment.
If he should insure the vessel without
authority therefor he shall be subsidiarily liable
for the solvency of the underwriter.
Art. 606. If the captain should be a part

owner in the vessel, he may not be discharged
unless the agent returns to him the amount of
his interest therein, which, in the absence of an
agreement between the parties, shall be
appraised by experts appointed in the manner
established in the law of civil procedure.
Art. 599.
The managing agent of an
association, shall give his co-owners an account
of the results of each voyage of the vessel,
without prejudice to always having the books
and correspondence relating to the vessel and
to its voyages at their disposal.
Art. 607. If the captain who is a part

owners should have obtained the command of
the vessel by virtue of a special agreement
contained in the articles of copartnership, he
cannot be deprived thereof except for the
reasons mentioned in Article 605.
Art. 600.
After the account of the
managing agent has been approved by a
relative majority, the co-owners shall satisfy the
expenses in proportion to their interest, without
prejudice to the civil or criminal actions which
the minority may deem fit to institute
afterwards.
In order to enforce the payment, the
managing agents shall be entitled to an
executory action, which shall be instituted by
virtue of a resolution of the majority, and
without
further
proceedings
than
the
acknowledgment of the signatures of the
persons who voted for the resolution.
Art. 608. In case of the voluntary sale of

the vessel, all contracts between the agent and
captain shall terminate, reserving to the latter
his right to the indemnity which may be proper,
according to the agreements made with the
agent.
The vessel sold shall remain subject to
the security of the payment of said indemnity if,
after the action against the vendor has been
instituted, the latter should be insolvent.
* Note : an executory action is no longer recognized in

this jurisdiction
Art. 601. Should there be any profits, the
co-owners may demand of the managing agent
the amount due them, by means of an executory
action without further requisite than the
acknowledgment of the signatures in the
instrument approving the account.
Art. 602. The agent shall indemnify the
captain for all the expenses he may have made
from his own funds or from those of other
persons, for the benefit of the vessel.
Art. 603. Before a vessel goes out to sea
the agent may at his discretion, discharge the
captain and members of the crew whose
contract did not state a definite period nor a
definite voyage, paying them the salaries
earned according to their contracts, and without
any indemnity whatsoever, unless there is an
expressed and specific agreement in respect
thereto.
Art. 604. If the captain or any other member
of the crew should be discharged during the voyage,
they shall receive their salary until their return to the
place where the contract was made, unless there are
good reasons for the discharge, all in accordance with
Art. 636 et seq. of this Code.
Art. 605. If the contracts of the captain
and members of the crew with the agent should
be for a definite period or voyage, they cannot
be discharged until the fulfillment of their
contracts, except for reasons of insubordination
in serious matters, robbery, theft, habitual
drunkenness, and damage caused to the vessel
or to its cargo by malice or manifest or proven
negligence.
Art. 618.
The captain shall be civilly
liable to the ship agent and the latter to the
third persons who may have made contracts
with the former 1. For all the damages suffered by the
vessel and its cargo by reason of want of skill or
negligence on his part. If a misdemeanor or
crime has been committed he shall be liable in
accordance with the Penal Code.
2.
For all the thefts and robberies
committed by the crew, reserving his right of
action against the guilty parties.
3.
For
the
losses,
fines,
and
confiscations imposed on account of violation of
the laws and regulations of customs, police,
health, and navigation.
4. For the losses and damages caused by
mutinies on board the vessel, or by reason of
faults committed by the crew in the service and
defense of the same, if he does not prove that
he made full use of his authority to prevent or
avoid them.
5.
For those arising by reason of a
misuse of powers and nonfulfillment of the
duties which pertain to him in accordance with
Articles 610 and 612.
6. For those arising by reason of his
going out of his course or taking a course which,
in the opinion of the officers of the vessel, at a
meeting
attended
by
the
shippers
or
supercargoes who may be on board, he should
not have taken without sufficient cause.
No exception whatsoever shall exempt
him from his obligation.
7. For those arising by reason of his
voluntarily entering a port other than his
destination, with the exception of the cases or
without the formalities referred to in Article
612.
8. For those arising by reason of the
nonobservance of the provisions contained in
the regulations for lights and maneuvers for the
purpose of preventing collisions.
Art. 618 provides for the direct responsibility of the
shipowner and shipagent to third persons; the captain
shall be civilly liable to the ship agent and the latter is
the one liable to third persons This article applies to
PAGE 62

breaches of contract and tortious negligence of the
captain
But where the vessel is totally chartered for
use of a single party, the shipowner and that party
may validly stipulate that the latter shall be exempt
from liability for the negligence of the captain and
crew
Reason for imposition of liability on owner for
damages suffered by third persons occasioned
by the acts of the captain: To place the primary
liability upon the person who has actual control over
the conduct of the voyage and who has the most
capital embarked in the venture, namely, the owner of
the ship, leaving him to obtain recourse, from other
individuals who have been drawn into the venture as
shippers
The shippers and passengers in making
contracts with the captain do so through the
confidence they have in the shipowner who appointed
him --> they presume that the owner made a most
careful investigation before appointing him
Distinction between liability for lawful and
unlawful acts :
The lawful acts and obligations of the captain
beneficial to the vessel may be enforced as against the
agent/owner for the reason that such obligations arise
from the contract of agency ( provided that the captain
does not exceed his authority)
As to any liability incurred by the captain
through his unlawful acts, the ship agent is simply
subsidiarily liable
Liabilities of captain:
the responsibility of the
captain extends to every fraudulent or negligent act of
any person in the complement, in the execution of his
employment --> he does not respond for personal
injuries of the crew arising from personal quarrels but
he is liable for damages to persons or property
occasioned by a maneuvering of the vessel, for failure
to follow international rules and regulations, for failure
to take the precautions to prevent every damage
possible to the vessel which has suffered an average
Standard Oil vs Castelo 42 Phil 256
F:
Castelo, owner of the interisland steamer
Batangueno, contracted with Chumbuque stipulating
that for a term of one year, the latter shall use it in
conveying cargo; that the crew should be supplied by
the owner; and that the charterer should have no
control over the captain and crew than to specify the
voyages. Plaintiff delivered petroleum which was
placed on deck. While the steamer was on her way, a
typhoon came, compelling the captain to jettison the
petroleum. When the storm abated, the ship made
port and 13 cases of petroleum were recovered, but
the remainder was wholly lost. Plaintiff brought action
to recover the petroleum value against the shipowner.
CFI rendered judgment for plaintiff.
Held : Ordinarily, the loss of cargo carried on deck
shall not be considered as general average loss, as
expressed in the York- Antwerp Rules. This rule, first
made during the days of sailing vessels has changed
and it is now generally held that jettisoned goods
carried on deck, according to the customs of trade, by
steam vessels navigating coastwise and inland waters,
are entitled to contribution as general average loss.
The reason for this, in coastwise trade, is that boats
are small and voyages are short, with the result that
the coasting vessel can use more circumspection
about the condition of the weather at departure time.
It is evident therefore, that the loss of the petroleum is
a general average with the result that plaintiff is
entitled to recover an amount bearing such proportion
to its total loss as the value of both ship and cargo

bears to the value of ship and entire cargo before
jettison was effected.
It is universally recognized that the captain is
the representative of the owner and both under Art.
586 of the Code of Commerce, are civilly liable for the
acts of the master. When jettison of cargo occurs, it is
the duty of the captain to effect the adjustment,
liquidating and distribution of the general average; his
failure gave rise to liability for which the owner of the
ship must answer.
The owner of the ship ordinarily has vastly
more capital embarked upon a voyage than has any
shipper of cargo.
Moreover, the shipowner, in
captain's person, has complete and exclusive control
of the crew and ship navigation. It is therefore proper
that any person whose property may have been cast
should have a right of action directly against the
shipowner for breach of duty which the law imposed
on the captain with respect to such cargo. The evident
intention of the Com. Code is to place primary liability
upon the person who has actual control over the
conduct of the voyage and who has most capital in the
venture, namely, the shipowner, leaving him to obtain
recourse, as it is very easy to do, from other
individuals who have been drawn into the venture as
shippers. Defendant is therefore liable.
Araullo, and Avancena, dissenting :
Action for recovery, if any, should be brought
not against the defendant owner but against the
captain thereof.
(a) Responsibilities and
liabilities
Yu Con vs Ipil 41 Phil 770
F:
Yu delivered to Ipil and Solamo P 450 for
delivery from Catmon to Cebu aboard a banca named
Maria of which Lauron was the owner and Ipil and
Solamo, the master and supercargo, respectively. The
money together with various merchandise belonging
to plaintiff was to be carried from the port of Cebu to
Catmon in Cebu. The money was placed by Yu in his
trunk and was transferred to that of Ipil. That night,
the window of the stateroom in which the trunk
containing the money was kept was broken through by
persons not identified and through which the said
trunk was stolen. It was found at the trial that Ipil and
Solamo were negligent in guarding the money because
they were sound asleep at the time of the theft and
they assigned no one to stand guard during the night.
Their defense was that Yu chartered and had control
and responsibility of the banca and that the theft was
due to Yu's negligence. The CFI held Ipil and Solamo
negligent and held Lauron liable as ER and shipowner
under Articles 586, 587 and 618 of the Code of
Commerce.
Held : Ipil and Solamo, as carriers and depositories of
the money were liable under the Civil Code, the theft
not being a fortuitous event or of force majeure and
they being manifestly negligent and at fault.
As to the liability of Lauron, the SC proceeded
by first defining the banca "Maria" as within the
meaning of the term "vessel." Thus, according to the
foregoing definitions (by the Mercantile Code, by Reus
in Commentaries on the Code of Commerce, and by
Blanco) we hold that the banca "Maria" chartered by
Yu Con from Lauron, was a "vessel" under Mercantile
Law and the Code of Commerce. Ipil, the master of
the banca, was also held to be the captain (masters
are to small vessels as captains are to big ones).
Under Arts. 587 and 618, the shipowner shall be civilly
liable to third persons when the captain of the vessel
PAGE 63

causes the damage or loss to goods entrusted to him
by said third persons under a contract to carry said
goods. Thus, it is well and god that the shipowner be
not held criminally liable for such crimes or quasi
crimes but he cannot be excused from liability for the
damage and harm which in consequence of those acts
may be suffered by the third parties who contracted
with the captain in his double capacity of agent and
subordinate of the shipowner himself. In maritime
commerce, the shippers and passengers in making
contracts with the captain do so through the
confidence they have in the shipowner who appointed
him.
The owner of a minor craft who has equipped
and victualed it for the purpose of using it in the
transportation of merchandise from one port to
another is under the law a shipowner and the master
of the craft is to be considered as its captain in the
legal acceptation of this word, and the former must be
held civilly liable for indemnities in favor of third
parties to which the conduct of the master/captain
may give rise in the custody of the effects laden on the
craft, and for all losses which, through his fault or
negligence, may occur to the merchandise or effects
delivered to him for their transportation as well as for
the damages suffered by those who contracted with
him, in consequence of misdemeanors and crimes
committed by him or by the members of the crew of
the craft.
Manila Steamship vs Abdulhaman 100 Phil 32
F:
At around 7 p.m., M/L Consuelo V, owned by
Lim Hong To, laden with cargoes and passengers left
Zamboanga City bound for Siokon under the command
of Faustino Macrohon. Among her passengers were
plaintiff Insa Abdulhaman, his wife, and their 5 kids.
On the same night, the M/S Bowline Knot owned by the
Manila Steamship Co. were navigating from Maribojoc
towards Zamboanga City.
The weather then was
considered fair.
At around 10 PM, without any warning to the
resting passengers, both vessels collided.
M/L
Consuelo V capsized, resulting in the death of
Abdulhaman's five children. The above facts found by
the Board of Marine Inquiry, was used by the CFI to
hold the owners of both vessels solidarily liable to
Abdulhaman for P 20,784 as damages.
The CA,
however, exempted Lim from liability by reason of the
sinking and total loss of his vessel. Hence, this
petition by the Manila Steamship Co. questioning the
exemption of Lim while also alleging its exemption
having had exercised due diligence in the selection of
its EEs.
Held : (1) While it is true that plaintiff's action against
petitioner is based on a tort or quasi-delict, the tort in
question is not a civil tort under the Civil Code but is a
maritime tort resulting in a collision at sea, governed
by Arts. 826-939 of the Code of Commerce, while the
owners of both colliding vessels are solidarily liable for
damages caused.
This direct responsibility is
recognized in Art. 618 of the Code of Commerce,
under which the captain shall be civilly liable to the
ship agent, and the latter is the one liable to third
persons.
In fact it is a general principle well established
in the maritime law and custom, that shipowners and
shipagents are civilly liable for the acts of the captain
(Art. 586) and for the indemnities due to the third
persons (Art. 587). This direct liability moderated and
limited by the owner's right of abandonment of the
vessel and earned freight (Art. 587) has been declared
to exist not only in the case of breached contracts but
also in cases of tortious negligence.
It is easy to see that to admit the defense of
the diligence of a bonus pater familias in the selection
and vigilance of the officers and crew as exempting

the shipowner from any liability for their faults, would
render nugatory the solidary liability in Art. 827 for the
greater protection of injured parties.
(2) It is to be noted that Macrohon was not
duly licensed as a shipmaster and Lim knew of this
fact when it hired the former, thus deliberately
increasing the risk to which the unknowing passengers
would be subjected.
The liability of Lim, cannot,
therefore be identical to that of a shipowner who bears
in mind the safety of the passengers by employing
duly licensed officers. To hold, as the CA had done,
that Lim may limit his liability to the value of his
vessels, is to erase all differences between compliance
with law and the deliberate disregard thereof.
The international rule is to the effect that the
right of abandonment of vessels, as a legal limitation
of a shipowner's liability, does not apply to cases
where the injury of the average is due to shipowner's
own fault.
(b) The doctrine of limited
liability
* Doctrine of limited liability is provided for in Arts.
587, 590 and 837
Art. 587. The ship agent shall also be
civilly liable for the indemnities in favor of third
persons which arise from the conduct of the
captain in the care of the goods which the
vessel carried; but he may exempt himself
therefrom by abandoning the vessel with all her
equipments and the freightage he may have
earned during the voyage.
A shipagent is liable notwithstanding the insolvency of
the principal/owner
BUT the ship agent may exempt himself from liability
by abandoning the vessel with all her equipment and
the freight it may have earned during the voyage -->
the effect of abandonment is to extinguish the liability
of the shipagent
The ship agent's liability is confined to that
which he is entitled as a matter of right to abandon :
the vessel with all her eqpt. and the freight it may
have earned during the voyage and to the insurance
thereof
Limited liability is not applicable when no
abandonment of vessel is made
Effect of abandonment: An abandonment amounts
to an offer of the value of the vessel, of her equipment,
and freight money earned --> results in the cessation
of the responsibility of the owner/agent
Abandonment cannot be refused by creditors
This applies to all cases where the
owner/agent may be held liable for the negligent or
illicit acts of the captain
Effect of loss or destruction of vessel:
The
shipagent's liability is merely co-extensive with his
interest in the vessel such that the total loss thereof
results in its extinction --> the total destruction of the
vessel extinguishes a maritime lien as there is no
longer any res to which it can attach.
Thre (3) cases where the loss of the
vessel
extinguishes
the
liability
of
the
shipowner:
(1) under 587, liability arising from the
conduct of the captain in the vigilance of the goods
and for the safety of the passengers and for any
liability arising from the negligent or illicit acts of the
PAGE 64

captain for which the shipowner or ship agent may be
held liable
(2) under 643, liability for the wages of the
captain and the crew and for advances made by the
shipagent if the vessel is lost by shipwreck or capture
(3) under 837, liability for collision
Exceptions:
(1) Doctrine does not apply where shipowner is at fault
: the doctrine is premised on the condition that the
death or injury to the passenger occurred by reason of
the fault or negligence of the captain only
(2) Doctrine does not apply in cases of Workmen's
Compensation --> such compensation has nothing to
do with maritime commerce; it is an item in the cost of
production which must be included in the budget of
any well-managed industry
(3) Total destruction of the vessel does not affect the
liability of the owner for repairs on the vessel
completed before its loss --> owners of a vessel are
liable for necessary repairs; its liability for repairs
remains unaffected by the loss of the thing
Reason for limited liability: This doctrine had its
origin when maritime trade and sea voyage was
attended by innumerable hazards and perils --> to
offset against these adverse conditions and to
encourage shipbuilding and maritime commerce, it
was deemed necessary to confine the liability of the
owner or agent arising from the operation of a ship to
the vessel, eqpt. and freight or insurance, if any
Limited liability is evidence of the real and
hypothecary nature of maritime law:
(1) limitation of liability to the actual value of the
vessel and freight; (2) right to retain the cargo and the
embargo and detention of the vessel in cases where
the ordinary civil law would not allow more than a
personal action against the debtor or personal liable -> the maritime creditor may attach the vessel itself to
secure his claim without waiting for a settlement of his
rights by a final judgment, even to the prejudice of a
third person
Manila Steamship vs Abdulhaman 100 Phil 32
Issue : How is the doctrine of limited liability applied in
this case with M/V Consuelo?
Held : The direct liability may be moderated or limited
by the shipowner's right to abandon the vessel and
earned freight. However, this right of abandonment of
vessels, as a legal limitation of a shipowner's liability
does not apply to cases where the injury or the
average is due to shipowner's fault. Thus, the owner of
Consuelo is solidarily liable with Manila Steamship, the
former having caused the vessel to sail without
licensed officers, for injuries caused by the collision
over and beyond the value of the said vessel.
In the application for permission to operate,
despite lack of trained crew, Lim Hong To even
declared expressly, "that in case of any accident,
damage, or loss, I shall assume full risks and
responsibility for all consequences, thereof." Hence,
Lim cannot escape liability because of the sinking of
the vessel. Operating with an unlicensed shipmaster
constitutes such negligence as would prevent the
shipowner from claiming the benefit of limited liability
under Art. 587.
Yangco vs Laserna 73 Phil 330
F:
Petitioner Yangco's vessel SS Negros left
Romblon for Manila. The captain was duly advised and
his attention was called by the passengers that
typhoon Signal No. 2 was up. But the boat proceeded
to sail after some loading. The boat was overloaded

with cargo and passengers (180 instead of only 123).
After two weeks of sailing, the sea became too
dangerous. The captain ordered that they return to
Romblon and while turning, a big wave caught them
on the side causing it to capsize.
Among the
passengers who perished were the relatives of
respondents Laserna.
In the separate civil action for damages for the
death of the passengers, the CFI held Yangco liable for
a total of P3,180. After the rendition of the judgment,
Yangco
sought
to
abandon
the
vessel
to
plaintiffs/respondents
with all its equipments.
Abandonment was denied. The CA affirmed the
judgment.
Held : Art. 587 accords a shipowner or agent 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.
In other words, such liability is limited to the value of
the vessel and other things appertaining thereto such
that a total loss thereof results in its extinction.
Although the article appears to deal only with the
limited liability of shipowners or agents for damages
arising from the misconduct of the captain in the care
of the goods which the vessel carries, this is a mere
deficiency of language and in no way indicates the
true extent of such liability, to wit, the benefit of
limited liability applies in all cases (as regards both
goods and passengers of the vessel) wherein the
shipowner or agent may properly be held for the
negligent or illicit acts of the captain.
The reason for the limited liability is the real
and hypothecary nature of maritime law as
distinguished from civil law and mercantile law in
general. As evidence of this real nature, we have (1)
the limitation of the liability of the agents to the actual
value of the vessel and the freight money and (2) the
right of the maritime creditor to retain the cargo, and
the embargo and detention of the vessel in cases
where the ordinary civil law would not allow more than
a personal action against the debtor or person liable.
Thus, even assuming that Yangco is liable for breach of
contract because his relationship to the passengers
rests on a contract of carriage, the exclusively real and
hypothecary nature of maritime law still operates to
limit his liability to the value of the vessel or to the
insurance thereon, if any. In this case, the vessel was
not insured. Whether the abandonment of the vessel
sought by the petitioner in instant case was in
accordance with law or not, is immaterial. The vessel
having totally perished, any act of abandonment would
be an idle ceremony. Petitioner is absolved from all
complaints.
Abueg vs San Diego 77 Phil 730
F:
Bartolome San Diego was the owner of 2
motorships, San Diego II and Bartolome S. Dionisia
Abueg is the widow of Amado Nunez, who was a
machinist on board the M/S San Diego II. Marciana de
Salvacion is the widow of Victoriano Salvacion, who
was a machinist on board the M/S Bartolome S.
Rosario Oching is the widow of Francisco Oching, who
was the captain of the M/S Bartolome S. The 2 ships,
while engaged in fishing operations around Mindoro
Island on October 1941, were caught by a typhoon as
a consequence of which they were sunk and totally
lost. Nunez, Salvacion and Oching while acting in their
capacities perished in the shipwreck. The vessels
were not covered by any insurance. The widows were
awarded
compensation
under
the
Workmen's
Compensation Act by the CFI.
Held : The real and hypothecary nature of the liability
of the shipowner or agent embodied in the provisions
PAGE 65

of the Maritime Law, had its origin in the prevailing
conditions of the maritime trade and sea voyages
during the medieval ages, attended by innumerable
hazards and perils. To offset against these adverse
conditions and to encourage shipbuilding and
maritime commerce, it was deemed necessary to
confine the liability of the owner or agent arising from
the operation of a ship to the vessel, equipment, and
freight, or insurance, if any, so that if the shipowner or
agent abandoned the ship, equipment, and freight, his
liability was extinguished.
The provisions of the Code of Commerce
regarding maritime commerce have no room in the
application of the Workmen's Compensation Act which
seeks to improve, and aims at the amelioration of, the
condition of laborers and EEs. Said Act creates a
liability to compensate EEs and laborers in cases of
injury received by or inflicted upon them, while
engaged in the performance of their work or
employment, or the heirs and dependents of such
laborers and EEs in the event of death caused by their
employment.
The officers of motor ships engaged in fishing
are industrial EEs and are entitled to the benefits of
the Workmen's Compensation Act. If an accident is
compensable under the WCA, it must be compensated
even when the workman's right is not recognized by or
is in conflict with other provisions of the Civil Code or
Code of Commerce. The reason is that the WCA was
enacted in abrogation of existing laws.
Heirs of Amparo de los Santos vs CA 186 SCRA 649
F:
M/V Mindoro owned by Compania Maritima
sailed from Manila bound for New Washington, Aklan.
Said vessel met typhoon Welming on the Sibuyan Sea,
causing the death of many of its passengers, although
about 136 survived. Mauricio de los Santos declared
that he, his wife and 4 children were aboard the boat
together with their household utensils valued at P
1,000, with the intention of living in Aklan
permanently. His wife and his children were among
the casualties. The Board of Marine Inquiry found that
the captain and some officers of the crew were
negligent in operating the vessel and imposed upon
them a suspension and/or revocation of their license
certificates.
This decision could not be executed
against the captain who perished with the vessel. The
shipowner alleged that no negligence was ever
established and in fact they took all the necessary
precautions in operating the vessel. Furthermore, the
loss of lives as a result of the drowning of some
passengers, including the relatives of the plaintiffs,
was due to force majeure because of the strong
typhoon Welming. It also presented the findings of the
Board of Marine Inquiry recommending that the
captain be exonerated and that the ship was in
seaworthy condition. The CFI dismissed the complaint
in view of lack of sufficient evidence. The CA ruled that
while concurring negligence on the part of the captain
is imputable to Maritima, Maritima could not be held
liable in damages based on the principle of limited
liability of the shipowner or shipagent under Art. 587
of the Code of Commerce.
Held : There is no dispute as to the finding of the
captain's negligence. The present controversy centers
on the questions of Maritima's negligence and of the
application of Art. 587 of the Code of Commerce.
Under this 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.
This rule is found necessary to offset against the
innumerable hazards and perils of a sea voyage and to
encourage shipbuilding and marine commerce. The
limited liability doctrine applies not only to the goods

but also in all cases like death or injury to passengers
wherein the shipowner of agent may properly be held
liable for the negligent or illicit acts of the captain.
Art. 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,
Art. 587 does not apply. Such a situation will be
covered by the Civil Code provisions on CCs. Owing to
the nature of their business and for reasons of public
policy, they are required to observe EO diligence.
Maritima's claim that it had no information of
typhoon Welming until after the boat was at sea is
untenable in light of modern technology which enables
it to detect any incoming atmospheric disturbances.
In fact, the Weather Bureau issued a total of 17
warnings or advisories of typhoon 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
the
captain
was
negligent
for
overloading the ship, Maritima shares equally in his
negligence. M/V Mindoro was cleared for departure at
2 PM by the Bureau of Customs and the Coast Guard
but its departure was delayed for 4 hours. Maritima
could not account for the delay because it neither
checked from the captain the reasons behind the
delay. It was due to this interim that there is great
probability that unmanifested cargo and passengers
were loaded.
Maritima presented evidence of the seaworthy
condition of the ship prior to its departure, including
the installation of life saving equipment and other
navigational instruments. But it could not present
evidence that it specifically installed a radar which
could have allowed the vessel to navigate safely for
shelter during the storm. An important device such as
the radar could have enabled the ship to pass through
the river and to safety.
Maritima's lack of EO diligence coupled with
the negligence of the captain were the proximate
causes of the sinking of M/V Mindoro. Maritima is liable
for the deaths and injury of the victims. It was ordered
to pay death indemnities to the heirs of the victims,
moral damages, actual damages and attorney's fees.
(c) Specific rights and prerogatives

Art. 575. Part owners of vessels shall
enjoy the right of pre-emption and redemption
in the sales made to strangers; but they can
only exercise it within the nine days following
the record of the sale in the registry and by
delivering the price at once.
Art. 593. The owners of a vessel shall
have preference in her charter over other
persons, offering equal conditions and price. If
two or more of the former should claim said right
the one having greater interest shall be preferred, and
should they have an equal interest it shall be decided
by lot.
Art. 594. The part owners shall elect the
manager who is to represent them in the
capacity of agent.
The appointment of director or agent
shall be revocable at the will of the partners.
PAGE 66

Art. 596. The agent may discharge the
duties of captain of the vessel, subject, in every
case, to the provisions contained in Article 609.
If two or more co-owners request the
position of captain, the disagreement shall be
decided by a vote of the members; and if the
vote should result in a tie, the position shall be
given to the part owner having the larger
interest in the vessel.
If the interest of the petitioners should
be the same, and there should be a tie, the
matter shall be decided by lot.
Art. 609. Captains, masters
or patrons of vessels must be
Filipinos, have legal capacity to
contract in accordance with this
Code,
and
prove
the
skill,
capacity,
and
qualifications
necessary to command and direct
the vessel, as established by
marine
or
navigation
laws,
ordinances, or regulations, and
must not be disqualfied according
to the same for the discharge of
the duties of the position.
If the owner of a vessel
desires to be the captain thereof,
without
having
the
legal
qualifications therefor, he shall
limit himself to the financial
administration of the vessel, and
shall intrust the navigation to a
person
possessing
the
qualifications required by said
ordinances nd regulations.
possessing the qualifications required by said

ordinances and regulations.
notes:
- Captain - one who governs vessels that navigate the
high seas or ships of large dimensions and importance,
although they may be engaged in coastwise trade
- Master - one who commands smaller ships engaged
exclusively in coastwise trade
- captain and master have the same meaning for
maritime commerce
- patron - bancas
- Roles of the captain :
(1) general agent of the shipowner
(2) technical director of the vessels
(3) represents the government of the country under
whose flag he navigates
(b) Inherent Powers
Art. 601. Should there be any profits, the

co- owners may demand of the managing agent
the amount due them, by means of an executory
action without further requisite than the
acknowledgment of the signatures in the
instrument approving the account.
2. Captains and Masters
(a) Qualifications and licensing
RA 5173
Sec. 3. The Philippine Coast Guard shall
perform the following functions : (e) to issue
licenses and certificates to officers, pilots, major
and minor patrons and seamen, as well as
suspend
and
revoke
such
licenses
and
certificates.
Art. 609. Captains and masters of vessels
must be Filipinos having legal capacity to bind
themselves in accordance with this Code, and
must prove that they have the skill, capacity, and
qualifications required to command and direct
the vessel, as established by marine laws,
ordinances, or regulations, or by those of
navigation, and that they are not disqualified
according to the same for the discharge of the
duties of that position.
If the owner of a vessel desires to be the
captain thereof and does not have the legal
qualifications therefore, he shall limit himself to
the financial administration of the vessel, and
shall entrust her navigation to the person
Art. 610. The following powers are

inherent in the position of captain or master of a
vessel:
1. To appoint or make contracts with the
crew in the absence of the ship agent and
propose said crew, should said agent be present;
but the agent may not employ any member
against the captain's express refusal.
2. To command the crew and direct the
vessel to the port to its destination, in
accordance with the instructions he may have
received from the ship agent.
3.
To impose, in accordance with the
contracts and the laws and regulations of the
merchants
marine,
on
board
the
vessel,
correctional punishment upon those who do not
comply with his orders or who conduct
themselves
against
discipline,
holding
a
preliminary
investigation
on
the
crimes
committed on board the vessel on the high seas,
which he shall turn over to the authorities, who
are to take cognizance thereof, at the first port
touched.
4. To make contracts for the charter of the
vessel in the absence of the ship agent or of the
consignee, acting in accordance with the
instructions received and protecting the interests
of the owner with utmost care.
5. To adopt all the measures which may be
necessary to keep the vessel well supplied and
equipped, purchasing all that may be necessary
for the purpose, provided there is no time to
request instructions of the agent.
6. To provide in similar urgent cases and
on a voyage, for the repairs to the hull and
engines of the vessel and to her rigging and
equipment which are absolutely necessary in
order for her to be able to continue and conclude
her voyage; but if she should arrive at a point
where there is a consignee of the vessel, he shall
act in concurrence with the latter.
notes: The first three powers cannot be renounced as
they relate to public order and are vested in the captain
as a delegation of public authority
Art. 611.
In order to comply with the
obligations mentioned in the foregoing article,
and when he has no funds and does not expect to
receive any from the agent, the captain shall
procure the same in the successive order stated
below:
1. By requesting said funds of the
consignees of the vessel or the correspondents of
the ship agent.
PAGE 67

2. By applying to the consignees of the
cargo or to the persons interested therein.
3. By drawing on the ship agent.
4. By borrowing the amount required by
means of a bottomry loan.
5. By selling a sufficient amount of the
cargo to cover the amount absolutely necessary
to repair the vessel and to equip her to pursue
the voyage.
In the two last cases he must apply to the
judicial authority of the port, if in the Philippines
and to the Filipino consul, if in a foreign country;
and where there should be none, to the local
authority, proceeding in accordance with the
prescriptions of Article 583, and with the
provisions of the law of civil procedure.
Art. 583.
If while on a
voyage the captain should find it
necessary to contract one or more
of the obligations mentioned in
subdivisions 8 and 9 of articl 580,
he shall apply to the judge or
court if he is in the Philippine
territory, and otherwise to the
consul of the Republic of the
Philippines, should there be one,
and in his absence, to the judge or
court or proper local authority,
presenting the certificate of the
registration sheet treated of in
Article 612 and the instruments
proving the obligation contracted.
The judge or court, the
consul, or the local authority, as
the case may be, in view of the
result
of
the
proceedings
institutied,
shall
make
a
temporary memorandum of their
result in the certificate, in order
that it may be recorded in the
registry when the vessel returns
to the port of its registry, or so
that it can be admitted as a legal
and preferred obligation in case of
sale before its return, by reason
of the sale of the vessel on
account
of
a
declaration
of
unseaworthiness.
The
omission
of
this
formality shall make the captain
personally liable for the credits
prejudiced on his account.
(the ff. is not required by the outline)
Art. 612. The following duties are inherent
in the office of captain:
1. To have on board before starting on a
voyage a detailed inventory of the hull, engines,
rigging, tackle, stores, and other equipments of
the vessel; the navigation certificate; the roll of
the persons who make up the crew of the vessel,
and the contracts entered into with the crew; the
list of passengers; the health certificate; the
certificate of the registry proving the ownership
of the vessel; and all the obligations which
encumber the same up to that date; the charters
or authenticated copies thereof; the invoices or
manifest of the cargo, and the instrument of the
expert visit or inspection, should it have been
made at the port of departure.
2. To have a copy of this Code on board.
3.
To have three folioed and stamped
books, placing at the beginning of each one a
note of the number of folios it contains, signed by
the marine official, and in his absence by the
competent authority.
In the first book, which shall be called "log

book," he shall enter every day the condition of
the atmosphere, the prevailing winds, the course
sailed, the rigging carried, the horsepower of the
engines, the distance covered, the maneuvers
executed, and other incidents of navigation. He
shall also enter the damage suffered by the
vessel in her hull engines, rigging, and tackle, no
matter what is its cause, as well as the
imperfections and averages of the cargo, and the
effects and consequence of the jettison, should
there be any; and in cases of grave resolutions
which require the advice or a meeting of the
officers of the vessel, or even of the passengers
and crew, he shall record the decision adopted.
For the informations indicated he shall make use
of the binnacle book, and of the steam or engine
book kept by the engineer.
In the second book, called the "accounting
book", he shall enter all the amounts collected
and paid for the account of the vessel, entering
specifically article by article, the sources of the
collection,
and
the
amounts
invested
in
provisions, repairs, acquisition of rigging or
goods, fuel, outfits, wages, and all other
expenses. He shall furthermore enter therein a
list of all the members of the crew, stating their
domiciles, their wages and salaries, and the
amounts they may have received on accounts,
either directly or by delivery to their families.
In the third book, called "freight book," he
shall record the entry and exit of all the goods,
stating their marks and packages, names of the
shippers and of the consignees, ports of loading
and unloading, and the freight earned. In the
same book he shall record the names and places
of sailing of the passengers and the number of
packages of which their baggage consists, and
the price of the passage.
4. To make, before receiving the freight,
with the officers of the crew, and the two
experts, if required by the shippers and
passengers, an examination of the vessel, in
order to ascertain whether she is watertight, and
whether the rigging and engines are in good
condition; and if she has the equipment required
for good navigation, preserving a certificate of
the memorandum of this inspection, signed by all
the persons who may have taken part therein,
under their liability.
The experts shall be appointed one by the
captain of the vessel and the other one by the
persons who request the examination, and in
case of disagreement a third shall be appointed
by the marine authority of the port.
5.
To remain constantly on board the
vessel with the crew during the time the freight
is taken on board and carefully watch the
stowage thereof; not to consent to any
merchandise or goods of a dangerous character
to be taken on, such as inflammable or explosive
substances, without the precautions which are
recommended for their packing, management
and isolation; not to permit that any freight be
carried on deck which by reason of its disposition, volume, or weight makes the work of the
sailors difficult, and which might endanger the
safety of the vessel; and if, on account of the
nature of the merchandise, the special character
of the shipment, and principally the favorable
season it takes place, he allows merchandise to
be carried on deck, he must hear the opinion of
the officers of the vessel, and have the consent
of the shippers and of the agent.
6. To demand a pilot at the expense of the
vessel whenever required by navigation, and
principally when a port, canal, or river, or a
roadstead or anchoring place is to be entered
PAGE 68

with which neither he, the officers nor the crew
are acquainted.
7. To be on deck at the time of sighting
land and to take command on entering and
leaving ports, canals, roadsteads, and rivers,
unless there is a pilot on board discharging his
duties. He shall not spend the night away from
the vessel except for serious causes or by reason
of official business.
8. To present himself, when making a port
in distress, to the maritime authority if in the
Philippines and to the Filipino consul if in a
foreign country, before twenty-four hours have
elapsed, and make a statement of the name,
registry, and port of departure of the vessel, of
its cargo, and reason of arrival, which declaration
shall be vised by the authority of by the consul if
after examining the same it is found to be
acceptable, giving the captain the proper
certificate in order to show his arrival under
stress and the reasons therefore. In the absence
of marine officials or of the consul, the
declaration must be made before the local
authority.
9. To take the steps necessary before the
competent authority in order to enter in the
certificate of the vessel in the registry of the
vessels, the obligations which he may contract in
accordance with Article 583.
10. To put in a safe place and keep all the
papers and belongings of any members of the
crew who might die on the vessel, drawing up a
detailed inventory, in the presence of passengers
as witnesses, and, in their absence, of members
of the crew.
11. To conduct himself according to the
rules and precepts contained in the instructions
of the agent, being liable for all that he may do in
violation thereof.
12. To give an account to the agent from
the port where the vessel arrives, of the reason
therefore, taking advantage of the semaphore,
telegraph, mail, etc., according to the cases;
notify him the freight he may have received,
stating the name and domicile of the shippers,
freight earned, and amounts borrowed on
bottomry bond, advise him of his departure, and
give him any information and date which may be
of interest.
13. To observe the rules on the situation
of lights and evolutions to prevent collisions.
14. To remain on board in case of danger
to the vessel, until all hope to save her is lost,
and before abandoning her to hear the officers of
the crew, abiding by the decision of the majority;
and if he should have to take a boat he shall take
with him, before anything else, the books and
papers, and then the articles of most value, being
obliged to prove in case of the loss of the books
and papers that he did all he could to save them.
15. In case of wreck he shall make the
proper protest in due form at the first port
reached, before the competent authority or
Filipino consul, within twenty-four hours, stating
therein all the incidents of the wreck, in
accordance with case 8 of this article.
16.
To comply with the obligations
imposed by the laws and rules of navigation,
customs, health, and others.
Notes: Although the duties in Art. 612 are inherent in
the captain, the civil liability arising from the nonfulfillment thereof is not limited to the captain, since
while the captain is liable to the shipagent, the
shipagent is liable to third persons (Art. 618).
(not included in the outline)

Art. 622. If when on a voyage the captain
should receive news of the appearance of
privateers or men of war against his flag, he shall
be obliged to make the nearest neutral port,
inform his agents or shippers, and await an
occasion to sail under convoy or until the danger
is over or to receive final orders from the ship
agent or shippers.

Art. 624. A captain whose vessel has gone
through a hurricane or who believes that the
cargo has suffered damages or averages, shall
make a protest thereon before the competent
authority at the first port he touches within the
twenty-four hours following his arrival, and shall
ratify it within the same period when he arrives
at the place of his destination, immediately
proceeding with the proof of the facts, it not
being permitted to open the hatches until after
this has been done.
The captain shall proceed in the same
manner if, the vessel having been wrecked, he is
saved alone or with part of his crew, in which
case he shall appear before the nearest
authority, and make a sworn statement of the
facts.
The authority or the consul abroad shall
verify the said facts, receiving sworn statements
of the members of the crew and passengers who
may have been saved, and taking such other
steps as may help in arriving at the facts, he shall
make a statement of the result of the
proceedings in the log book and in that of the
sailing mate, and shall deliver the original
records of the proceedings to the captain,
stamped and folioed, with a memorandum of the
folios, which he must rubricate, for their
presentation to the judge or court of the port of
destination.
The statement of the captain shall be
believed if it is in accordance with those of the
crew and passengers; if they disagreed, the latter
shall be accepted, unless there is proof to the
contrary.
Art. 625.
Upon arrival at the port of
destination, the captain shall, under his personal
liability, turn over the cargo, without any
defalcation, to the consignees, and, in a proper
case, the vessel, rigging, and freights to the
agent, after having obtained the necessary
permission from the health and customs officers
and fulfilled the other formalities required by the
regulations of the administration.
[If, by reason of the absence of the
consignee or on account of the nonappearance of
a legal holder of the invoices, the captain does
not know to whom he is to make the legal
delivery of the cargo, he shall place it at the
disposal of the proper judge or court or authority,
in order that he may decide with regard to its
deposit, preservation, and custody.]
Notes: Under 619, the delivery of the cargo at the port
of discharge terminates the captain's responsibility as to
the cargo
PAGE 69

INTER-ORIENT MARINE ENTERPRISES V. NLRC [235
S 634 (1994)]
F:
1. Captain Rizalino Tayong was employed by
petitioner shipwoners as master of a vessel for one year.
His instructions were to replenish bunker and diesel fuel
and to sail to South Africa , and there to load 120,000
metric tons of coal.
2. While in HK, a storm hit, and precautionary measures
were taken since the vessel was 14 years old and the
turbo-charger was leaking. The Captain requisitioned for
supplies of oxygen and acetylene necessary for the
repairs. The vessel sailed from HK to Singapore.
3. While in Singapore, the supplies were not available,
hence after consultation with the Chied Engineer, the
Captain decided to delay departure and wait for the
supplies.
4. After the supplies were delivered, the vessel sailed for
South Africa, where upon arrival, the Captain was
instructed to turn over his post to a new captain. He was
then repatriated to the Philippines.
5. Captain Tayong filed with the POEA a complaint for
illegal dismissal, which was dismissed.
6. On appeal, the NLRC reversed and ordered the
shipowner to pay his salary for the unexpired contract
plus one month leave benefit, and attorney's fees.
Hence, this appeal.
ISSUE: W/N CAPTAIN TAYONG WAS ILLEGALLY
DISMISSED?
4. Compagnie de Commerce v. Hamburg is instructive in

this connection. In that case, the captain of a German
vessel at the port of Saigon decided to head for the port
of Manila instead of the ports of Dunkirk and Hamburg
because of WWI has been declared and in his judgment,
the vessel could not reach its destination. The charterer
sued for damages arising from the breach of the charter
party, and unauthorized sale of the Cargo. The SC held
that the master of the vessel had reasonable grounds to
apprehend that the vessel was in danger of seizure of
captur by the French authorities in Saigon and was
justified by necessity to elect the court which he took to flee Saigon for the port of Manila - with the result that
the shipowner was relieved from liability for the
deviation from the stipulated route and from liability for
the damage to the cargo.
(c) Prohibited acts and transactions
Art. 613.
A captain who navigates for
freight in common or on shares may not make
any separate transaction for his own account,
and should he do so the profits shall belong to
the other persons interested, and the losses shall
be borne by him alone.
Art. 615. Without the consent of the ship
agent, the captain may not have himself
substituted by another person; and should he do
so, besides being liable for all the acts of the
substitute and bound to pay the indemnities
mentioned in the foregoing article, the substitute
as well as the captain may be discharged by the
ship agent.
HELD: Yes.
1. It is well settled that confidential and managerial
employees cannot be arbitrarily dismissed at any time,
and without case as reasonably established in an
appropriate investigation.
2. The captain of a vessel is a confidential and
managerial employee within the meaning of the above
doctrine. A master or captain, for purposes of maritime
commerce, is one who has command of a vessel. A
captain commonly performs three (3) distinct roles: (1)
he is a general agent of the shipowner; (2) he is also
commander and technical director of the vessel; and (3)
he is a representative of the country under whose flag
he navigates. Of these roles, by far the most important
is the role performed by the captain as commander of
the vessel, for such role (which to our mind, is
analogous to that of "Chief Executive Officer" [CEO] of a
present-day corporate enterprise) has to do with the
operation and protection of the vessel during its voyag
and the protection of the passengers (if any) and crew
and cargo. In his role as general agent of the shipowner,
the captain has authority to sign bills of lading, carry
goods aboard and and deal with the freight earned,
agree upon rates and decide whether to take cargo. The
ship captain, as agent of the shipowner, has legal
authority to enter into contracts with respect to the
vessel and the trading of the vessel, subkect to
applicable limitations established by statute, contract or
instructions and regulations of the shipowner. To the
captain is committed the governance, care and
management of the vessel. Clearly, the captain is veste
with both management and fiduciary functions.
3. More importantly, a ship's captain must be accorded
a reasonable measure of discretionary authority to
decide what the safety of the ship and its crew and
cargo specifically requires on a stipulated ocean voyage.
The captain is held responsible, and properly so, for
such safety.
Notes: The duties of a captain are essentially personal

due to the confidence given to him arising from the fact
that he possesses the required technical ability and that
he is a man worthy of trust of the shipowner
Art. 617. The captain may not contract
loans on respondentia secured by the cargo, and
should he do so the contract shall be void.
Neither may he borrow money on bottomry
for his own transactions, except on the portion of
the vessel he owns, provided no money has been
previously borrowed on the whole vessel, and
provided there does not exist any other kind of
lien or obligation chargeable against the vessel.
When he is permitted to do so, he must
necessarily state what interest he has in the
vessel.
In case of violation of this article the
principal, interest, and costs shall be charged to
the private account of the captain, and the ship
agent may furthermore discharge him.
Art. 621. A captain who borrows money on
the hull, engine, rigging, or tackle of the vessel,
or who pledges or sells merchandise or provisions
outside of the cases and without the formalities
prescribed in this Code, shall be liable for the
principal, interest, and costs, and shall indemnify
for the damages he may cause.
He who commits fraud in his accounts
shall reimburse the amount defrauded, and shall
be subject to the provisions of the Penal Code.
Art. 583. If the ship being on a voyage the
captain should find it necessary to contract one
or more of the obligations mentioned in Nos. 8
and 9 of Article 580, he shall apply to the judge or
PAGE 70

court if he is in Philippine territory, and otherwise
to the Filipino consul, should there be one, and in
his absence to the judge or court or to the proper
local authority, presenting the certificate of the
registry of the vessel treated of in Article 612,
and the instruments proving the obligation
contracted.
The judge or court, the consul or the local
authority as the case may be in view of the result
of the proceedings instituted, shall make a
temporary memorandum in the certificate of their
result, in order that it may be recorded in the
registry when the vessel returns to the port of
her registry, or so that it can be admitted as a
legal and preferred obligation in case of sale
before the return, by reason of the sale of the
vessel
by
virtue
of
a
declaration
of
unseaworthiness.
The lack of this formality shall make the
captain personally liable to the creditors who may
be prejudiced through his fault.
Notes: Obligations covered by this article : (1) price
which has not been paid to the last vendor; (2) for
materials and labor in the construction of the vessel; (3)
for the repair, equipment and provisioning with the
victuals and fuel; (4) loan on bottomry before departure
of the vessel; (5) insurance premiums under Art. 580
pars. 8 and 9.
3. Other Officers and Crew
notes:
Art. 626 - 631 : sailing mate or second in command
Art. 632 - 633 : second mate or third in command
Complement of a vessel or crew - all the persons on
board, from the captain to the cabin boy, necessary for
the management, maneuvers, and service; includes the
sailing mates, engineers, stokers, and other employees.
(a) Contracts and formalities
Art. 634. The captain may make up his
crew with the number he may consider advisable,
and in the absence of Filipino sailors he may ship
foreigners residing in the country, the number
thereof not to exceed one-fifth of the total crew.
If in foreign ports the captain should not find a
sufficient number of Filipino sailors, he may make
up the crew with foreigners, with the consent of
the consul or marine authorities.
The agreements which the captain may
make with the members of the crew and others
who go to make up the complement of the
vessels, to which reference is made in Article 612
(obligations inherent in the office of captain)
must be reduced to writing in the account book
without the intervention of a notary public or
clerk of court, signed by the parties thereto, and
vised by the marine authority if they are
executed in Filipino territory, or by the consuls or
consular agents of the Philippines if executed
abroad, stating therein all the obligations which
each one contracts and all the rights they
acquire, said authorities taking care that these
obligations and rights are recorded in a concise
and clear manner, which will not give rise to
doubts or claims.
The captain shall take care to read to them
the articles of this Code which concern them,
stating in the said document that they were read.
If the book includes the requisites
prescribed in Article 612, and there should not
appear any signs of alterations in its entries, it
shall be admitted as evidence in questions which
may arise between the captain and the crew with

regard to the agreements contained therein and
the amounts paid on account of the same.
Every member of the crew may demand of
the captain a copy, signed by the latter, of the
agreement and of the liquidation of his wages, as
they appear in the book.
Notes: The contract with a seaman has the nature of a
lease of service, in virtue of which one person binds
himself to perform or to do the services or works for
which he has signed himself in the vessel in
consideration of the compensation stipulated
(b) Duties and liabilities
Art. 635. A sailor who has been contracted
to serve on a vessel cannot rescind his contract
nor fail to comply therewith except by reason of a
legitimate impediment which may have occurred.
Neither can he pass from the service of
one vessel to another without obtaining the
written consent of the vessel on which he may be.
If, without obtaining said permission, the
sailor who has signed for one vessel should sign
for another one, the second contract shall be
void, and the captain may choose between forcing him to fulfill the service to which he first
bound himself or look for a person to substitute
him at his expense.
Said sailor shall furthermore lose the
wages earned on his first contract to the benefit
of the vessel for which he may have signed.
A captain who, knowing that a sailor is in
the service of another vessel, should have made
a new agreement with him, without having
requested the permission referred to in the
foregoing paragraphs, shall be personally liable
to the captain of the vessel to which the sailor
first belonged for that part of the indemnity,
referred to in the third paragraph of this article,
which the sailor may not be able to pay.
(c) Rights
Art. 636. Should there be no fixed period
for which a sailor has been contracted, he cannot
be discharged until the end of the return voyage
to the port where he enlisted.
Art. 637.
Neither may the captain
discharge a sailor during the time of his contract
except for just cause, the following being
considered as such:
1.
The perpetration of a crime which
disturbs order on the vessel.
2.
Repeated insubordination, want of
discipline, or nonfulfillment of the service.
3. Incapacity and repeated negligence in
the fulfillment of the service which he should
render.
4. Habitual drunkenness.
5. Any occurrence which incapacitates the
sailor to perform the work entrusted to him, with
the exception of that provided in Article 644.
PAGE 71
Art. 644.
A seaman who
falls sick shall not lose his right to
wages during the voyage, unless
the sickness is the result of his
own fault. At any rate, the costs of
the attendance and cure shall be
defrayed from the common funds,
in the form of a loan.

If
the
sickness
should
comee from an injury received in
the service or defense of the
vessel, the seaman shall be
attended
and
cured
at
the
expense of the common funds deducting, before anything else,
from
the
proceeds
of
the
freightage
the
cost
of
the
attendance and cure.
6. Desertion.
The captain may, however, before setting out on
a voyage and without giving any reason whatsoever,
refuse to permit a sailor whom he may have engaged to
go on board, and may leave him on land, in which case
his wages have to be paid as if he had rendered
services.
The indemnity shall be paid from the funds of
the vessel if the captain should have acted for reasons
of prudence and in the interest of the safety and good
service of the vessel. Should this not be the case, it
shall be paid by the captain personally.
After the voyage has begun, and during the
same and until the conclusion thereof, the captain may
not abandon any member of his crew on land or on the
sea, unless, as the accused of a crime, his imprisonment
and delivery to the competent authority in the first port
touched should be proper, which shall be obligatory to
the captain.
Art. 638.
If, after the crew has been
engaged, the voyage is revoked by the will of the
ship agent or of the charterers, before or after
the vessel has put to sea, or if the vessel is for
the same reason given a different destination
from that fixed in the agreement with the crew,
the latter shall be indemnified on account of the
rescission of the contract, according to the
following cases:
1. If the revocation of the voyage should
be decided before departure of the vessel from
the port, each sailor engaged shall be given one
month's salary, besides what may be due him, in
accordance with his contract, for the services
rendered to the vessel up to the date of the
revocation.
2. If the agreement should have been for
a fixed amount for the whole voyage, what may
be due for said month and days shall be
determined in proportion to the approximate
duration of the voyage, in the judgment of the
experts, in the manner established by the law of
civil procedure; and if the proposed voyage
should be of such short duration that it is
calculated at approximately one month, the
indemnity shall be fixed at fifteen days, discounting in all cases the sums advanced.
3.
If the revocation should take place
after the vessel has put to sea, the sailors
engaged for a fixed amount for the voyage shall
receive the entire salary which may have been
offered them if the voyage had terminated; and
those engaged by the month shall receive the
amount corresponding to the time they might
have been on board and to the time they may
require to arrive at the port of destination, the
captain being obliged, furthermore, to pay said
sailors in both cases the passage to the said port
or to the port of sailing of the vessel, as may be
convenient for them.
4. If the ship agent or the charterers of

the vessel should give it a destination different
from that fixed in the agreement, and the
members of the crew should not agree thereto,
they shall be given by way of indemnity half the
amount fixed in the first case, in addition to what
may be due them for the part of the monthly
wages corresponding to the days which may have
elapsed from the date of their agreements.
If they accept the change, and the voyage,
on account of greater distance or of other
reasons, should give rise to an increase of wages,
the latter shall be adjusted privately, or through
friendly adjusters in case of disagreement. Even
if the voyage should be shortened to a nearer
point, this shall not give rise to a reduction in the
wages agreed upon.
Should the revocation or change of the
voyage originate from the shippers or charterers,
the ship agent shall have a right to demand of
them the indemnity which may be justly due.
Art. 639. Should the revocation of the
voyage arise from a just cause independent of
the will of the ship agent and the charterers, and
the vessel should not have left the port, the
members of the crew shall no other right than to
collect the wages earned up to the day the
revocation was made.
Art. 640.
The following shall be just
causes for the revocation of the voyage:
1. A declaration of war or interdiction of
commerce with the power to whose territory the
vessel was bound.
2.
The blockade of the port of its
destination or the breaking out of an epidemic
after the agreement.
3. The prohibition to receive in said port
the goods which make up the cargo of the vessel.
4. The detention or embargo of the same
by order of the government, or for any other
reason independent of the will of the agent.
5. The inability of the vessel to navigate.
Art. 641.
If, after a voyage has been
begun, and any of the first three causes
mentioned in the foregoing article should occur,
the sailors shall be paid at the port which the
captain may deem advisable to make for the
benefit of the vessel and cargo, according to the
time they may have served thereon; but if the
vessel is to continue its voyage, the captain and
the crew may mutually demand the enforcement
of the contract.
In case of the occurrence of the fourth
cause, the crew shall continue to be paid half
wages, if the agreement is by month; but if the
detention should exceed three months, the
contract shall be rescinded and the crew shall be
paid what they should have earned according to
the contact, as if the voyage had been made.
And if the agreement should be for a fixed sum
for the voyage, the contract must be complied
with in the terms agreed upon.
In the fifth case, the crew shall have no
other right than to collect the wages earned; but
if the disability of the vessel should have been
caused by the negligence or lack of skill of the
captain, engineer, or sailing mate, they shall
indemnify the crew for the damages suffered,
always without prejudice to the criminal liability
which may be proper.
Art. 642. If the crew has been engaged on
shares it shall not be entitled, by reason of the
PAGE 72

revocation, delay, or greater extension of the
voyage, to anything but the proportionate part of
the indemnity which may be paid to the common
funds by the persons responsible for said
occurrences.
Art. 643.
If the vessel and her cargo
should be totally lost by reason of capture or
shipwreck, all rights shall be extinguished, both
as regards the right of the crew to demand any
wages and as regards the right of the ship agent
to recover the advances made.
If a portion of the vessel or of the cargo,
or of both, should be saved, the crew engaged on
wages, including the captain, shall retain their
rights on the salvage, as far as possible, on the
remainder of the vessel as well as on the value of
the freightage or the cargo saved; but sailors
who are engaged on shares shall have no right on
the salvage of the hull, but only on the portion of
the freightage saved.
(If they should have
worked to recover the remainder of the
shipwrecked vessel, they shall be given from the
amount of the salvage an award in proportion to
the efforts made and to the risks encountered in
order to accomplish the salvage.)
Art. 644. A sailor who falls sick shall not
lose his right to wages during the voyage, unless
his sickness is the result of his own fault. At any
rate, the costs of medical attendance and
treatment shall be defrayed from the common
funds, in the form of a loan.
If the sickness should be caused by an
injury received in the service or defense of the
vessel, the sailor shall be attended and treated at
the expense of the common funds, deducting,
before anything else, from the proceeds of the
freightage, the cost of the attendance and
treatment.
Art. 645. If a sailor should die during the
voyage, his heirs shall be given the wages earned
and not received, according to his contract and
the cause of his death, namely --If he died a natural death and was
engaged on wages, that which may have been
earned up to the date of his death shall be paid.
If the contract was for a fixed sum for the
whole voyage, half the amount earned shall be
paid if the sailor died on the voyage out, and the
whole amount if he died on the return voyage.
And if the contract was on shares and the
death occurred after the voyage was begun, the
heirs shall be paid the entire portion due the
sailor; but if the latter died before the departure
of the vessel from the port, the heirs shall not be
entitled to claim anything.
If death occurred in the defense of the
vessel, the sailor shall be considered as living,
and his heirs shall be paid, at the end of the
voyage, the full amount of wages or the entire
part of the profits which may be due him as
others of his class.
The sailor shall likewise be considered as
present if he was captured while defending the
vessel, in order to enjoy the benefits as the rest;
but should he have been captured on account of
carelessness or other accident not related to the
service, he shall only receive the wages due up
to the day of his capture.
Art. 646. The vessel with her engines,
rigging, equipment, and freightage shall be liable
for the wages earned by the crew engaged per
month or for the trip, the liquidation and payment
to take place between one voyage and the other.
// After a new voyage has been undertaken,
credits of such kind pertaining to the preceding

voyage shall lose the preference.
Art. 647. The officers and the crew of the
vessel shall be exempted from all obligations
contracted, if they deem if proper, in the
following cases;
1. If, before the beginning of the voyage,
the captain attempts to change it, or there occurs
a naval war with the power to which the vessel
was destined.
2. If a disease should break out and be
officially declared epidemic in the port of
destination.
3. If the vessel should change owner or
captain.
4. Supercargoes
Art. 649. Supercargoes shall discharge on
board the vessel the administrative duties which
the agent or shippers may have assigned them;
they shall keep an account and record of their
transactions in a book which shall have the same
conditions and requisites as required for the
accounting book of the captain, and shall respect
the latter in his duties as chief of the vessel.
The powers and liabilities of the captain
shall cease, when there is a supercargo, with
regard to that part of the administration
legitimately conferred upon the latter, but shall
continue in force for all acts which are
inseparable from his authority and office.
Supercargo: An agent of the owner of the goods
shipped as cargo on a vessel, who has charge of the
cargo on board, sells the same to the best advantage in
the foreign markets, buys cargo to be brought back on
the return voyage of the ship, and comes home with it
Art. 650. All the provisions contained in
the second section of Title III, Book II, with regard
to qualifications, manner of making contracts,
and liabilities of factors shall be applicable to
supercargoes.
Now governed by the provisions on agency
Art. 651. Supercargoes cannot, without
special authorization or agreement, make any
transaction for their own account during the
voyage, with the exception of the ventures which,
in accordance with the custom of the port of
destination, they are permitted to do.
Neither shall they be permitted to invest
in the return trip more than the profits from the
ventures, unless there is a special authorization
therefor from the principals.
D. Accidents and Damages in Maritime
Commerce
RISKS, DAMAGES, AND ACCIDENTS OF MARITIME
COMMERCE
1. Averages
(a) Nature and Kinds
Art. 806. For the purposes of this Code
the following shall be considered averages:
1.
All extraordinary or accidental
expenses which may be incurred during the
voyage for the preservation of the vessel or
cargo, or both.
2. All damages or deterioration which
the vessel may suffer from the time it puts to
PAGE 73

sea at the port of departure until it casts anchor
at the port of destination, and those suffered by
the merchandise from the time they are loaded
in the port of shipment until they are unloaded
in the port of their consignment.
Art. 807.
The petty and ordinary
expenses incident to navigation, such as those
of pilotage of coasts and ports, lighterage and
towage,
anchorage,
inspection,
health,
quarantine lazaretto, and other so-called port
expenses, costs of barges, and unloading, until
the merchandise is placed on the wharf, and
other usual expenses of navigation shall be
considered ordinary expenses to be defrayed by
the shipowner, unless there is an express
agreement to the contrary.
Art. 808. Averages shall be:
1. Simple or particular.
2. General or gross.
Averages consist of 2 items :
1. Expenses : to constitute an average, an
expense must be:
a. extraordinary or accidental
b. incurred during the voyage
c. incurred in order to preserve the
vessel, cargo or both
2. Damages or deterioration : to constitute an
average, it must be:
a. have been suffered from the time
the vessel puts to sea from
the port of departure until it casts
anchor in the port of
destination
b. have
been
suffered
by the
merchandise from the time they are
loaded in the port of shipment until
they are unloaded in the port
of consignment
(1) Simple or Particular
(a) Defined
Art. 809. As a general rule, simple or
particular averages include all the expenses and
damages caused to the vessel or to her cargo
which have not inured to the common benefit
and profit of all the persons interested in the
vessel and her cargo, especially the following:
1. The losses suffered by the cargo from
the time of its embarkation until it is unloaded,
either on account of the inherent defect of the
goods or by reason of a marine accident or force
majeure, and the expenses incurred to avoid
and repair the same.
2. The losses and expenses suffered by
the vessel in its hull, rigging, arms, and
equipments, for the same causes and reasons,
from the time it puts to sea from the port of
departure until it anchors in the port of
destination.
3.
The
losses
suffered
by
the
merchandise loaded on deck, except in
coastwise navigation, if the marine ordinances
allow it.
4. The wages and victuals of the crew
when the vessel is detained or embargoed by a
legitimate order or force majeure, if the charter
has been contracted for a fixed sum for the
voyage.
5. The necessary expenses on arrival at

port, in order to make repairs or secure
provisions.
6. The lowest value of the goods sold by
the captain in arrivals under stress for the
payment of provisions and to save the crew, to
meet any other need of the vessel against which
the proper amount shall be charged.
7. The victuals and wages of the crew
while the vessel is in quarantine.
8. The loss inflicted upon the vessel or
cargo by reason of an impact or collision with
another, if it is accidental and unavoidable. If
the accident should occur through the fault or
negligence of the captain, the latter shall be
liable for all the damage caused.
9.
Any loss suffered by the cargo
through the faults, negligence, or barratry of
the captain or of the crew, without prejudice to
the right of the owner to recover the
corresponding indemnity from the captain, the
vessel, and the freight.
Distinguishing feature : an expense incurred or
damage suffered which has not inured to the common
benefit and profit of all persons interested in the
vessel and its cargo
(b) Effects
Art. 810. The owner of the goods which
gave rise to the expense or suffered the
damage shall bear the simple or particular
averages.
(2) Gross or General
(a) Defined
Art. 811. As a general rule, general or
gross averages shall include all the 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, and
particularly the following:
1. The goods or cash invested in the
redemption of the vessel or of the cargo
captured by enemies, privateers, or pirates, and
the provisions, wages, and expenses of the
vessel detained during the time the settlement
or redemption is being made.
2. The goods jettisoned to lighten the
vessel, whether they belong to the cargo, to the
vessel, or to the crew, and the damage suffered
through said act by the goods which are kept on
board.
3. The cables and masts which are cut
or rendered useless, the anchors and the chains
which are abandoned, in order to save the
cargo, the vessel, or both.
4.
The expenses of removing or
transferring a portion of the cargo in order to
lighten the vessel and place it in condition to
enter a port or roadstead, and the damage
resulting therefrom to the goods removed or
transferred.
5. The damage suffered by the goods of
the cargo by the opening made in the vessel in
order to drain it and prevent its sinking.
6. The expenses caused in order to float
a vessel intentionally stranded for the purpose
of saving it.
7.
The damage caused to the vessel
which had to be opened, scuttled or broken in
order to save the cargo.
8. The expenses for the treatment and
subsistence of the members of the crew who
PAGE 74

may have been wounded or crippled in
defending or saving the vessel.
9. The wages of any member of the crew
held as hostage by enemies, privateers, or
pirates, and the necessary expenses which he
may incur in his imprisonment, until he is
returned to the vessel or to his domicile, should
he prefer it.
10. The wages and victuals of the crew
of a vessel chartered by the month, during the
time that it is embargoed or detained by force
majeure or by order of the Government, or in
order to repair the
damage caused for the
common benefit.
11.
The depreciation resulting in the
value of the goods sold at arrivals under stress
in order to repair the vessel by reason of gross
average.
12. The expenses of the liquidation of
the average.
Art. 817. If in the lightening a vessel on
account of a storm, in order to facilitate its
entry into a port or roadstead, part of her cargo
should be transferred to lighters or barges and
be lost, the owner of said part shall be entitled
to indemnity, as if the loss had originated from
a gross average, the amount thereof being
distributed between the vessel and cargo from
which it came.
If, on the contrary, the merchandise
transferred should be saved and the vessel
should be lost, no liability may be demanded of
the salvage.
Art. 818. If, as a necessary measure to
extinguish a fire in port, roadstead, creek, or
bay, it should be decided to sink any vessel, this
loss shall be considered gross average, to which
the vessels saved shall contribute.
Distinguishing feature: Expense or damage suffered
deliberately in order to save the vessel, its cargo or
both from a real and known risk --> it is the
deliverance from an immediate peril, by a common
sacrifice, that constitutes the essence of general
average
Requisites for general average:
1. there must be a common danger --> the
ship and cargo are subject to the same danger and
that the danger arises from accidents of the sea,
dispositions of the authorities or faults of men,
provided that the circumstances producing the peril
should be ascertained and imminent
2. for the common safety, part of the vessel or
the cargo or both is sacrificed deliberately
3. from the expenses or damages caused
follows the successful saving of the vessel and cargo
4. the expenses or damages should have been
incurred or inflicted after taking legal steps and
authority
If the latter should object, and the

captain and officers or a majority of them, or
the captain, if opposed to the majority, should
consider certain measures necessary, they may
be executed under his responsibility, without
prejudice to the right of the shippers to proceed
against the captain before the competent judge
or court, if they can prove that he acted with
malice, lack of skill, or negligence.
If the persons interested in the cargo,
being on board the vessel, have not been heard,
they shall not contribute to the gross average,
their share being chargeable against the
captain, unless the urgency of the case should
be such that the time necessary for previous
deliberation was wanting.
Art. 814.
The resolution adopted to
cause the damages which constitute general
average must necessarily be entered in the log
book, stating the motives and reasons on which
it is based, the votes against it and the reason
for the dissent, should there be any, and the
irresistible and urgent causes which impelled
the captain if he acted of his own accord.
In the first case the minutes shall be
signed by all the persons present who could do
so before taking action, if possible; and if not,
at the first opportunity. In the second case, it
shall be signed by the captain and by the
officers of the vessel.
In the minutes, and after the resolution,
shall be stated in detail all the goods jettisoned,
and mention shall be made of the injuries
caused to those kept on board. The captain
shall be obliged to deliver one copy of these
minutes to the maritime judicial authority of the
first port he may make, within twenty- four
hours after his arrival, and to ratify it
immediately under oath.
Formalities for incurring gross average :
1. there must be an assembly of the sailing mate and
other officers with the captain including those with
interests in the cargo
2. there must be a resolution of the captain
3. the resolution shall be entered in the log book,
with the reasons and motives and the votes for and
against the resolution
4. the minutes shall be signed by the parties
5. within 24 hours upon arrival at the first port the
captain makes, he shall deliver one copy of these
minutes to the maritime judicial authority thereat
Art. 860. If, notwithstanding the jettison
of the merchandise, breakage of masts, ropes,
and equipment, the vessel should be lost
running same risk, no contribution whatsoever
by reason of gross average shall be proper.
The owners of the goods saved shall not
be liable for the indemnification of those
jettisoned, lost or damaged.
The goods that were not sacrificed shall not be liable
for the indemnification of those sacrificed One of
the requisites of general average is lacking, that is,
success in saving the vessel and remaining cargo
(b) Essential
Requisites
Art. 813. In order to incur the expenses
and cause the damages corresponding to gross
average, there must be a resolution of the
captain, adopted after deliberation with the
sailing mate and other officers of the vessel,
and after hearing the persons interested in the
cargo who may be present.
Magsaysay Inc. vs Agan 96 Phil. 504

F:
Plaintiff's vessel SS Antonio left for Manila for
Basco, Batanes with general cargo owned by the
different shippers including that of the defendant.
Upon reaching Aparri, it accidentally ran aground.
PAGE 75

Plaintiff
had
it
refloated
by
Luzteveco
for
compensation. After refueling, the vessel proceeded
to Basco where the cargoes were delivered. On the
theory that the expenses incurred in floating the
vessel constituted a general average to which both the
ship and cargo should contribute, plaintiff asked from
the shippers a deposit or bond to answer for
contribution to the average. All shippers acceded
except the defendant.
In action to recover said
contribution, the Manila CFI decided for the plaintiff.
Defendant appealed contending that the floating of a
vessel, unintentionally stranded inside a port and at
the mouth of a river during a fine weather, does not
constitute general average expenses.
Held: In classifying averages into simple or particular
and general or gross and defining each class, the Code
of Commerce at the same time enumerate certain
specific cases as coming specially under one or the
other class. While the expenses incurred in putting
the vessel afloat may well come under No. 2 of Art.
809 - referring to expenses suffered by the vessel due
to an accident of the sea or force majeure- said
expenses do not fit into any of the specific cases of
general average enumerated in ART. 811. No. 6 of Art.
811 mentions expenses caused to afloat a vessel, but
it specifically refers to a vessel intentionally stranded
for the purpose of saving it, and would have no
application where the stranding was unintentional.
The following are the requisites for a general
average: 1) there must be common danger, 2) for the
common safety part of the vessel or cargo or both is
sacrificed deliberately, 3) from the expenses or
damages caused follows the successful saving of the
vessel and cargo, and 4) the expenses or damages
should have been incurred or inflicted after taking the
proper legal steps and authority.
It is the deliverance from an immediate peril,
by reason of a common sacrifice, that constitutes the
essence of a general average. Where there is no proof
that the stranded vessel had to be put afloat to save it
from imminent danger, and what does appear is that
the vessel had to be salvaged in order to enable it to
proceed to its port of destination, the expenses
incurred in floating the vessel do not constitute
general average. It is the safety of the property, and
not of the voyage which constitutes the true
foundation of general average.
The expenses incurred for the common safety
of the vessel and cargo in this case did not arise from
the imminent peril of both. The cargo could have been
unloaded by the owners had they been required to do
so. The refloating was a success, but as the sacrifice
was for the vessel's benefit -- to enable it to proceed to
its destination -- and not for the purpose of saving the
cargo, the cargo owners are not in law bound to
contribute to expenses. The final requisite has not
been proved for it does not appear that the expenses
in question were incurred after following the procedure
laid down in Art. 913.
Decision reversed.
International Harvester vs Hamburg American Line 42

Phil 845
F:
In the spring of 1917, defendant undertook to
carry agricultural machineries, belonging to the
plaintiff, from Hamburg to Vladivostok, Russia. Freight
charges were prepaid to ultimate destination and
defendant reserved the right to forward the
machineries at its own expense by some other means
in case of its inability to effect discharge at the port of
destination. When the voyage was almost completed
at the China Sea, war broke out between Germany and
Russia, and the ship put in to the port of Manila, where
it was interned. Captain of the vessel refused to
surrender the machineries to the owner's agent unless

the latter would agree to subject said cargo to liability
upon general average to satisfy the cost and expenses
of the vessel incident to its stay in Manila. Plaintiff did
not assent and brought an action for recovery of the
machineries plus damages.
The plaintiff later
obtained said cargo by a writ of replevin and
forwarded it to Vladivostok by another streamer.
Defendant denied liability asserting its lien on the
cargo for general average. Trial court awarded the
plaintiff damages. Defendant appealed.
Held: It is clear that the cargo in question is not liable
to a general average. It is not claimed that said cargo
was contraband of war and being neutral goods, they
were not liable to forfeiture in the event of capture by
the enemies of the ship's flag. It follows that when the
master of the vessel decided to take refuge in Manila,
he acted exclusively with a view to the vessel's
protection. There was no common danger to the ship
and cargo; and, therefore, it was not a case for a
general average.
The outbreak of the war between Germany and
Russia absolved the defendant from conveying the
cargo to Russia, and no damage could be recovered by
the plaintiff from the defendant for the latter's failure
to convey the cargo to the port of destination on that
ship.
But by the terms of the contract of
affreightment, the defendant was bound to forward the
cargo to Vladivostok at its expense, not necessarily by
a streamer of defendant. It does not by any means
follow that it is not liable for the expenses incurred by
the plaintiff in completing the unfinished portion of the
voyage in another ship. Defendant is, therefore, liable
for the cost of forwarding the cargo by another line,
the full freight having been received by the ship at the
commencement of the voyage.
Judgment affirmed.
Compagnie de Commerce vs Hamburg 36 Phil 590
F:
In July 1914, defendant's vessel undertook to
carry a cargo of rice meal in the French port of Saigon
for delivery to Dunkirk under a contract of
affreightment with a French shipper. While the loading
of the cargo was made, rumors of the outbreak of war
between French and Germany spread. The master of
the German vessel, after completion of the loading of
the cargo and after being refused by the French
Governor at Saigon for a pass of safe-conduct, fled
with his vessel and her cargo and took refuge in
Manila. Considering the nature of the cargo and its
impossibility of being delivered to its destination
within reasonable time, the master of the vessel
consulted the shipper's instruction as to the
disposition of the cargo, but the shipper's agent
refused to assume responsibility. Defendant's agent in
Manila, upon the court's authority secured by the
master of the vessel, sold said rice meal and deposited
the proceeds thereof with the court minus the
expenses incident to the sale. Plaintiff filed an action
for recovery of the proceeds of the sale and the
resulting damages.
Defendant also claimed, in a
cross-complaint, contribution from plaintiff for general
average for the expenses incurred by the vessel's stay
in Manila. Trial court decided for the plaintiff including
damages for the defendant's breach of the charter
party. Both parties appealed.
Held: The danger from which the master of the vessel
fled was a real and not merely an imaginary one.
Seizure at the hands of the enemy, though not
inevitable, was a possible outcome of a failure to leave
the port of Saigon; and it cannot be said that under
the conditions existing at the time when the master
elected to flee from that port, there were no grounds
for a reasonable apprehension of danger from seizure
PAGE 76

by French authorities, and therefore no necessity for
flight. The deviation of the vessel therefore, from the
route prescribed in her charter party, and the
subsequent abandonment by the master of the voyage
contemplated in the contract of affreightment, must
be held to have been justified by the necessity under
which the master was placed to elect that course
which would remove and preserve the vessel from
danger of seizure by the public enemy of the flag
which the vessel sailed; and that neither the vessel
nor her owners are liable for the resultant damages
suffered by the owner of the cargo.
The claim for general average by the
shipowner, however, cannot be sustained under the
provisions of the York-Antwerp Rules. An examination
of the entire body of these rules discloses that general
average is never allowed thereunder unless the loss or
damage sought to be made good as general average
has been incurred for the `common safety'. It is very
clear that in fleeing from the port of Saigon and taking
refuge in Manila, the master of the vessel was not
acting for the common safety of the vessel and her
cargo. The French cargo was absolutely secure from
danger of seizure or confiscation so long as it
remained in the port of Saigon, and there can be no
question that the flight of the vessel was a measure of
precaution adopted solely and exclusively for the
preservation of the vessel from danger of seizure or
capture. Delivery of the net proceeds of the sale to
plaintiff should be affirmed, but recovery of damages
by plaintiff should be reversed. Defendant cannot
claim for general average.
Judgment modified.
(c) Effects
Art. 812. In order to satisfy the amount
of the gross or general averages, all the persons
having an interest in the vessel and cargo
therein at the time of the occurrence of the
average shall contribute.
(d) Jettison
Art. 815. The captain shall direct the
jettison, and shall order the goods cast
overboard in the following order:
1.
Those which are on deck, beginning
with those which embarrass the maneuver or
damage the vessel, preferring, if possible, the
heaviest ones with the least utility and value.
2.
Those which are below the upper
deck, always beginning with those of the
greatest weight and smallest value, to the
amount and number absolutely indispensable.
Art. 816.
In order that the goods
jettisoned may be included in the gross average
and the owners thereof be entitled to indemnity,
it shall be necessary in so far as the cargo is
concerned that their existence on board be
proven by means of the bill of lading; and with
regard to those belonging to the vessel, by
means of the inventory prepared before the
departure,
in
accordance
with
the
first
paragraph of Article 612.
the sacrifice or expenditure may have been due to the

fault of one of the parties to the adventure; but this
shall not prejudice any remedies which may be open
against that party for such fault.
(b) Proof and Liquidation of
Averages
(1) Modes
Art. 846. Those interested in the proof
and liquidation of averages may mutually agree
and bind themselves at any time with regard to
the liability, liquidation and payment thereof.
In the absence of agreements, the
following rules shall be observed:
1. The proof of the average shall take
place in the port where the repairs are made,
should any be necessary, or in the port of
unloading.
2. The liquidation shall be made in the
port of unloading, if it is a Philippine port.
3. If the average occurred outside of the
jurisdictional waters of the Philippines, or the
cargo has been sold in a foreign port by reason
of an arrival under stress, the liquidation shall
be made in the port of arrival.
4. If the average has occurred near the
port of destination, so that said port can be
made, the proceedings mentioned in rules 1 and
2 shall be held there.
Art. 847.
In the case where the
liquidation of the averages is made privately by
virtue of agreement, as well as when a judicial
authority intervenes at the request of any of the
parties interested who do not agree thereto, all
of them shall be cited and heard, should they
not have renounced this right.
Should they not be present or should
they
have
no
legal
representative,
the
liquidation shall be made by the consul in a
foreign port, and where there is none, by the
competent judge or court, according to the laws
of the country and for the account of the proper
party.
When the representative is a person well
known in the place where the liquidation is
made, his intervention shall be admitted and
shall produce legal effects, even though he be
authorized only by a letter of the ship agent, the
shipper, or the insurer.
Art. 848. Claims for averages shall not
be admitted if they do not exceed 5 per cent of
the interest which the claimant may have in the
vessel or in the cargo if it be gross average, and
1 per cent of the goods damaged if particular
average, deducting in both cases the expenses
of appraisal, unless there is an agreement to
the contrary.
(2) Appraisal of general

average
(e) Jason
Clause
Jason Clause, Rule D, York-Antwerp Rules
Rights to contribution in general average shall
not be affected, though the event which gave rise to
Art. 850. If by reason of one or more

accidents of the sea, particular and gross
averages of the vessel, of the cargo, or of both,
should take place on the same voyage, the
expenses and damages corresponding to each
average shall be determined separately in the
port where the repairs are made, or where the
merchandise is discharged, sold, or utilized.
PAGE 77

For this purpose the captains shall be
obliged to demand of the expert appraisers and
of the contractors making the repairs, as well as
of those appraising and taking part in the
unloading, repair, sale, or utilization of the
merchandise, that in their appraisements or
estimates
and
accounts
they
set
down
separately and accurately the expenses and
damages pertaining to each average, and in
those of each average those corresponding to
the vessel and to the cargo, also stating
separately whether or not there are damages
proceeding from inherent defect of the thing
and not from accident of the sea; and in case
there should be expenses common to the
different averages and to the vessel and its
cargo, the amount corresponding to each must
be estimated and stated distinctly.
Art. 851. At the instance of the captain,
the adjustment, liquidation, and distribution of
gross averages shall be held privately, with the
consent of all the parties in interest.
For this purpose, within forty-eight
hours, following the arrival of the vessel at the
port, the captain shall convene all the persons
interested in order that they may decide as to
whether the adjustment or liquidation of the
gross average is to be made by experts and
liquidators appointed by themselves, in which
case did shall be so done if the interested
parties agree.
If an agreement is not possible, the
captain shall apply to the competent judge or
court, who shall be the one in the port where
these proceedings are to be held in accordance
with the provisions of this Code, or to the consul
of the Philippines should there be one, and
should there be none, to the local authority
when they are to be held in a foreign port.
Art. 852. If the captain does not comply
with the provisions of the preceding article, the
ship agent or the shippers shall demand the
liquidation, without prejudice to the action they
may bring to demand indemnity from him.
Under Art. 851, the captain is required to initiate the
proceedings for the adjustment, liquidation and
distribution of any gross average; it is his duty to take
the proper steps to protect any shipper whose goods
may have been jettisoned for the general safety ==>
if the captain does not comply with his duty under
851, the shipowner or shipper has the right to
maintain an action against the captain for
indemnification for the loss --> this does not involve
the suppression of the right of action of the shipper
against the shipowner
Art. 853. After the experts have been
appointed by the persons interested, or by the
court, and after the acceptance, they shall
proceed to the examination of the vessel and of
the repairs required and to the appraisal of
their cost, separating these losses and damages
from those arising from the inherent defect of
the things.
The experts shall also declare whether
the repairs may be made immediately, or
whether it is necessary to unload the vessel in
order to examine and repair it.
With regard to the merchandise, if the
average should be visible at a mere glance, the
examination thereof must be made before they
are delivered. Should it not be visible at the

time of unloading, said examination may be
made after the delivery, provided that it is done
within forty-eight hours from the unloading, and
without prejudice to the other proofs which the
experts may deem proper.
Art. 854. The valuation of the objects
which are to contribute to the gross average,
and that of those which constitute the average,
shall be subject to the following rules:
1. The merchandise saved which is to
contribute to the payment of the gross average
shall be valued at the current price at the port
of unloading, deducting the freightage, customs
duties, and expenses of unloading, as may
appear from a material inspection of the same,
without taking the bills of lading into
consideration, unless there is an agreement to
the contrary.
2. If the liquidation is to be made in the
port of departure, the value of the merchandise
loaded shall be determined by the purchase
price, including the expenses until they are
placed on board, the insurance premium
excluded.
3.
If the merchandise should be
damaged, it shall be appraised at its true value.
4. If the voyage having been interrupted,
the merchandise should have been sold in a
foreign port, and the average cannot be
estimated, the value of the merchandise in the
port of arrival, or the net proceeds obtained at
the sale thereof, shall be taken as the
contributing capital.
5. Merchandise lost, which constitutes
the gross average, shall be appraised at the
value which merchandise of its kind may have in
the port of unloading, provided that its kind and
quality appear in the bill of lading; and should
they not appear, the value shall be that stated
in the invoices of the purchase issued in the
port of shipment, adding thereto the expenses
and freightage subsequently arising.
6. The masts cut down, the sails, cables,
and other equipment of the vessel rendered
useless for the purpose of saving it, shall be
appraised at the current value, deducting onethird by reason of the difference between new
and old.
This deduction shall not be made with
respect to anchors and chains.
7. The vessel shall be appraised at its
true value in the condition in which it is found.
8. The freightage shall represent 50 per
cent by way of contributing capital.
Art. 855. The merchandise loaded on the
upper deck of the vessel shall contribute to the
gross average should it be saved; but there
shall be no right to indemnify if it should be lost
by reason of having been jettisoned for common
safety, except when the marine ordinances
allow its shipment in this manner in coastwise
navigation.
The same shall take place with that
which is on board and is not included in the bills
of lading or inventories, according to the cases.
In any case the shipowner and the
captain shall be liable to the shippers for the
damages from the jettison, if the storage on the
upper deck was made without the consent of
the latter.
The goods may be stowed on deck (1) with the
consent of the shipper or (2) without his consent --> if
stowed on deck with his consent, he takes the risk
PAGE 78

upon himself of the perils arising from the dangers of
the sea and any damage will be borne by the owner
[particular average]
--> if stowed on deck without his consent, the
captain does so at his own risk; the captain cannot
protect himself by showing that they are damaged or
lost by dangers of the sea
The carriage of gasoline on deck by coastwise
or interisland vessels is allowed by marine regulations
--> the loss of petroleum for common safety and
benefit will constitute a general average.
Art. 857. After the appraisement of the
goods saved and of those lost which constitute
the gross average, has been concluded by the
experts, the repairs, if any, made on the vessel,
and, in this case, the accounts of the same
approved by the persons interested or by the
judge or court, the entire record shall be turned
over to the liquidator appointed, in order that
he may proceed with the distribution of the
average.
Art. 867.
If the persons contributing
should not pay the amount of the contribution
at the end of the third day after having been
required to do so, the goods saved shall be
proceeded against, at the request of the
captain, until payment has been made from
their proceeds.
Art. 868.
If the person interested in
receiving the goods saved should not give
security sufficient to answer for the amount
corresponding to the gross average,
the
captain may defer the delivery thereof until
payment has been made.
Art. 869. The experts whom the court or
the persons interested may appoint, as the case
may be, shall proceed with the examination and
appraisement of the averages in the manner
prescribed in Articles 853 and 854, Rules 2 to 7,
in so far as they are applicable.
(3) Liquidation of
general average
(4) Liquidation of
particular average
Art. 858.
In order to
effect the
liquidation, the liquidator shall examine the
protest of the captain, comparing it, if
necessary, with the log book, and all the
contracts which may have been made among
the persons interested in the average, the
appraisements,
expert
examinations,
and
accounts of repairs made. If, as a result of this
examination, he should find any defect in the
procedure which might injure the rights of the
persons interested or affect the liability of the
captain, he shall call attention thereto in order
that it may be corrected, if possible, and
otherwise he shall include it in the exordial of
the liquidation.
Immediately thereafter he shall proceed
with the distribution of the amount of the
average, for which purpose he shall fix:
1.
The contributing capital, which he
shall determine by the value of the cargo, in
accordance with the rules established in Article
854.
2. That of the vessel in its actual
condition, according to a statement of experts.
3. The 50 per cent of the amount of the
freightage, deducting the remaining 50 per cent
for wages and maintenance of the crew.
After the amount of the gross average
has been determined in accordance with the
provisions of this Code, it shall be distributed
pro rata among the goods which are to cover
the same.
Art. 865. The distribution of the gross
average shall not be final until it has been
agreed to, or in the absence thereof, until it has
been approved by the judge or court, after an
examination of the liquidation and a hearing of
the persons interested who may be present or
of their representatives.
Art. 866. After the liquidation has been
approved, it shall be the duty of the captain to
collect the amount of the contribution, and he
shall be liable to the owners of the goods
averaged for the damages they may suffer
through his delay or negligence.
Art. 869. The experts whom the court or

the persons interested may appoint, as the case
may be, shall proceed with the examination and
appraisement of the averages in the manner
prescribed in Articles 853 and 854, Rules 2 to 7,
in so far as they are applicable.
2. Arrivals Under Stress
(a) Causes
Art. 819.
If during the voyage the
captain should believe that the vessel cannot
continue the trip to the port of destination on
account of the lack of provisions, well-founded
fear of seizure, privateers, or pirates, or by
reason of any accident of the sea disabling it to
navigate, he shall assemble the officers and
shall summon the persons interested in the
cargo who may be present, and who may attend
the meeting without the right to vote; and if,
after examining the circumstances of the case,
the reason should be considered well-founded,
the arrival at the nearest and most convenient
port shall be agreed upon, drafting and entering
the proper minutes, which shall be signed by all,
in the log book.
The captain shall have the deciding vote,
and the persons interested in the cargo may
make the objections and protests they may
deem proper, which shall be entered in the
minutes in order that they may make use
thereof in the manner they may consider
advisable.
Art. 820.
An arrival shall not be
considered lawful in the following cases:
1. If the lack of provisions should arise
from the failure to take the necessary
provisions for the voyage according to usage
and custom, or if they should have been
rendered useless or lost through bad stowage or
negligence in their care.
2. If the risk of enemies, privateers, or
pirates should not have been well known,
PAGE 79

manifest, and based on positive and provable
facts.
3. If the defector the vessel should have
arisen from the fact that it was not repaired,
rigged, equipped, and prepared in a manner
suitable for the voyage, or from some erroneous
order of the captain.
4. Whenever malice, negligence, want of
foresight, or lack of skill on the part of the
captain exists in the act causing the damage.
Arrival under stress:
Arrival of a vessel at the
nearest and most convenient port, if during the voyage
the vessel cannot continue the trip to the port of
destination due to : (1) lack of provisions, (2) wellfounded fear of seizure, privateers, or pirates, (3) by
navigate
(b) Formalities
Art. 819.
If during the voyage the
captain should believe that the vessel cannot
continue the trip to the port of destination on
account of the lack of provisions, well-founded
fear of seizure, privateers, or pirates, or by
navigate, he shall assemble the officers and
shall summon the persons interested in the
cargo who may be present, and who may attend
the meeting without the right to vote; and if,
after examining the circumstances of the case,
the reason should be considered well-founded,
the arrival at the nearest and most convenient
port shall be agreed upon, drafting and entering
the proper minutes, which shall be signed by all,
in the log book.
The captain shall have the deciding vote,
and the persons interested in the cargo may
make the objections and protests they may
deem proper, which shall be entered in the
minutes in order that they may make use
thereof in the manner they may consider
advisable.
Formalities : 1. assembly of the officers including all
interested parties
2. drafting and entering in the log book the proper
minutes, which shall be signed by all
3. entry in the log book of the objections and
protests of the persons interested in the cargo
Art. 822. If in order to make repairs to
the vessel or because there is danger that the
cargo may suffer damage, it should be
necessary to unload, the captain must request
authorization from the competent judge or court
for the removal, and carry it out with the
knowledge of the person interested in the
cargo, or his representative, should there be
any.
In a foreign port, it shall be the duty of
the Filipino consul, where there is one, to give
the authorization.
In the first case, the expenses shall be
for the account of the ship agent or owner, and
in the second, they shall be chargeable against
the owners of the merchandise for whose
benefit the act was performed.
If the unloading should take place for
both reasons, the expenses shall be divided
proportionately between the value of the vessel
and that of the cargo.
(c) Expenses
Art. 821.
The expenses of an arrival
under stress shall always be for the account of
the shipowner or agent, but they shall not be
liable for the damages which may be caused the
shippers by reason of the arrival, provided the
latter is legitimate.
Otherwise, the ship agent and the
captain shall be jointly liable.
Art. 822. If in order to make repairs to
the vessel or because there is danger that the
cargo may suffer damage, it should be
necessary to unload, the captain must request
authorization from the competent judge or court
for the removal, and carry it out with the
knowledge of the person interested in the
cargo, or his representative, should there be
any.
In a foreign port, it shall be the duty of
the Filipino consul, where there is one, to give
the authorization.
In the first case, the expenses shall be
for the account of the ship agent or owner, and
in the second, they shall be chargeable against
the owners of the merchandise for whose
benefit the act was performed.
If the unloading should take place for
both reasons, the expenses shall be divided
proportionately between the value of the vessel
and that of the cargo.
Requisites for the captain to unload the cargo
arriving under stress:
1. the unloading must be necessary to make repairs or
there must be danger that the cargo may suffer
damage
2. the captain must be authorized by either a
competent court or the Phil. consul, depending on the
port of arrival
(d) Responsibility of Captain
Art. 823. The custody and preservation
of the cargo which has been unloaded shall be
entrusted to the captain, who shall be
responsible for the same, except in cases of
force majeure.
Art. 824.
If the entire cargo or part
thereof should appear to be damaged, or there
should be imminent danger of its being
damaged, the captain may request of the
competent judge or court, or of the consul in a
proper case, the sale of all or of part of the
former, and the person taking cognizance of the
matter shall authorize it, after an examination
and declaration of experts, advertisements, and
other formalities required by the case, and an
entry in the book, in accordance with the
provisions of Article 624.
The captain shall, in a proper case,
justify the legality of his conduct, under the
penalty of answering to the shipper for the price
the merchandise would have brought if it had
arrived in good condition at the port of
destination.
Art. 825.
The captain
shall
be
responsible for the damages caused by his
delay, if after the cause of the arrival under
PAGE 80

stress has ceased, he should not continue the
voyage.
If the cause of the arrival should have
been the fear of enemies, privateers, or pirates,
a deliberation and resolution in a meeting of the
officers of the vessel and persons interested in
the cargo who may be present, in accordance
with the provisions contained in Article 819,
shall precede the departure.
The captain has the duty to continue the voyage
without delay after the cause of the arrival under
stress has ceased--> otherwise, he shall be liable for
damages caused by the delay
7. The vessel which is not properly moored or

does not observe the proper distances, has the
presumption against itself.
8. The vessel which is moored at a place not
used for the purpose, or which is improperly moored or
does not have sufficient cables, or which has been left
without watch, has also against itself the presumption.
9. The same rule applies to those vessels
which do not have buoys to indicate the location of its
anchors to prevent damage to these vessels which
may approach it.
Zones in time of collisions (3 time zones):
3. Collisions
Collision: impact of two vessels both of which are
moving
Allision: striking of a moving vessel against one that
is stationary
Cases of collision :
1. due to the fault, negligence or lack of skill of the
captain, sailing mate or the complement of the vessel
--> under 826, the shipowner shall be liable for the
losses and damages
2. due to the fault of both vessels --> under 827, each
vessel shall suffer its own losses, but as regards the
owners of the cargoes, both vessels shall be jointly
and severally liable
3. where it cannot be determined which of the 2
vessels is at fault --> under 828, each vessel shall
suffer its own losses, and both shall also be solidarily
responsible for the losses and damages caused to
their cargoes
4. collision due to fortuitous event or force majeure -->
under 830, each vessel shall bear its own damages
5. where two vessels collide with each other without
their fault but by reason of the fault of a third vessel -> under 831, the owner of the third vessel causing the
collision shall be liable for the losses and damages 6. a
vessel which is properly anchored and moored may
collide with those nearby by reason of a storm or other
cause of force majeure --> under 832, the vessel run
into shall suffer its own damages and expenses
Nautical Rules to determine negligence :
1. When 2 vessels are about to enter a port,
the farther one must allow the nearer to enter first; if
they collide, the fault is presumed to be imputable to
the one who arrived later, unless it can be proved that
there was no fault on its part.
1. all the time up to the moment when the risk

of collision may have said to have begun
--> within this zone, no rule is applicable
because none is necessary. Each vessel is free to
direct its course as it deems best with reference to the
movements of the other vessel.
2. the time between the moment when the risk
of collission begins and the moment when it has
become a practical necessity.
3. the time between the moment when
collission has become a practical certainty and the
moment of actual contact
Effect of fault of privileged vessel during third
zone :
If a vessel having a right of way suddenly
changes its course during the third zone, in an effort to
avoid an imminent collision due to the fault of another
vessel, such act may be said to be done in extremis,
and even if wrong, cannot create responsibility on the
part of said vessel with the right of way. Thus, it has
been held that fault on the part of the sailing vessel at
the moment preceding a collission, that is, during the
third division of time, does not absolve the steamship
which has suffered herself and a sailing vessel to get
into such dangerous proximity as to cause inevitable
harm and confusion, and a collision results as a
consequence. The steamer having a far greater fault in
allowing such proximity to be brought about is chargeable with all the damages resulting from the collission;
and the act of the sailing vessel having been done in
extremis and even wrong, is not responsible for the
result.
(a) Classes and Effects
2. When 2 vessels meet, the smaller should

give the right of way to the larger one.
(1) Fortuitous
3. A vessel leaving port should leave the way

clear for another which may be entering the same
port.
Art. 830. If a vessel should collide with

another through fortuitous event or force
majeure, each vessel and its cargo shall bear its
own damages.
4. The vessel which leaves later is presumed to

have collided against one who has left earlier.
5. There is also a presumption against the
vessel which sets sail at night.
6. The presumption also works against the
vessel with spread sails which collides with another
which is at anchor, and cannot move, even when the
crew of the latter has received word to lift anchor,
when there was not sufficient time to do so or there
was fear of a greater damage or other legitimate
reason.
Art. 832. If, by reasons of a storm or

other cause of force majeure, a vessel which is
properly anchored and moored should collide
with those nearby, causing them damages, the
injury occasioned shall be considered as
particular average of the vessel run into.
Each to his own damage --> particular damage
PAGE 81
(2) Culpable

Art. 826. If a vessel should collide with
another, through the fault, negligence, or lack of
skill of the captain, sailing mate, or any other
member of the complement, the owner of the
vessel at fault shall indemnify the losses and
damages suffered, after an expert appraisal.
having been obliged to make a port to repair the

damages caused by the collision, is lost during
the voyage or is obliged to be stranded in order
to be saved, shall be presumed as lost by
reason of collision.
(c) Liabilities
Where the obligation arises from tortious act and not

from contract, both the owner and the shipagent
should be declared liable
Art. 827. If the collision is imputable to
both vessels, each one shall suffer its own
damages,
and
both
shall
be
solidarily
responsible for the losses and damages
occasioned to their cargoes.
Defense of due diligence of a good father of a family in
the selection and vigilance of the officers and crew
cannot be used to render nugatory the solidary liability
under 827
Under the express provisions of 827, the shipowners
cannot successfully maintain an action against the
other for the loss or injury to his vessel
Art.831. If a vessel should be forced by a
third vessel to collide with another, the owner of
the third vessel shall indemnify the losses and
damages caused, the captain thereof being
civilly liable to said owner.
(3) Inscrutable Fault
Art. 828. The provisions of the preceding
article are applicable to the case in which it
cannot be determined which of the two vessels
has caused the collision.
Relation of Art. 827 to Art. 828
Art. 828 must be considered an extension of
Art. 827
The rule of liability under Art. 827 is applicable
not only to the case where both vessels may be shown
to be actually blameworthy but also to the case where
it is obvious that only one was at fault but the proof
does not show which
(1) Shipowner or agent

Art. 837. The civil liability incurred by
the shipowners in the cases prescribed in this
section, shall be understood as limited to the
value of the vessel with all its appurtenances
and freightage earned during the voyage.
Art. 838. When the value of the vessel
and her appurtenances should not be sufficient
to cover all the liabilities, the indemnity due by
reason of the death or injury of persons shall
have preference.
Limited liability : limited to the value of the vessel and
the freight earned during the voyage [provided for in
Arts. 587, 590 and 837]
Damages may be recovered to the extent of
what may be salvaged or of the freightage received or
of the value of the insurance recoverable
(2) Captain, pilot,

others
Art. 829. In the cases above mentioned
the civil action of the owner against the person
causing the
injury as well as the criminal
liabilities, which may be proper, are reserved.
Art. 834. If the vessels colliding with
each other should have pilots on board
discharging their duties at the time of the
collision, their presence shall not exempt the
captains from the liabilities they incur, but the
latter shall have the right to be indemnified by
the pilots, without prejudice to the criminal
liability which the latter may incur.
(3) conditions; protests
Under Arts. 827 and 828, in case of collision

between two vessels at sea, both are solidarily liable
for the loss of cargo carried by either to the full extent
of the value thereof, not only in the cse where both
vessels may be shown to be actually blameworthy but
also in the case where it is shown that only one ws at
fault but the proof does not show it --> it makes no
difference that the negligence imputable to the two
vessels may have differed somewhat in character and
degree and that the negligence of the sunken ship was
somewhat more marked than that of the ther
The doctrine of last clear chance cannot be
raised --> under the express provisions of Art. 827,
under which the evidence disclosing that both vessels
are blameworthy, the owners of neither can
successfully maintain an action against the other for
the loss or injury to his vessel
(b) Presumption of loss by
collision
Art.833. A vessel which, upon being run
into, sinks immediately, as well as that which,
Art. 835. The action for the recovery of

losses and damages arising from collisions
cannot be admitted if a protest or declaration is
not presented within twenty-four hours before
the competent authority of the point where the
collision took place, or that of the first port of
arrival of the vessel, if in Philippine territory
and to the consul of the Philippines, if it
occurred in a foreign country.
Art. 836.
With respect to damages
caused to persons or to the cargo, the absence
of a protest may not prejudice the persons
interested who were not on board or were not in
a condition to make known their wishes.
Art. 835 establishes a condition precedent before any
action for the recovery of damages arising from
collisions may be admitted --> presentation of a
protest or declaration within 24 hours before the
proper authorities [competent authority at the point
where the collision took place or of the first port of
PAGE 82

arrival of the vessel or to the consul of the Philippines
if it occurred in a foreign country]
The requirement of protest is not necessary with
respect to small boats engaged in river and bay traffic
and boats manned by a group of fishermen
Reason for requiring protest: Neccesity of
preventing
fictitious
collisions
and
improper
indemnities
Summary of cases where protest is required:
1. under 612, when the vessel makes an arrival under
stress
2. under 612, 624 and 843, where the vessel is
shipwrecked
3. under 624, where the vessel has gone through a
hurricane or when the captain believes that the cargo
has suffered damages or averages
4. under 835, in case of maritime collisions
Art. 839.
If the collision should take
place between Philippine vessels in foreign
waters, of if having taken place in the open
seas, and the vessels should make a foreign
port, the Filipino consul in said port shall hold a
summary
investigation
of
the
accident,
forwarding the proceedings to the Secretary of
the
Department
of
Foreign
Affairs
for
continuation and conclusion.
same as in general averages and neither is liable for

the salvage due from the other
Where a personal action is brought by the
salvor against the owner of the ship, the liability of the
latter is limited to such
part of the salvage
compensation due for the entire service as is
proportionate to the value of the ship
Art. 843. If several vessels sail under
convoy, and any of them should be wrecked, the
cargos saved shall be distributed among the
rest in proportion to the amount which each one
is able to take.
If any captain should refuse, without
sufficient
cause,
to
receive
what
may
correspond to him, the captain of the wrecked
vessels shall enter a protest against him, before
two sea officials, of the losses and damages
resulting therefrom, ratifying the protest within
twenty-four hours after arrival at the first port,
and including it in the proceedings he must
institute in accordance with the provisions
contained in Article 612.
If it is not possible to transfer to the
other vessels the entire cargo of the vessel
wrecked, the goods of the highest value and
smallest volume shall be saved first, the
designation thereof to be made by the captain
with the concurrence of the officers of his
vessel.
Salvage Law (Act No. 2616)
4. Shipwrecks
Art. 840. The losses and deteriorations
suffered by a vessel and her cargo by reason of
shipwreck or stranding shall be individually for
the account of the owners, the part which may
be saved belonging to them in the same
proportion.
Art. 841. If the wreck or standing should
be caused by the malice,e negligence, or lack of
skill of the captain, or because the vessel put to
sea insufficiently repaired and equipped, the
ship agent or the shippers may demand
indemnity of the captain for the damages
caused to the vessel or to the cargo by the
accident, in accordance with the provisions
contained in Articles 610, 612, 614, and 621.
Shipwreck: Loss of a vessel at sea, either by being
swallowed up by the waves, by running against
another vessel or thing at sea, or on coast --> renders
the ship incapable of navigation
Under 841, in case the wreck or stranding is
due to the (1) malice, negligence, or lack of skill of the
captain, or (2) because the vessel put to sea was
insufficiently repaired and equipped, the captain shall
be liable
Art. 842.
The goods saved from the
wreck shall be specially bound for the payment
of the expenses of the respective salvage, and
the amount thereof must be paid by the owners
of the former before they are delivered to them,
and with preference over any other obligation if
the merchandise should be sold.
Where a ship and its cargo are saved together, the
salvage allowance should be charged against the ship
and cargo in proportion of their respective values, the
Section 1. When in case of shipwreck, the

vessel or its cargo shall be beyond the control
of the crew, or shall have been abandoned by
them, and picked up and conveyed to a safe
place by other persons, the latter shall be
entitled to a reward for the salvage.
Those who, not being included in the
above paragraph, assist in saving a vessel or its
cargo from shipwreck, shall be entitled to a like
reward.
Salvage.-- The compensation allowed to persons by
whose voluntary assistance a ship at sea or her cargo
or both have been saved in whole or in part from
impending sea peril, or such property recovered from
actual peril or loss, as in cases of shipwrecks, derelict
or recapture
-- a service which one person, renders
to the owner of a ship or goods by his own labor,
preserving the goods or ship which the owner or those
entrusted with the care of them either abandoned in
distress at sea or are unable to protect and secure --->
a permit is required to engage in salvage business
Shipwreck-means a ship which has received
injuries rendering her incapable by navigation; loss of
a vessel at sea, either by being swallowed up by the
waves, running against a thing at sea, or on the coast
Derelict.-- A ship or her cargo which is abandoned
and deserted at sea by those who are in charge of it,
without any hope of recovering it, or without any
intention of returning it --> if those in charge of the
property left it with the intention of finally leaving it, it
is a derelict and the change of their intention and an
attempt to return to it will not change its nature
ex. a schooner which has capsized in the high
seas, deserted by her captain with no intention to
return, is a derelict
a vessel, though not abandoned, may be the
subject of salvage, if at the time the services were
rendered, there was a probable, threatening danger to
the vessel or its cargo --> if the vessel towed is aided
in escaping present or prospective danger, the service
is one of salvage an the towage is merely incidental
PAGE 83

Rights of finder of derelict: The finder who
takes possession with the intention of saving her,
gains a right of possession which he can maintain
against the true owners. The owner does not renounce
his right of property. This is not presumed to be
intentional, nor does the finder acquire any such right.
But the owner thus abandons temporarily, his right of
possession, which is transferred to the finder who
becomes bound to preserve the property with GF and
bring it to a place of safety for the owner's use; in
return, he acquires a right to be paid for his service a
reasonable and proper compensation out of the
property itself. He is not bound to part with the
possession until he is paid or the property is taken into
the possession of the law preparatory to the amount of
salvage being legally asserted
Elements of a valid salvage:
1. a marine peril
2. service voluntarily rendered when not
required as an existing duty or from special contract
3. success, in whole or in part, or that the
services rendered contributed to such success
Distinction between salvage and towage is of
importance to the crew of the salvaging ship : if the
contract for towage is in fact towage, then the crew
does not have any interest or rights with the
renumeration pursuant to the contract; BUT if the
owners of the respective vessels are of a salvage
nature, the crew of the salvaging ship is entitled to
salvage, and can look to the salvaged vessel for its
share
Captain towing vessel cannot invoke equity in
quasi-contract of towage --> there is an express
provision of law (Art. 2142, NCC)
applicable to the
relationship of quasi-contract of towage, where the
crew is not entitled to compensation separate from
that of the vessel
Section 2. If the captain of the vessel, or
the person acting in his stead, is present, no
one shall take from the sea, or from the shores,
or coast merchandise or effects proceeding
from a shipwreck or proceed to the salvage of
the vessel, without the consent of such captain
or person acting in his stead.
Section 3. He who shall save or pick up a
vessel or merchandise at sea, in the absence of
the captain of the vessel, owner or a
representative of either of them, they being
unknown, shall convey and deliver such vessel
or merchandise, as soon as possible, to the
Collector of Customs, if the port has a collector,
and otherwise to the provincial treasurer or
municipal mayor.
Section
4.
After
the
salvage
is
accomplished, the owner or his representative
shall have the right to the delivery of the vessel
or the things saved, provided that he pays or
gives a bond to secure the expenses and the
proper reward.
Salvor has an interest in the property; this is called a
lien, but it is not a debt due by the owner to the salvor
for services rendered but upon the principle that the
service creates a property in the thing saved --> he is,
to all intents and purposes, a joint owner and if, the
property is lost he must bear his share like other joint
owners.
Payment of compensation where vessel and cargo
salvage : where a ship and its cargo are saved
together, the salvage allowance should be charged

against the ship and cargo in the proportion of their
respective values, as in the case of general average
Section 5. The Collector of Customs,
provincial treasurer, or municipal mayor, to
whom a salvage is reported, shall order:
a. That the things saved be safeguarded
and inventoried.
b. The sale at public auction of the things
saved which may be in danger of immediate loss
or those whose conservation is evidently
prejudicial to the interests of the owner, when
no objection is made to such sale.
c. The advertisement within the 30 days
subsequent to the salvage, in one of the local
newspapers or in the nearest newspaper
published, of all the details of the disaster, with
a statement of the mark and number of the
effects requesting all interested persons to
make their claims.
Section 6. If, while the vessel or thing
saved are at the disposition of the authorities,
the owner or his representative shall claim
them, such authorities shall order their delivery
to such owner or his representative, provided
that there is no controversy over their value,
and a bond is given by the owner or his
representative to secure the payment of the
expenses and the proper reward. Otherwise,
the delivery shall not be made until the matter
is decided by the CFI (RTC) of the province.
Section 7. No claim being presented in
the three months subsequent to the publication
of the advertisements prescribed in subsection
(c) of Section 5, the things saved shall be sold at
public auction, and their proceeds, after
deducting the expenses and the proper reward
shall be deposited in the insular treasury. If
three years shall pass without anyone claiming
it, one-half of the deposit shall be adjudged to
him who saved the things, and the other half to
the insular government.
Section 8. The following shall have no
right to a reward for salvage or assistance:
a. The crew of the vessel shipwrecked or
which was in danger of shipwreck;
b. He who shall have commenced the
salvage in spite of opposition of the captain or
his representative; and
c. He who shall have failed to comply
with the provisions of Section 3.
Section 9. If, during the danger, an
agreement is entered into concerning the
amount of the reward for salvage or assistance,
its validity may be impugned because it is
excessive, and it may be required to be reduced
to
an
amount
proportionate
to
the
circumstances.
Kinds of salvage service:
(1) voluntary - wherein the compensation is
dependent upon success
(2) rendered under a contract for a pier diem
or per horam wage, payable at all events
Where the compensation is dependent upon success,
it may be very much larger than mere quantum meruit
--> as a reward for perilous services
Such contracts for salvage will not be set aside
unless corruptly entered into, or made under
fraudulent representations, a clear mistake or
suppression of important facts, under compulsion or
contrary to equity and good conscience
PAGE 84

Section 10. In a case coming under the
last preceding section, as well
as in the
absence of an agreement, the reward for
salvage or assistance shall be fixed by the RTC
of the province where the things salvaged are
found, taking into account principally the
expenditures made to recover, or save the
vessel or the cargo or both, the zeal
demonstrated, the time employed, the services
rendered, the excessive expenses occasioned,
the number of persons who aided, the danger to
which they and their vessels were exposed as
well as that which menaced the things
recovered or salvaged, and the value of such
things after deducting the expenses.
Reasons for allowing salvage compensation to
salving vessel:
(1) to reward promptness, energy, efficiency, and
heroic endeavor in saving life and property in peril;
(2) to compensate the use and service of the vessel as
an indispensable instrument for the salvage;
(3) recognizes the danger and risk to which the crew
and the vessel were exposed to in saving the ship and
property and life.
The amount should be liberal enough to cover the
expenses and to give an extra sum as a reward for the
services rendered; should be liberal enough to offer an
inducement to others to render like services in similar
emergencies in the future; BUT should not be so high
as to cause vessels in need of assistance to hesitate
because of ruinous cost
"Public policy encourages the hardy
and adventurous mariner to engage in
these
laborious
and
sometimes
dangerous enterprises, and with a view
to withdraw from him every temptation
to embezzlement and dishonesty, the
law allows him, in case he is
successful, a liberal compensation."
Section 11. From the proceeds of the sale
of the things saved shall be deducted, first, the
expenses
of
their
custody,
conversation,
advertisement, and auction, as well as whatever
taxes or duties they should pay for their
entrance; then there shall be deducted the
expenses of salvage; and from the net amount
remaining shall be taken the reward for the
salvage or assistance which shall not exceed 50%
of such amount remaining.
Section 12. If in the salvage or in the
rendering of assistance different persons shall
have intervened the reward shall be divided
between them in proportion to the services which
each one may have rendered, and in case of
doubt, in equal parts.
Those who, in order to save persons, shall
have been exposed to the same dangers shall
also have a right to participation in the reward.
No other person has the right to interfere with the
salvage of a vessel or cargo if the salvor is able to effect
the salvage with fidelity and vigor --> if their means are
inadequate, they are bound to accept additional
assistance if offered
Taking passengers from a sinking ship, without
rendering any service in rescuing the vessel, is not a
salvage service, being a duty of humanity and not for
reward --> the Salvage Act, giving salvors of human life
a fair share or remuneration offered to salvors of the
vessel, refers to a situation where both lives and
property were simultaneously imperiled and both are

rescued at the same time
Section 13. If a vessel or its cargo shall
have been assisted or saved, entirely or partially,
by another vessel, the reward for salvage or for
assistance shall be divided between the owner,
the captain, and the remainder of the crew of the
latter vessel, so as to give the owner a half, the
captain a fourth, and all the remainder of the
crew the other fourth of the reward, in proportion
to their respective salaries, in the absence of an
The expenses of
salvage, as well as the reward for salvage or
assistance, shall be a charge on the thing
salvaged or their value.
The owner of the salving vessel has always been
considered as entitled to salvage reward for the use of
his vessel in rendering salvage services, though he was
not present when the salvage service was rendered -->
remuneration is awarded on account of the danger to
which the service exposes their property and the risk
which they run of loss in suffering their vessels engaged
in such perilous undertaking.
Section 14. This Act shall take effect on
its passage. Enacted 2/4/16.
MRR vs Macondray 37 Phil 850
F:
On April 6, 1915 the steamer Seward owned by
Macondray & Co. left Saigon for the Philippine Islands,
encountering a moderately high sea. Laden with a cargo
of rice, the weight of which, taken with the condition of
the sea, caused the vessel to spring a leak, and her
master felt compelled to return to Saigon. At this
juncture, the steamship Hondagua owned by plaintiff,
was sighted, whereupon the Seward flew the
international distress signal asking for assistance. The
Hondagua changed her course and approached the
Seward. Seward had indicated that it had sprung a leak
and wished to be taken in tow. In response to signals
from the Hondagua, the Seward sent her boat to the
Hondagua for a heaving line, by means of which a
hawser was passed from the Hondagua to the Seward
and the former, with the latter in tow, then proceeded at
half speed towards Saigon. Shortly afterwards, the
Seward signaled that the leak was gaining rapidly. The
Hondagua went full speed ahead, until their arrival at
Cape St. James, at the mouth of the Saigon River. The
towing occupied some 4 or 5 hours and covered a
distance of 20 to 30 miles.
The court found that the value of the Seward
upon her arrival at Cape St. James did not exceed P
20,000 and that the value of the cargo was
approximately P 54,000. The defendant company had no
interest in the cargo, other than that of the carrier, and
the cargo was owned by shippers whose names do not
appear of record.
Plaintiff filed an action in the CFI of Manila,
seeking to recover from defendant P 75,000, the alleged
value of the salvage service. The CFI ordered the
defendant to pay P 4,000 to the plaintiff. Both appealed.
Issues : Is the plaintiff entitled to recover renumeration
for saving the cargo as well as for saving the ship? What
is the reasonable compensation which should be
allowed?
Held : There is no question as to the liability of
defendant for the service rendered by plaintiff. Nor is
there any dispute over the fact that the service
rendered was a salvage service and renumerable as
such. Where a ship and its cargo are saved together, as
a result of services carried on with a view to saving
both, the salvage allowance should be apportioned
between the ship and cargo in the proportion of their
PAGE 85

respective values, the same as in a case of general
average; and neither is liable for the salvage due from
the other. If one who have salved both ship and cargo
brings before the court in his salvage action only the
ship, or only the cargo, he will get judgment only for
such amount of reward as the court finds to be due in
respect of the value of that property which is before the
court. Not only is the salvage charge a separate and
divisible burden as between ship and cargo, but also as
between portions of the cargo belonging to different
owners. There is no common liability for the amounts
due from the ship or other portions of the cargo when
the ship and cargo, or either, are brought into the
custody of the court as a result of a proceeding in rem.
The rule of liability must be the same where a personal
action is instituted against the owners of the one or the
other. The personal liability of each must be limited to
the portion of the salvage charge which should be borne
by his own property.
If it had been alleged and proved that the ship
was unseaworthy when she put to sea or that the
necessity for the salvage service was due to the
negligence of the master, or of the ship's owner, the
latter might have been liable, at least between himself
and the shipper, for the entire cost of the service. But
when the claim is put upon the basis of salvage, the
fixing of the compensation goes beyond the limits of a
quantum meruit for the work and labor done and
involves the assessment of a bounty. The amount to be
allowed is in part determined upon considerations of
equity and public policy; and it is not proper to make the
ship or the ship's owner liable for the whole amount. But
where the owner of the cargo has not been made a
party to the action, no recovery can be had in this action
in regard to the service rendered to the cargo.
In fixing the compensation, the ff. circumstances
are taken into consideration: (1) the labor expended by
the salvors in rendering the salvage service; (2) the
promptitude, skill and energy displayed in rendering the
service and saving the property; (3) the value of the
property employed by the salvors, and the danger to
which such property was exposed; (4) the risk incurred
by the salvors in rescuing the property from the
impending peril; (5) the value of the property salved;
and (6) the degree of danger from which the property
was rescued.
In applying these criteria to this case, the ff.
circumstances are pertinent : the Hondagua was
delayed in her voyage about nine hours. This delay
caused her to enter Iloilo, the port of destination, in the
early hours of the morning instead of the late afternoon
of the previous day; but the unloading of her cargo was
not thereby retarded. Under the charter party contract
under which she was operating, the Hondagua was
earning about P 300/day, which was considered
reasonable compensation for her use, including the
services of officers and crew. The service rendered did
not involve any further expenditure of labor on the part
of the salvors, no unusual display of skill and energy and
the condition of the sea was not such as to involve any
special risk either to Hondagua or her crew. Finally, the
danger from which the Seward was rescued was real
since the ship was confronted by a serious peril.
In determining the amount of the award, the aim
should be to hold out to seafaring men a fair
inducement to the performance of salvage service
without fixing a scale of compensation so high as to
cause vessels in need of such services to hesitate and
decline to receive them because of the ruinous cost.
That the salvor is entitled, as of bounty, to something
more than mere renumeration for his own work and the
risk incurred by him is conceded; but the interests of
commerce should also be considered. Towage is not
considered a salvage service of high order of merit and
where the risk is inconsiderable and other conditions
favorable, the compensation to be allowed should be
modest in its amount.
In this case, the sum of P 1,000 is adequate for

the service rendered.
Barrios vs Go Thong 7 SCRA 535
F:
Plaintiff Barrios was the captain of MV Henry I, a
vessel of William Lines, Inc. At about 8:00 p.m. of May
1, 1958, plaintiff as captain received an SOS or distress
signal by blinkers from the MV Alfredo, owned by the
defendant Carlos Go Thong & Co. Answering the SOS
call, the plaintiff as captain of MV Henry, which was then
sailing from Dumaguete City, altered the course of said
vessel, and headed towards the MV Don Alfredo, which
plaintiff found to be in trouble, due to engine failure and
the loss of her propeller, for which reason, it was drifting
slowly southward from Negros Island towards Borneo in
the open China Sea, at the mercy of a moderate easterly
wind. At about 8:25 p.m. on the same day, May 1, 1958,
the MV Henry, under the command of the plaintiff,
succeeded in getting near the MV Don Alfredo -- in fact
as near as about 7 meters from the latter ship -- and
with the consent and knowledge of the captain and/or
master of the MV Don Alfredo, the plaintiff caused the
latter vessel to be tied to, or well-secured and
connected with two lines from the MV Henry; and the
latter had the MV Don Alfredo in tow and proceeded
towards the direction of Dumaguete City, as evidenced
by a written certificate to this effect executed by the
Master, the Chief Engineer, the Chief Officers, and the
Second Engineer of the MV Don Alfredo, who were then
on board the latter ship at the time of the occurrence.
When both vessels were approaching the vicinity of
Negros Oriental, the MV Lux, a sister ship of MV Don
Alfredo, was sighted heading towards the two vessels.
At the request and instance of the captain of MV Don
Alfredo, the plaintiff caused the tow lines to be released,
thereby also releasing the MV Don Alfredo.
Issue: WON the service rendered by plaintiff constituted
salvage or towage, and if so, WON plaintiff may recover
from defendant compensation for such service.
Held :(1) According to Sec. 1 of the Salvage Law, those
who assist in saving a vessel or its cargo from
shipwreck, shall be entitled to a reward (salvage).
"Salvage" has been defined as the compensation
allowed to persons by whose assistance a ship or her
cargo has been saved, in whole or in part, form
impending peril on the sea, or in recovering such
property from actual loss, as in case of shipwreck,
derelict or recapture. There was no marine peril in this
case. Although defendant's vessel was in a helpless
condition due to engine failure, it did not drift too far
from the place where it was. As found by the LC, the
weather was fair, clear and good. The waves were small
and too slight, so much so, that there were only ripples
on the sea, which was quite smooth. During the towing
of the vessel on the same night, there was moonlight.
Although said vessel was drifting towards the open sea,
there was no danger of its foundering or being stranded,
as it was far from any island or rocks. In case of danger
of stranding, its anchor could be released, to prevent
such occurrence. There was no danger that defendant's
vessel would sink, in view of the smoothness of the sea
and the fairness of the weather. That there was absence
of danger is shown by the fact that said vessel or its
crew did not even find it necessary to lower its launch
and two motor boats, in order to evacuate its
passengers no were the cargo in danger of perishing.
All that the vessel's crew members could no do was to
move the vessel on its own power. That did not make
the vessel a quasi-derelict, considering that even before
the plaintiff-appellant extended the help to the
distressed ship, a sister vessel was known to be on its
way to succor it.
(2) But plaintiff's service can be considered as a
quasi- contract of towage. In consenting to plaintiff's
offer to tow the vessel, the defendant through its
PAGE 86

captain, thereby impliedly entered into a juridical
relation of towage with the owner of the MV Henry. If
the contract thus created is one for towage, then only
the owner of the towing vessel , to the exclusion of the
crew of the said vessel, may be entitled to
renumeration. And as the vessel-owner, William Lines,
had expressly waived its claim for compensation for the
towage service rendered to defendant, it is clear that
plaintiff, whose right if at all depends upon and not
separate from the interest, is not entitled to payment for
such towage services. Neither may the plaintiff captain
invoke equity in support of his claim for compensation
against defendant. There being an express provision of
law (Art. 2142, NCC) applicable to the relationship
created in this case, that is, that of a quasi-contract of
towage where the crew is not entitled to compensation
separate from that of the vessel, there is no occasion to
resort to equitable considerations.
E. SPECIAL CONTRACTS OF MARITIME COMMERCE
chartered the vessel, the ship captain, its officers and

crew were under the employ of the shipowner and
therefore continued to be under its direct supervision
and control. Thus it continued to be a public carrier.
It is therefore imperative that a public carrier shall
remain as such, notwithstanding the charter of the
whole or portion of a vessel, provided the charter is
limited to the ship only, as in the case of a timecharter or a voyage-charter.
It is only when the
charter includes both the vessel and the crew, as in a
bareboat or demise that a CC becomes private, insofar
as such particular voyage is concerned.
Issue : WON the carrier is liable for damages. NO.
Held : The presumption of negligence on the part of
respondent carrier has been overcome by the showing
of extraordinary zeal and assiduity exercised by the
carrier in the care of the cargo. On the other hand, no
proof was adduced by the petitioner showing that the
carrier was remiss in the exercise of due diligence in
order to minimize the loss or damage to the goods it
carried.
1. Charter Parties
b. Kinds
a. Definition; as common
carrier
Classes of charter party:
A charter party is a contract by virtue of which

the owner or agent of a vessel binds himself to
transport merchandise or persons for a fixed price. It is
a contract by which the owner or agent of the vessel
leases for a certain price the whole or a portion of the
vessel for the transportation of goods or persons from
one port to another.
Towage is not a charter party; instead it is a
contract for the hire of services by virtue of which a
vessel is engaged to tow another vessel from one port
to another for a consideration
(1) as to extent of vessel hired

(a) total
(b) partial - the charterer does not as a
rule acquire the right to fix the date when the vessel
should depart, unless such right is expressly granted
in the contract
(2) as to time
(a) until a fixed day or for a determined
number of days or month
(b) for a voyage
Planters Products vs CA G.R. 101503 (Sept. 15, 1993)

F:
Planters purchased urea fertilizer from
Mitsubishi,New York. The fertilizer was shipped on MV
Sun Plum, which is owned by KKKK, from Alaska to San
Fernando, La Union. A time charter party was entered
into between Mitsubishi as shipper/charterer and KKKK
as shipowner. Upon arrival in the port, PPI unloaded
the cargo. It took PPI 11 days to unload the cargo. PPI
hired a marine and cargo surveyor to determine if
there was any shortage.
A shortage and
contamination of the fertilizer was discovered. PPI
sent a claim letter to SSA, the resident agent of KKKK
for the amount of the loss. An action for damages was
filed. SSA contended that the provisions on CC do not
apply to them because they have become private
carriers by reason of the charter-party. The TC awarded
damages. The CA reversed.
Issue : Does a charter party between a shipowner and
a charterer transform a CC into a private one as to
negate the civil law presumption of negligence in case
of loss or damage to its cargo? NO.
Held : 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. There
are 2 kinds : (1) contract of affreightment which
involves the use of shipping space or vessels leased by
the owner in part or as a whole, to carry goods for
others; and (2) charter by demise or bareboat charter
where the whole vessel is let to the charterer with a
transfer to him of its entire command and possession
and consequent control over its navigation, including
the master and the crew, who are his servants.
It is not disputed that the carrier operates as a
CC in the ordinary course of business. When PPI
(3) as to freightage
(a) for a fixed amount for the whole
cargo
(b) for a fixed rate per ton
(c) for so much per month
Maritime Agencies vs CA 187 SCRA 346
F:
Transcontinental Fertilizer Co. of London
chartered from Hongkong Island Shipping Co. the
motor vessel Hongkong Island for the shipment of
bagged urea from Odessa, USSR to the Philippines.
The parties signed a Uniform General Charter dated
August 1979. The consignee was Atlas Fertilizer Co.
while the insurer was the Union Insurance Society of
Canton. Maritime Agencies was appointed as the
charterer's agent and Macondray as the owner's
agent. The vessel arrived in Manila to unload part of its
cargo and then proceeded to Cebu to discharge the
rest of the cargo. The consignee filed a formal claim
for shortlanded bags. The consignee also filed a claim
against Viva Customs Brokerage for the unrecovered
spillage. These claims having been rejected, the
consignee went to Union, which paid the total
indemnity of P 113,123.86 pursuant to the insurance
contract. As subrogee of the consignee, Union filed a
claim for reimbursement against Hongkong Island Co.,
Maritime Agencies and/or Viva Customs Brokerage.
Viva was dropped from the complaint while Macondray
Co. was impleaded.
The RTC found Hongkong Island liable for the
shortlanded bags while Maritime Agencies was held
liable for the spillage during discharge. The RTC
ordered Hongkong Island
and its local agent
Macondray to pay P 87,000+ and Maritime Agencies to
pay P 36,000+ to Union Insurance. CA exempted
Hongkong Island and Macondray exempt from liability.
Thus this petition. Maritime pleads non-liability on the
ground that it was only the charterer's agent and
PAGE 87

should not answer for whatever responsibility might
have attached to the principal. Union asked that
Maritime should be made solidarily liable since its
principal had not been impleaded.
Held : There are 3 general categories of charters:
1. Demise or bareboat charter - involves the
transfer of full possession and control of the vessel for
the period covered by the contract, the charterer
obtaining the right to use the vessel and carry
whatever cargo it chooses, while manning and
supplying the ship as well
2. Time Charter - contract to use a vessel for a
particular period of time, the charterer obtaining the
right to direct the movements of the vessel during the
chartering period, although the owner retains
possession and control
3. Voyage Charter - contract for the hire of a
vessel for one or a series of voyages usually for the
purpose of transporting goods for the charterer; the
voyage charter is a contract of affreightment and is
considered a private carriage
- being a private carriage, the parties may
freely contract respecting liability for damages to the
goods and other matters; responsibility for the cargo
loss falls on the one who agreed to perform the duty
involved in accordance with the terms of the voyage
charter
This case involves a voyage charter.In the
present case, the charterer was responsible for
loading, stowage and discharging at the ports visited,
while the owner was responsible for the care of the
cargo. Par. 2 of the Uniform General Charter provided
that the owner shall be responsible for loss or damage
or delay in the delivery of goods caused by improper
or negligent stowage of the goods or by personal want
of due diligence in making the vessel seaworthy and
properly manned. However, the owner shall not be
liable for any other cause, even from the neglect of the
captain or the crew or any other person employed by
the owner on board, or for any unseaworthiness of the
vessel on loading or commencement of the voyage.
In cases at bar, the TC found that there were
shortlanded bags, which could only mean that they
were damaged or lost on board the vessel before
unloading of the shipment. The entire cargo was
covered by a clean B/L. As the bags were in good order
when received by the vessel, the presumption is that
they were damaged or lost during the voyage as a
result of their negligent improper storage.
The
shipowner should be held liable.
The filing of the claim must be within one year,
in accordance with the COGSA. Otherwise, the carrier
and the ship shall be discharged from liability. The one
year period should commence from Oct. 20, 1979, the
date when the last item was delivered to the
consignee. Union filed the complaint against
Hongkong within the one year period but tardily
against Macondray. The action has prescribed with
respect Macondray but not against the principal,
Hongkong Island.
As regards the goods damaged or lost during
unloading, the charterer is liable thereof, having
assumed this activity under the charter party free of
expense to the vessel.
The difficulty is that
Transcontinental has not been impleaded and so is
beyond the court's jurisdiction. The liability imposed
on it cannot be borne by Maritime which is a mere
agent and is not answerable for the injury caused by
its principal (unless the principal is undisclosed).
In this case, the charterer did not represent
itself as a carrier and indeed assumed responsibility
only for the unloading of the cargo. Maritime acted in
representation of the charterer and not of the vessel.
As a mere charterer's agent, it cannot be held
solidarily liable with Transcontinental for the
losses/damages to the cargo outside the custody of
the vessel. Transcontinental was disclosed as the

charterer's principal and Maritime only acted within
the scope of its authority.
The TC's findings were upheld except for some
modifications. The liability of Macondray can no longer
be enforced because of prescription. Maritima cannot
be held liable for the principal's acts.
c. Forms and Effects
Art. 652. A charter party must be drawn
in duplicate and signed by the contracting
parties, and when either does not know how or
is not able to do so, by two witnesses at his
request.
The charter party shall include, besides
the
condition
stipulated,
the
following
circumstances:
1. The kind, name, and tonnage of the
vessel.
2. Her flag and port or registry.
the captain.
the agent, if the latter should make the charter
party.
the charterer, and if he states that he is acting
by commission, that of the person for whose
account he makes the contract.
6. The port of loading and unloading.
7. The capacity, number of tons or
weight, or measure which they respectively
bind themselves to load and transport, or
whether it is the total cargo.
8. The freightage to be paid, stating
whether it is to be a fixed amount for the
voyage or so much per month, or for the space
to be occupied, or for the weight or measure of
the goods of which the cargo consists, or in any
other manner whatsoever agreed upon.
9. The amount of primage to be paid the
captain.
10. The days agreed upon for loading and
unloading.
11. The lay days and extra lay days to
be allowed and the rate of demurrage.
Art. 653.
If the freight should be
received without the charter party having been
signed, the contract shall be understood as
executed in accordance with what appears in
the bill of lading, which shall be the only
instrument with regard to the freight to
determine the rights and obligations of the ship
agent, of the captain, and of the charterer.
If the cargo is received without a charter party, the B/L
shall be considered the contract of the parties
Q: If there is no charter party and B/L, would there be
a valid contract?
A:
Taking Art. 653 literally, the answer is no.
However, if we take into account the fact that delivery
of the cargo does not constitute the making of a
contract but rather the partial performance thereof,
the mere fact of delivery and receipt of such cargo, the
GF and mutual consent with which they have been
made, should be a better substitute for the charter
party than is the B/L which is nothing more than the
proof of such delivery.
Primage.-Formerly, a small allowance or
compensation payable to the master and marines of a
ship; to the former for the use of his cables and ropes
PAGE 88

to discharge the goods of the merchant; to the latter
for lading and unlading in any port of haven
Primage, at present, it is no longer a gratuity
to the master, unless especially stipulated; but it
belongs to owners or freighters and is nothing but an
increase of the freight rate.
Demurrage.-- Sum which is fixed by the contract of
carriage, or which is allowed, as remuneration to the
owner of a ship for the detention of his vessel beyond
the number of days allowed by the charter party for
loading and unloading or for sailing; it is an extended
freight or reward to the vessel in compensation for the
earnings she is improperly caused to lose
Lay days.-Days allowed to charter parties for
loading and unloading the cargo
Art. 654. The charter parties executed
with the intervention of a broker, who certifies
to the authenticity of the signatures of the
contracting parties made in his presence, shall
be full evidence in court; and, if they should be
conflicting, that which agrees with the one
which the broker must keep in his registry, if
kept in accordance with law, shall govern.
The contracts shall also be admitted as
evidence, even though a broker has not taken
part
therein,
if
the
contracting
parties
acknowledge the signatures of the same as
their own.
Should no broker have taken part in the
charter party and the signatures be not
acknowledged, doubts shall be decided by what
is provided for in the bill of lading, and, in the
absence thereof, by the proofs submitted by the
parties.
Art. 655. Charter parties executed by the
captain in the absence of the ship agent shall be
valid and effective, even though in executing
them he should have acted in violation of the
orders and instructions of the agent or
shipowner; but the latter shall have a right of
action against the captain to recover damages.
Art. 656. If in the charter party the time
in which the loading and unloading are to take
place is not stated, the usages of the port where
these acts take place shall be observed. After
the stipulated or customary period has passed,
and should there not be in the freight contract
an express provision fixing the indemnification
for the delay, the captain shall be entitled to
demand demurrage for the lay days and extra
lay days which may have elapsed in loading and
unloading.
Art. 657. If during the voyage the vessel
should be rendered unseaworthy the captain
shall be obliged to charter at his expense
another one in good condition, to carry the
cargo to its destination, for which purpose he
shall be obliged to look for a vessel not only at
the port of arrival but also in the neighboring
ports within a distance of 150 kilometers.
If the captain, through indolence or
malice, should not furnish a vessel to take the
cargo to its destination, the shippers, after
requesting the captain to charter a vessel
within an unextendible period, may charter one
and apply to the judicial authority for the
summary approval of the charter party which
they may have made.
The same authority shall judicially

compel the captain to carry out for his account
and under his responsibility the charter made
by the shippers.
If the captain, notwithstanding his
diligence, should not find a vessel to charter, he
shall deposit the cargo at the disposal of the
shippers, to whom he shall communicate the
facts on the first opportunity, the freight being
adjusted in such cases by the distance covered
by
the
vessel,
with
no
right
to
any
indemnification whatsoever.
Articles 659 to 664 : Some of the goods being
transported may : (1) be sold by the captain to pay for
necessary repairs; (2) be jettisoned for the common
safety; (3) be lost by reason of shipwreck or stranding;
(4) be seized by pirates or enemies; (5) suffer
deteriorations or dimunitions; or (6) increase by
natural cause in weight or size
** Goods that shall not pay freightage:
(1) Art. 660 - goods jettisoned for the common safety
but the amount of freightage that should have been
paid shall be considered as a general average and
shall be computed in proportion to the distance
covered when they were jettisoned
(2) Art. 661 - merchandise lost by reason of shipwreck
or stranding; if freight had been paid in advance, it
shall be returned
(3) Art. 661 - goods seized by pirates or enemies;
freight paid in advance shall be returned
** Goods required to pay freightage:
(1) Art. 659 - goods sold by the captain to pay for the
necessary repairs to the hull, machinery or equipment
or for unavoidable and urgent needs --> but the freight
may not be required to be paid in full
(2) Art. 663 - goods which suffer deterioration or
dimunition on account of (a) inherent defects or bad
quality of packing, or of (b) fortuitous event
(3) Art. 644 - goods that increase in size or weight by
natural cause
d. Rights and Obligations of
Shipowners
Art. 669. The shipowner of the captain
shall observe in charter parties the capacity of
the vessel or that expressly designated in its
registry, a difference greater than 2 per cent
between that registered and her true capacity
not being permissible.
If the shipowner or the captain should
contract to carry a greater amount of cargo
than the vessel can carry, in view of her
tonnage, they
shall indemnify the shippers
whose contracts they do not fulfill for the losses
they may have caused them by reason of their
default, according to the cases, viz:
If the vessel has been chartered by one
shipper only, and there should appear to be an
error or fraud in her capacity, and the charterer
should not wish to rescind the contract, when he
has a right to do so, the freightage shall be
reduced in proportion to the cargo the vessel
cannot receive, the person from whom the
vessel is chartered being furthermore obliged to
indemnify the charterer for the losses he may
have caused him.
If, on the contrary, there should be
several charter parties, and by reason of the
want of space all the cargo contracted for
cannot be received, and none of the charterers
desires to rescind the contract, preference shall
be given to the person who has already loaded
and arranged the cargo in the vessel, and the
PAGE 89

rest shall take the place corresponding to them
in the order of the dates of their contracts.
Should
there
be
no
priority,
the
charterers may load, if they wish, in proportion
to the weight or space they may have engaged,
and the person from whom the vessel was
chartered shall be obliged to indemnify them for
losses and damages.
Art. 670. If the person from whom the
vessel is chartered, after receiving a part of the
cargo, should not find sufficient to make up at
least three fifths of the amount the vessel can
hold, at the price he may have fixed, he may
substitute for that transportation another
vessel inspected and declared suitable for the
same voyage, the expenses of transfer, and the
increase in the price of the charter, should there
be any, being for his account. Should he not be
able to make this change, the voyage shall be
undertaken at the time agreed upon; and should
no time have been fixed, within fifteen days
from the time the loading began, should nothing
to the contrary have been stipulated.
If the owner of the part of the cargo
already loaded should procure some more at the
same price and under similar or proportionate
conditions to those accepted for the freight
received, the person from whom the vessel is
chartered or the captain may not refuse to
accept the rest of the cargo; and should he do
so, the charterer shall have a right to demand
that the vessel put to sea with the cargo she
may have on board.
Art. 671. After three-fifths of the vessel
is loaded, the person from whom she is
chartered may not, without the consent of the
charterers or shippers, substitute the vessel
designated in the charter party with another
one, under the penalty of making himself
thereby liable for all the losses and damages
occurring during the voyage to the cargo of
those who did not consent to the change.
Art. 672.
If the vessel has been
chartered in whole, the captain may not,
without the consent of the person chartering
her, accept cargo from any other person; and
should he do so, said charterer may oblige him
to unload it and to indemnify him for the losses
suffered thereby.
Art. 673.
The person from whom the
vessel is chartered shall be liable for all the
losses caused the charterer by reason of the
voluntary delay of the captain in putting to sea,
according to the rules prescribed, provided he
has been requested to put to sea at the proper
time through a notary or judicially.
Art. 674. If the charterer should carry to
the vessel more cargo than that contracted for,
the excess may be admitted in accordance with
the price stipulated in the contract if it can be
well stowed without incurring the other
shippers, but if in order to stow said cargo it
should be necessary to stow it in such manner
as to throw the vessel out of trim the captain
must refuse it or unload it at the expense of its
owner.
The captain may likewise, before leaving
the port, unload the merchandise clandestinely
placed on board, or transport it, it he can do so
and keep the vessel in trim, demanding by way

of freightage the highest price which may have
been stipulated for said voyage.
Art. 675.
If the vessel has been
chartered to receive the cargo in another port,
the captain shall appear before the consignee
designated in the charter party, and should the
latter not deliver the cargo to him, he shall
inform the charterer and await his instructions,
the lay days agreed upon, or those allowed by
custom in the port, beginning to run in the
meantime,
unless
there
is
an
express
Should the captain not receive an answer
within the time necessary therefore, he shall
make efforts to find cargo; and should he not
find any after the lay days and extra lay days
have elapsed, he shall make a protest and
return to the port where the charter was made.
The charterer shall pay the freightage in
full, discounting that which may have been
earned on the merchandise which may have
been carried on the voyage out or on the return
trip, if carried for the account of third persons.
The same shall be done if a vessel,
having been chartered for the round trip, should
not be given any cargo for her return.
Art. 676.
The captain shall lose the
freightage and shall indemnify the charterers if
the latter should prove, even against the
certificate of inspection, if one has been made
at the port of departure, that the vessel was not
in a condition to navigate at the time of
receiving the cargo.
Art. 677. The charter party shall subsist
if the captain should not have any instructions
from the charterer, and a declaration of war or a
blockade should take place during the voyage.
In such case the captain must proceed to
the nearest safe and neutral port, requesting
and awaiting orders from the shipper; and the
expenses and salaries accruing during the
detention shall be paid as general average.
If, by orders of the shipper, the cargo
should be discharged at the port of arrival, the
freightage for the voyage out shall be paid in
full.
Art. 678. If the time necessary, in the
opinion of the judge or court, to receive orders
from the shippers should have elapsed without
the captain having received any instructions,
the cargo shall be deposited, and it shall be
liable for the payment of the freightage and
expenses incurred by reason of the delay, which
shall be paid from the proceeds of the part first
sold.
Obligations of shipowner:
1. Art. 669 - to observe in the charter parties, the
capacity of the vessel, and to indemnify the shippers
whose contracts are not fulfilled for the losses they
may have suffered by the failure of the shipowner to
observe the capacity of the vessel
2. Art. 670 - to undertake a voyage at the time agreed
upon or within 15 days from loading if no time is
stipulated, even if the shipowner should not find cargo
sufficient to make up at least 3/5 of the amount which
the vessel may hold, where he fails to exercise his
right to change vessel
PAGE 90

3. Art. 670 - where the shipowner should not find cargo
sufficient to make up at least 3/5 of the amount which
the vessel may hold, to accept other cargo procured
by the owner of the freight already loaded under the
same price and conditions
4. Art. 671- not to change the vessel after 3/5 of the
vessel has been loaded, without the consent of the
charterers or shippers
5. Art. 672 - if the vessel has been chartered in whole,
not to accept cargo from any other person without the
consent of the charterer
6. Art. 673 - to answer for losses arising from delay in
putting to sea
7. Art. 676 - to have the vessel in a condition to
navigate at the time of receiving the cargo
8. Art. 677 - in case of declaration of war or blockade
during the voyage, where the captain has not received
any instructions from the charterer, for the captain to
proceed to the nearest safe and neutral port,
requesting and awaiting orders from the shippers
Rights of Shipowner:
1. Art. 670 - where the cargo is not sufficient to make
up at least 3/5 of the amount which the vessel may
hold, he may substitute anohter vessel inspected and
declared suitable for the voyage --> expenses of
transfer and increase in price of the charter shall be
paid by him
2. Art. 674 - to collect the freight in accordance with
the price stipulated for cargo in excess of that agreed
upon is such excess can be properly stowed 3. Art. 674
- to refuse and unload at the expense of the owner
excess cargo that cannot be properly stowed
4. Art. 674 - to unload merchandise clandestinely
placed on board, or to transport them if he can do so,
demanding the highest freightage
5. Art. 675- to find freight to take place of freight not
received, if the vessel has been chartered to receive
cargo in another port, after he receives no cargo from
the consignee and after he receives no answer from
the charterer
6. Art. 675 - to receive freight in full, discounting that
which may have been earned on the merchandise
carried as substitute
7. Art. 677 - to have the charter party subsist
notwithstanding the declaration of war or a blockade
during the voyage, and to receive in such cases, the
freightage in full where the shipper orders that the
cargo should be discharged at the port of arrival
e. Obligations of charterers
Art. 679.
The charterer of an entire
vessel may subcharter the whole or part thereof
for the amounts he may consider most
convenient, the captain not being allowed to
refuse to receive on board the cargo delivered
by the second charterers, provided the
conditions of the first charter are not changed,
and that the price agreed upon is paid in full,
even though the full cargo is not loaded, with
the limitation established in the next article.
Art. 680.
A charterer who does not
complete the full cargo he bound himself to ship
shall pay the freightage of the amount he fails
to load, if the captain does not take other
freight to complete the load of the vessel, in
which case he shall pay the first charterer the
difference should there be any.
Art. 681. If the charterer should ship
goods different from those indicated at the time
of executing the charter party, without the
knowledge of the person from whom the vessel
was chartered or of the captain, and should

thereby give rise to losses, by reason of
confiscation, embargo, detention, or other
causes, to the person from whom the vessel was
chartered or to the shippers, the person giving
rise thereto shall be liable with the value of his
shipment and furthermore with his property, for
the full indemnity to all those injured through
his fault.
Art. 682. If the merchandise should have
been shipped for the purpose of illicit
commerce, and was taken on board with the
knowledge of the person from whom the vessel
was chartered or of the captain, the latter,
jointly with the owner of the merchandise, shall
be liable for all the losses which may be caused
to other shippers, and even though it may have
been
agreed,
they
cannot
demand
any
indemnity whatsoever from the charterer for
the damage caused the vessel.
Art. 683. In case of making a port to
repair the hull, machinery, or equipment of the
vessel, the shippers must wait until the vessel is
repaired, being permitted to unload her at their
own expense should they deem it advisable.
If, for the benefit of cargo which runs the
risk of deterioration, the shippers or the court,
or the consul, or the competent authority in a
foreign land should order the merchandise to be
unloaded, the expenses of unloading and
reloading shall be for the account of the former.
Art. 684. If the charterer, without the
occurrence of any
of the cases of force majeure mentioned in the
foregoing article, should wish to unload his
merchandise before arriving at the port of
destination, he shall pay the full freightage, the
expenses of the arrival made at his request, and
the losses and damages caused the other
shippers, should there be any.
Art. 685. In charters for transportation
of general freight any of the shippers may
unload the merchandise before the beginning of
the voyage, paying one half the freightage, the
expense of stowing and restoring the cargo, and
any other damage which may be caused the
other shippers.
Art. 686.
After the vessel has been
unloaded and the cargo placed at the disposal
of the consignee, the latter must immediately
pay the captain the freightage due and the
other expenses for which the cargo may be
liable.
The primage must be paid in the same
proportion and at the same time as the
freightage, all the changes and modifications to
which the latter should be subject also
governing the former.
Art. 687. The charterers and shippers
may not abandon merchandise damaged on
account of its own inherent defect or of
fortuitous event for the payment of the
freightage and other expenses.
The abandonment shall be proper,
however, if the cargo should consist of liquids
which may have leaked out, there remaining in
PAGE 91

the containers not more than one-fourth of their
contents.
Obligations of the charterer:
1. Art. 680 - to pay the freight in full even if the
charterer does not complete the full cargo he bound
himself to ship
2. Art. 681- to answer with the value of his shipment
and other property for the losses suffered by the
shipowner, captain or other shippers arising from
confiscation, embargo, detention, or other causes,
where the charterer loads goods different from those
stated at the time of the execution of the charter party
3. Art. 682 - to be jointly liable with the captain for
losses which may be caused to the other shippers
where the charterer ships goods for illicit commerce
with the knowledge of the shipowner or captain
4. Art. 682 - in case of making a port to repair the hull,
machinery or equipment of the vessel, to wait until the
vessel is repaired or to pay for the expenses of
unloading should the charterer choose to unload
5. Art. 684 - where the charterer unloads goods before
arriving at port of destination without any force
majeure occurring, to pay (1) expenses of arrival, (2)
full freight and (3) for the damages and losses caused
to other shippers, if any
6. Art. 685 - where the charterer unloads before the
beginning of the voyage, (1) to pay 1/2 of the freight,
(2) to pay for the expenses of stowing and restowing
the cargo, (3) to pay any other damage which he may
have caused other shippers
7. Art. 686 - to pay for freight, other expenses and the
primage after the vessel has been unloaded and the
cargo placed at the disposal of the consignee
8. Art. 687 - not to abandon merchandise damaged
on account of inherent defect or fortuitous event, for
the payment of the freight and other expenses
f. Rescission
Art. 688.
A charter party may be
annulled at the request of the charterer:
1. If before loading the vessel he should
abandon the charter, paying half the freightage
agreed upon.
2. If the capacity of the vessel should
not agree with that stated in the certificate of
tonnage, or if there be an error in the statement
of the flag under which she sails.
3. If the vessel should not be placed at
the disposal of the charterer within the period
and in the manner agreed upon.
4. If, after the vessel has put to sea, she
should return to the port of departure, on
account of risk from pirates, enemies, or bad
weather, and the shippers should agree to
unload her.
In the second and third cases the person
from whom the vessel was chartered shall
indemnify the charterer for the losses he may
suffer.
In the fourth case the person from whom
the vessel was chartered shall have a right to
the freightage in full for the voyage out.
If the charter should have been made by
the month, the charterers shall pay the full
freightage for one month, if the voyage is for a
port in the same waters; and two months, if for
a port in different waters.
(From one port to another of the
Peninsula (Philippines) and adjacent islands, the
freightage for one month only shall be paid.)
5. If a vessel should make a port during
the voyage in order to make urgent repairs and
the charterers should prefer to dispose of the
merchandise.
When the delay does not exceed thirty

days, the shippers shall pay the full freightage
for the voyage out.
Should the delay exceed thirty days, they
shall pay the freight in proportion to the
distance covered by the vessel.
Art. 689. At the request of the person
from whom the vessel is chartered the charter
party may be rescinded:
1. If the charterer at the termination of
the extra lay days does not place the cargo
alongside the vessel.
In such case the charterer must pay half
of the freightage stipulated besides the
demurrage due for the lay days and extra lay
days.
2. If the person from whom the vessel
was chartered should sell it before the charterer
has begun to load it and the purchaser should
load it for his own account.
In such case the vendor shall indemnify
the charterer for the losses he may suffer.
If the new owner of the vessel should not
load it for his own account the charter party
shall be respected, and the vendor shall
indemnify the purchaser if the former did not
inform him of the charter pending at the time of
making the sale.
Art. 690.
The charter party shall be
rescinded and all action arising therefrom shall
be extinguished if, before the vessel puts to sea
from the port of departure, any of the following
cases should occur:
1. A declaration of war or interdiction of
commerce with the power to whose ports the
vessel was to make its voyage.
2. A condition of blockage of the port of
destination of said vessel, or the breaking out of
an epidemic after the contract was executed.
3. The prohibition to receive at the said
port the merchandise constituting the cargo of
the vessel.
4. An indefinite detention, by reason of
an embargo of the vessel by order of the
government, or for any other reason independent of the will of the ship agent.
5. The inability of the vessel to navigate,
without fault of the captain or ship agent.
The unloading shall be made for the
account of the charterer.
Art. 691. If the vessel cannot put to sea
on account of the closing of the port of
departure, or any other temporary cause, the
charter shall remain in force without right of
either of the contracting parties to claim
damages.
The subsistence and wages of the crew
shall be considered as general average.
During the interruption the charterer
may, at the proper timer and for his own
account, unload and load the merchandise,
paying demurrage if the reloading should
continue after the cause for the detention has
ceased.
Art. 692.
A charter party shall be
partially
rescinded,
unless
there
is
an
agreement to the contrary, and the captain shall
only be entitled to the freightage for the voyage
out, if, by reason of a declaration of war, closing
of ports, or interdiction of commercial relations
PAGE 92

during the voyage, the vessel should make the
port designated for such a case in the
instructions of the charterer.
Marine insurance vs Bottomry and Respondentia

Loans:
The borrower is in effect indemnified for his loss, at
least, to the extent of the loan --> in case of loss of the
thing given as security, the borrower is under no
obligation to pay the loan
2. Loans on Bottomry and

Respondentia
a. Loan on Bottomry, defined
A contract in the nature of a mortgage, by
which the owner of the ship borrows money for the
use, equipment and repair of the vessel and for a
definite term, and pledges the ship (or the keel or
bottom of the ship) as a security for its repayment,
with maritime or extraordinary interest on account of
the maritime risks to be borne by the lender, it being
stipulated that if the ship be lost in the course of the
specific voyage or during the limited time, by any of
the perils enumerated in the contract, the lender shall
also lose his money.
Marine insurance
bottomry/respondentia loans
1. indemnity is paid after the
indemnity is paid in advance by way of loan
loss has occurred
2. when marine peril occurs,
when marine peril causes the loss of the
the obligation of the insurer
vessel
or cargo, the obligation of the
becomes absolute
borrower to pay is extinguished
3. consensual contract
real
contract --perfected from the
* governed by Insurance Act
moment of delivery of the thing loaned
b. Loan on Respondentia,
defined
One made on the goods laden on board the
ship, and which are to be sold or exchanged in the
course of the voyage, the borrower's personal
responsibility being deemed the principal security for
the performance of the contract, which is therefore
called respondentia.
The lender must be paid his
principal and interest, thought the ship perishes,
provided that the goods are saved.
c. Character of Loan
Art. 719. A loan in which, under any
condition whatever, the repayment of the sum
loaned and of the premium stipulated depends
upon the safe arrival in port of the goods on
which it is made, or of the price they may
receive in case of accident, shall be considered
a loan on bottomry or respondentia.
When loss does not extinguish loan: (Art. 731)

1. where the loss is caused by inherent defect of the
thing
2. where the loss is caused by fault or malice of
borrower
3. where loss is caused by barratry on the part of the
captain
4. where loss is caused by damage to the vessel
as a consequence of its
engaging in contraband
5. where loss
arose from having loaded the
merchandise on a vessel different from that
designated in the contract, except if change is due to
force majeure
d. Forms and Requisites
Real, unilateral, aleatory contract:

1. delivery of the amount loaned is necessary
for the perfection of the contract
2. although there are reciprocal benefits, the
contract produces obligations only for one party, the
borrower who must return the amount borrowed plus
premium
3. lender really runs known risks
Distinguished from ordinary loans:
Ordinary loan
on bottomry and respondentia
1. first lender has preference
last lender has preference over
over subsequent lenders
previous ones
2. must be paid absolutely
loan is required to be paid only upon
at all events, WON thing
arrival of the thing given as
given as security is lost or
security at port of destination
destroyed
3. subject to Usury Law
as to rate of interest in
loan
safe
no limit
view of
diff. classes and various

risks in
a maritime voyage
Art. 720. Loans on bottomry or

respondentia may be executed:
1. By means of a public instrument.
2. By means of a policy signed by the
contracting parties and the broker taking part
therein.
3. By means of a private instrument.
Under whichever of these forms the
contract is executed, it shall be entered in the
certificate of the registry of the vessel and shall
be recorded in the registry of vessels, without
which requisites the credits of this kind shall
not have, with regard to other credits, the
preference which, according to their nature,
they should have, although the obligation shall
be valid between the contracting parties.
The contracts made during a voyage
shall be governed by the provisions of Articles
583 and 611, and shall be effective with regard
to third persons from the date of their
execution, if they should be recorded in the
registry of vessels of the port of registry of the
vessel before the lapse of eight days following
its arrival.
If said eight days should elapse
without the record having been made in the
registry of vessels, the contracts made during
the voyage of a vessel shall produce no effect
with regard to third persons, except from the
day and date of their inscription.
In order that the policy of the contracts
executed in accordance with No.2 may have
binding force, they must conform to the registry
PAGE 93

of the broker who took part therein.
With
respect to those executed in accordance with
No. 3 the acknowledgment of the signature shall
be required.
Contracts which are not reduced in
writing shall not give rise to judicial action.
the object liable for the bottomry loan, on

account of fraudulent measures employed by
the borrower, the loan shall be valid only for the
amount at which said object is appraised by
experts.
The surplus principal shall be returned
with legal interest for the entire time required
for repayment.
Effect of registration:
1. the loan shall have, with regard to other credits, the
preference which, according to its nature, it should
have (Art. 580 - 8th in the order of preference)
2. effective against third persons from the time of
execution/registration
Art. 721. In a contract on bottomry or
respondentia the following must be stated:
1. The kind, name, and registry of the
vessel.
the captain.
3. The names, surnames, and domiciles
of the person giving and the person receiving
the loan.
4. The amount of the loan and the
premium stipulated.
5. The time for repayment.
6. The goods pledged to secure
repayment.
7. The voyage during which the risk is
run.
Art. 722. The contracts may be made to
order, in which case they shall be transferable
by indorsement, and the indorsee shall acquire
all the rights and shall incur all the risks
corresponding to the indorser.
Art. 727. If the full amount of the loan

contracted in order to load the vessel should not
be used for the cargo, the balance shall be
returned before clearing.
The same procedure shall be observed
with regard to the goods taken as loan, if they
were not loaded.
The excess shall be valid only as an ordinary loan
g. By whom
Art. 728.
The loan which the captain
takes at the point of residence of the owners of
the vessel shall only affect that part thereof
which belongs to the captain, if the other
owners or their agents should not have given
their express authorization therefor or should
not have taken part in the transaction.
If one or more of the owners should be
requested to furnish the amount necessary to
repair or provision the vessel, and they should
not do so within twenty-four hours, the interest
which the parties in default may have in the
vessel shall be liable for the loan in the proper
proportion.
Outside of the residence of the owners,
the captain may contract loans in accordance
with the provisions of Articles 583 and 611.
e. On What Constituted
Art. 724. The loans may be constituted
jointly or separately:
1. On the hull of the vessel.
2. On the rigging.
3. On the equipment, provisions, and
fuel.
4. On the engine, if the vessel is a
steamer.
5. On the merchandise loaded.
If the loan is constituted on the hull of
the vessel, the rigging, equipment and other
goods, provisions, fuel, steam engines, and the
freightage earned during the voyage on which
the loan is made, shall also be considered as
included in the liability for the loan.
If the loan is made on the cargo, all that
which constitutes the same shall be subject to
the repayment; and if on a particular object of
the vessel or of the cargo, only the object concretely and specifically mentioned shall be
liable.
Art. 725. No loans on bottomry may be
made on the salaries of the crew or on the
profits expected.
f. Amount
Art. 723. Loans may be made in goods
and in merchandise, fixing their value in order
to determine the principal of the loan.
Art. 726. If the lender should prove that
he loaned an amount larger than the value of
Art. 617. The captain may not contract

loans on respondentia secured by the cargo,
and should he do so the contract shall be void.
Neither may he borrow money on
bottomry for his own transactions, except on
the portion of the vessel he owns, provided no
money has been previously borrowed on the
whole vessel, and provided there does not exist
any other kind of lien or obligation chargeable
against the vessel. When he is permitted to do
so, he must necessarily state what interest he
has in the vessel.
In case of violation of this article the
principal, interest, and costs shall be charged to
the private account of the captain, and the ship
agent may furthermore discharge him.
Art. 611. In order to comply with the
obligations mentioned in the foregoing article,
and when he has no funds and does not expect
to receive any from the agent, the captain shall
procure the same in the successive order stated
below:
1. By requesting said funds of the
consignees of the vessel or the correspondents
of the ship agent.
2. By applying to the consignees of the
cargo or to the persons interested therein.
3. By drawing on the ship agent.
4. By borrowing the amount required by
means of a bottomry loan.
5. By selling a sufficient amount of the
cargo to cover the amount absolutely necessary
PAGE 94

to repair the vessel and to equip her to pursue
the voyage.
In the two last cases he must apply to
the judicial authority of the port, if in the
Philippines and to the Filipino consul, if in a
foreign country; and where there should be
none, to the local authority, proceeding in
accordance with the prescriptions of Article 583,
and with the provisions of the law of civil
procedure.
Art. 583. If the ship being on a voyage
the captain should find it necessary to contract
one or more of the obligations mentioned in
Nos. 8 and 9 of Article 580, he shall apply to the
judge or court if he is in Philippine territory, and
otherwise to the Filipino consul, should there be
one, and in his absence to the judge or court or
to the proper local authority, presenting the
certificate of the registry of the vessel treated
of in Article 612, and the instruments proving
the obligation contracted.
The judge or court, the consul or the
local authority as the case may be in view of the
result of the proceedings instituted, shall make
a temporary memorandum in the certificate of
their result, in order that it may be recorded in
the registry when the vessel returns to the port
of her registry, or so that it can be admitted as
a legal and preferred obligation in case of sale
before the return, by reason of the sale of the
vessel
by
virtue
of
a
declaration
of
unseaworthiness.
The lack of this formality shall make the
captain personally liable to the creditors who
may be prejudiced through his fault.
h. Effects of Contract
Art. 719. A loan in which, under any
condition whatever, the repayment of the sum
loaned and of the premium stipulated depends
upon the safe arrival in port of the goods on
which it is made, or of the price they may
receive in case of accident, shall be considered
a loan on bottomry or respondentia.
Art. 729.
Should the goods on which
money is taken not be subjected to risk, the
contract shall be considered a simple loan, with
the obligation on the part of the borrower to
return the principal and interest at the legal
rate, if that agreed upon should not be lower.
Art. 726. If the lender should prove that
he loaned an amount larger than the value of
the object liable for the bottomry loan, on
account of fraudulent measures employed by
the borrower, the loan shall be valid only for the
amount at which said object is appraised by
experts.
The surplus principal shall be returned
with legal interest for the entire time required
for repayment.
Art. 727. If the full amount of the loan
contracted in order to load the vessel should not
be used for the cargo, the balance shall be
returned before clearing.
The same procedure shall be observed
with regard to the goods taken as loan, if they
were not loaded.
Art. 730. Loans made during the voyage

shall have preference over those made before
the clearing of the vessel, and they shall be
graduated in the inverse order of their dates.
The loans for the last voyage shall have
preference over prior ones.
Should several loans have been made at
the same port of arrival under stress and for the
same purpose, all of them shall be paid pro rata.
F. BILL OF LADING
B/L operates both as a receipt and as a contract; it is a
receipt for the goods shipped and a contract to
transport and deliver the same as stipulated
A stipulation that a CC's liability is limited to
the value of the goods appearing in the B/L, unless the
owner declares a greater value, is valid and binding
Bill of Lading vs Charter party
1. Charter party - entire or complete contract
B/L - private receipt which the captain gives to
accredit that such goods belong to such persons
2. Charter party - consensual party, which can be
dissolved by means of indemnity for losses and
damages
B/L - real contract; exists only after delivery of the
goods to be transported is made
1. Contents
Art. 706. The captain and the shipper
shall have the obligation of drawing up the bill
of lading, in which shall be stated:
1. The name, registry, and tonnage of
the vessel.
2. The name of the captain and his
domicile.
3. The port of loading and that of
unloading.
4. The name of the shipper.
5. The name of the consignee, if the bill
of lading is issued in the name of a specified
person.
6.
The quantity, quality, number of
packages, and marks of the merchandise.
7. The freightage and the primage
stipulated.
The bill of lading may be issued to
bearer, to order, or in the name of a specified
person, and must be signed within twenty- four
hours after the cargo has been received on
board, the shipper being entitled to demand the
unloading at the expense of the captain should
the latter not sign it, and, in any case, the
losses and damages suffered thereby.
Art.707. Four true copies of the original
bill of lading shall be made, and all of them shall
be signed by the captain and by the shipper. Of
these copies the shipper shall keep one and
send another to the consignee; the captain shall
take two, one for himself and the other for the
ship agent.
There may also be drawn as many copies
of the bill of lading as may be considered
necessary by the parties; but, when they are
issued to order or to bearer, there shall be
stated in all the copies, be they the first four or
the subsequent ones, the destination of each
one, stating whether it is for the ship agent, for
the captain, for the shipper, or for the
consignee. If the copy sent to the latter should
have a duplicate, this circumstance and the fact
PAGE 95

that it is not valid except in default of the first
one must be stated therein.
Art. 713. If before the delivery of the
cargo a new bill of lading should be demanded
of the captain, on the allegation that the failure
to present the previous ones is on account of
their loss or for any other just cause, he shall be
obliged to issue it, provided that security for the
value of the cargo is given to his satisfaction;
but without changing the consignment and stating therein the circumstances prescribed in the
last paragraph of Article 707, when dealing with
the bills of lading referred to therein, under
penalty, should he not do so, of being liable for
said cargo if improperly delivered through his
fault.
Art. 714. If before the vessel puts to sea
the captain should die or should cease to hold
his position through any cause, the shipper shall
have the right to demand of the new captain the
ratification of the first bills of lading, and the
latter must do so, provided that all the copies
previously issued be presented or returned to
him, and it should appear from an examination
of the cargo that they are correct.
The
expenses
arising
from
the
examination of the cargo shall be for the
account of the ship agent, without prejudice to
his right of action against the first captain, if he
ceased to be such through his own fault. Should
said examination not be made, it shall be
understood that the new captain accepts the
cargo as it appears from the bills of lading.
2. Probative Value
Art. 709. A bill of lading drawn up in
accordance with the provisions of this title shall
be proof as between those interested in the
cargo and between the latter and the insurers,
evidence to the contrary being reserved by the
latter.
Art. 710. If the bills of lading do not
agree, and no change or erasure appears in any
of them, those in the possession of the shipper
or consignee signed by the captain shall be
proof against the latter or ship agent in favor of
the consignee or the shipper; and those
possessed by the captain or ship agent signed
by the shipper shall be proof against the
shipper or consignee in favor of the captain or
ship agent.
B/L - proof of the agreement between the parties
Issuance of B/L is merely prima facie evidence
of the receipt of the merchandise by the carrier or his
agent; not conclusive evidence
Defective and irregular B/L may be cured by
other complementary documents
G. PASSENGERS ON SEA VOYAGE
1. Nature of Contract
Art. 695. The right to passage, if issued
to a specified person, may not be transferred
without the consent of the captain or of the
consignee.
2. Obligations of Passengers
Art. 693. If the passage price has not

been agreed upon, the judge or court shall
summarily fix it, after a statement of experts.
Art. 699. If the contract is rescinded,
before or after the commencement of the
voyage, the captain shall have a right to claim
payment for what he may have furnished the
passengers.
Art. 704. In order to collect the fare and
expenses of sustenance, the captain may retain
the goods belonging to the passenger, and in
case of their sale, he shall be given preference
over other creditors, acting in the same way as
in the collection of freightage.
Art. 694.
Should the passenger not
arrive on board at the time fixed, or should he
leave the vessel without permission from the
captain, when the latter is ready to leave the
port, the captain may continue the voyage and
demand the full passage price.
Art. 700.
In all that pertains to the
preservation of order and discipline on board
the vessel, the passengers shall be subject to
the orders of the captain, without any
distinction whatsoever.
3. Rights of Passengers
Art. 697. If before beginning the voyage
it should be suspended through the sole fault of
the captain or ship agent, the passengers shall
be entitled to have their passage refunded and
to recover for losses and damages; but if the
suspension was due to an accidental cause, or
to force majeure, or to any other cause beyond
the control of the captain or ship agent, the passengers shall only be entitled to the return of
the passage money.
Art. 698. In case a voyage already begun
should be interrupted, the passengers shall be
obliged to pay only the fare in proportion to the
distance covered, and without right to recover
for losses and damages if the interruption is
due to a fortuitous event or to force majeure,
but with a right to indemnify if the interruption
should have been caused by the captain
exclusively. If the interruption should be by
reason of the disability of the vessel, and the
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
delay shall be for his own account.
In case of delay in the departure of the
vessel, the passengers have a right to remain
on board and to be furnished food for the
account of the vessel, unless the delay is due to
an accidental cause or to force majeure. If the
delay should exceed 99ten days, the passengers
requesting the same shall be entitled to the
return of the fare; and if it is due exclusively to
the captain or ship agent they may furthermore
demand indemnity for losses and damages.
A vessel exclusively destined to the
transportation of passengers must take them
directly to the port or ports of destination, no
PAGE 96

matter what the number of passengers may be,
making all the stops indicated in its itinerary.
In the Philippines, there is no law which requires
shipowners to publish a schedule of the arrivals and
departures of their vessels in the different ports of call,
and which holds them liable in damages to passengers
for any deviation from said schedule
Sweet Lines vs CA 121 SCRA 769
F:
Private respondents purchased first-class
tickets from petitioner 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, the vessel
sailed at around 3 A.M. only to be towed back to Cebu
due to engine trouble, arriving back at Cebu at about 4
PM. After repairs, the vessel was only able to leave
around 8 A.M. of the next day.
Instead of docking at Catbalogan, which was
the first port of call, the vessel proceeded directly to
Tacloban. Private respondents had no recourse but to
disembark and board a ferryboat to Catbalogan. Hence
this suit for damages for breach of contract of
carriage. The TC and CA decided in favor of plaintiffs.
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.
Furthermore, the conditions relied upon by
petitioner cannot prevail over Arts. 614 and 698 of the
Code of Commerce.
The voyage to Catbalogan was interrupted by
the captain upon instruction of management. The
interruption was not due to fortuitous event or force
majeure nor to disability of the vessel. Having been
caused by the captain upon instructions 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 under
Art. 586 of the Code of Commerce.
The passengers are also entitled to moral
damages on account of the BF on the part of the
carrier. They did not give notice of the change of
schedule. Knowing fully well that it would take 15
hours to repair the vessel, they informed the
passengers that it would take only a few hours. They
did not offer to refund the tickets of the passengers
nor provide them transportation from Bacolod City to
Catbalogan.
4. Responsibilities of Captain
Issue: WON defendant is liable.

Held: The governing provisions are found in the Code
of Commerce. Art. 614 provides that a captain who
agreed to make a voyage and who fails to fulfill his
undertaking, without being prevented by fortuitous
event or force majeure, shall indemnify all the losses
which his failure may cause, without prejudice to
criminal penalties which may prosper. Art. 698 also
provides for the captain's 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.
As found by both courts below, there was no
fortuitous event or force majeure which prevented the
vessel from fulfilling its undertaking of taking private
respondents to Catbalogan. Mechanical defects in the
CC are not considered caso fortuito that exempts the
CC from responsibility. Even granting that the engine
failure was a fortuitous event, it accounted only for the
delay in the departure. When the vessel left Cebu,
there was no longer any force majeure that justified
the by-passing a port of call.
The vessel was
completely repaired when it left Cebu for Samar and
Leyte. In fact, after docking at Tacloban City, the
vessel left for Manila to complete its voyage.
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 ff. 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 tickets and refund the passenger the value
of his/her ticket.
11. The sailing schedule of the vessel xxx is
subject to change without previous notice."
Even assuming that those conditions are
applicable to 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 vessels' sailing schedule that
was involved. The complaint is directed not at the
delayed departure the next day but at the by-passing
of Catbalogan, their destination.
Had petitioner
Art. 701. The convenience or the interest

of the passengers shall not obligate nor
empower the captain to stand in-shore or enter
places which may take the vessel out of her
course, nor to remain in the ports he must or is
under the necessity of touching for a period
longer than that required by the needs of
navigation.
Art. 702. In the absence of an agreement
to the contrary, the subsistence of the
passengers during the voyage shall be deemed
included in the price of the passage; but should
it be for their account, the captain shall be
under the obligation, in case of necessity, to
supply the food necessary for their sustenance
at a reasonable price.
Art. 705.
In case of the death of a
passenger during the voyage the captain shall
be authorized, with respect to the body, to take
the steps required by the circumstances, and
shall carefully take care of the papers and
goods of said passenger which may be on board,
complying with the provisions of case No. 10 of
Article 612 with regard to members of the crew.
Art. 612.
The following duties are
inherent in the office of captain:
1. To have on board before starting on a
voyage a detailed inventory of the hull, engines,
rigging, tackle, stores, and other equipments of
the vessel; the navigation certificate; the roll of
the persons who make up the crew of the
vessel, and the contracts entered into with the
crew; the list of passengers; the health
certificate; the certificate of the registry
proving the ownership of the vessel; and all the
obligations which encumber the same up to that
date; the charters or authenticated copies
thereof; the invoices or manifest of the cargo,
and the instrument of the expert visit or
inspection, should it have been made at the port
of departure.
2. To have a copy of this Code on board.
PAGE 97

3. To have three folioed and stamped
books, placing at the beginning of each one a
note of the number of folios it contains, signed
by the marine official, and in his absence by the
competent authority.
In the first book, which shall be called
"log book," he shall enter every day the
condition of the atmosphere, the prevailing
winds, the course sailed, the rigging carried, the
horsepower of the engines, the distance
covered, the maneuvers executed, and other
incidents of navigation. He shall also enter the
damage suffered by the vessel in her hull
engines, rigging, and tackle, no matter what is
its cause, as well as the imperfections and
averages of the cargo, and the effects and
consequence of the jettison, should there be
any; and in cases of grave resolutions which
require the advice or a meeting of the officers
of the vessel, or even of the passengers and
crew, he shall record the decision adopted. For
the informations indicated he shall make use of
the binnacle book, and of the steam or engine
book kept by the engineer.
In
the
second
book,
called
the
"accounting book", he shall enter all the
amounts collected and paid for the account of
the vessel, entering specifically article by
article, the sources of the collection, and the
amounts
invested
in
provisions,
repairs,
acquisition of rigging or goods, fuel, outfits,
wages, and all other expenses.
He shall
furthermore enter therein a list of all the
members of the crew, stating their domiciles,
their wages and salaries, and the amounts they
may have received on accounts, either directly
or by delivery to their families.
In the third book, called "freight book,"
he shall record the entry and exit of all the
goods, stating their marks and packages, names
of the shippers and of the consignees, ports of
loading and unloading, and the freight earned.
In the same book he shall record the names and
places of sailing of the passengers and the
number of packages of which their baggage
consists, and the price of the passage.
4. To make, before receiving the freight,
with the officers of the crew, and the two
experts, if required by the shippers and
passengers, an examination of the vessel, in
order to ascertain whether she is watertight,
and whether the rigging and engines are in
good condition; and if she has the equipment
required for good navigation, preserving a
certificate
of
the
memorandum
of
this
inspection, signed by all the persons who may
have taken part therein, under their liability.
The experts shall be appointed one by
the captain of the vessel and the other one by
the persons who request the examination, and
in case of disagreement a third shall be
appointed by the marine authority of the port.
5. To remain constantly on board the
vessel with the crew during the time the freight
is taken on board and carefully watch the
stowage thereof; not to consent to any
merchandise or goods of a dangerous character
to be taken on, such as inflammable or
explosive substances, without the precautions
which are recommended for their packing,
management and isolation; not to permit that
any freight be carried on deck which by reason
of its disposition, volume, or weight makes the
work of the sailors difficult, and which might
endanger the safety of the vessel; and if, on
account of the nature of the merchandise, the
special
character
of
the
shipment,
and
principally the favorable season it takes place,
he allows merchandise to be carried on deck, he

must hear the opinion of the officers of the
vessel, and have the consent of the shippers
and of the agent.
6. To demand a pilot at the expense of
the vessel whenever required by navigation,
and principally when a port, canal, or river, or a
roadstead or anchoring place is to be entered
with which neither he, the officers nor the crew
are acquainted.
7. To be on deck at the time of sighting
land and to take command on entering and
leaving ports, canals, roadsteads, and rivers,
unless there is a pilot on board discharging his
duties. He shall not spend the night away from
the vessel except for serious causes or by
reason of official business. 8.
To
present
himself, when making a port in distress, to the
maritime authority if in the Philippines and to
the Filipino consul if in a foreign country, before
twenty-four hours have elapsed, and make a
statement of the name, registry, and port of
departure of the vessel, of its cargo, and reason
of arrival, which declaration shall be vised by
the authority of by the consul if after examining
the same it is found to be acceptable, giving the
captain the proper certificate in order to show
his arrival under stress and the reasons
therefor. In the absence of marine officials or of
the consul, the declaration must be made before
the local authority.
9. To take the steps necessary before
the competent authority in order to enter in the
certificate of the vessel in the registry of the
vessels, the obligations which he may contract
in accordance with Article 583.
10. To put in a safe place and keep all
the papers and belongings of any members of
the crew who might die on the vessel, drawing
up a detailed inventory, in the presence of
passengers as witnesses, and, in their absence,
of members of the crew.
11. To conduct himself according to the
rules and precepts contained in the instructions
of the agent, being liable for all that he may do
in violation thereof.
12. To give an account to the agent from
the port where the vessel arrives, of the reason
therefor, taking advantage of the semaphore,
telegraph, mail, etc., according to the cases;
notify him the freight he may have received,
stating the name and domicile of the shippers,
freight earned, and amounts borrowed on
bottomry bond, advise him of his departure, and
give him any information and date which may be
of interest.
13. To observe the rules on the situation
of lights and evolutions to prevent collisions.
14. To remain on board in case of danger
to the vessel, until all hope to save her is lost,
and before abandoning her to hear the officers
of the crew, abiding by the decision of the
majority; and if he should have to take a boat he
shall take with him, before anything else, the
books and papers, and then the articles of most
value, being obliged to prove in case of the loss
of the books and papers that he did all he could
to save them.
15. In case of wreck he shall make the
proper protest in due form at the first port
reached, before the competent authority or
Filipino consul, within twenty-four hours, stating
therein all the incidents of the wreck, in
accordance with case 8 of this article.
16.
To comply with the obligations
imposed by the laws and rules of navigation,
customs, health, and others.
PAGE 98

Art. 703.
A passenger shall be
considered a shipper of the goods he carries on
board, and the captain shall not be responsible
for what the former may keep under his
immediate and special custody, unless the
damage arises from an act of the captain or of
the crew.
Art. 1754. The provisions of Arts. 1733 to
1753 shall apply to the passenger's baggage
which is not in his personal custody or in that of
his employee. As to the other baggage, the
rules in Articles 1998 and 2000 to 2003
concerning the responsibility of hotel-keepers
shall be applicable. (New Civil Code.)
Q: What application does COGSA have in carriage of

passengers?
A: None. Applies only to carriage of goods.
Sec. 2. This Act shall take effect upon its
approval. (Approved October 22, 1936).
TITLE I
Notes: In relation to Civil Code :

Art. 1753 - governed by law of place of destination, if
shipped to a foreign country, governed by law of
foreign country
Art. 1766 - goods from foreign country shipped to the
Philippines, governed by the Civil Code
Sec. 1. When used in this Act(a) The term "carrier" includes the owner
or the charterer
who enters into a contract of carriage with a
shipper.
(b) The term "contract
of
carriage"
applies only to contracts of carriage covered
by a bill of lading or any similar document of
title, insofar as such document relates to the
carriage of goods by sea, including any bill of
lading or any similar document as aforesaid
issued under or pursuant to a charter party
from the moment at which such bill of lading or
similar document of title regulates the relations
between a carrier and a holder of the same.
(c) The term "goods" includes goods,
wares, merchandise, and articles of ever kind
whatsoever, except live animals and cargo
which by the contract of carriage is stated as
being carried on deck and is so carried.
(d) The term "ship" means any vessel
used for the carriage
of goods by sea.
(e) The term "carriage of goods" covers
the period from the time when the goods are
loaded to the time when they are discharged
from the ship
COGSA - applicable to all transportation of goods by

sea in foreign trade to and from Philippine ports
- does not apply to purely domestic transport
RISKS
J. Carriage of Goods by Sea Act (Commonwealth Act.

No. 65, Public Act No. 521, 74the US Congress)
Sec. 1. That the provisions of Public Act No. 521
of the 74th Congress of the United States,
approved on April 16, 1936, be accepted, as it is
hereby accepted to be made applicable to all
contracts for the carriage of goods by sea to
and from Philippine ports in foreign trade:
Provided, that nothing in this Act shall be
construed as repealing any existing provision of
the Code of Commerce which is not in force, or
as limiting its application.
- Laws applicable to a contract for the carriage of

goods by sea:
1. Distinguish - common carrier (Civil Code)
- private carrier
2. Where is the vessel going?
a. Common carrier coming to the Phils. = what law
applies?
1st: Civil Code
2nd: COGSA (it's more specific than Code of
Commerce)
- in foreign trade
3rd: Code of Commerce
Sec. 2.
Subject to the provisions of
Section 6, under every contract of carriage of
goods by sea, the carrier in relation to the
loading, handling, stowage, carriage, custody,
care, and discharge of such goods shall be
subject to the responsibilities and liabilities and
entitled
to
the
rights
and
immunities
hereinafter set forth.
RESPONSIBILITIES AND LIABILITIES
b. Private carrier coming to the Phils. in foreign trade

1st: COGSA (because it's more specific)
2nd: Code of Commerce
3rd: Civil Code (provisions not on common carriers
e.g. torts, contracts)
Sec. 3. (1) The carrier shall be bound

before and at the beginning of the voyage to
exercise due diligence to(a) Make the ship
seaworthy;
(b) Properly man, equip,
and supply the ship;
(c)
Make
the
holds,
refrigerating
and
cooling
chambers, and all other parts of
the ship in which goods are
carried, fit and safe for their
reception,
carriage,
and
preservation
c. From the Phils. to a foreign country: apply laws of

such foreign country (Art. 1753)
- with respect to vessels destined for foreign ports, the
COGSA doesn't apply unless parties make it
applicable.
Q: In what situations does COGSA primarily apply?
A: Where the parties expressly stipulate that COGSA
shall govern their respective rights and obligations.
Q: Can the COGSA apply in domestic shipping?
A: Generally, NO.
EXCEPTION: when parties agree to make it apply.
(2)
The carrier shall properly and
carefully load, handle, stow, carry, keep, care
for, and discharge the goods carried.
(3) After receiving the goods into his
charge the carrier, or the master or agent of the
PAGE 99

carrier, shall, on demand of the shipper, issue to
the shipper a bill of lading showing among other
things(a) The loading marks necessary
for identification of the goods as
the same are furnished in writing
by the shipper before the loading
of such goods starts, provided
such marks are stamped or
otherwise shown clearly upon the
goods if uncovered, in such a
manner
as
should
ordinarily
remain legible until the end of the
voyage.
(b) Either the number of packages
or pieces, or the quantity or
weight, as the case may be, as
furnished
in
writing
by
the
shipper.
(c) The apparent order and conditions of
the goods:
Provided, that no carrier,
master, or agent of the carrier, shall be
bound to state or show in the bill of lading
any marks, number, quantity, or weight
which he has reasonable ground for
suspecting not accurately to represent the
goods actually received or which he has
had no reasonable means of checking.
(4) Such a bill of lading shall be prima
facie evidence of the receipt by the carrier of the
goods as therein described in accordance with
paragraphs (3) (a), and (c), of this section: (The
rest of the provision is not applicable to the
Philippines).
(5) The shipper shall be deemed to have
guaranteed to the carrier the accuracy at the
time of shipment of the marks, number, quantity,
and weight, as furnished by him; and the shipper
shall indemnify the carrier against all loss,
damages, and expenses arising or resulting from
inaccuracies in such particulars. The right of the
carrier to such indemnity shall in no way limit his
responsibility and liability under the contract of
carriage to any person other than the shipper.
(6) Unless notice of loss or damage and
the general nature of such loss or damage be
given in writing to the carrier or his agent at the
port of discharge or at the time of the removal of
the goods into the custody of the person entitled
to delivery thereof under the contract of carriage,
such removal shall be prima facie evidence of the
delivery by the carrier of the goods as described
in the bill of lading. If the loss or damage is not
apparent, the notice must be given within three
days of the delivery.
Said notice of loss or damage may be
endorsed upon the receipt for the goods given by
the person taking delivery thereof.
The notice in writing need not be given if
the state of the goods has at the time of their
receipt been the subject of joint survey or
inspection.
In any event the carrier and the ship shall
be discharged from all liability in respect of loss
or damage unless suit is brought within one year
after delivery of the goods or the date when the
goods should have been delivered:
Provided,
that, if a notice of loss or damage, either
apparent or concealed, is not given as provided
for in this section, that fact shall not affect or
prejudice the right of the shipper to bring suit
within one year after the deliver of the goods or

the date when the goods should have been
delivered.
In the case of any actual or apprehended
loss or damage, the carrier and the receiver shall
give all reasonable facilities to each other for
inspecting and tallying the goods
(7) After the goods are loaded the bill of
lading to be issued by the carrier, master, or
agent of the carrier to the shipper shall if the
shipper so demands, be a "shipped" bill of lading:
Provided, that if the shipper shall have previously
taken up any document of title to such goods, he
shall surrender the same as against the issue of
the "shipped" bill of lading, but at the option of
the carrier such document of title may be noted
at the port of shipment by the carrier, master, or
agent with the name or names of the ship or
ships upon which the goods have been shipped
and the date or dates of shipment, and when so
noted the same shall for the purpose of this
section be deemed to constitute a "shipped" bill
of lading.
(8) Any clause, covenant, or agreement in
a contract of carriage relieving the carrier of the
ship from liability for loss or damage to or in
connection
with
the
goods,
arising
from
negligence, fault, or failure in the duties and
obligations provided in this section, or lessening
such liability otherwise than as provided in this
Act, shall be null and void and of no effect. A
benefit of insurance in favor of the carrier, or
similar clause, shall be deemed to be a clause
relieving the carrier from liability.
Notes: Prescriptive period under Section 3(6). - the
carrier and the agent shall be discharged form liability
in respect of loss or damage unless suit is brought
within 1 year from:
(1) in case of damaged goods: from the time
delivery of the goods was made
(2) in case of non-delivery (i.e., lost goods):
from the date the goods should have been delivered
Cases of misdelivery or conversion not covered.
1 year-prescriptive period in Sec. 3 (6) applies only
where there is loss or damage.
Loss contemplates only where no delivery at all was
made by the carrier of the goods because the same had
perished, gone out of commerce, or disappeared in such
a way that their existence is unknown or they cannot be
recovered
Hence, in case of misdelivery (delivery to wrong person)
or conversion of the goods, the rules on prescription
found in the Civil Code shall apply (10 years for
contracts; 4 years for tortious obligations)
Shipper, consignee or legal holder of B/L may invoke the
prescriptive period and have the right to file suit within
one year after delivery of the goods or failure to deliver.
Mere proposal for arbitration or fact that there have
been initial negotiations does not suspend the running
of the period for prescription
NOTE: Prof. Quimbo does not agree with this SC ruling.
If there is a misdelivery or conversion, there is a case of
loss from the point of view of the consignee or shipper.
Q:
Is the prescriptive period under the COGSA
interrupted from the time of the making of extra-judicial
demand or filing of judicial action as provided in Art.
1155, NCC?
PAGE 100

A: No. 1 year period is a special prescriptive period,
uniform worldwide
(a) Act, neglect, or default of the

master, mariner, pilot, or the
servants of the carrier in the
navigation or in the management
of the ship;
(b)
Fire, unless caused by the
actual fault or privity of the
carrier;
(c) Perils, dangers, and accidents
of the sea or other navigable
water;
(d) Act of God;
(e) Act of war;
(f) Act of public enemies;
(g) Arrest or restraint of princes,
rulers, or people, or seizure under
legal process;
(h) Quarantine restrictions;
(i) Act or omission of the shipper
or owner of the goods, his agent
or representative;;
(j) Strikes or lockouts or stoppage
or
restraint
of
labor
from
whatever cause, whether partial
or general: Provided, that nothing
herein
contained
shall
be
construed to relive a carrier from
responsibility for the carrier's own
acts:
(k) Riots and civil commotions;
(l) Saving or attempting to save
life or property at sea;
(m) Wastage in bulk or weight or
any other loss or damage arising
from inherent defect, quality, or
vice of the goods;
(n) Insufficiency of packing;
(o) Insufficiency or inadequacy of
marks;
(p) Latent defects not
discoverable by due diligence; and
(q)
Any other cause
arising
without
the
actual fault and
privity of the carrier and without
the fault or neglect of the agents
or servants of the carrier, but the
burden of proof shall be on the
person claiming the benefit of this
exception to show that neither the
actual fault or privity of the carrier not the fault or neglect of the
agents or servants of the carrier
contributed to the loss or damage.
Rationale behind the 3-day notice and relatively short

prescriptive period:
- to provide carrier an opportunity to look for
the lost goods
- to discover who was at fault
- in case of transshipment, to determine, when
and where damage occurred
Shipper, consignee or legal holder of bill may invoke
prescriptive period although the proviso in Sec. 3 (6)
gives the impression that it is the shipper alone who can
invoke the same.
But prescriptive period does not apply to the action by
an insurer as subrogee of the consignee.
Stipulation in bill limiting carrier's liability contrary to
sec. 3(8) is void; e.g. provision in the bill excepting th
owner form liability for loss or damage of cargo unless
written notice is thereof was given to the carrier within
30 days; such a provision is contrary to a provision of
the COGSA since Sec. 3 provides that even if a notice of
loss or damage is not given as required, that fact shall
not prejudice the right of the shipper to bring suit within
1 year after delivery of the goods.
Notice requirements:
COGSA: Sec. 3(6)
If loss or damage is apparent - protest as soon as
receipt of goods
If not apparent -> within 3 days of delivery
Code of Commerce: Art. 366
apparent - protest at time of receipt
non-apparent - within 24 hours after receipt
WARSAW: Art. 26
in case of damage:
of baggage - within 3 days from receipt
of goods - within 7 days
in case of delay: within 14 days from receipt
failure to comply with the 3-days notice requirement
under COGSA does not affect the right of the shipper to
bring action provided he brings the same within 1 year
To be distinguished from the notice requirement
in the WARSAW convention and Code of Commerce,
where the notice requirement is a condition precedent
for the right of action against the shipowner to accrue.
RIGHTS AND IMMUNITIES
Sec. 4. (1) Neither the carrier not the ship
shall be liable for loss or damage arising or
resulting from unseaworthiness unless caused by
want of due diligence on the part of the carrier to
make the ship seaworthy and to secure that the
ship is properly manned, equipped, and supplied,
and to make the holds, refrigerating and cooling
chambers, and all other parts of the ship in which
goods are carried fit and safe for their reception,
carriage, and preservation, in accordance with
the provisions of paragraph (1) of Section (3).
Whenever loss or damage has resulted from
unseaworthiness, the burden of proving the
exercise of due diligence shall be on the carrier
or other person claiming exemption under this
section.
(2) Neither the carrier not the ship shall
be responsible for loss or damage arising or
resulting from-
(3) The shipper shall not be responsible

for loss or damage sustained by the carrier or the
ship arising or resulting from any cause without
the act, or neglect of the shipper, his agents, or
his
(4) An deviation in saving or attempting to
save life or property at sea, or any reasonable
deviation shall not be deemed to be an
infringement or breach of this Act or of the
contract of carriage, and carrier shall not be
liable for any loss or damage resulting therefrom:
Provided, however, that if the deviation is for the
purpose of loading or unloading cargo or
passengers it shall, prima facie, be regarded as
unreasonable.
(5) Neither the carrier nor the ship shall
in any event be or become liable for any loss or
damage
to
or
in
connection
with
the
transportation of goods in an amount exceeding
$500 per package of lawful money of the United
States, or in case of goods not shipped in
packages, per customary freight unit, or the
PAGE 101

equivalent of that sum in other currency, unless
the nature and value of such goods have been
declared by the shipper before shipment and
inserted in the bill of lading. This declaration, if
embodied in the bill of lading, shall be prima facie
evidence, but shall not be conclusive on the
carrier.
By agreement between the carrier, master
or agent of the carrier, and the shipper another
maximum amount than that mentioned in this
paragraph may be fixed:
Provided, that such
maximum shall not be less than the figure above
named. In no event shall the carrier be liable for
more than the amount of damage actually
sustained.
Neither the carrier nor the ship shall be
responsible in any event for loss or damage to or
in connection with the transportation of the
goods if the nature or value thereof has been
knowingly and fraudulently mis-stated by the
shipper in the bill of lading.
(6) Goods of an inflammable, explosive, or
dangerous nature to the shipment whereof, the
carrier, master or agent of the carrier, has not
consented with knowledge of their nature and
character, may at any time before discharge be
landed at any place or destroyed or rendered
innocuous by the carrier without compensation,
and the shipper of such goods shall be liable for
all damages and expenses directly or indirectly
arising out of or resulting from such shipment. If
any such goods shipped with such knowledge and
consent shall become a danger to the ship or
cargo, they may in like manner be landed at any
place, or destroyed or rendered innocuous by the
carrier without liability on the part of the carrier
except to general average if any.
Notes:
Amount recoverable in
$500/package, even if not stipulated
case
of
loss:
The plaintiff cannot dispute said limitation on the

ground that it was not freely and fairly agreed upon or
that it is against public policy, since the LAW ITSELF
PROVIDES FOR SAID LIMITATION; THE SAME IS DEEMED
READ INTO THEIR CONTRACT
Package - means individual packaging of the goods
- does not cover 1 container van
Parties may agree to amount of liability less than $500
under Sec. 4(5).
By providing that $500 is the
maximum liability, the law does not disallow an
agreement for liability at a lesser amount. Moreover,
Art. 1749 of the NCC expressly allows th limitation of the
carrier's liability. (Eastern v. Great American)
SURRENDER OF RIGHTS AND IMMUNITIES AND
INCREASE OF RESPONSIBILITIES AND LIABILITIES
Sec. 5. A carrier shall be at liberty to
surrender in whole or in part all or any of his
rights and immunities or to increase any of his
responsibilities and liabilities under this Act,
provided such surrender or increase shall be
embodied in the bill of lading issued to the
shipper.
The provisions of this Act shall not be
applicable to charter parties; but if bills of lading
are issued in the case of a ship under a charter
party, they shall comply with the terms of this
Act. Nothing in this Act shall be held to prevent

the insertion in a bill of lading of any lawful
provisions regarding general average.
SPECIAL CONDITIONS
Sec. 6. Notwithstanding the provisions of
the preceding section, a carrier, master or agent
of the carrier, and a shipper shall, in regard to
any particular goods be at liberty to enter into
any agreement in any terms as to the
responsibility and liability of the carrier for such
goods, and as to the rights and immunities of the
carrier in respect to such goods, or his obligation
as to seaworthiness, (so far as the stipulation
regarding seaworthiness is not contrary to public
policy), or the care or diligence of his servants or
agents in regard to the loading, handling,
stowage, carriage, custody, care and discharge of
the goods carried by sea; provided, that in this
case no bill of lading has been or shall be issued
and that the terms agreed shall be embodied in a
receipt which shall be a non-negotiable document
and shall be marked as such.
Any agreement so entered into shall have
full legal effect: Provided, that this section shall
not apply to ordinary commercial shipments
made in the ordinary course of trade but only to
other shipments where the character or condition
of
the
property
to
be
carried
or
the
circumstances, terms and conditions under which
the carriage is to be performed are such as
reasonable to justify a special agreement.
Sec. 7. Nothing contained in this Act shall
prevent a carrier or a shipper from entering into
any
agreement,
stipulation,
condition,
reservation, or exemption as to the responsibility
and liability of the carrier or the ship for the loss
or damage to or in connection with the custody
and care and handling of goods prior to the
loading on and subsequent to the discharge from
the ship on which the goods are carried by sea.
Sec. 8. The provisions of this Act shall not
affect the rights and obligations of the carrier
under the provisions of the Shipping Act, 1916, or
under the provisions of Section 4281 to 4292,
inclusive, of the Revised Statutes of the United
States, or of any amendments thereto, or under
the provisions of any other enactment for the
time being in force relating to the limitation of
the liability of the owners of seagoing vessels.
TITLE II
Sec. 9. Nothing contained in this Act shall
be construed as permitting a common carrier by
water
to
discriminate
between
competing
shippers
similarly
placed
in
time
and
circumstances, either
(a) with respect to their right to demand
and receive bills of lading subject to the
provisions of this Act; or
(b) when issuing such bills of lading either
in the surrender of any of the carrier's rights and
immunities or in the increase of any of the
carrier's responsibilities and liabilities pursuant
to Section 5, Title I, of this Act;
(c) in any other way prohibited by the
Shipping Act, 1916, as amended.
PAGE 102

Sec.
10.
Philippines.)
(Not
applicable
to
the
Sec. 11. When under the custom of any

trade the weight of any bulk cargo inserted in the
bill of lading is a weight ascertained or accepted
by a third party other than the carrier or the
shipper and the fact that the weight as
ascertained or accepted is stated in the bill of
lading, then notwithstanding anything in this Act,
the bill of lading shall not be deemed to be prima
facie evidence against the carrier of the receipt
of goods of the weight so inserted in the bill of
lading, and the accuracy thereof at the time of
shipment shall not be deemed to have been
guaranteed by the shipper.
Sec.
12.
Philippines.)
(Not
applicable
to
the
Sec. 13.
This act shall apply to all
contracts for carriage of goods by sea to or from
ports of the United States in foreign trade. As
used in this Act the term "United States" includes
its
districts,
territories,
and
possessions:
Provided, however, that the Philippine Legislature
may
by
law
exclude
its
application
to
transportation to or from ports of the Philippine
Islands. The term "foreign trade" means the
transportation of goods between the ports of the
United States and ports of foreign countries.
Nothing in this Act shall be held to apply to contracts for carriage of goods by sea between any
port of the United States or its possession:
Provided, however, that any bill of lading or
similar document of the title which is evidence of
a contract for the carriage of goods by sea
between such ports, containing an express
statement that it shall be subject to the
provisions of this Act, shall be subjected hereto
as fully as if subject hereto by the express
provisions of this Act: Provided, further, that
every bill of lading or similar document of title
which is evidence of a contract for the carriage of
goods by sea from ports of the United States in
foreign trade, shall contain a statement that it
shall have effect subject to the provisions of this
Act.
Notes: American Insurance vs Cia Maritima : contract of
carriage from NY with final destination in Cebu. COGSA
is applicable despite the fact that from Manila to Cebu,
the goods were transshipped on an interisland vessel.
Transshipment was not a separate transaction from that
originally entered into by the parties but was part of the
carrier's contractual obligation.
Sec. 14.
Upon the certification of the
Secretary
of
Commerce
that
the
foreign
commerce of the United States in its competition
with that of foreign nations is prejudiced by the
provisions, or any of them, of the Title I of this
Act, or by the laws of any foreign country or
countries relating to the carriage of goods by
sea, the President of the United States may, from
time to time by proclamation, suspend any or all
provisions of Title I of this Act for such periods of
time or indefinitely as may be designated in the
proclamation., The President may at any time
rescind such suspension of Title I hereof, and any
time rescind such suspension of Title I hereof,
and any provisions thereof which may have been
thereafter made for carriage of goods by sea.
Any proclamation of suspension or rescission of
any such suspension shall take effect on the date

named therein, which date shall be not less than
ten days from the issue of the proclamation.
Any contract for the carriage of goods by
sea, subject to the provisions of this Act,
effective during any period when Title I hereof, or
any part thereof, is suspended, shall be subject
to all provisions of law now or hereafter
applicable to that part of Title I which may have
thus been suspended.
Sec. 15, COGSA. This Act shall take effect ninety
days after the date of its approval; but nothing in
this Act shall apply during a period not to exceed
one year following its approval to any contract
for the carriage of goods by sea, made before the
date on which this Act is approved nor to any bill
of lading or similar document of title issued,
whether before or after such date of approval in
pursuance of any such contract as aforesaid.
Sec. 16, COGSA. This Act may be cited as the
"Carriage of Goods by Sea Act."
Approved, April 16, 1936.
V. International Air Transport

A. The Warsaw Convention, 51 O.G. 5084 (October
1955);
Presidential Proclamation No. 201, 51 O.G. 4933
(October 1955)
MAKING PUBLIC THE ADHERENCE OF THE R.P. TO
THE CONVENTION FOR THE UNIFICATION OF
CERTAIN RULES RELATING TO INTL.
TRANSPORTATION BY AIR AND THE ADDITIONAL
PROTOCOL THERETO, 1929
WHEREAS, a Convention for the Unification
of Certain Rules Relating to International
Transportation by Air & an Additional Protocol
thereto relating to Article 2 of the Convention
were signed at Warsaw by the plenipotentiaries
of 32 countries;
WHEREAS, Article 38 of the aforesaid
Convention provides that a Government on behalf
of which this Convention has not been signed,
shall be allowed to adhere thereto at any time
after the Convention has come into force, by
means of a notification addressed to the
Government of the Republic of Poland;
WHEREAS, the Senate of the Congress of
the Philippines, by its Resolution No. 19 adopted
on May 16, 1950, concurred in the adherence by
the Republic of the Philippines Government to the
said Convention
& the said Protocol in
accordance with the Philippine Constitution,
subject to the reservation, as provided in the
Additional Protocol, that the 1st paragraph of Art.
2 of the Convention shall not apply to
PAGE 103

international
transportation
that
may
performed by the Republic of the Philippines;
be
WHEREAS, the Republic of the Philippines

Government has formally adhered to the said
Convention its Additional Protocol, & the
Government of the Republic of Poland was
notified of said adherence on November 9, 1950,
when the instrument of adherence was registered
in accordance with Article 38 (2) of said Convention; and,
WHEREAS, the adherence of the Republic
of the Philippines Government, pursuant to Art.
38(3) of said Convention, took effect as from the
90th day after November 9, 1950.
NOW, THEREFORE, be it known that I,
Ramon Magsaysay, Republic of the Philippines
President, in pursuance
of the aforesaid
concurrence of the Senate of the Congress of the
Philippines, and subject to the reservation as
provided in the Additional Protocol that the First
paragraph of Art.2 of the Convention shall not
apply to international transportation that may be
performed by the Republic of the Philippines, do
hereby proclaim and make public the said
Convention and said Protocol, a copy of which is
hereto attached, to the end that the same and
every article and clause thereof may be observed
& fulfilled with good faith by the Republic of the
Philippines and the citizens thereof.
Notes: If common carrier, Civil Code first applies, then
Warsaw Convention.
Situations where Warsaw is applicable is in private
carriers.
The only criterion for the Warsaw Convention to be
applicable is: it is applicable to ALL international
transportation of persons, baggage, or goods performed
by aircraft for hire.
International transport: where there's transport by AIR &
there is a point of contact in 2 high contracting parties
(countries which have acceded to the Convention).
E.g. transportation by PAL from Manila to San Francisco
Federal Express - transporation of goods
B. Constitutionality
SANTOS V. NORTHWEST AIRLINES [210 S 256
(1992)]
F:
1. A Filipino minor was informed by Northwest
that he had no reservations for his flights, and had to be
waitlisted, despite a previous confirmation. He sued for
damages. Northwest moved to dismiss on the ground of
lack of jurisdiction based on Art.28 (1) of the Warsaw
Convention, where the complaint could be instituted in
the territory of one of the contracting parties before the
court of the
(1) domicile of the carrier;
(2) principal place of business;
(3) where it has a place of business through which the
contract had been made; and
(4) place of destination.
assumed by the Philippine Government and as such, has

the force and effect of law. The presumption is that this
joint legislative-executive act was first carefully studied
and determined to be constitutional before it was
adopted. Petitioner's allegation have not overcome this
presumption. Moreover, the treaty since 1950 has not
been rejected by the Philippine Government.
SECOND ISSUE: W/NOT THE WC SHOULD BE RENDERED
IRRELEVANT BY THE DOCTRINE OF REBUS SIC
STANTIBUS?
HELD: No. The circumstance that the airline industry
was still in infancy when the Convention was made,
alone, is not sufficient justification for the rejection of
the treaty at this time. The changes recited by petitioner
were not entirely unforeseen although they were
expected in a general sense only. (Check Art.41).
THIRD ISSUE: W/NOT THE REQUISITS OF THE WC IS
MERELY A MATTER OF VENUE OR JURISDICTION?
HELD: Jurisdiction
(1) The wording of Art. 32, which indicates the places
where the action for damages "must" be brought,
underscores the mandatory nature of Art. 28 (1).
(2) This characterization is consistent with one of the
objectives of the convention, which is to regulate in a
uniform manner the conditions of international
transportation by air.
FOURT ISSUE: W/NOT PHILIPPIN
JURISDICTION OVER THIS CASE?
COURTS
HAVE
HELD: No. Art. 28 (1) provides that an action for

damage must be brought at the option of the plaintiff:
(a) before the court of the domicile of the carrier;
(b) the court of its principal place of business;
(c) the court where it has a place of business thru w/c
the contract had been made;
(d) the court of the place of destination.
In this case, the ff. were not followed, and hence
the Philippines, not being one of the courts mentioned
in Art.28 (1), does not have jurisdiction over the case.
(1) court of domicile is Minnesota, U.S.A;
(2) principal place of business of carrier is also U.S.A;
(3) place of business where contract was made was in
San Francisco;
(4) place of destination is also San Francisco, Santos
having purchased a round trip-ticket from SFO-TYO-MNL,
then back to TYO- SFO. The "ultimate destination" being
San Francisco.
The court called upon to determine the
applicability of the limitation provision must first be
vested with the appropriate jurisdiction. If the carrier is
indeed is indeed not guilty of WILLFUL MISCONDUCT, it
can avail itself of the limitations set forth in this article.
But it can be done only if the action has first been
commenced properly under the rules set forth in Art.28
(1).
Notes: The enumeration of the causes of action in the
WC is not an exclusive list. You can have a cause of
action even if it is not:
(a) death or wounding of passenger;
(b) damage or loss or destruction of checked baggage;
(c) delay in transportation of passengers, luggage and
goods.
FIRST ISSUE: W/NOT THE WARSAW CONVENTION IS

UNCONSTITUTIONAL?
The case of Northwest is actually overbooking. Delay

still a cause of action under WC.
HELD: No. Art. 28 (1) of

Although the case can
without resolving the
Warsaw Convention is a
Note however, that the limitations of liability in the

Convention favors the carrier.
Warsaw Con. is constitutional.

be decided on other grounds
constitutional question, the
treaty commitment voluntarily
PAGE 104

C. When Applicable
Art. 1. (1) This convention shall apply to all
international transportation of persons, baggage,
or goods performed by aircraft for hire. It shall
apply equally to gratuitous transportation by
aircraft performed by an air transportation
enterprise.
(2) For the purpose of this convention the
expression "international transportation" shall
mean any transportation in which, according to
the contract made by the parties, the place of
departure and the place of destination, whether
or not there be a break in the transportation or a
transshipment, are situated either within the
territories of two High Contracting Parties, or
within the territory of a single High Contracting
Party, if there is an agreed stopping place within
a territory subject to the sovereignty, suzerainty,
mandate, or authority of another power, even
though that power is not a party to this
convention. Transportation without such an
agreed stopping place between territories subject
to the sovereignty, suzerainty, mandate, or
authority of the same High Contracting Party
shall not be deemed to be international for the
purposes of this Convention.
(3) Transportation to be performed by
several successive air carriers shall be deemed,
for the purposes of this Convention, to be one
undivided transportation, if it has been rendered
by the parties as a single operation, whether it
has been agreed upon under the form of a single
contract or of a series of contracts is to be
performed entirely w/in a territory subject to the
sovereignty, suzerainty, mandate, or authority of
the same High Contracting Party.
Art. 2. (1) This convention shall apply to
transportation performed by the state or by legal
entities constituted under public law provided it
falls within the conditions laid down in Art .1.
(2) This convention shall not apply to
transportation performed under the terms of any
international postal convention.
D. Liabilities Under the Convention
damage sustained in the event of the death or
wounding of a passenger or any other bodily
injury suffered by a passenger, if the accident
which caused the damage so sustained took place
on board the aircraft or in the course of any of
the operations of embarking or disembarking.
Art. 18. (1) The carrier shall be liable for
damage sustained in the event of the destruction
or loss of, or of damage to, any checked baggage,
or any goods, if the occurrence
which caused
the damage so sustained took place during the
(2) The transportation by air within the
meaning of the proceeding paragraph shall
comprise the period during which the baggage or
the goods are in charge of the carrier, whether in
an airport or on board an aircraft, or in the case
of a landing outside an airport, in any place
whatsoever.
(3) The period of the transportation by air
shall not extend to any transportation by land, by
sea, or by river performed outside of an airport. If
however, such transportation takes place in the
performance of a contract for transportation by
air, for the purpose of loading, delivery, or

transshipment,any damage is presumed, subject
to proof to the contrary, to have been the result
of an event which took place during the
damage
occasioned
by
delay
in
the
transportation by air of passengers,baggage, or
goods.
NORTHRWEST V. CUENCA [14 S 1063 (1965)]

F:
Nicolas Cuenca, an official delegate of
Philippines to a conference in Tokyo, was transferred
from first class to tourist class despite his first class
ticket. The Northwest agent also treated him rudely in
front of other passengers. Northwest argues that
according to the Warsaw Convention, Arts. 17, 18, 19,
an air carrier is liable only in the event of (a) death
of a passenger or injury suffered by him; (b) of
destruction or loss of, or damage to any checked
baggage/goods; & (c) delay in the transportation by air
of passengers, baggage or goods.
ISSUE: W/NOT CUENCA HAS A CAUSE OF ACTION
THOUGH NOT AMONG THOSE MENTIONED IN THE WC?
HELD: Yes. The said articles merely declare the carrier
liable for damages in the enumerated cases, if the
conditions therein specified are present. Neither the
provisions of said articles nor others regulate or exclude
liability for other breaches of contract by the carrier.
Under petitioner's theory, an air carrier would be
exempt from any liability for damages in the event of its
absolute refusal, in bad faith, to comply with a contract
of carriage, which is absurd.
ALITALIA V. IAC [192 SCRA 10 (1990)]
F:
Dr. Felipa Pablo, an Associate UP Professor and
research grantee of
the Philippine Atomic Energy
Agency was scheduled to speak in a UN meeting in
Ispra, Italy. She arrived in Milan a day before the
meeting, but her luggage (where her speech was) was
delayed, and arrived a day after the meeting. She
returned to Manila before the meeting.
ISSUE: W/NOT THE WC SHOULD APPLY TO LIMIT
ALITATLIA'S LIABILITY?
HELD: No. The WC does not operate as an absolute limit
of the extent of an airline's liability. It does not regulate
or exclude liability for other breaches of contract by the
carrier.
Under the WC,
an air carrier
is made liable for
damages for delay in the transportation by air of
passengers, luggage or goods. The WC also limits the
liability of the carrier to 250 francs per kilo of the total
weight of the package. The WC denies to the carrier
availment of the provisions which exclude or limit his
liability, if the damage is caused
by his willful
misconduct or by such default on his part as, in
accordance with the law of the court seized of the case,
is considered as willful misconduct, or if the damage is
caused by any agent of the carrier acting w/in the
scope of his employment.
2. The WC does not regulate or exclude liability for other
breaches of contract by the carrier or misconduct of its
officers and employees or
for some particular or
exceptional damage. The WC has been held inapplicable
where there was proof of malice or bad faith attributable
PAGE 105

to its officers and employees. Here, however, there was
no bad faith on the part of the employees.
Nominal damages however, was awarded because of
the presence of some special species of injury caused to
Dr. Pablo.
E. Limitations on Liability
RE: PASSENGERS
Art.22.
(1) In the transportation of
passengers the liability of the carrier for each
passenger shall be limited to the sum of 125,000
francs. (Now $100,000) Where, in accordance w/
the law of the court to w/c the case is submitted,
damages may be awarded in the form of
periodical payments, the equivalent capital value
of the said payments shall not be exceed 125,000
francs. Nevertheless, by special contract, the
carrier and the passenger may agree to a higher
limit of liability.
RE: BAGGAGE/GOODS
(2) In the transportation of checked
baggage and of goods, the liability of the carrier
shall be limited to a sum of 250 francs per
kilogram (Now $20 per kilo), unless the consignor
has made, at the time when the package was
handed over to the carrier, a special declaration
of the value of the delivery and has paid a
supplementary sum if the case so requires. In
that case, the carrier will be liable to pay a sum
not exceeding the declared sun, unless he proves
that the sum is grater that the actual value to the
consignor at delivery.
for P83,000 for actual damages. PanAm contended that

such award was beyond the limitation of liability set
forth in the Warsaw Con., the provisions of such being
found at the back of the ticket.
ISSUE: WON Pangan is bound by such Warsaw
provisions & hence is entitled only to $600 ($20
standard X 30 kilos) ---- YES.
Such provisions have been held to be a part of
the contract of carriage, & is valid & 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. Inasmuch as Pangan failed to declare any
higher value for his luggage & to pay add'l charges,
PanAm's liability is limited to $600, as stipulated at the
back of the ticket.
FELICIANO v. PAN AM (CA CASE)
F:
Feliciano, & her Co. asked P182,000 for the
value of the contents of her lost luggage (including
loss of possible opportunities). PanAm contends its
liability if limited by the Warsaw Con. to not more than
$20 per kilo. TC held that there was no issue of fact
except as to amount& awarded $600 ($20 X 30 kgs).
Was TC correct? --- YES.
Indeed, SC has granted damages on the ground
of fraud or bad faith due to the personal misconduct of
airline employees. This case, however, the contract of
carriage of PET's baggage is based on the conditions in
the airline. Such contract is governed by Art.22(2). Since
there is no evidence that PET had declared a higher
value for her lost luggage for w/c the corresponding
value, the Warsaw Con. should apply.
(3) As regards objects of w/c the

passenger takes charge himself, the liability of
the carrier shall be limited to 5,000 francs per
passenger.
(4) The sums mentioned above shall be
deemed to refer to the French franc consisting of
65 1/2 milligrams of gold at the standard of
fineness of nine hundred thousandths. These
sums may be converted into any national
currency in round figures.
F. When limitations unavailable

Art. 3. (1) For the transpo. of passengers
the carrier must deliver a passenger ticket w/c
shall contain the ff. particulars:
(a) The place & date of issue;
(b) The place of departure & of
destination;
(c) The agreed stopping places,
provided that the carrier may
reserve the right to alter the
stopping places in case of necessity, and that if he exercises that
right, the alteration shall not have
the
effect
of
depriving
the
transportation
of
its
intl.
character;
(d) The name & address of the
carrier/s;
(e) A statement that the transpo.
is subject to the rules relating to
liability
established
by
this
convention.
Art. 23. Any provision tending to relieve

the carrier of liability or to fix a lower limit that
which is laid down in this convention shall be null
and void, but the nullity of any such provision
shall not involve the nullity of the whole contract,
which shall remain subject to the provisions of
this convention.
Art. 24. (1) In the cases covered
by
Arts.18 & 19 any action for damages, HOWEVER
FOUNDED, can only be brought subject to the
conditions and limit set out in this convention.
(2) In the case covered by Art.17, the
provisions of the preceding paragraph shall also
apply,w/o prejudice to the question as to who are
the persons who have the right to bring suit and
what are their respective rights.
NOTES: Even if you base your claim on quasi-delict, you
can still sue under Warsaw, invoking Art.24 (1).
PAN AM v. IAC (164 SCRA)
F:
Pangan's luggages didn't arrive w/ his flight. As
a consequence the film exhibitions he set up &
promoted for, was cancelled. CFI ordered PanAm to pay
(2) The absence, irregularity, or loss of

the passenger ticket shall not affect the
existence or the validity of the contract of
transportation, w/c shall none the less be subject
to the rules of this convention. Nevertheless, if
the carrier accepts a passenger w/o a passenger
ticket having been delivered he shall not be
entitled to avail himself of those provisions of
this Convention w/c exclude or limit his liability.
to
PAGE 106
Art.25. (1) The carrier shall not be entitled

avail himself of the provisions of this

convention w/c exclude or limit his liability, if the
damage is caused by his wilful misconduct or by
such default on his part as, in accordance w/ the
law of the court to w/c the case is submitted, is
considered to be equivalent to wilful misconduct.
(2) Similarly the carrier shall not be
entitled to avail himself of the said provisions, is
the
damage
is
caused
under
the
same
circumstances by any agent of the carrier acting
w/in the scope of his employment.
NOTES: Q: In what cases can carrier NOT invoke
limitations?
A: 1. wilfull misconduct (Art.25)
2. default amounting to wilful misconduct accdg. to
court where action is brought;
3. accepting passengers w/o passenger ticket (Art.32);
4. accepting goods w/o air waybill/baggage w/o
baggage check.
Q: Can carrier rely
wilfull misconduct?
on WC if it was guilty of
A: YES. It just can't avail of the limitation on

liability. Thus it can still invoke the provisions on NOTICE
or PRESCRIPTION/LACK OF CAUSE OF ACTION.
e.g. If damage wasn't one of the enumerations in the
WC, & case was filed beyond the 2 year requirement.
The carrier can invoke prescription. But
if suit is
brought w/in 2 years, carrier may be liable for a higher
amount than the limitation.
The only time when WC isn't applicable is when
it's not intl. air transport. There is nothing in Art.25 w/c
says that the WC doesn't apply entirely.
ALITALIA v.IAC (supra)
The Convention does not regulate or exclude
liability for other breaches of contract by the carrier or
misconduct of its officers and employees or for some
particular or exceptional damage. The Con. has been
held inapplicable where there was proof of malice or bad
faith attributable to its officers & employees. HERE,
HOWEVER, no bad faith of EES. Nominal damages
however, was awarded because of the presence of some
special species of injury caused to Dr. Pablo.
Art.26. (1) Receipt by the person entitled

to the delivery of baggage of goods w/o
complaint shall be prima facie evidence that the
same have been delivered in good condition & in
accordance w/ the document of transpo.
(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 3 days from the date of receipt in
the case of BAGGAGE and 7 days from the date of
receipt in the case of GOODS. In case of DELAY
the complaint must be made at the latest w/in 14
days from the date on w/c the baggage or goods
have been placed at his disposal.
(3) Every complaint must be made in
writing upon the document of transportation or
by separate notice in writing dispatched w/in the
times aforesaid.
(4) Failing complaint w/in the times
aforesaid, no action shall lie against the carrier,
save in the case of fraud on his part.
NOTE: No notice requirement in case or a person's
death or injury.
Art. 27. In the case of death of the person
liable, an action for damages lies in accordance
w/ th terms of this convention against those
legally representing his estate.
Art. 28. (1) An action for damage must be
brought at the option of the plaintiff, in the
territory of one of the High Contracting Parties,
either before the court of the domicile of the
carrier or of his principal place of business , or
where he has a place of business through w/c the
contract has been made, or before the court at
the place of destination.
(2) Questions of procedure shall be governed
by the law of the court to w/c the case is
submitted.
SANTOS v. NORTHWEST (supra)
Art. 28(1)
provides that an action for
damage must be brought at the option of the
plaintiff:
(a) before the court of the
domicile of the carrier;
(b) the court of its principal place
of business;
(c) the court where it has a place
of business thru w/c the contract
had been made;
(d) the court of the place of
destination.
TWA v. CA (165 SCRA)

F:
Vinluan, ACCRA lawyer, was downgraded from
1st class to economy & was issued refund
application, in his MNL-Europe-NYK- SFO-MNL flight.
(His NYK-SFO flight particularly) He also noticed that
white Caucasian passengers who checked in later than
him were given preference in 1st class seats, w/c
became available due to "no show" passengers. He sued
in CFI for breach of contract & bad faith.
ISSUE: WON Warsaw Con. limit on liability can be
availed of --- NO.
There was obvious discrimination & humiliation
to w/c Vinluan was subjected. Such inattention & lack of
care for interest of its passengers amount to bad faith
w/c entitles passenger to moral damages.
NOTES: His entire trip, even though he availed of the
services of other airlines, is equal to one transport.
E.g. MNL-SFO via PAL } one continuing
SFO-NYK via United }
ticket
Hence, if injury appears in SFO-NYK, Warsaw can be
applied.
F. Conditions of Liability
xxx
In this case, the ff. were not followed, and hence
the Phils., not being one of the courts mentioned in
Art.28 (1), does not have jurisdiction over the case.
(1) court of domicile is U.S., Minnesota;
(2) principal place of business of carrier is also US;
(3) place of business where contract was made was in
San Francisco;
(4) place of destination is also San Francisco, Santos
having purchased a round trip-ticket from SFO-TYO-MNL,
then back to TYO- SFO. The "ultimate destination" being
San Francisco.
Art. 32.
Any clause contained in the
contract an all special agreements entered into
before the damage occurred by which the parties
PAGE 107

purport to infringe the rules laid down by this
convention, whether by deciding the law to be
applied or by altering the rules as to jurisdiction,
shall be null and void.
Nevertheless, for the
transportation of goods, arbitration clauses shall
be allowed, subject to this convention, if the
arbitration is to take place within one of the
jurisdictions referred to in the first paragraph of
Article 28.
PAGE 108

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TRANSPORTATION AND MARITIME LAW

Based on the outline of Prof. Rodrigo Quimbo

done for general business purposes, any common

TRANSPORTATION AND MARITIME LAW

shall not be considered as operating a public

2. CA 146, as amended, Sec 13 (b)

(c) The word "person" includes every

TRANSPORTATION AND MARITIME LAW

Philippines; Provided, that 60% of the stock or

Section 14. The ff. are exempted from

(c) To fix and determine individual or

Section 15. With the exception of those

(d) To fix just and reasonable standards,

(i) To direct any railroad, street, railway

(a) To issue certificates ... authorizing the

TRANSPORTATION AND MARITIME LAW

Provided, that said fees shall be smaller than

(j) To authorize, in its discretion, any

(b) To require payment of actual

(m) To amend, modify or revoke at any

(e) To permit any street railway or

(n) To suspend or revoke any certificate

(g) To require any public service to keep

(o) To fix, determine, and regulate, as the

(i) To require every public service to file

TRANSPORTATION AND MARITIME LAW

commission in accordance with section 16 of

(k) To investigate accidents directly or

(a) To adopt, establish, fix, impose,

o Section 18 - It shall be unlawful for any

(b) To establish, construct, maintain or

(a) To provide or maintain any service

(e) Hereafter to issue any stock or stock

(b) To make or give, directly or indirectly,

(g) To sell, alienate, mortgage, encumber

(c) To refuse or neglect, when requested

(h) To sell or register in its books the

TRANSPORTATION AND MARITIME LAW

- prior operator is given opportunity to improve service

(i) To sell, alienate or in any manner

Raymundo vs Luneta Motor 58 Phil 889

(b) The Certificate of Public

Issue : Which of the two sales should prevail? public

Nature of certificate : It constitutes neither a franchise

Batangas Transportation Co. vs Orlanes 52 Phil 455

TRANSPORTATION AND MARITIME LAW

Carmelo and Oriol then applied to the PSC for

a CPC should be issued to a second

Held : NO. Decision of PSC is revoked.

San Pablo vs Pantranco South Express, Inc. 153 SCRA

Carmelo vs Monserrat 55 Phil 644

TRANSPORTATION AND MARITIME LAW

EO 125, Sec. 4. Mandate. The DOTC shall

In the case of Javellana vs PSC, the Court

EO 125-A, Sec. 5. To accomplish its

TRANSPORTATION AND MARITIME LAW

Section 11. A CPCN is a permit issued by

Sec. 13. xxx

Section 12. Except as otherwise provided

(ii) Civil Aeronautics

TRANSPORTATION AND MARITIME LAW

f. issue subpoena and subpoena duces