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TRANSPORTATION LAW
MIDTERMS

I. CONCEPT OF COMMON CARRIERS

A. Definition (Art. 1732)
ARTICLE 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.

De Guzman v. Court of Appeals, G.R. No. L-47822, December 22, 1988, 168 SCRA 612 (1988)

The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local
Idiom as "a sideline"). Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general population. We think that Article
1733 deliberaom making such distinctions.

Planters Products Inc. v. Court of Appeals, 226 SCRA 76 (1993)

It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of
the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in
the case of a time-charter or voyage-charter. It is only when the charter includes both the vessel and its
crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular
voyage covering the charter-party is concerned.

Loadstar Shipping Co., Inc. v. Court of Appeals, 315 SCRA 339 (1999)

Anent the first assigned error, we hold that LOADSTAR is a common carrier. It is not necessary
that the carrier be issued a certificate of public convenience, and this public character is not altered by the
fact that the carriage of the goods in question was periodic, occasional, episodic or unscheduled.

B. Tests/Characteristics

First Phil. Industrial Corp. v. Court of Appeals, 300 SCRA 661

The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment, and must hold
himself out as ready to engage in the transportation of goods for person generally as a business and
not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his established
roads; and
4. The transportation must be for hire.

National Steel Corp. v. Court of Appeals, 283 SCRA 45 (1997)

Article 1732 of the Civil Code defines a common carrier as "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." It has been held that the true test of a
common carrier is the carriage of passengers or goods, provided it has space, for all who opt to avail
themselves of its transportation service for a fee. 11 A carrier which does not qualify under the above test is
deemed a private carrier. "Generally, private carriage is undertaken by special agreement and the carrier
does not hold himself out to carry goods for the general public. The most typical, although not the only form
of private carriage, is the charter party, a maritime contract by which the charterer, a party other than the
shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage or
voyages."

Phil. American Gen. Ins. Company v. PKS Shipping Company, G.R. No. 149038, April 9, 2003

Much of the distinction between a common or public carrier and a private or special carrier lies
in the character of the business, such that if the undertaking is an isolated transaction, not a part of the
business or occupation, and the carrier does not hold itself out to carry the goods for the general public or to
a limited clientele, although involving the carriage of goods for a fee,[3] the person or corporation providing
such service could very well be just a private carrier. A typical case is that of a charter party which includes
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both the vessel and its crew, such as in a bareboat or demise, where the charterer obtains the use and
service of all or some part of a ship for a period of time or a voyage or voyages[4] and gets the control of the
vessel and its crew.[5] Contrary to the conclusion made by the appellate court, its factual findings indicate
that PKS Shipping has engaged itself in the business of carrying goods for others, although for a limited
clientele, undertaking to carry such goods for a fee. The regularity of its activities in this area indicates more
than just a casual activity on its part.[6] Neither can the concept of a common carrier change merely
because individual contracts are executed or entered into with patrons of the carrier. Such restrictive
interpretation would make it easy for a common carrier to escape liability by the simple expedient of entering
into those distinct agreements with clients.
Addressing now the issue of whether or not PKS Shipping has exercised the proper diligence
demanded of common carriers, Article 1733 of the Civil Code requires common carriers to observe
extraordinary diligence in the vigilance over the goods they carry. In case of loss, destruction or
deterioration of goods, common carriers are presumed to have been at fault or to have acted negligently,
and the burden of proving otherwise rests on them.[7] The provisions of Article 1733, notwithstanding,
common carriers are exempt from liability for loss, destruction, or deterioration of the goods due to any of
the following causes:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers; and
(5) Order or act of competent public authority.


Asia Lighterage and Shipping, Inc. v. Court of Appeals, G.R. No. 147246, August 19, 2003

We therefore hold that petitioner is a common carrier whether its carrying of goods is done on an
irregular rather than scheduled manner, and with an only limited clientele. A common carrier need not have
fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets.

To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of
Appeals.[24] The test to determine a common carrier is whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the general public as his occupation rather than
the quantity or extent of the business transacted.[25] In the case at bar, the petitioner admitted that it is
engaged in the business of shipping and lighterage,[26] offering its barges to the public, despite its limited
clientele for carrying or transporting goods by water for compensation

Spouses Cruz v. Sun Holidays, Inc., G.R. No. 186312, June 29, 2010

Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business
as to be properly considered ancillary thereto. The constancy of respondents ferry services in its resort
operations is underscored by its having its own Coco Beach boats. And the tour packages it offers, which
include the ferry services, may be availed of by anyone who can afford to pay the same. These services are
thus available to the public.

That respondent does not charge a separate fee or fare for its ferry services is of no moment. It
would be imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of
beach resort operators offering tour packages to factor the transportation fee in arriving at the tour package
price. That guests who opt not to avail of respondents ferry services pay the same amount is likewise
inconsequential. These guests may only be deemed to have overpaid.

As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberately
refrained from making distinctions on whether the carrying of persons or goods is the carriers principal
business, whether it is offered on a regular basis, or whether it is offered to the general public. The intent of
the law is thus to not consider such distinctions. Otherwise, there is no telling how many other distinctions
may be concocted by unscrupulous businessmen engaged in the carrying of persons or goods in order to
avoid the legal obligations and liabilities of common carriers.


C. Distinguished from private carrier

Home Insurance Co. v. American Steamship, 23 SCRA 24 (1968)

The provisions of our Civil Code on common carriers were taken from Anglo-American law.7 Under
American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special
person only, becomes a private carrier.8 As a private carrier, a stipulation exempting the owner from liability
for the negligence of its agent is not against public policy,9 and is deemed valid.

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Such doctrine We find reasonable. 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 its agent would be void only if the strict
public policy governing common carriers is applied. Such policy has no force where the public at large is not
involved, as in the case of a ship totally chartered for the use of a single party.

San Pablo v. Pantranco, 153 SCRA 199 (1987)

The contention of private respondent PANTRANCO that its ferry service operation is as a private
carrier, not as a common carrier for its exclusive use in the ferrying of its passenger buses and cargo trucks
is absurd. 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" that crosses Matnog to
Allen, 20PANTRANCO cannot pretend that in issuing tickets to its passengers it did so as a private carrier
and not as a common carrier. The Court does not see any reason why inspite of its amended franchise to
operate a private ferry boat service it cannot accept walk-in passengers just for the purpose of crossing the
sea between Matnog and Allen. Indeed evidence to this effect has been submitted. 21 What is even more
difficult to comprehend is that while in one breath respondent PANTRANCO claims that it is a private carrier
insofar as the ferryboat service is concerned, in another breath it states that it does not thereby abdicate
from its obligation as a common carrier to observe extraordinary diligence and vigilance in the transportation
of its passengers and goods. Nevertheless, considering that the authority granted to PANTRANCO is to
operate a private ferry, it can still assert that it cannot be held to account as a common carrier towards its
passengers and cargo. Such an anomalous situation that will jeopardize the safety and interests of its
passengers and the cargo owners cannot be allowed.

National Steel Corp. v. Court of Appeals, 283 SCRA 45 (1997)

. . . in a contract of private carriage, the parties may freely stipulate their duties and obligations
which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage
does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a
private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given by law in contracts involving common carriers.

Because the MV Vlasons I was a private carrier, the shipowner's obligations are governed by the
foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule, places
the prima faciepresumption of negligence on a common carrier. It is a hornbook doctrine that:

In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to
prove that the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while
in the carrier's custody does not put the burden of proof on the carrier.

Since . . . a private carrier is not an insurer but undertakes only to exercise due care in the
protection of the goods committed to its care, the burden of proving negligence or a breach of that duty rests
on plaintiff and proof of loss of, or damage to, cargo while in the carrier's possession does not cast on it the
burden of proving proper care and diligence on its part or that the loss occurred from an excepted cause in
the contract or bill of lading. However, in discharging the burden of proof, plaintiff is entitled to the benefit of
the presumptions and inferences by which the law aids the bailor in an action against a bailee, and since the
carrier is in a better position to know the cause of the loss and that it was not one involving its liability, the
law requires that it come forward with the information available to it, and its failure to do so warrants an
inference or presumption of its liability. However, such inferences and presumptions, while they may affect
the burden of coming forward with evidence, do not alter the burden of proof which remains on plaintiff, and,
where the carrier comes forward with evidence explaining the loss or damage, the burden of going forward
with the evidence is again on plaintiff.

Where the action is based on the shipowner's warranty of seaworthiness, the burden of proving a
breach thereof and that such breach was the proximate cause of the damage rests on plaintiff, and proof
that the goods were lost or damaged while in the carrier's possession does not cast on it the burden of
proving seaworthiness. . . . Where the contract of carriage exempts the carrier from liability for
unseaworthiness not discoverable by due diligence, the carrier has the preliminary burden of proving the
exercise of due diligence to make the vessel seaworthy. 20

D. Government regulation
KMU Labor Center v. Garcia, Jr., 239 SCRA 386 (1994)

Public utilities are privately owned and operated businesses whose service are essential to the
general public. They are enterprises which specially cater to the needs of the public and conduce to their
comfort and convenience. As such, public utility services are impressed with public interest and concern.
The same is true with respect to the business of common carrier which holds such a peculiar relation to the
public interest that there is superinduced upon it the right of public regulation when private properties are
affected with public interest, hence, they cease to be juris privati only. When, therefore, one devotes his
property to a use in which the public has an interest, he, in effect grants to the public an interest in that use,
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and must submit to the control by the public for the common good, to the extent of the interest he has thus
created. 1

An abdication of the licensing and regulatory government agencies of their functions as the instant
petition seeks to show, is indeed lamentable. Not only is it an unsound administrative policy but it is inimical
to public trust and public interest as well.

Tatad v. Garcia, Jr., 241 SCRA 334 (1997)

Section 11 of Article XII of the Constitution provides:

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 sixty per centum of whose capital is owned by such citizens, nor shall such
franchise, certificate or authorization be exclusive character or for a longer period than fifty years . . .
(Emphasis supplied).

In law, there is a clear distinction between the "operation" of a public utility and the ownership of the
facilities and equipment used to serve the public.

Ownership is defined as a relation in law by virtue of which a thing pertaining to one person is
completely subjected to his will in everything not prohibited by law or the concurrence with the rights of
another (Tolentino, II Commentaries and Jurisprudence on the Civil Code of the Philippines 45 [1992]).

The exercise of the rights encompassed in ownership is limited by law so that a property cannot be
operated and used to serve the public as a public utility unless the operator has a franchise. The operation
of a rail system as a public utility includes the transportation of passengers from one point to another point,
their loading and unloading at designated places and the movement of the trains at pre-scheduled times
(cf. Arizona Eastern R.R. Co. v. J.A.. Matthews, 20 Ariz 282, 180 P.159, 7 A.L.R. 1149 [1919] ;United States
Fire Ins. Co. v. Northern P.R. Co., 30 Wash 2d. 722, 193 P. 2d 868, 2 A.L.R. 2d 1065 [1948]).

The right to operate a public utility may exist independently and separately from the ownership of
the facilities thereof. One can own said facilities without operating them as a public utility, or conversely, one
may operate a public utility without owning the facilities used to serve the public. The devotion of property to
serve the public may be done by the owner or by the person in control thereof who may not necessarily be
the owner thereof.

This dichotomy between the operation of a public utility and the ownership of the facilities used to
serve the public can be very well appreciated when we consider the transportation industry. Enfranchised
airline and shipping companies may lease their aircraft and vessels instead of owning them themselves.

E. Governing Law
Samar Mining Co., Inc. v. Nordeutscher Lloyd, 132 SCRA 529 (1984)

The liability of the common carrier for the loss, destruction or deterioration of goods transported
from a foreign country to the Philippines is governed primarily by the New Civil Code. 15 In all matters not
regulated by said Code, the rights and obligations of common carriers shall be governed by the Code of
Commerce and by special laws. 16 A careful perusal of the provisions of the New Civil Code on common
carriers (Section 4, Title VIII, Book IV) directs our attention to Article 1736 thereof, which reads: t.hqw

Article 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 article 1738.

Article 1738 referred to in the foregoing provision runs thus:

Article 1738. The extraordinary liability of the common carrier continues to be operative even
during the time the goods are stored in a warehouse of the carrier at the place of destination, until the
consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to
remove them or otherwise dispose of them.

There is no doubt that Art. 1738 finds no applicability to the instant case. The said article
contemplates a situation where the goods had already reached their place of destination and are stored in
the warehouse of the carrier. The subject goods were still awaiting transshipment to their port of destination,
and were stored in the warehouse of a third party when last seen and/or heard of. However, Article 1736 is
applicable to the instant suit. Under said article, the carrier may be relieved of the responsibility for loss or
damage to the goods upon actual or constructive delivery of the same by the carrier to the consignee, or to
the person who has a right to receive them. In sales, actual delivery has been defined as the ceding of
corporeal possession by the seller, and the actual apprehension of corporeal possession by the buyer or by
some person authorized by him to receive the goods as his representative for the purpose of custody or
disposal. 17 By the same token, there is actual delivery in contracts for the transport of goods when
possession has been turned over to the consignee or to his duly authorized agent and a reasonable time is
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given him to remove the goods. 18 The court a quo found that there was actual delivery to the consignee
through its duly authorized agent, the carrier.

Eastern Shipping Lines v. IAC, 150 SCRA 464 (1984)

The law of the country to which the goods are to be transported governs the l iability of the common
carrier in case of their loss, destruction or deterioration. 4 As the cargoes in question were transported from
Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code. 5 However,
in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by
the Code of Commerce and by special laws. 6 Thus, the Carriage of Goods by Sea Act, a special law, is
suppletory to the provisions of the Civil Code. 7

National Dev. Co. v. Court of Appeals, 164 SCRA 593 (1988)

The pivotal issue in these consolidated cases is the determination of which laws govern loss or
destruction of goods due to collision of vessels outside Philippine waters, and the extent of liability as well as
the rules of prescription provided thereunder.

This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1 50
SCRA 469-470 [1987]) where it was held under similar circumstance "that 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" (Article 1753, Civil Code). Thus, the rule was specifically laid down that for cargoes
transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code
and in all matters not regulated by said Code, the rights and obligations of common carrier shall be
governed by the Code of commerce and by laws (Article 1766, Civil Code). Hence, the Carriage of Goods by
Sea Act, a special law, is merely suppletory to the provision of the Civil Code.

In the case at bar, it has been established that the goods in question are transported from San
Francisco, California and Tokyo, Japan to the Philippines and that they were lost or due to a collision which
was found to have been caused by the negligence or fault of both captains of the colliding vessels. Under
the above ruling, it is evident that the laws of the Philippines will apply, and it is immaterial that the collision
actually occurred in foreign waters, such as Ise Bay, Japan.


I. CONTRACTUAL EFFECTS
A. Vigilance over goods
1. Extra-ordinary diligence required of common carriers (Art. 1733)

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 all the circumstances of each case.

a. Registered Owner Rule
Gelisan v. Alday, 154 SCRA 388 (1987)

The Court has invariably held in several decisions that the registered owner of a public service
vehicle is responsible for damages that may arise from consequences incident to its operation or that may
be caused to any of the passengers therein. 5 The claim of the petitioner that he is not hable in view of the
lease contract executed by and between him and Roberto Espiritu which exempts him from liability to third
persons, cannot be sustained because it appears that the lease contract, adverted to, had not been
approved by the Public Service Commission. It is settled in our jurisprudence that if the property covered by
a franchise is transferred or leased to another without obtaining the requisite approval, the transfer is not
binding upon the public and third persons. 6

Benedicto v. IAC, 187 SCRA 547 (1990)

The prevailing doctrine on common carriers makes the registered owner liable for consequences
flowing from the operations of the carrier, even though the specific vehicle involved may already have been
transferred to another person. This doctrine rests upon the principle that in dealing with vehicles registered
under the Public Service Law, the public has the right to assume that the registered owner is the actual or
lawful owner thereof It would be very difficult and often impossible as a practical matter, for members of the
general public to enforce the rights of action that they may have for injuries inflicted by the vehicles being
negligently operated if they should be required to prove who the actual owner is. 11 The registered owner is
not allowed to deny liability by proving the identity of the alleged transferee. Thus, contrary to petitioner's
claim, private respondent is not required to go beyond the vehicle's certificate of registration to ascertain the
owner of the carrier. In this regard, the letter presented by petitioner allegedly written by Benjamin Tee
admitting that Licuden was his driver, had no evidentiary value not only because Benjamin Tee was not
presented in court to testify on this matter but also because of the aforementioned doctrine. To permit the
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ostensible or registered owner to prove who the actual owner is, would be to set at naught the purpose or
public policy which infuses that doctrine.

Philtranco v. Court of Appeals, 273 SCRA 562 (1997)

Civil Case No. 373 is an action for damages based on quasi-delict[15] under Article 2176 and 2180
of the Civil Code against petitioner Manilhig and his employer, petitioner Philtranco, respectively. These
articles pertinently provide:

ART. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this
Chapter.

ART. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or
omissions, but also for those of persons for whom one is responsible.
...
The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on the
occasion of their functions.

Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks even though the former are not engaged in any business or
industry.
...
The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage.

We have consistently held that the liability of the registered owner of a public service vehicle, like
petitioner Philtranco,[16] for damages arising from the tortious acts of the driver is primary,direct, and joint
and several or solidary with the driver.[17] As to solidarity, Article 2194 expressly provides:

ART. 2194. The responsibility of two or more persons who are liable for a quasi-delict is solidary.

Since the employer's liability is primary, direct and solidary, its only recourse if the judgment for
damages is satisfied by it is to recover what it has paid from its employee who committed the fault or
negligence which gave rise to the action based on quasi-delict. Article 2181 of the Civil Code provides:

ART. 2181. Whoever pays for the damage caused by his dependents or employees may recover
from the latter what he has paid or delivered in satisfaction of the claim.

b. Kabit System
Santos v. Sibug, 104 SCRA 520 (1981)

The controversy in this case will be resolved on the basis of the following facts and expositions.
Prior to April 26, 1963 (the ACCIDENT DATE), Vicente U. Vidad (VIDAD, for short) was a duly authorized
passenger jeepney operator. Also prior to the ACCIDENT DATE, petitioner Adolfo L. Santos (SANTOS, for
short) was the owner of a passenger jeep, but he had no certificate of public convenience for the operation
of the vehicle as a public passenger jeep. SANTOS then transferred his jeep to the name of VIDAD so that it
could be operated under the latter's certificate of public convenience. ln other words, SANTOS became what
is known in ordinary parlance as a kabit operator. For the protection of SANTOS, VIDAD executed a re-
transfer document to the former, which was to be a private document presumably to be registered if and
where it was decided that the passenger jeep of SANTOS was to be withdrawn from the kabit arrangement.

In this case, SANTOS had fictitiously sold the jeepney to VIDAD, who had become the registered
owner and operator of record at the time of the accident. lt is true that VIDAD had executed a re-sale to
SANTOS, but the document was not registered. Although SANTOS, as the kabit was the true owner as
against VIDAD, the latter, as the registered owner/operator and grantee of the franchise, is directly and
primarily responsible and liable for the damages caused to SIBUG, the injured party, as a consequence of
the negligent or careless operation of the vehicle. 6 This ruling is based on the principle that the operator of
record is considered the operator of the vehicle in contemplation of law as regards the public and third
persons 7 even if the vehicle involved in the accident had been sold to another where such sale had not
been approved by the then Public Service Commission.

SANTOS, as the kabit should not be allowed to defeat the levy on his vehicle and to avoid his
responsibilities as a kabit owner for he had led the public to believe that the vehicle belonged to VIDAD. This
is one way of curbing the pernicious kabit system that facilitates the commission of fraud against the
travelling public.

Lita Enterprises v. Court of Appeals, 129 SCRA 464 (1984)

"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored
maxim that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither
can seek relief from the courts, and each must bear the consequences of his acts.
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Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit
system", whereby a person who has been granted a certificate of convenience allows another person who
owns motors vehicles to operate under such franchise for a fee. A certificate of public convenience is a
special privilege conferred by the government . Abuse of this privilege by the grantees thereof cannot be
countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft
and corruption in the government transportation offices. In the words of Chief Justice Makalintal, 1 "this is a
pernicious system that cannot be too severely condemned. It constitutes an imposition upon the goo faith of
the government.

Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized
as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It is
a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave
them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and
appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code
denies them such aid. It provides:t.hqw

ART. 1412. if the act in which the unlawful or forbidden cause consists does not constitute a
criminal offense, the following rules shall be observed;

(1) when the fault, is on the part of both contracting parties, neither may recover what he has given
by virtue of the contract, or demand the performance of the other's undertaking.

The principle of in pari delicto is well known not only in this jurisdiction but also in the United States
where common law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition is
universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its
specific performance, or to recover the property agreed to be sold or delivered, or damages for its property
agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laid down as
though it was equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will
be given to one against the other." 3 Although certain exceptions to the rule are provided by law, We see no
cogent reason why the full force of the rule should not be applied in the instant case.

Teja Marketing v. IAC, 148 SCRA 347 (1987)

'Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) is the time-honored maxim
that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can
seek relief from the courts, and each must bear the consequences of his acts." (Lita Enterprises vs. IAC, 129
SCRA 81.)

Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit
system" whereby a person who has been granted a certificate of public convenience allows another person
who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a
special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be
countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft
and corruption in the government transportation offices.

Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as
being contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil Code. It is a
fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave both
where it finds then. Upon this premise it would be error to accord the parties relief from their predicament.
Article 1412 of the Civil Code denies them such aid. It provides:

Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal
offense, the following rules shall be observed:

1. When the fault is on the part of both contracting parties, neither may recover that he has given
by virtue of the contract, or demand, the performance of the other's undertaking.

The defect of in existence of a contract is permanent and cannot be cured by ratification or by
prescription. The mere lapse of time cannot give efficacy to contracts that are null and void.

c. Boundary System
Magboo v. Bernardo, 7 SCRA 952 (1963)

A similar contention has been rejected by this Court in several cases. In National Labor Union v.
Dinglasan, 52 O.G., No. 4, 1933, it was held that the features which characterize the "boundary system"
namely, the fact that the driver does not receive a fixed wage but gets only the excess of the receipt of fares
collected by him over the amount he pays to the jeep-owner and that the gasoline consumed by the jeep is
for the account of the driver are not sufficient to withdraw the relationship between them from that of
employer and employee. The ruling was subsequently cited and applied in Doce v. Workmen's
Compensation Commission, L-9417, December 22, 1958, which involved the liability of a bus owner for
injury compensation to a conductor working under the "boundary system."

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The same principle applies with greater reason in negligence cases concerning the right of third
parties to recover damages for injuries sustained. In Montoya v. Ignacio, L-5868, December 29, 1953, the
owner and operator of a passenger jeepney leased it to another, but without the approval of the Public
Service Commission. In a subsequent collision a passenger died. We ruled that since the lease was made
without such approval, which was required by law, the owner continued to be the operator of the vehicle in
legal contemplation and as such was responsible for the consequences incident to its operation. The same
responsibility was held to attach in a case where the injured party was not a passenger but a third person,
who sued on the theory of culpa aquiliana (Timbol vs. Osias, L-7547, April 30, 1955). There is no reason
why a different rule should be applied in a subsidiary liability case under Article 103 of the Revised Penal
Code. As in the existence of an employer-employee relationship between the owner of the vehicle and the
driver. Indeed to exempt from liability the owner of a public vehicle who operates it under the "boundary
system" on the ground that he is a mere lessor would be not only to abet flagrant violations of the Public
Service law but also to place the riding public at the mercy of reckless and irresponsible drivers - reckless
because the measure of their earnings depends largely upon the number of trips they make and, hence, the
speed at which they drive; and irresponsible because most if not all of them are in no position to pay the
damages they might cause. (See Erezo vs. Jepte, L-9605, September 30, 1957).

2. Liability of carriers for loss, destruction and deterioration of goods; Exceptions; Presumption of negligence
(Art. 1734-1735; 1739-1743)
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 of omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.

Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as required in Article 1733.

Art. 1739. In order that the common carrier may be exempted from
responsibility, the natural disaster must have been the proximate and only
cause of the loss. However, the common carrier must exercise due diligence to
prevent or minimize loss before, during and after the occurrence of flood,
storm or other natural disaster in order that the common carrier may be
exempted from liability for the loss, destruction, or deterioration of the goods.
The same duty is incumbent upon the common carrier in case of an act of the
public enemy referred to in Article 1734, No. 2.

Art. 1740. If the common carrier negligently incurs in delay in transporting the
goods, a natural disaster shall not free such carrier from responsibility.

Art. 1741. If the shipper or owner merely contributed to the loss, destruction
or deterioration of the goods, the proximate cause thereof being the
negligence of the common carrier, the latter shall be liable in damages, which
however, shall be equitably reduced.

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. 1743. If through the order of public authority the goods are seized or
destroyed, the common carrier is not responsible, provided said public
authority had power to issue the order.

Eastern Shipping Lines v. IAC, 150 SCRA 464 (1984)

The heavy seas and rains referred to in the masters report were not caso fortuito, but normal
occurrences that an ocean going vessel, particularly in the month of September which, in our area, is a
month of rains and heavy seas would encounter as a matter of routine. They are not unforeseen nor
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unforeseeable. These are conditions that ocean-going vessels would encounter and provide for, in the
ordinary course of voyage.

The rain water (not sea water) found its way into Japri Venture is a clear indication that care and
foresight did not attend the closing of the ships hatches so that rain water would not find its way into the
cargo,

Since Easter has failed to establish any caso fortuito, the presumption of fault or negligence on the
part of the carrier applies; and the carrier must present evidence that it has observed the extraordinary
diligence required in Art. 1733 to escape liability.

The SC held that the presumption that the cargo was in apparent good condition when it was
delivered by the vessel to the arrastre operation by the clean tally sheets has been overturned. The
evidence is clear to the effect that the damage to the cargo was suffered while aboard petitioners vessel.

Ganzon v. Court of Appeals, 161 SCRA 646 (1985)

Petitioner Ganzon failed to show that the loss of the scrap iron due to any cause enumerated in Art.
1734. The order of the acting Mayor did not constitute valid authority for petitioner to carry out. In any case,
the intervention of the municipal officials was not of a character that would render impossible the fulfillment
by the carrier of its obligation. The petitioner was not duly bound to obey the illegal order to dump into the
sea the scrap of iron. Moreover, there is absence of sufficient proof that the issuance of the same order was
attended with such force or intimidation as to completely overpower the will of the petitioners employees.

By the delivery made during Dec. 1, 1956, the scraps were unconditionally placed in the
possession and control of the common carrier, and upon their receipt by the carrier of transportation, the
contract of carriage was deemed perfected. Consequently, Ganzons extraordinary responsibility for the
loss, destruction or deterioration of the goods commenced. According to Art 1738, such extraordinary
responsibility would cease only upon the delivery by the carrier to the consignee or persons with right to
receive them. The fact that part of the shipment had not been loaded on board did not impair the contract of
transportation as the goods remained in the custody & control of the carrier.

Eastern Shipping Lines v. Court of Appeals, 196 SCRA 570 (1991)

The heavy seas and rains referred to in the masters report were not caso fortuito but normal
occurrences that an ocean-going vessel, particularly in the month of September which, in our area, is a
month of rains and heavy seas would encounter as a matter of routine. They are not unforeseen nor
unforeseeable. These are conditions that ocean-going vessels would encounter and provide for, in the
ordinary course of a voyage. That rain water (not sea water) found its way into the holds of the Jupri Venture
is a clear indication that care and foresight did not attend the closing of the ship's hatches so that rain water
would not find its way into the cargo holds of the ship.

Since the carrier has failed to establish any caso fortuito, the presumption by law of fault or
negligence on the part of the carrier applies; and the carrier must present evidence that it has observed the
extraordinary diligence required by Article 1733 of the Civil Code in order to escape liability for damage or
destruction to the goods that it had admittedly carried in this case. No such evidence exists of record. Thus,
the carrier cannot escape liability.

Sarkies Tours Phils. v. Court of Appeals, 280 SCRA 58 (1997)

Under the Civil Code, 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 transported by them,
and this liability 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
person who has a right to receive them, unless the loss is due to any of the excepted causes under Article
1734 thereof.

Where the common carrier accepted its passenger's baggage for transportation and even had it
placed in the vehicle by its own employee, its failure to collect the freight charge is the common carrier's own
lookout. It is responsible for the consequent loss of the baggage. In the instant case, defendant appellant's
employee even helped Fatima Minerva Fortades and her brother load the luggages/baggages i n the bus'
baggage compartment, without asking that they be weighed, declared, receipted or paid for. Neither was this
required of the other passengers.

Valenzuela Hardwood & Industrial Supply v. Court of Appeals, 274 SCRA 642 (1997)

In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo
rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo
caused even by the negligence of the ship captain. Pursuant to Article 1306 17 of the Civil Code, such
stipulation is valid because it is freely entered into by the parties and the same is not contrary to law, morals,
good customs, public order, or public policy. Indeed, their contract of private carriage is not even a contract
of adhesion. We stress that in a contract of private carriage, the parties may freely stipulate their duties and
obligations which perforce would be binding on them. Unlike in a contract involving a common carrier,
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private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on
common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial
goods as a private carrier. Consequently, the public policy embodied therein is not contravened by
stipulations in a charter party that lessen or remove the protection given by law in contracts involving
common carriers.

Yobido v. Court of Appeals, 281 SCRA 1 (1997)

The explosion of the new tire is not a fortuitous event. There are human factors involved in the
situation. The fact that the tire was new did not imply that it was entirely free from manufacturing defects or
that it was properly mounted on the vehicle. Neither may the fact that the tire bought and used is of a brand
name noted for quality, resulting in the conclusion that it could not explode within five days use. It is settled
that an accident caused either by defects in the automobile or through the negligence of its driver is not a
caso fortuito. Moreover, a common carrier may not be absolved from liability in case of force majeure. A
common carrier must still prove that it was not negligent in causing the death or injury resulting from the
accident. Thus, having failed to overthrow the presumption of negligence with clear and convincing
evidence, petitioners are hereby held liable for damages.

3. Commencement, duration and termination of carriers responsibility over the goods (Art. 1736-1738)

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 Article 1738.

Art. 1737. The common carrier's duty to observe extraordinary diligence over
the goods remains in full force and effect even when they are temporarily
unloaded or stored in transit, unless the shipper or owner has made use of the
right of stoppage in transitu.

Art. 1738. The extraordinary liability of the common carrier continues to be
operative even during the time the goods are stored in a warehouse of the
carrier at the place of destination, until the consignee has been advised of the
arrival of the goods and has had reasonable opportunity thereafter to remove
them or otherwise dispose of them.

Compania Maritima v. Insurance Co. of North America, 12 SCRA 213 (1964)

The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry
and deliver, and if actually 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 and delivery to a lighter in charge of a vessel for shipment
on the vessel, where it is the custom to deliver in that way, is a good delivery and binds the vessel receiving
the freight, the liability commencing at the time of delivery to the lighter and, similarly, where there is a
contract to carry goods from one port to another, and they cannot be loaded directly on the vessel and
lighters are sent by the vessel to bring the goods to it, the lighters are for the time its substitutes, so that the
bill of landing is applicable to the goods as soon as they are placed on the lighters.

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. A bill of lading is not indispensable for the creation of a contract of carriage. The bill of lading is
juridically a documentary proof of the stipulations and conditions agreed upon by both parties. The liability of
the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely
with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to
complete delivery and acceptance. Even where it is provided by statute that liability commences with the
issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier.

Lu Do v. Binamira, 101 Phil. 120 (1957)

While delivery of the cargo to the consignee, or to the person who has a right to receive them,
contemplated in Article 1736, because in such case the goods are still in the hands of the Government and
the owner cannot exercise dominion over them, we believe however that the parties may agree to limit the
liability of the carrier considering that the goods have still to through the inspection of the customs authorities
before they are actually turned over to the consignee. This is a situation where we may say that the carrier
losses control of the goods because of a custom regulation and it is unfair that it be made responsible for
what may happen during the interregnum.

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American President Lines Ltd. v. Klepper, 110 PHIL 243

With regard to the contention of the carrier that COGSA should control in this case, the same is of
as moment. Art. 1763 of the New Civil Code provides that the laws of the country to which the goods are
transported shall govern the liability of the common carrier in case of loss, destruction and deterioration.
This means that the law of the Philippines on the New Civil Code. Under 1766 of NCC, in all matter not
regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of
Commerce and by Special Laws. Art. 1736-1738, NCC governs said rights and obligations. Therefore,
although Sec 4(5) of COGSA states that the carrier shall not be liable in an amount exceeding $500 per
package unless the value of the goods had been declared by the shipper and asserted in the bill of lading,
said section is merely supplementary to the provisions of the New Civil Code.

Servando v. Phil. Steam, 117 SCRA 832 (1982)

The court a quo held that the delivery of the shipment in question to the warehouse of the Bureau
of Customs is not the delivery contemplated by Article 1736; and since the burning of the warehouse
occurred before actual or constructive delivery of the goods to the appellees, the loss is chargeable against
the appellant.

It should be pointed out, however, that in the bills of lading issued for the cargoes in question, the
parties agreed to limit the responsibility of the carrier for the loss or damage that may be caused to the
shipment therein the following stipulation:

Clause 14. Carrier shall not be responsible for loss or damage to shipments billed 'owner's risk'
unless such loss or damage is due to negligence of carrier. Nor shall carrier be responsible for loss or
damage caused by force majeure, dangers or accidents of the sea or other waters; war; public enemies; . . .
fire . ...

We sustain the validity of the above stipulation; there is nothing therein that is contrary to law,
morals or public policy.

Appellees would contend that the above stipulation does not bind them because it was printed in
fine letters on the back-of the bills of lading; and that they did not sign the same. This argument overlooks
the pronouncement of this Court in Ong Yiu vs. Court of Appeals, where the same issue was resolved in this
wise:
While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by
the provisions thereof. 'Such provisions have been held to be a part of the contract of carriage, and valid and
binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation'. It is
what is known as a contract of 'adhesion', in regards which it has been said that contracts of adhesion
wherein one party imposes a ready made form of contract on the other, as the plane ti cket in the case at
bar, are contracts 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."


Saludo, Jr. v. Court of Appeals, 207 SCRA 498 (1992)

Except as may be prohibited by law, there is nothing to prevent an inverse order of events, that is,
the execution of the bill of lading even prior to actual possession and control by the carrier of the cargo to be
transported. There is no law which requires that the delivery of the goods for carriage and the issuance of
the covering bill of lading must coincide in point of time or, for that matter, that the former should precede the
latter. While we agree with petitioners' statement that "an airway bill estops the carrier from denying receipt
of goods of the quantity and quality described in the bill," a further reading and a more faithful quotation of
the authority cited would reveal that "(a) bill of lading may contain constituent elements of estoppel and thus
become something more than a contract between the shipper and the carrier. . . . (However), as between
the shipper and the carrier, when no goods have been delivered for shipment no recitals in the bill can
estopped the carrier from showing the true facts . . . Between the consignor of goods and receiving carrier,
recitals in a bill of lading as to the goods shipped raise only a rebuttable presumption that such goods were
delivered for shipment. As between the consignor and a receiving carrier, the fact must outweigh the recital."

There is a holding in most jurisdictions that the acceptance of a bill of lading without dissent raises
a presumption that all terms therein were brought to the knowledge of the shipper and agreed to by him, and
in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such terms.
This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of its
contents, and acceptance under such circumstances makes it a binding contract. In order that any
presumption of assent to a stipulation in a bill of lading limiting the liability of a carrier may arise, it must
appear that the clause containing this exemption from liability plainly formed a part of the contract contained
in the bill of lading. A stipulation printed on the back of a receipt or bill of lading or on papers attached to
such receipt will be quite as effective as if printed on its face, if it is shown that the consignor knew of its
terms. Thus, where a shipper accepts a receipt which states that its conditions are to be found on the back,
such receipt comes within the general rule, and the shipper is held to have accepted and to be bound by the
conditions there to be found.

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Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the
common carrier begins from the time the goods are delivered to the carrier. This responsibility remains in full
force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner
exercises the right of stoppage in transitu, and terminates only after the lapse of a reasonable time for the
acceptance, of the goods by the consignee or such other person entitled to receive them. And, there is
delivery to the carrier when the goods are ready for and have been placed in the exclusive possession,
custody and control of the carrier for the purpose of their immediate transportation and the carrier has
accepted them. Where such a delivery has thus been accepted by the carrier, the liability of the common
carrier commences. Only when such fact of delivery has been unequivocally established can the liability for
loss, destruction or deterioration of goods in the custody of the carrier, absent the exempting causes under
Article 1734, attach and the presumption of fault of the carrier under Article 1735 be invoked.

Macam v. Court of Appeals, 313 SCRA 77 (1999)

The extraordinary responsibility of the common carriers lasts until actual or constructive delivery of
the cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was
indicated in the bills of lading as consignee whereas GPC was the notify party. However, in the export
invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his demand
letter to respondent WALLEM and in his complaint before the trial court. This premise draws us to conclude
that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than
the consignee, the right to receive them was proper.

The real issue is whether respondents are liable to petitioner for releasing the goods to GPC
without the bills of lading or bank guarantee. From the testimony of petitioner, we gather that he has been
transacting with GPC as buyer/importer for around two (2) or three (3) years already. When mangoes and
watermelons are in season, his shipment to GPC using the facilities of respondents is twice or thrice a week.
The goods are released to GPC. It has been the practice of petitioner to request the shipping lines to
immediately release perishable cargoes such as watermelons and fresh mangoes through telephone calls
by himself or his "people." In transactions covered by a letter of credit, bank guarantee is normally required
by the shipping lines prior to releasing the goods. But for buyers using telegraphic transfers, petitioner
dispenses with the bank guarantee because the goods are already fully paid. In his several years of
business relationship with GPC and respondents, there was not a single instance when the bill of lading was
first presented before the release of the cargoes.

4. Stipulations limiting carriers liability
a. Degree of diligence; Reasonable time in the delivery (Art. 1744-1745)

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

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 movables transported;
(5) That the common carrier shall not be responsible for the acts or omission
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 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.

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Maersk Line v. Court of Appeals, 222 SCRA 108 (1993)

While it is true that common carriers are not obligated by law to carry and to deliver merchandise,
and persons are not vested with the right to prompt delivery, unless such common carriers previously
assume the obligation to deliver at a given date or time, delivery of shipment or cargo should at least be
made within a reasonable time.

While there was no special contract entered into by the parties indicating the date of arrival of the
subject shipment, petitioner nevertheless, was very well aware of the specific date when the goods were
expected to arrive as indicated in the bill of lading itself. In this regard, there arises no need to execute
another contract for the purpose as it would be a mere superfluity. In the case before us, we find that a delay
in the delivery of the goods spanning a period of two months and seven days falls was beyond the realm of
reasonableness.

b. Amount of liability (Art. 1749-1750)

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 v. Barretto, 51 PHIL 90 (1927)

Limiting the common carriers liability for loss or damage from any cause or for any reason for less
than 1/8 the actual value of the goods is unconscionable and therefore against public policy. A common
carrier cannot lawfully stipulate for exemption from liability, unless such exemption is just and reasonable
and the contract is freely and fairly made.

Shewaram v. Philippine Airlines, 17 SCRA 606 (1966)

It can not be said that a contract has been entered into between a passenger and the common
carrier, embodying the conditions as printed at the back of the ticket. The fact that those 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 the passenger was aware of those conditions such that he had "fairly and freely agreed" to
those conditions. The passenger is considered not having agreed to the stipulation on the ticket, as
manifested by the fact that he did not sign the ticket.

Ong Yiu v. Court of Appeals, 91 SCRA 223 (1966)

While it may be true that the passenger had not signed the plane ticket, he is nevertheless bound
by the provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid
and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation". It is
what is known as a contract of "adhesion", in regards which it has been said that contracts of adhesion
wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at
bar, are contracts not entirely prohibited. 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 agreed valuation does not
offend against the policy of the law forbidding one from contracting against his own negligence.

Sea Land Services, Inc. v. IAC, 153 SCRA 552 (1987)

Since the liability of a common carrier for loss of or damage to goods transported by it under a
contract of carriage so governed by the laws of the country of destination and the goods in question were
shipped from the United States to the Philippines, the liability of common carrier to the consignee is
governed primarily by the Civil Code. Applying the Civil Code provisions (Article 1749 and 1750) the
stipulation in the bill of lading limiting the liability of the common carrier for loss or damages to the shipment
covered by said rule unless the shipper declares the value of the shipment and pays additional charges is
valid and binding on the consignee.

Citadel Lines, Inc. v. Court of Appeals, 184 SCRA 544 (1990)

Basic is the rule that a stipulation limiting the liability of the carrier to the value of the goods
appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. Furthermore,
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.
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In this case, the award based on the alleged market value of the goods is erroneous. It is provided
in a clause in the BOL that its liability is limited to US$2.00/kilo. The consignee also admits in the
memorandum that the value of the goods does not appear in the bill of lading. Hence, the stipulation on the
carriers limited liability applies.

Everett Steamship Corp. v. Court of Appeals, 297 SCRA 496 (1998)

In the bill of lading, the carrier made it clear that all claims for which it may be liable shall be
adjusted and settled on the basis of the shipper's net invoice cost plus freight and insurance premiums, if
paid, and in no event shall the carrier be liable for any loss of possible profits or any consequential loss. Its
liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, had the
option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier.
Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with
the stipulations.

The commercial Invoice does not in itself sufficiently and convincingly show that the common
carrier has knowledge of the value of the cargo as contended by the shipper.

British Airways v. Court of Appeals, 285 SCRA 450 (1998)

The contract of transportation was exclusively between the passenger and common carrier BA.
The latter merely endorsing the Manila to Hong Kong log of the formers journey to PAL, as its subcontractor
or agent. Conditions of contracts were one of continuous air transportation. Well-settled rule that an agent is
also responsible for any negligence in the performance of its function and is liable for damages which the
principal may suffer by reason of its negligent act. When an action is based on breach of contract of
carriage, the passenger can only sue BA and not PAL, since the latter was not a party in the contract.

The contention of BA with respect to limited liability was overruled although it is recognized in the
Philippines, stating that BA had waived the defense of limited liability when it allowed Mahtani(the
passenger) to testify as to the actual damages he incurred due to the misplacement of his luggage, without
any objection.

H.E. Heacock Co. v. Macondray & Co., 42 PHIL 205 (1921)

Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the
carrier from any and all liability for loss or damage occasioned by its own negligence. The second is one
providing for an unqualified limitation of such liability to an agreed valuation. And the third is 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. According to an almost uniform weight of authority, the first and second kinds of stipulations
are invalid as being contrary to public policy, but the third is valid and enforceable.

If a common carrier gives to a shipper the choice of two rates and if the shipper makes such a
choice, understandingly and freely, and names his valuation, he cannot thereafter recover more than the
value which he thus places upon his property. A limitation of liability based upon an agreed value does not
conflict with any sound principle of public policy; and it is not conformable to plain principles of justice that a
shipper may understate value in order to reduce the rate and then recover a larger value in case of loss.

c. Void stipulation (Art. 1745)
ARTICLE 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 movables transported;
(5) That the common carrier shall not be responsible for the acts or omission
of his or its employees;
(6) That the common carriers 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 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.

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Sweet Lines v. Teves, 83 SCRA 361 (1978)

Considered in the light of circumstances prevailing in the inter-island shipping industry in the
country today, We find and hold that Condition No. 14 printed at the back of the passage tickets should be
held as void and unenforceable for the following reasons first, under circumstances obligation in the inter-
island shipping industry, it is not just and fair to bind passengers to the terms of the conditions printed at the
back of the passage tickets, on which Condition No. 14 is Printed in fine letters, and second, Condition No.
14 subverts the public policy on transfer of venue of proceedings of this nature, since the same will prejudice
rights and interests of innumerable passengers located in different places of the country who, under
Condition No. 14, will have to file suits against petitioner only in the City of Cebu. Considering the expense
and trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of Cebu,
he would most probably decide not to file the action at all. The condition will thus defeat, instead of enhance,
the ends of justice. Upon the other hand, petitioner has branches or offices in the respective ports of call of
its vessels and can afford to litigate in any of these places. Hence, the filing of the suit in the CFI of Misamis
Oriental, as was done in the instant case, will not cause inconvenience to, much less prejudice, petitioner.

Under Art. 2220 of the Civil Code, moral damages are justly due in breaches of contract where the
defendant acted fraudulently or in bad faith. Both the Trial Court and the Appellate Court found that there
was bad faith on the part of petitioner in that:

(1) Defendants- Appellants did not give notice to plaintiffs-appellates as to the change of scheduled
of the vessel;
(2) Knowing fully well that it would take no less than fifteen hours to effect the repairs of the
damaged engine, defendants- appellants instead made announce ment of assurance that the vessel would
leave within a short period of time, and when plaintiff-appellees wanted to leave the port and gave up the
trip, defendants- appellants employees would come and say, we are leaving already.
(3) Defendants- appellants did not offer to refund plaintiffs-appellees tickets nor provide them with
transportation form Tacloban to Catbalogan.


5. Passengers baggage (Art. 1754)

ARTICLE 1754. The provisions of articles 1733 to 1753 shall apply to the
passengers baggage which is not in his personal custody or in that of his
employee. As to other baggage, the rules in articles 1998 and 2000 to 2003
concerning the responsibility of hotel-keepers shall be applicable.

B. Safety of passengers
1. Utmost diligence required of common carriers (Art. 1755)

ARTICLE 1755. A common carrier is bound to carry the passengers safely as far
as human care and foresight can provide, using the utmost diligence of very
cautious persons, with a due regard for all the circumstances.

Nocum v. Laguna Tayabas Bus. Co. v. Court of Appeals, 83 SCRA 386 (1978)

Fairness demands that in measuring a common carrier's duty towards its passengers, allowance
must be given to the reliance that should be reposed on the sense of responsibility of all the passengers i n
regard to their common safety. It is to be presumed that a passenger will not take with him anything
dangerous to the lives and limbs of his co-passengers, not to speak of his own. Not to be lightly considered
must be the right to privacy to which each passenger is entitled. He cannot be subjected to any unusual
search, when he protests the innocuousness of his baggage and nothing appears to indicate the contrary,
as in the case at bar. In other words, inquiry may be verbally made as to the nature of a passenger's
baggage when such is not outwardly perceptible, but beyond this, constitutional boundaries are already in
danger of being transgressed. Calling a policeman to his aid, as suggested by the service manual invoked
by the trial judge, in compelling the passenger to submit to more rigid inspection, after the passenger had
already declared that the box contained mere clothes and other miscellaneous, could not have justified
invasion of a constitutionally protected domain.

Mecenas v. CA, 180 SCRA 83 (1989)

The behaviour of the captain of the "Don Juan" in tills instance-playing mahjong "before and up to
the time of collision constitutes behaviour that is simply unacceptable on the part of the master of a vessel to
whose hands the lives and welfare of at least seven hundred fifty (750) passengers had been entrusted.
Whether or not Capt. Santisteban was "off-duty" or "on-duty" at or around the time of actual collision is quite
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 common carrier upon whom the law imposes the duty of
extraordinary diligence.

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The record shows that the "Don Juan" sank within ten (10) to fifteen (15) minutes after initial
contact with the "Tacloban City. While the failure of Capt. Santisteban to supervise his officers and crew in
the process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking of his
vessel after collision, did not cause the collision by themselves, such failures doubtless contributed
materially to the consequent loss of life and, moreover, were indicative of the kind and level of diligence
exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to actual contact
between the two (2) vessels. The officer-on-watch in the "Don Juan" admitted that he had failed to inform
Capt. Santisteban not only of the "imminent danger of collision" but even of "the actual collision itself " There
is also evidence that the "Don Juan" was carrying more passengers than she had been certified as allowed
to carry.

Under these circumstances, a presumption of gross negligence on the part of the vessel (her
officers and crew) and of its ship-owner arises.

Negros Navigation Co., Inc. v. Court of Appeals, 281 SCRA 717 (1997)

The Duty to exercise due diligence includes the duty to take passengers or cargoes that are within
the carrying capacity of the vessel. (Same Ruling with Mecenas)

Korean Airlines Co. Ltd. v. Court of Appeals, 234 SCRA 14 (1999)

The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his
name was entered in the passenger manifest of KAL for its Flight No. KE 903. His clearance through
immigration and customs clearly shows that he had indeed been confirmed as a passenger of KAL in that
flight. KAL thus committed a breach of the contract of carriage between them when it failed to bring Lapuz to
his destination.

This Court has held that a contract to transport passengers is different in kind and degree from any
other contractual relation. The business of the carrier is mainly with the traveling public. It invites people to
avail themselves of the comforts and advantages it offers. The contract of air carriage generates a relation
attended with a public duty. Passengers have the right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration. They are entitled to be protected against personal
misconduct, injurious language, indignities and abuses from such employees. So it is that any discourteous
conduct on the part of these employees toward a passenger gives the latter an action for damages against
the carrier.

Fortune Express, Inc. v. Court of Appeals, 305 SCRA 14 (1999)

Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a
passenger on account of wilfull acts of other passengers, if the employees of the common carrier could have
prevented the act through the exercise of the diligence of a good father of a family. In the present case, it is
clear that because of the negligence of petitioner's employees, the seizure of the bus by Mananggolo and
his men was made possible.

Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were
planning to take revenge on the petitioner by burning some of its buses and the assurance of petitioner's
operation manager, Diosdado Bravo, that the necessary precautions would be taken, petitioner did nothing
to protect the safety of its passengers. Had petitioner and its employees been vigilant they would not have
failed to see that the malefactors had a large quantity of gasoline with them. Under the circumstances,
simple precautionary measures to protect the safety of passengers, such as frisking passengers and
inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before allowing
them on board could have been employed without violating the passenger's constitutional rights.

The acts of Maranaos could not be considered as caso fortuito because there was already a
warning by the PC.

No contributory negligence could be attributed to the deceased. The assailant's motive was to
retaliate for the loss of life of two Maranaos as a result of the collision between petitioner's bus and the
jeepney in which the two Maranaos were riding. The armed men actually allowed deceased to retrieve
something from the bus. What apparently angered them was his attempt to help the driver of the bus by
pleading for his life.

Gatchalian v. Delim, 203 SCRA 126 (1991)

The record yields affirmative evidence of fault or negligence on the part of respondent common
carrier. The driver did not stop to check if anything had gone wrong with the bus when the snapping sound
was heard and made known to him by the passengers, instead told them that it was normal. The driver's
reply necessarily indicated that the same "snapping sound" had been heard in the bus on previous
occasions. This could only mean that the bus had not been checked physically or mechanically to determine
what was causing the "snapping sound" which had occurred so frequently that the driver had gotten
accustomed to it. Such a sound is obviously alien to a motor vehicle in good operating condition, and even a
modicum of concern for life and limb of passengers dictated that the bus be checked and repaired. The
obvious continued failure of respondent to look after the roadworthiness and safety of the bus, coupled with
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the driver's refusal or neglect to stop the mini-bus after he had heard once again the "snapping sound" and
the cry of alarm from one of the passengers, constituted wanton disregard of the physical safety of the
passengers, and hence gross negligence on the part of respondent and his driver.

Because what is involved here is the liability of a common carrier for injuries sustained by
passengers in respect of whose safety a common carrier must exercise extraordinary diligence, we must
construe any such purported waiver most strictly against the common carrier. For a waiver to be valid and
effective, it must not be contrary to law, morals, public policy or good customs. A cursory examination of the
purported waiver will readily show that appellees did not actually waive their right to claim damages from
appellant for the latter's failure to comply with their contract of carriage. All that said document proves is that
they expressed a "desire" to make the waiver which obviously is not the same as making an actual waiver of
their right. A waiver of the kind invoked by appellant must be clear and unequivocal.

A person is entitled to the physical integrity of his or her body; if that integrity is violated or
diminished, actual injury is suffered for which actual or compensatory damages are due and assessable.
Petitioner Gatchalian is entitled to be placed as nearly as possible in the condition that she was before
mishap. A scar, especially one on the face of the woman, resulting from the infliction of injury upon her, is a
violation of bodily integrity, giving raise to a legitimate claim for restoration to her condition ante.

Del Castillo v. Jaymalin, 112 SCRA 629 (1982)

Common carriers are responsible for the death of their passengers (Articles 1764 and 2206 of the
Civil Code). This liability includes the loss of the earning capacity of the deceased. It appears proven that the
defendant corporations failed to exercise the diligence that was their duty to observe according to Articles
1733 and 1755. The conductor was apprised of the fact that Mario del Castillo was deaf and dumb. With this
knowledge the conductor should have taken extra-ordinary care for the safety of the said passenger. In this
he failed.

a. Doctrine of last clear chance

Philippine Rabbit Bus Lines v. IAC, 189 SCRA 158 (1990)

The principle about "the last clear" chance, would call for application in a suit between the owners
and drivers of the 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."

It is the rule under the substantial factor test that if the actor's conduct is a substantial factor in
bringing about harm to another, the fact that the actor neither foresaw nor should have foreseen the extent
of the harm or the manner in which it occurred does not prevent him from being liable. The bus driver's
conduct is not a substantial factor in bringing about harm to the passengers of the jeepney. It cannot be said
that the bus was travelling at a fast speed when the accident occurred because the speed of 80 to 90
kilometers per hour, assuming such calculation to be correct, is yet within the speed limit allowed in
highways.

Bustamante v. Court of Appeals, 193 SCRA 603 (1991)

The doctrine, stated broadly, is that the negligence of the plaintiff does not preclude a recovery for
the negligence of the defendant where it appears that the defendant, by exercising reasonable care and
prudence, might have avoided injurious consequences to the plaintiff notwithstanding the plaintiff's
negligence. In other words, the doctrine of last clear chance means that even though a person's own acts
may have placed him in a position of peril, and an injury results, the injured person is entitled to recovery. As
the doctrine is usually stated, a person who has the last clear chance or opportunity of avoiding an accident,
notwithstanding the negligent acts of his opponent or that of a third person imputed to the opponent is
considered in law solely responsible for the consequences of the accident.

All premises considered, the Court is convinced that the respondent Court committed an error of
law in applying the doctrine of last clear chance as between the defendants, since the case at bar is not a
suit between the owners and drivers of the colliding vehicles but a suit brought by the heirs of the deceased
passengers against both owners and drivers of the colliding vehicles. Therefore, the respondent court erred
in absolving the owner and driver of the cargo truck from liability.

b. Accommodation passenger

Lara vs. Valencia, 104 SCRA 65 (1958)

The owner and driver of a vehicle owes to accommodation passengers or invited guests merely the
duty to exercise reasonable care so that they may be transported safely to their destination. Thus, "The rule
is established by weight of authority that the owner or operator of an automobile owes the duty to an invited
guest to exercise reasonable care in its operation, and not unreasonably to expose him to danger and injury
by increasing the hazard of travel. The owner of the vehicle in the case at bar is only required to observe
ordinary care, and is not in duty bound to exercise extraordinary diligence as required by our law.
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A passenger must observe the diligence of a father of a family to avoid injury to himself which
means that if the injury to the passenger has been proximately caused by his own negligence, the carrier
cannot be held liable.

c. Carrier not an insurer against all risks
Necessito v. Paras, 104 Phil. 75 (1958)

While the carrier is not an insurer of the safety of the passengers, it should nevertheless be held to
answer for the laws its equipment if such flaws were at all discoverable. In this connection, the manufacturer
of the defective appliance is considered in law the agent of the carrier, and the good repute of the
manufacturer will not relieve the carrier from liability. The rationale of the carrier's liability is the fact that the
passenger has no privity with the manufacturer of the defective equipment; hence, he has no remedy
against him, while the carrier usually has.

Japan Airlines v. Court of Appeals, 294 SCRA 19 (1998)

Accordingly, there is no question that when a party is unable to fulfill his obligation because of
"force majeure," the general rule is that he cannot be held liable for damages for non-performance.
Corollarily, when JAL was prevented from resuming its flight to Manila due to the effects of Mt. Pinatubo
eruption, whatever losses or damages in the form of hotel and meal expenses the stranded passengers
incurred, cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel expenses of
respondents for their unexpected overnight stay on June 15, 1991.

It has been held that airline passengers must take such risks incident to the mode of travel. In this
regard, adverse weather conditions or extreme climatic changes are some of the perils involved in air travel,
the consequences of which the passenger must assume or expect.

While JAL was no longer required to defray private respondents' living expenses during their stay in
Narita on account of the fortuitous event, JAL had the duty to make the necessary arrangements to transport
private respondents on the first available connecting flight to Manila. Petitioner JAL reneged on its obligation
to look after the comfort and convenience of its passengers when it declassified private respondents from
"transit passengers" to "new passengers" as a result of which private respondents were obliged to make the
necessary arrangements themselves for the next flight to Manila.

d. Res ipsa loquitur
Layugan v. IAC, 167 SCRA 363 (1988)

Res ipsa loquitur is a doctrine which states thus: "Where the thing which causes injury is shown to
be under the management of the defendant, and the accident is such as in the ordinary course of things
does not happen if those who have the management use proper care, it affords reasonable evidence, in the
absence of an explanation by the defendant, that the accident arose from want of care. The doctrine of Res
ipsa loquitur as a rule of evidence is peculiar to the law of negligence which recogni zes that prima facie
negligence may be established without direct proof and furnishes a substitute for specific proof of
negligence. The doctrine can be invoked when and only when, under the circumstances involved, direct
evidence is absent and not readily available.

Whether the cargo truck was parked along the road or on half the shoulder of the right side of the
road would be of no moment taking into account the warning device consisting of the lighted kerosene lamp
placed three or four meters from the back of the truck. But despite this warning which we rule as sufficient,
the Isuzu truck driven by Daniel Serrano, an employee of the private respondent, still bumped the rear of the
parked cargo truck. As a direct consequence of such accident the petitioner sustained injuries on his left
forearm and left foot. It is clear therefore that the absence or want of care of Daniel Serrano has been
established by clear and convincing evidence. It follows that the doctrine of Res ipsa loquitur is inapplicable,
making the employer of the driver liable for the negligence of his employee.

2. Commencement, duration and termination of carriers responsibility

La Mallorca v. De Jesus, 17 SCRA 739 (1966)

The liability of the carrier for the child, who was already led by the father to a place about 5 meters
away from the bus for her safety under the contract of carriage, persists. The relation of carrier and
passenger does not necessarily cease where the latter, after alighting from the car, aids the carrier's servant
or employee in removing his baggage from the car.

It has been recognized as a rule that the relation of carrier and passenger does not cease at the
moment the passenger alights from the carrier's vehicle at a place selected by the carrier at the point of
destination, but continues until the passenger has had a reasonable time or a reasonable opportunity to
leave the carrier's premises. And, what is a reasonable time or a reasonable delay within this rule is to be
determined from all the circumstances.

Aboitiz Shipping Co. v. Court of Appeals, 179 SCRA 95 (1989)
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The rule is that the relation of carrier and passenger continues until the passenger has been landed
at the port of destination and has left the vessel owner's dock or premises. Once created, the relationship
will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the
carrier's conveyance or had a reasonable opportunity to leave the carrier's premises. All persons who
remain on the premises a reasonable time after leaving the conveyance are to be deemed passengers, and
what is a reasonable time or a reasonable delay within this rule is to be determined from all the
circumstances, and includes a reasonable time to see after his baggage and prepare for his departure. The
carrier-passenger relationship is not terminated merely by the fact that the person transported has been
carried to his destination if, for example, such person remains in the carrier's premises to claim his baggage.

When the accident occurred, the victim was in the act of unloading his cargoes, which he had every
right to do, from petitioner's vessel. Even if he had already disembarked an hour earlier, his presence in
petitioner's premises was not without cause. The victim had to claim his baggage which was possible only
one hour after the vessel arrived since it was admittedly standard procedure in the case of petitioner's
vessels that the unloading operations shall start only after that time.

Mallari Sr. v. Court of Appeals, 324 SCRA 147 (2000)

Clearly, the proximate cause of the collision resulting in the death of a passenger of the jeepney,
was the sole negligence of the driver of the passenger jeepney, petitioner Alfredo Mallari Jr., who recklessly
operated and drove his jeepney in a lane where overtaking was not allowed by traffic rules. Under Art. 2185
of the Civil Code, unless there is proof to the contrary, it is presumed that a person driving a motor vehicle
has been negligent if at the time of the mishap he was violating a traffic regulation.
Under Art. 1755 of the Civil Code, a common carrier is bound to carry the passengers safely as far
as human care and foresight can provide using the utmost diligence of very cautious persons with due
regard for all the circumstances. Moreover, under Art. 1756 of the Civil Code, in case of death or injuries to
passengers, a common carrier is presumed to have been at fault or to have acted negligently, unless it
proves that it observed extraordinary diligence. Further, pursuant to Art. 1759 of the same Code, it is liable
for the death of or injuries to passengers through the negligence or willful acts of the former's employees.
This liability of the common carrier does not cease upon proof that it exercised all the diligence of a good
father of a family in the selection of its employees.

3. Presumption of Negligence; Liability in case of death or injury to passengers; Exceptions (Art. 1756-1758)

ARTICLE 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.

ARTICLE 1757. The responsibility of a common carrier for the safety of
passengers as required in articles 1733 and 1755 cannot be dispensed with or
lessened by stipulation, by the posting of notices, by statements on tickets, or
otherwise.

ARTICLE 1758. When a passenger is carried gratuitously, a stipulation limiting
the common carriers liability for negligence is valid, but not for wilful acts or
gross negligence.

The reduction of fare does not justify any limitation of the common carriers
liability.

Bayasen v. Court of Appeals, 103 SCRA 197 (1981)

It is a well known physical tact that cars may skid on greasy or slippery roads, as in the instant
case, without fault on account of the manner of handling the car. Skidding means partial or complete loss of
control of the car under circumstances not necessarily implying negligence. It may occur without fault.

Under the particular circumstances of the instant case, the petitioner- driver who skidded could not
be regarded as negligent, the skidding being an unforeseen event, so that the petitioner had a valid excuse
for his departure from his regular course.

Cervantes v. Court of Appeals, 304 SCRA 27 (1999)

Since the PAL agents are not privy to the said Agreement and petitioner knew that a written
request to the legal counsel of PAL was necessary, he cannot use what the PAL agents did to his
advantage. The said agents, acted without authority when they confirmed the flights of the petitioner. Under
Article 1989 of the New Civil Code, the acts of an agent beyond the scope of his authority do not bind the
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principal, unless the latter ratifies the same expressly or impliedly. Furthermore, when the third person
(herein petitioner) knows that the agent was acting beyond his power or authority, the principal cannot be
held liable for the acts of the agent. If the said third person is aware of such limits of authority, he is to
blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the
principal's ratification.

Calalas v. Court of Appeals, 332 SCRA 356 (2000)

It is immaterial that the proximate cause of the collision between the jeepney and the truck was the
negligence of the truck driver. The doctrine of proximate cause is applicable only in actions for quasi -delict,
not in actions involving breach of contract. The doctrine is a device for imputing liability to a person where
there is no relation between him and another party. In such a case, the obligation is created by law itself.
But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who
create the obligation, and the function of the law is merely to regulate the relation thus created. Insofar as
contracts of carriage are concerned, some aspects regulated by the Civil Code are those respecting the
diligence required of common carriers with regard to the safety of passengers as well as the presumption of
negligence in cases of death or injury to passengers.

In case of death or injuries to passengers, Art. 1756 of the Civil Code provides that common
carriers are presumed to have been at fault or to have acted negligently unless they prove that they
observed extraordinary diligence as defined in Arts. 1733 and 1755 of the Code. This provision necessarily
shifts to the common carrier the burden of proof.

The driver of jeepney did not carry safely as far as human care and foresight could provide, using
the utmost diligence of very cautious persons, with due regard for all the circumstances" as required by Art.
1755. First, the jeepney was not properly parked, its rear portion being exposed about two meters from the
broad shoulders of the highway, and facing the middle of the highway in a diagonal angle. The petitioner's
driver took in more passengers than the allowed seating capacity of the jeepney. These are violations of the
Land Transportation and Traffic Code. Therefore, there is no assumption of risk by the passenger.

Pestao v. Sumayang, 346 SCRA 870 (2000)

In the case at bar, Pestao, as a professional driver operating a public transport bus, should have
anticipated that overtaking at a junction was a perilous maneuver and should thus have exercised extreme
caution.

Under Articles 2180 and 2176 of the Civil Code, owners and managers are responsible for
damages caused by their employees. When an injury is caused by the negligence of a servant or an
employee, the master or employer is presumed to be negligent either in the selection or in the supervision of
that employee. This presumption may be overcome only by satisfactorily showing that the employer
exercised the care and the diligence of a good father of a family in the selection and the supervision of its
employee.

4. Negligence of intentional assault by carriers employee
Gillaco v. Manila Railroad Co., 97 Phil. 884 (1955)

While a passenger is entitled to protection from personal violence by the carrier or its agents or
employees, since the contract of transportation obligates the carrier to transport a passenger safely to his
destination, the responsibility of the carrier extends only to those acts that the carrier could foresee or avoid
through the exercise of the degree of care and diligence required of it. In the present case, the act of the
train guard of the Manila Railroad Company in shooting the passenger (because of a personal grudge
nurtured against the latter since the Japanese occupation) was entirely unforseeable by the Manila Railroad
Co. The latter had no means to ascertain or anticipate that the two would meet, nor could it reasonably
forsee every personal rancor that might exist between each one of its many employees and any one of the
thousands of eventual passengers riding in its trains. The shooting in question was therefore "caso fortuito"
within the definition of Art. 1105 of the old Civil Code (which is the law applicable), being both unforeseeable
and inevitable under the given circumstances; and pursuant to established doctrine, the resulting breach of
the company's contract of safe carriage with the deceased was excused thereby.

Maranan v. Perez, 20 SCRA 412 (1967)

The basis of the common carrier's liability under NCC for assaults on passengers committed by its
drivers rests either on (1) the doctrine of respondeat superior or (2) the principle that it is the carrier's implied
duty to transport the passenger safely.

Under the first, which is the minority view, the carrier is liable only when the act of the employee is
within the scope of his authority and duty. It is not sufficient that the act be within the course of employment
only. Under the second view, upheld by the majority and also by the later cases, it is enough that the assault
happens within the course of the employee's duty. It is no defense for the carrier that the act was done in
excess of authority or in disobedience of the carrier's orders. The carrier's liability here is absolute in the
sense that it practically secures the passengers from assaults committed by its own employees. Art. 1759,
evidently follows the rule based on the second view.

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Accordingly, it is the carrier's strict obligation to select its drivers and similar employees with due
regard not only to their technical competence and physical ability, but also, no less important, to their total
personality, including their patterns of behavior, moral fibers, and social attitude.

5. Passengers duty to observe diligence to avoid injury; Contributory negligence
PNR v. Court of Appeals, 139 SCRA 87 (1985)

When a train boarded by the deceased passenger was so over-crowded that he and many other
passengers had no choice but to sit on the open platforms between the coaches of the train, the common
carrier is negligent.

Likewise when the train did not even slow down when it approached the Iyam Bridge which was
under repair at the time, neither did the train stop, despite the alarm raised by other passengers that a
person had fallen off the train at lyam Bridge, there was negligence. The petitioner has the obligation to
transport its passengers to their destinations and to observe extraordinary diligence in doing so. Death or
any injury suffered by any of its passengers gives rise to the presumption that it was negligent in the
performance of its obligation under the contract of carriage.

But while petitioner failed to exercise extraordinary diligence as required by law, it appears that the
deceased was chargeable with contributory negligence. Since he opted to sit on the open platform between
the coaches of the train, he should have held tightly and tenaciously on the upright metal bar found at the
side of said platform to avoid falling off from the speeding train.

Isaac v. Al Ammen Trans, 101 Phil 1046 (1957)

If the carriers employee is confronted with a sudden emergency, he is not held to the same degree
of care he would otherwise, be required in the absence of such emergency.

By placing his left arm on the window, petitioner is guilty of contributory negligence. It cannot
however relieve the carrier but can only reduce its liability (ART. 1762). It is a prevailing rule that it is
negligence per se for passengers on a railroad to protrude any part of his body and that no recovery can be
had for an injury.

6. Injury to passenger due to acts of co-passenger or stranger
Bachelor Express, Inc. v. Court of Appeals, 188 SCRA 216 (1990)

The running amuck of the passenger was the proximate cause of the incident as it triggered off a
commotion and panic among the passengers such that the passengers started running to the sole exit
shoving each other resulting in the falling off the bus by passengers Beter and Rautraut causing them fatal
injuries. The sudden act of the passenger who stabbed another passenger in the bus is within the context of
force majeure. However, in order that a common carrier may be absolved from liability in case of force
majeure, it is not enough that the accident was caused by force majeure. The common carrier must still
prove that it was not negligent in causing the injuries resulting from such accident. In this case, Bachelor
was negligent.

Considering the factual findings of the Court of Appeals-the bus 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; and the bus was not properly equipped with doors in
accordance with law.

Fortune Express, Inc. v. Court of Appeals, 305 SCRA 14 (1999)

Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a
passenger on account of wilfull acts of other passengers, if the employees of the common carrier could have
prevented the act through the exercise of the diligence of a good father of a family. In the present case, it is
clear that because of the negligence of petitioner's employees, the seizure of the bus by Mananggolo and
his men was made possible.

The acts of Maranaos could not be considered as caso fortuito because there was already a
warning by the PC.

No contributory negligence could be attributed to the deceased. The assailant's motive
was to retaliate for the loss of life of two Maranaos as a result of the collision between petitioner's bus and
the jeepney in which the two Maranaos were riding. The armed men actually allowed deceased to retrieve
something from the bus. What apparently angered them was his attempt to help the driver of the bus by
pleading for his life.

II. DAMAGES (Art. 1764)
A. Actual/Compensatory damages (Art. 2199, 2201 & 2203)

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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 is referred to as actual or compensatory
damages.

Art. 2201. In contracts and quasi-contracts, the damages for which the obligor
who acted in good faith is liable shall be those that are the 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. (1107a)

Art. 2203. The party suffering loss or injury must exercise the diligence of a
good father of a family to minimize the damages resulting from the act or
omission in question.

Cariaga v. LTB Co., 110 PHIL 346 (1960)

The income which deceased could earn if he should finish the medical course and pass the
corresponding board examinations must be deemed to be within the same category provided for by Art.
2201 of the Civil Code, which are those 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.

LTB could not be held liable to pay moral damages under Article 2220 of the Civil Code on account
of breach of its contract of carriage because it did not act fraudulently or in bad faith. LTB had exercised due
diligence in the selection and supervision of its employees like the drivers of its buses in connection with the
discharge of their duties and so it must be considered an obligor in good faith.

Villa Rey Transit, Inc. v. Court of Appeals, 31 SCRA 511 (1970)

Life expectancy is, not only relevant, but, also, an important element in fixing the amount
recoverable by private respondents herein. Although it is not the sole element determinative of said amount,
no cogent reason has been given to warrant its disregard and the adoption, in the case at bar, of a purely
arbitrary standard, such as a four-year rule.

When the liability of common carrier had been fixed at a minimal rate of only of P2,184.00 a year,
which is the annual salary of deceased at the time of his death, as a young "training assistant" and when the
deceaseds potentiality and capacity to increase his future income was not considered said liability may be
enforced upon finality of the decision.

Pan American World Airways v. IAC, 153 SCRA 521 (1987)

By refusing to accommodate plaintiff in said flight, defendant had willfully and knowingly violated
the contract of carriage and failed to bring the plaintiff to her place of destination under its contract with
plaintiff. Bad faith was also present. Self-enrichment or fraternal interest and not personal ill will may have
been the motive of defendant, but it is malice nevertheless. The fact that plaintiff was ordered out under
some pretext in order to accommodate a white man in an airline owned by an American firm with a
reputation for bumping off non- Caucasian to accommodate whites is very regrettable.

Defendant having breached its contract with plaintiff in bad faith, it is not error to have awarded
exemplary damages. The rationale behind exemplary or corrective damages is, as the name implies, to
provide an example or correction for public good . In view of it nature, it should be imposed in such amount
as to sufficiently and effectively deter similar breach of contract in the future by defendant and other airlines.

An award of attorney's fees is also in order, having found bad faith on the part of defendant.

Gatchalian v. Delim, 203 SCRA 126 (1991)

A person is entitled to the physical integrity of his or her body; if that integrity is violated or
diminished, actual injury is suffered for which actual or compensatory damages are due and assessable.
Petitioner Gatchalian is entitled to be placed as nearly as possible in the condition that she was before
mishap. A scar, especially one on the face of the woman, resulting from the infliction of injury upon her, is a
violation of bodily integrity, giving rise to a legitimate claim for restoration to her condition ante.

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1. Recovery for physical injuries
Soberano v. MRR & Benguet Auto Line, 18 SCRA 732 (1966)

In case of physical injuries, moral damages are recoverable only by the party injured and not by his
next of kin, unless there is express statutory provision to the contrary. In this case it was Juana Soberano,
not her husband Jose, who sustained the bodily injuries.

Attorneys fees may only be awarded when the defendant's act or omission has compelled the
plaintiff to litigate with third persons or incur expenses to protect his interest, or when the defendant acted in
gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim. It will
be observed that the defendant companies offered to settle the case by offering to the Soberanos the
additional sum of P5,000. The Soberanos, however, rejected the offer and proceeded to court to recover
damages in the total sum of P76,757.76.

Marchan v. Mendoza, 24 SCRA 888 (1968)

It is argued that this Court is without jurisdiction to adjudicate the exemplary damages since there
was no allegation nor prayer, nor proof, nor counterclaim of error for the same by the respondents. It is to be
observed however, that in the complaint, plaintiffs "prayed for such other and further relief as this Court may
deem just and equitable." Now, since the body of the complaint sought to recover damages against the
defendant-carrier wherein plaintiffs prayed for indemnification for the damages they suffered as a result of
the negligence of the driver who is appellant's employee and since exemplary damages is intimately
connected with general damages, plaintiffs may not be expected to single out by express term the kind of
damages they are trying to recover against the defendant's carrier. Suffice it to state that when plaintiffs
prayed in their complaint for such other relief and remedies that may be availed of under the premises, in
effect, therefore, the court is called upon the exercise and use its discretion whether the imposition of
punitive or exemplary damages even though not expressly prayed or pleaded in the plaintiffs' complaint.
Exemplary damages may be imposed by way of example or correction only in addition, among others, to
compensatory damages, but that they cannot be recovered as a matter of right, their determination
depending upon the discretion of the court. If the amount of exemplary damages need not be proved, it need
not also be alleged, and the reason is obvious because it is merely incidental or dependent upon what the
court may award as compensatory damages.

2. Damages in case of death
De Caliston v. Court of Appeals, 122 SCRA 958 (1983)

The deletion of the P10,000.00 awarded for loss of pension is unjustified. Under Article 2206 of the
Civil Code: The amount of damages for death caused by a crime or quasi-delict shall be at least three
thousand pesos, 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. .
The pension of the decedent being a sure income that was cut short by her death for which
Dalmacio was responsible, the surviving heir of the former is entitled to the award of P 10,000.00 which is
just equivalent to the pension the decedent would have received for one year if she did not die.
On the other hand, the P5,000.00 paid to the herein petitioner by the insurer of the passenger bus
which figured in the accident may be deemed to have come from the bus owner who procured the
insurance. Since the civil liability (ex-delicto) of the latter for the death caused by his driver is subsidiary and,
at bottom, arises from the same culpa, the insurance proceeds should be credited in favor of the errant
driver.

PAL v. Court of Appeals, 185 SCRA 110 (1990)

Petitioner relies on "the principle of law generally recognized and applied by the courts in the
United States" that "the controlling element in determining loss of earnings arising from death is, as
established by authorities, the life expectancy of the deceased or of the beneficiary, whichever is shorter.
However, resort to foreign jurisprudence would be proper only if no law or jurisprudence is available locally
to settle a controversy. Even in the absence of local statute and case law, foreign jurisprudence is only
persuasive.

For the settlement of the issue at hand, there are enough applicable local laws and jurisprudence.
Under Article 1764 and Article 2206(1) of the Civil Code, the award of damages for death is computed on
the basis of the life expectancy of the deceased, not of his beneficiary.

B. Moral damages (Art. 2206, 2216-17 & 2219-2220)

Art. 2206. The amount of damages for death caused by a crime or quasi-delict
shall be at least three thousand pesos, 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
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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 spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the
death of the deceased.

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 discretion
of the court, according to the circumstances of each case.

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 for omission.

Art. 2219. Moral damages may be recovered in the following and analogous
cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32,
34, and 35.

The parents of the female seduced, abducted, raped, or abused, referred to in
No. 3 of this article, may also recover moral damages.
The spouse, descendants, ascendants, and brothers and sisters may bring the
action mentioned in No. 9 of this article, in the order named.
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.

Cachero v. Manila Yellow Taxi Cab, 101 Phil. 523 (1957)

While under the law, employers are made responsible for the damages caused by their employees
acting within the scope of their assigned task, plaintiff, in the present case, does not maintain his action
against all the persons who might be liable for the damages caused but on an alleged breach of contract of
carriage and against the defendant employer alone. However, the defendant taxicab company has not
committed any criminal offense resulting in physical injuries against the plaintiff. The one that committed the
offense against plaintiff is the driver of defendant's taxicab but he was not made party defendant to the case.
Therefore, plaintiff is not entitled to compensation for moral damages as his case does not come within the
exception of paragraph 1 of Article 2219 of the Civil Code.

The present case does not come under any of the exceptions enumerated in Article 2208 of the
Civil Code, specially of paragraph 2 thereof, because defendant's failure to meet its responsibility was not
the cause that compelled the plaintiff to litigate or to incur expenses to protect his interests. The present
action was instituted because plaintiff demanded an exorbitant amount for moral damages and naturally the
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defendant did not and could not yield to such demand. This is neither a case that comes under paragraph 11
of said Article because the Lower Court did not deem it just and equitable to award any amount for
attorney's fees, on which point this Court agrees.

Fores v. Miranda, 105 Phil. 266 (1959)

The exception to the basic rule of damages now under consideration is a mishap resulting in the
death of a passenger, in which case Article 1764 makes the common carrier expressly subject to the rule of
Art. 2206, that entitles the spouse, descendants and ascendants of the deceased passenger to "demand
moral damages for mental anguish by reason of the death of the deceased". But the exceptional rule of 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 carrier was guilty of malice or bad faith. We think it is clear that the
mere carelessness of the carrier's driver does not per se constitute or justify an inference of malice or bad
faith on the part of the carrier; and in the case at bar there is no other evidence of such malice to support the
award of moral damages by the Court of Appeals. To award moral damages for breach of contract,
therefore, without proof of bad faith or malice on the part of the defendant, as required by Art. 2220, would
be to violate the clear provisions of the law, and constitute unwarranted judicial legislation.

Lopez v. Pan American, 16 SCRA 431 (1966)

As a proximate result of defendant's breach in bad faith of its contracts with plaintiffs, the latter
suffered social humiliation, wounded feelings, serious anxiety and mental anguish. For plaintiffs were
travelling with first class tickets issued by defendant and yet they were given only the tourist class. At stop-
overs, they were expected to be among the first-class passengers by those awaiting to welcome them, only
to be found among the tourist passengers. It may not be humiliating to travel as tourist passengers; it is
humiliating to be compelled to travel as such, contrary to what is rightfully to be expected from the
contractual undertaking. Senator Lopez was then Senate President Pro Tempore. International carriers like
defendant know the prestige of such an office. And he was former Vice-President of the Philippines. Senator
Lopez was going to the United States to attend a private business conference of the Binalbagan-Isabela
Sugar Company; but his aforesaid rank and position were by no means left behind, and in fact he had a
second engagement awaiting him in the United States: a banquet tendered by Filipino friends in his honor as
Senate President Pro Tempore. For the moral damages sustained by him, therefore, an award of
P100,000.00 is appropriate.

A written contract for attorney's services shall control the amount to be paid therefor unless found
by the court to be unconscionable or unreasonable. A consideration of the attorneys prominence as well as
comparison of the defense counsels fees could well establish the reasonableness of the attorneys fees,
such as in this case.

Ortigas Jr. v. Lufthansa, 64 SCRA 610 (1975)

It is Our considered view that when it comes to contracts of common carriage, inattention and lack
of care on the part of the carrier 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 the award of moral damages in
accordance with Article 2220 of the Civil Code. But in the instant 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. What worsened the situation of was that Lufthansa succeeded in
keeping Ortigas as its passenger by assuring him that he would be given first class accommodation at the
next stations, the proper arrangements therefor having been made already, when in truth such was not the
case.

A passenger contracts for first class accommodations for many reasons peculiar to himself and
pays a higher price therefor, and it is certainly not for the airplane to say later, after it deprives him of his
space in order to favor another passenger, that economy class is anyway just as good as first class.

We have uniformly upheld the right of a passenger to damages in all cases wherein, after having
contracted and paid for first class accommodations duly confirmed and validated, he is transferred over his
objection to economy, class, which he has to take in order to be able to arrive at his destination on his
scheduled time.

Phil. Rabbit Bus Lines v. Esguerra, 117 SCRA 741 (1982)

Moral damages are not recoverable in actions for damages predicated on a breach of the contract
of transportation, as in the instant case, in view of the provisions of Articles 2219 and 2220 of the New Civil
Code. The exceptions are (1) where the mishap results in the death of a passenger, and (2) where it is
proved that the carrier was guilty of fraud or bad faith, even if death does not result. The Court of Appeals
found that the two vehicles sideswiped each other at the middle of the road. In other words. both vehicles
were in their respective lanes and that they did not invade the lane of the other. It cannot be said therefore
that there was fraud or bad faith on the part of the carrier's driver. This being the case, no moral damages
are recoverable.

Sweet Lines v. Court of Appeals, 121 SCRA 769 (1983)
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Petitioner sacrificed the comfort of its first class passengers including private respondent Vinluan
for the sake of economy. Such inattention and lack of care for the interest of its passengers who are entitled
to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the
passenger to the award of moral damages. More so in this case where instead of courteously informing
private respondent of his being downgraded under the circumstances, he was angrily rebuffed by an
employee of petitioner.

At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior
partner of a big law firm in Manila. He was a director of several companies and was active in civic and social
organizations in the Philippines. Considering the circumstances of this case and the social standing of
private respondent in the community, he is entitled to the award of moral and exemplary damages.

Pan American World Airways v. IAC, 153 SCRA 521 (1987)

By refusing to accommodate plaintiff in said flight, defendant had willfully and knowingly violated
the contract of carriage and failed to bring the plaintiff to her place of destination under its contract with
plaintiff. Bad faith was also present. Self enrichment or fraternal interest and not personal ill will may have
been the motive of defendant, but it is malice nevertheless. The fact that plaintiff was ordered out under
some pretext in order to accommodate a white man in an airline owned by an American firm with a
reputation for bumping off non- Caucasian to accommodate whites is very regrettable.

Defendant having breached its contract with plaintiff in bad faith, it is not error to have awarded
exemplary damages. The rationale behind exemplary or corrective damages is, as the name implies, to
provide an example or correction for public good . In view of it nature, it should be imposed in such amount
as to sufficiently and effectively deter similar breach of contract in the future by defendant and other airlines.

An award of attorney's fees is also in order, having found bad faith on the part of defendant.

TransWorld Airlines v. Court of Appeals, 165 SCRA 143 (1988)

Petitioner sacrificed the comfort of its first class passengers including private respondent Vinluan
for the sake of economy. Such inattention and lack of care for the interest of its passengers who are entitled
to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the
passenger to the award of moral damages. More so in this case where instead of courteously informing
private respondent of his being downgraded under the circumstances, he was angrily rebuffed by an
employee of petitioner.

At the time of this unfortunate incident, the private respondent was a practicing lawyer, a senior
partner of a big law firm in Manila. He was a director of several companies and was active in civic and social
organizations in the Philippines. Considering the circumstances of this case and the social standing of
private respondent in the community, he is entitled to the award of moral and exemplary damages.

Armovit v. Court of Appeals, 184 SCRA 476 (1990)

The gross negligence committed by private respondent(Northwest Airlines) in the issuance of the
tickets by the erroneous entry of the date of departure and without changing or correcting the error when the
tickets were presented for re-confirmation and the manner by which petitioners were rudely informed that
they were bumped off are clear indicia of such malice and bad faith and establish that private respondent
committed a breach of contract which entitles petitioners to moral damages.

The deletion of the nominal damages by the appellate court is well-taken since there is an award of
actual damages. Nominal damages cannot co-exist with actual or compensatory damages.

PAL v. Court of Appeals, 106 SCRA 391

There was gross negligence by PAL for allowing Capt. Bustamante to fly on the that fateful day of
the accident, even if he was sick, having tumor on his nose. No one will certify the fitness to fly a plane of
one suffering from the disease. One month prior to the crash-landing, when the pilot was preparing to land in
Daet, private respondent warned him that they were not in the vicinity of Daet but above the town of Ligao.
The dizziness, headaches and general debility of private respondent were after-effects of the crash-landing.
And therefore there is causal connection between the accident and said after-effects. The negligence of PAL
is clearly a quasi-delict and therefore Art. 2219(2) is applicable, justifying the recovery of moral damages.
Even from the standpoint of the petitioner that there is an employee-employer relationship between it and
private respondent arising from the contract of employment, private respondent is still entitled to moral
damages in view of the finding of bad faith or malice, applying the provisions of Article 2220.

C. Exemplary damages (Art. 2229 & 2232-2233)
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.
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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.

Prudenciado v. Alliance Transport, 148 SCRA 440 (1987)

Dra. Prudenciado suffered a brain concussion which although mild can admittedly produce the
effects complained of by her and that these symptoms can develop after several years and can lead to
some, serious handicaps or predispose the patient to other sickness. Being a doctor by profession, her fears
can be more real and intense than an ordinary person. Otherwise stated, she is undeniably a proper
recipient of moral damages which are proportionate to her suffering.

As to exemplary damages, Article 2231 of the Civil Code provides: In quasi-delicts, exemplary
damages may be granted if the defendant acted with grave negligence. The rationale behind exemplary or
corrective damages is, as the name implies, to provide an example or correction for the public good.
Respondent driver was running at high speed after turning to the right along Taft Ave. coming from Ayala
Boulevard, considering that the traffic was clear. Failing to notice petitioner's car, he failed to apply his
brakes and did not even swerve to the right to avoid the collision. Much more, it was raining that time and
the roads are slippery. The frequent incidence of accidents of this nature caused by taxi drivers indeed
demands corrective measures.

Marchan v. Mendoza, 24 SCRA 888 (1968)
As to the finding of liability for exemplary damages, the Court of Appeals, in its resolution of March
31, 1965, stated the following: "We now come to the imposition of exemplary damages upon defendants-
appellants' carrier. It is argued that this Court is without jurisdiction to adjudicate this exemplary damages
since there was no allegation nor prayer, nor proof, nor counterclaim of error for the same by the appellees.
It is to be observed however, that in the complaint, plaintiffs "prayed for such other and further relief as this
Court may deem just and equitable." Now, since the body of the complaint sought to recover damages
against the defendant-carrier wherein plaintiffs prayed for indemnification for the damages they suffered as a
result of the negligence of said Silverio Marchan who is appellant's employee; and since exemplary
damages is intimately connected with general damages, plaintiffs may not be expected to single out by
express term the kind of damages they are trying to recover against the defendant's carrier. Suffice it to
state that when plaintiffs prayed in their complaint for such other relief and remedies that may be availed of
under the premises, in effect, therefore, the court is called upon the exercise and use its discretion whether
the imposition of punitive or exemplary damages even though not expressly prayed or pleaded in the
plaintiffs' complaint."9

In support of the above view, Singson v. Aragon was cited by the Court of Appeals. 10 As was there
held by this Court: "From the above legal provisions it appears that exemplary damages may be imposed by
way of example or correction only in addition, among others, to compensatory damages, but that they
cannot be recovered as a matter of right, their determination depending upon the discretion of the court. It
further appears that the amount of exemplary damages need not be proved, because its determination
depends upon the amount of compensatory damages that may be awarded to the claimant. If the amount of
exemplary damages need not be proved, it need not also be alleged, and the reason is obvious because it is
merely incidental or dependent upon what the court may award as compensatory damages. Unless and until
this premise is determined and established, what may be claimed as exemplary damages would amount to a
mere surmise or speculation. It follows as a necessary consequence that the amount of exemplary damages
need not be pleaded in the complaint because the same cannot be predetermined. One can merely ask that
it be determined by the court if in the use of its discretion the same is warranted by the evidence, and this is
just what appellee has done."